Red-meat mergers no magic bullet, says CEO
Alliance Group farmers are worried about the drought and low lamb prices, and want to talk about industry mergers, says new chief executive David Surveyor.
Surveyor took up his new post on January 22, replacing Grant Cuff, and has been quizzing farmers, staff, directors and industry people to learn all he can about the farmer-owned processing and export co-operative.
Change usually arrives with a new hand at the helm and he expects there will in time be new investments and costs reduced.
In the meantime, he is focusing on learning about the meatprocessing industry after previously leading a subsidiary of Fletcher Building and working for BHP in Australia and Bluescope Steel in Malaysia.
Surveyor said he was getting around as many farmers as he could and talking to people in the business after visiting seven of the eight Alliance plants, with only the Nelson site remaining on his itinerary.
He said the advice from farmers visiting Alliance’s tent at the Wanaka A&P Show last weekend was that it should consider carefully any developments proposed by Meat Industry Excellence (MIE) reform group .
‘‘Lots are talking about the schedule being too low, concerns about the drought and about general support for a [larger] cooperative.’’
Talks with MIE had been at a ‘‘listen and learn’’ level, he said.
‘‘We have to look at anything that is commercially sensible.’’
Surveyor said future conversations would have to include the significant costs of rationalisation and whether the parties were prepared to spend or had that money, but it would be premature to say this was a magic answer.
‘‘Beyond that, Silver Fern Farms is in the zone of play at the moment, but they are not the only ones.
‘‘There are a number of other players where there may be plants which might give us better geographical spread.’’
MIE put out a report this week, calculating hundreds of millions of dollars could be saved with better meat-plant distribution and realigning companies.
Surveyor said visits to Alliance plants had shown him that they were well run and with scale.
He said there was a lot of talk about over-capacity but, during the South Island drought, capacity had been short at the peak.
Alliance had given its shareholders priority processing when animal feed was down in line with co-operative principles.
The co-operative had already consolidated its meat plants and was about the right size, with only some tweaks remaining to optimise meat manufacturing, he said.
Long-term prospects for red meat were looking good because of growing global demand, increased health awareness, consumers seeking convenient foods and the growth of middle classes in Asia and elsewhere.
‘‘The mega trends are right, but we have to be realistic.
This has been a tough year for farmers, with some frustrations, and we can’t blame them.
It’s a fairly low-margin industry
Open-gate policy: and, over the next period of time, the focus is to be about how can we get it to be a better business, get returns up and efficiencies up to grow the market.’’
Meat schedule prices were reflecting softer demand than expected in global markets. Lamb prices varied between the South and North Islands, and the differences would be better explained to farmers in the future.
Forecasting was difficult as it sometimes went wrong, but the easy option would be to do nothing, he said.
The company was working on cost reductions as well as growing the business to create more value for farmers.
Surveyor said he might be light on meat-processing experience, but he would bring a fresh set of eyes, arrive quickly at a solution to problems and bring skills from mining and building corporates that could be applied to any business strategy as well as the ‘‘soft skills’’ of explaining change and getting people aboard.
He said the corporate skills of good timing, management, and governance could be passed on to farmers and Alliance might explore using its scale to get them better fuel, car and power prices.
Alliance’s new leader has bought a house in Christchurch for his family.