Outgoing Anzco leader turns attention to farming
Sir Graeme Harrison says the meat industry remains in a battle for survival, writes Heather Chalmers.
Life is turning full circle for retiring Anzco Foods founder and chairman Sir Graeme Harrison. Harrison, who has sold his shares in Anzco and steps down as chairman at its annual meeting in March, is now turning his attention to farming. After 34 years with the company he is relaxed about moving on, with the succession plan well signalled.
Again living in Methven, where his family farmed and trained racehorses in his younger days, his new focus is a hill country property with flats at Alford Forest in the Mid-Canterbury foothills. The sheep and beef property is farmed by his daughter and son-inlaw Michelle and Daniel Carson, and he intends to take an active role.
On receipt of his knighthood in 2011, Harrison spoke proudly of how he and The Warehouse founder Sir Stephen Tindall were the only two people of his generation to have built a business worth more than $1 billion out of nothing.
This is despite operating in the notoriously challenging meat sector and concentrating his focus on expanding into Asian markets outside the traditional sheep and beef export markets of the United Kingdom and United States.
It is fitting that Anzco should have a significant presence in MidCanterbury, where Harrison grew up. Five Star Beef, in coastal MidCanterbury remains New Zealand’s only large-scale beef cattle feedlot. The nearby Seafield processing plant – its first – was bought following the collapse of the Fortex meat company.
He is proud that apart from the Anzco head office in Christchurch and its Green Island plant in Dunedin, all its other operations are based in the regions, where most of its 3000 staff are employed.
Based on its 2016 result, Anzco believes it is New Zealand’s fifthlargest exporter and second-largest meat industry business with an annual turnover of $1.45 billion.
Stability of leadership has been a factor in its success, with only three chief executives over its 34 years, mainly himself and Mark Clarkson with Peter Conley for the past year, all appointed internally after working their way up the business.
Japanese company Itoham Foods, which has been a key partner and shareholder from the start now owns 100 per cent of Anzco, in a deal finalised in late December. This follows its purchase of the remaining 16.76 per cent owned by another Japanese group, Nissui, and 18.24 per cent held mainly by the Harrison family but also Anzco management.
Itoham Foods’ association with Anzco dates back to 1989 when the two companies formed a 50-50 partnership that resulted in the establishment of Five Star Beef. Itoham joined a management-led buyout of the then-Meat Board’s shareholding in Anzco in 1995 and held a minority 48 per cent until 2015 when it increased its position to 65 per cent.
Itoham has signalled that it will not be making any significant changes to the business operations of Anzco in the foreseeable future. Anzco is an important part of its strategy to grow its business internationally, particularly in Asian markets outside Japan.
Harrison’s view is that while New Zealand’s meat industry has been relatively stable in recent years, with no company collapses, make no mistake, its meat companies continue to be locked in a battle for survival. The industry operates on intense livestock procurement competition and thin margins.
‘‘Without question it is New Zealand’s most competitive industry.’’
Critics say short-term thinking plagues the meat industry, which lacks innovation. ‘‘People looking from outside think it’s management incompetence, but they don’t understand its competitive nature.
‘‘A processing and marketing sector operating in survival mode has little or no capital surplus to invest in innovation to help the industry’s relative competitiveness.’’
Harrison, who has also been a director of Westland Milk Products and Sealord says the meat industry is much more competitive and hardnosed than dairy or seafood as it does not have control over its biggest cost – livestock. As dairy and fruit are perishable products, farmers and growers have to commit to supply within tight timeframes, or face product loss.
‘‘Wool can sit in the back of the shed and there is no imperative to kill livestock on any particular day. So what actually happens is dictated by the farmer, whose actions are in turn dictated by the weather. This is right at the centre of how the industry behaves.’’
The meat industry continues to be a battle of attrition, with excess processing capacity because of land use change, a big drop in sheep numbers and fewer beef cattle, along with technology improvements.
‘‘Survival in the meat industry is much tougher than people imagine.’’
He does not begrudge sheep and beef farmers, whom he describes as traders. ‘‘Individual choice is a core belief in our society. Farmers want choice and only through necessity will they collectivise.’’
Initially a sales and marketing company, Anzco did not own a meat slaughter plant until it had been in business 10 years. Instead it contract-processed through five plants in Korea, cutting and repackaging New Zealand sheep carcasses for Japan and Taiwan.
‘‘But the reality is, even as a marketing company, you can’t survive unless you have certainty of supply,’’ Harrison says.
Anzco took a different path to other meat exporters, starting offshore as a sales and marketing company, then backwardintegrating, with the establishment of Five Star Beef, then processing plants. Harrison says the Five Star Beef feedlot remains the biggest individual source of New Zealand chilled beef exports.
‘‘People said it was doomed to failure. I am happy to say it has been a success.’’
Harrison went to Japan initially on behalf of the Meat Board in 1984 to set up a sheepmeat marketing company. Japan was targeted, as it was the largest importer of New Zealand sheepmeat at the time. In 1991, Japan liberalised its beef market access, marking a change for Anzco from exporting sheepmeat to mainly beef.
Rather than expanding livestock processing capacity, the investment focus of Anzco in recent years has been on value-add activities.
‘‘Anzco’s future business direction is to increasingly invest in what we describe as ‘food plus’, including food solutions, health care and food ingredients. New facilities have been constructed to service specific customers,’’ Harrison says
Chairing the New Zealand International Business Forum for seven years, Harrison says he is passionate about the importance of trade negotiations and market access. ‘‘Even though I will be on the sidelines, I will still be taking a strong interest. You look at Anzco’s history and it is all about market access.’’
He says the latest incarnation of the trans-Pacific trade agreement is vital for the beef business to reduce high tariffs of 38.5 per cent into Japan. This was limiting exports to Japan, particularly as Australia has a more than 10 per cent tariff advantage.
New Zealand does not have a choice about welcoming foreign investment. ‘‘If you want to go down the path of investing in serious value-add activities you have to attract capital. I’ve never had any hang-ups with foreign ownership. The jobs are here and opportunities are here.’’
He is looking forward to spending more time on his property, Mt Alford Station. ‘‘It one of those ironies that school friends are retiring from farming and I am going farming. I hope I can keep fit enough for a few years,’’ says the keen runner.
Re-fencing and development of the flats has been completed, with development of the hill blocks starting, as well as tree planting.
He also plans to become more involved in local and environmental matters such as a Landcare group and the Hinds managed aquifer recharge project.