Foreign investment in Southland meat
Talks to some of the major players and meat industry observers to see what the future holds for one of Southland’s key primary industries.
First Prime Range Meats, then Silver Fern Farms, now Blue Sky Meats.
All the above meat processors with a Southland presence have been the subject of either partial or total foreign acquisition over the past three years, with capital injection, and marketing and distribution benefits the stated underlying wisdom behind the deals.
That leaves just Invercargillheadquartered Alliance Group and Motueka’s Talley’s-owned South Pacific Meats (Affco/SPM) Awarua plant as the sole New Zealand flag flyers in the deep south.
But should it be a cause for alarm among red-blooded, red-meat-eating Kiwis, or rather a reason for celebration and pride in the global appeal of our primary produce? The answer is likely to lie somewhere in between, says Federated Farmers Southland president Allan Baird.
‘‘The investment in local processors is an indication of faith in our region as a strong food producer. It also shows the concerns in some parts of the world about food security, eg, China,’’ he said.
‘‘In terms of positives, generally there’s a requirement for upgrades at the plants acquired. Local owners may have been less prepared or able to make those capital decisions. New owners also tend to be able to route the processing into existing supply channels.’’
That might entail belt tightening for those businesses left in New Zealand hands, however.
‘‘The re-capitalised players will breathe efficiency requirements into existing processors. It’s a case of shape up, or feel the ground beginning to sink.’’
Baird was also concerned long-term industry health might be sacrificed for short-term gain.
‘‘Often it’s very hard to get these processing and marketing assets back. It disappoints me that it’s occurred. It reflects on our skills and competency at running a good business. If farmers want to control the supply channel beyond our gates, then support the businesses we own.’’
Far from being a threat to their existence, increased offshore ownership of the industry could prove to be a potential spur to growth, Alliance Group chief executive David Surveyor said.
‘‘The recent ownership change at Blue Sky leaves control with farmers. They have a choice of where they send their livestock and Alliance is an attractive option for those farmers who want the benefits of belonging to a co-operative. We are now the only true, 100 per centowned major red meat co-operative in New Zealand.’’
Alliance Group, owned by 5000 farmer shareholders, was the world’s largest processor and exporter of sheepmeat and a significant cattle and deer processor and marketer, employing 4700 staff during peak season and exporting to more than 65 countries, he said.
‘‘We’re running our own race and have a strategy that will build a better business and create value to our farmershareholders. We’re making significant progress and seeing measurable results.’’
Morton Mains-based Blue Sky Meats’ new owners - subject to Overseas Investment Office approval later this year - are Oamaru-based, Chinese-owned BX Foods Ltd.
BX Foods company director Richard Thorp said offshore investment was a positive step forward for the industry.
‘‘The China investment allows us to have capital input, add strength to the balance sheet, and realign our activities for greater efficiency, so yes, we believe that offshore investment is very positive for the industry as a whole. The availability of capital gives us the ability to invest in the best technology to produce the highest quality product for our customers. That sort of investment, wherever it comes from, is never a bad thing.’’
For Silver Fern Farms, which entered a 50:50 partnership with Chinese retail and distribution company Shanghai Maling late last year, seeking overseas investment was simply a consequence of a longstanding homegrown capital deficit, and shouldn’t cause undue alarm to New Zealanders.
‘‘We sought capital from diverse investors worldwide, including here at home, but accessing capital locally can be hard due to New Zealand’s relatively small capital market,’’ Silver Fern Farms chief executive Dean Hamilton said.
‘‘In the end, there are many different ownership models right across all industries in New Zealand, and I don’t think you can say there’s a right one or a wrong one. People get anxious about foreign investment, but it’s everywhere, and fulfilling a need that clearly isn’t satisfied elsewhere. If it keeps jobs and tax in New Zealand, then why not?’’
However, overseas-owned businesses could run the risk of becoming detached from their local roots, Affco/SPM general manager Andy Leonard believed.
‘‘There are various opinions on foreign ownership within the industry, but the fact we’ve committed to remaining New Zealand-owned is a clear statement of our position. Any reliance on a single market can increase risk from a currency, product or market dynamics perspective.
‘‘Our staff and local managers feel closer to a local business, having opportunities to interact with the owners and senior management. Profitability is retained and reinvested back into plant developments, further enhancing local business and communities.’’
Although reluctant to comment on the ownership structures of individual members, Meat Industry Association chief executive Tim Ritchie did say that whatever its origin, capital investment could only benefit the industry - and New Zealand - as a whole.
‘‘In general terms, our broader interest is to ensure the industry as a whole is well capitalised and able to invest in further development, innovation and market access,’’ he said.
‘‘Ultimately the success of the industry flows back to the success of the broader community, and to New Zealand as a whole.’’