Alliance makes strong gains

Invercargill-based Alliance Group is investing in technology, marketing and new products to sustain its position as a world player in export meat — it is one of NZ’s business success stories, writes

It’s just not about volume, it’s also about value. Alliance Group, one of the world’s largest processors of sheepmeat, is focused on capturing more value for its naturally grass-fed products.

The Invercargill-based Alliance cooperative is also investing heavily in technology to reduce costs and produce better returns for its farmers, and the country.

Alliance, established in 1948, is now putting as much effort into supplying the premium food services industry as it is servicing the global retail market. Choice cuts are going into hotels and restaurants around the world, from the UK and Europe, particularly Germany, to the Middle East, India, China, Southeast Asia, Indonesia, United States and Canada.

“Retail is still important but food services is a growing segment and we are committed to this sector,” says Alliance chairman Murray Taggart. “We hadn’t targeted food services in terms of product form and the way it is presented as we have done for retail.

“Different markets require different cuts. For instance, we are selling flaps, which are used extensively in Chinese hotpot restaurants. What we are finding is that as we get into the hotel trade they require more of the (meat) preparation before reaching their kitchens.

“Food services is an exciting area,” says Taggart. “As people get wealthier in places like Indonesia they embrace Western eating experiences and we can put in different high-end cuts. We are concentrating on putting the natural and safe story behind our products.

“I’d say 30 per cent of our whole business is taken up with the food services sector. We want to deliver a special occasion eating experience in the top end of the market.”

Alliance, which started as Alliance Freezing Company (Southland), has eight processing plants — in Dannevirke, Levin, Nelson, Timaru, Oamaru, Makarewa, Mataura and Invercargill — about 5000 staff, 5000 farmershareholders, and is New Zealand’s last remaining 100 per cent farmerowned red meat co-operative.

The country’s biggest lamb exporter, it also sells mutton, beef, venison and co-products to more than 65 countries, with China being the largest market by volume, and has a turnover of $1.4 billion.

Co-products include wool (25-38 microns); hides for shoes, upholstery, clothing; pelts; casings for smallgoods manufacturing; offals; pharmaceuticals; tallow for soap manufacturing; and protein meals for pet food supplements.

Alliance has four in-market partners: Grand Farm in China; Sainsbury’s — the UK’s largest supermarket chain; Alexander Eyckeler GmbH in Germany, and Spain’s biggest supermarket chain, Mercadona. It is also a major shareholder in The Lamb Company, which services the US and Canada markets.

It is increasing its distribution network by putting its own people into other markets such as the Middle East and Southeast Asia, including Hong Kong, Singapore and Malaysia.

“If we can have our own people on the ground, we can have a better connection with customers, tell them our story and capture value from that,” says Taggart.

Over the past year, Alliance has launched three new dual-branded products into China through Grand Farm, and is working with QualityNZ on new Pure South (Alliance’s main brand) product lines for India.

It has been investing in technology and robotics to increase productivity, performance and safety.

Two robotic primal/middle cutting machines, worth a total of $15 million, have gone into the Smithfield (Timaru) and Pukeuri (Oamaru) plans. The carcases are x-rayed, and the machine makes cuts in exactly the right places for maximum value.

The boning room at the Dannevirke plant is being reconfigured and automatic machinery added at a cost of more than $10m. If this pilot project works well, the model will be rolled out to the other plants.

“This gives us a health and safety benefit, as well as higher product yields,” says Taggart. “For example, we are replacing all the bandsaws with safety stop saws. If an operator’s finger gets near the saw, it stops automatically. We are committed to adding technology and improving performance and safety.”

Alliance is upgrading the engine room at the Lorneville plant near Invercargill, introducing an autonomous system to control refrigeration. “The system will operate the chillers and we will get an improvement in the throughput of meat,” says Taggart. “The upgrade will provide $4m additional value for our shareholders.”

New x-ray technology has been installed in the Pukeuri and Mataura plants, ensuring greater precision in packaging and labelling meat destined for manufacturing customers. The technology enables highly accurate chemical lean (fat to meat ratio) measurements.

Alliance has also built a new worldclass deer processing facility at the Lorneville plant, resulting in a 30 per cent reduction in southern deer processing costs.

Alliance is committed to the highest levels of environmental sustainability, ethical production and quality:

Its livestock are naturally grassfed, free of growth-promoting hormones, low in fat and full of iron, zinc and other essential nutrients.

All products are prepared under strict quality and hygiene management systems.

New Zealand’s geographic isolation and strict quarantine laws ensure a safe farming environment.

It is committed to the “five freedoms” for animal welfare: freedom from malnutrition, discomfort, sickness, fear and unnatural conditions. All its farmers must meet New Zealand’s Animal Welfare Advisory Committee standards.

Taggart says Alliance’s success and reputation is founded on the cooperative model. “Farmers invest in their farms for 40 years and the beauty of the co-op is that it can take a long-term view. We can develop (new) markets and deliver returns to farmers over a longer term.

“We were the first (from New Zealand) into Brazil, China and India; we developed markets where others were not brave enough to go.

“We couldn’t afford to market our products individually, and by grouping together as a co-op we have the marketing strength to sell around the world.

“The great thing is we can directly deal with the farmers who produce the product, and at the end of the day, the farmers share in the co-op’s profits and activities,” he says.

Taggart believes Brexit “won’t many any difference” to its arrangements in the UK. “When the UK exchange rate crashed, that made it challenging for us and we diverted product to other markets — but prices have lifted.

“The UK exports as much lamb to the Continent as we do to the UK. I guess if the UK exporters are not able to export lamb to the Continent, then more of them will stay in their local market.

“We will watch Brexit with a fair amount of interest, but I’m cautiously optimistic that commonsense will prevail and we will retain access to the market. A lot of our established customers in the UK would still trade with us even if there is more lamb on the market,” says Taggart.

“Still, we don’t want to be too reliant on one market … if you look at lamb, it is not a commonly available product in some countries.”

Taggart says the future looks bright for Alliance. “We’ve had our ups and downs and we are on a positive trajectory to grow the business. We have made significant investment in our plants, we have improved farmer support and we are chasing exciting opportunities in both retail and food services.

“I guess we have been a bit anonymous as a company. We are probably more well-known in overseas markets than in New Zealand.

“We export to 65 countries around the world and we turn over more than $1.4 billion. That’s a good story,” says Taggart.