Monday, April 22, 2024

Decade of peace and prosperity for red meat sector

Neal Wallace
Business-minded execs succeeded the tough guys and their bloody politics.
Reading Time: 3 minutes

For decades meat industry politics was as bloody as the process of dissecting animal carcases.

Fortunately, for the last 10 years that has not been the case.

In the past year, the chief executives and chairs at our two largest meat companies have retired or are about to – Simon Limmer (CEO) and Rob Hewett (chair) at Silver Fern Farms, and David Surveyor (CEO) and Murray Taggart (chair) at Alliance.

They have been replaced by, respectively, Dan Boulton and Anna Nelson at SFF and Willie Wiese and Mark Wynne at Alliance.

A feature of those appointments and also of their replacements, is that they have all spent most of their careers outside the meat industry, which brings a different approach to business and not the inherent competitiveness that was a feature of the 1980s, ’90s and early 2000s.

Back then turf protection, securing livestock and not giving a competitor a half chance was a priority of management.

This was driven by the need to keep their multi-chain processing plants, designed to handle the burgeoning sheep numbers of the 1970s and early 1980s, full and running efficiently.

Empty hooks are costly.

Little love was lost among senior managers of either co-operative, fuelled in part by an inherent rivalry prevalent among the co-operatives, Alliance and PPCS (now Silver Fern Farms).

Other players were not immune.

Fortunately that era has passed, partly due to economics but also reality.

Weighed down by $387 million of debt, in 2013 Silver Fern Farms recorded a $46m loss, prompting banks to impose strict covenants. Three years later a partnership agreement was reached with Shanghai Maling.

Alliance didn’t have the same scale of financial challenges but neither was it awash with profits.

Another factor was the appointment of senior managers and directors from outside the meat industry: Dean Hamilton for Silver Fern Farms in 2014 and David Surveyor at Alliance in 2015. 

Equally, the two chairs, Murray Taggart at Alliance and Rob Hewett at SFF, were focused on the business, not industry politics. 

The two companies are still fiercely competitive but gone is the hostility that soaked up management time and energy and derailed the many attempts to get them to merge.

The focus of the two companies shifted to what was needed: efficiency and adding value to farmer returns.

It was a largely unheralded moment in the sector’s history and a change welcomed by farmers.

As Taggart notes in this week’s story in his retirement from the Alliance board, it is a tough industry with narrow margins and large capital requirements.

Improving returns needs the total focus of managers and directors and he used the example of new health and wellbeing products and Alliance pursuing India as a developing sheepmeat market.

The co-operative has been developing markets in India through its  shareholding in QualityNZ, which it owns with New Zealand cricketers Sir Richard Hadlee, Stephen Fleming, Daniel Vettori and Brendon McCullum.

As the government seeks to secure a free trade agreement with India, Taggart says access is possible for sheepmeat but a comprehensive agreement that includes dairy makes it more difficult.

Alliance diversified into India to avoid overexposure to China and he is optimistic about its potential.

The government should listen to Taggart and Alliance as it considers how to develop trade with the world’s most populous country.

SFF is pursuing its own strategy, which includes targeting net high worth consumers with meat that is verified as net carbon zero or what it calls nature-positive.

Global consumers are demanding more accountability from food producers and if we are to reverse the current low sheepmeat prices, we need companies to be totally focused on finding the best-paying markets.

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