At first glance,
Roman legions crossing the Rubicon River
2000 years ago has nothing to do with the
parlous state of the NZ meat
industry yet the expression “to cross the
Rubicon” is exactly what some reformers of the
industry are calling for. Crossing the
Rubicon has evolved (in English) to mean - there
is no going back. Alea Iacta Est ; The die is cast.
The need to change many facets of the meat industry is obvious. Those industries that refuse to adapt - to changing trade patterns, production levels and competition - are doomed to fail as history shows.
To merge Silver Fern Farms and Alliance as
the first step towards rationalisation of the industry is fraught with questions and will also
mean there is no going back for the shareholders of both companies if things don’t
work out as hoped. To obtain 6% shareholder support for a special general
meeting to discuss why a merger should not occur - is no simple task; however
it could also mean that the remaining
94% of shareholders are somewhat less enthusiastic about the
merger proposal as the first step
towards reform of the meat industry.
And what of
rest of the meat processors in NZ? The
remaining 50%. Will it be competitive business as usual at the farm gate and in the
international market place?
Producers enjoy competition when buying and selling so many may not agree to forgo competition when selling
their produce, despite the
negative impact on processors/exporters not knowing where or when supply of
stock is coming in for processing. The rest of the
“independent” processors within the
meat industry would undoubtedly see the
new large co-op and their suppliers -
as fair game.
It is noted that in
dairy industry, Fonterra sees cherry picking of their
suppliers as a significant problem.
It is also hard to see cash strapped sheep farmers investing sufficient funds to ensure proper capitalisation of a new co-operative. Where
then will the essential new capital come from? More bank debt
or will all shareholders be approached to guarantee support for a single
co-operative processor before any decision to merge? And who would sit on the board of the
merged company? Some profiled individuals involved with the
industry over the years will no
doubt see an opportunity to reinvent themselves.
That would be a mistake.
It is unusual to say
the least for
shareholders and not the directors
to instigate a merger - which is the
case with SFF and .
Deals can look great on paper but traditionally Alliance there
is less attention paid as to how the
integration of the two separate
company’s cultures allow for a successful transition into one well functioning
International experience shows that most mergers fail to produce anywhere near
projected benefits, yet some do where there
are clearly identified commercial reasons.
It is worthy of note that Price Waterhouse Coopers were commissioned approx seven years ago to report on
the benefits or o therwise
of a merger between Alliance and SFF. Why has that report not been released to the
shareholders who paid for the
There are however o
aspects of this merger proposal which the
wider public have an interest in. The social, cultural and environmental
considerations of the sheep industry,
barely warrants a mention during this merger debate. It is increasingly noted
that stakeholders, such as the
industries’ work forces are pretty much ignored. It is also well understood
that environmental impacts of the
sheep industry are much more manageable, so it would seem not unreasonable to
assume that the wider community also
has a significant interest / stake in this important discussion. It is however the all important cultural differences that are
simply glossed over by the advocates
of a merger. The takeover by PPCS (now SFF) of was an unmitigated disaster for PPCS
due in large measure to Richmond the cultural
differences between the two
Has nothing been learned by
the advocates of a merger of the
Sou thern co-op’s?
Some farming folk believe that it is only through cooperatives that farmers can exercise a measure of control over
the industry. In truth farmers have never had any effective
control over the industry. Nei ther SFF nor
are or have ever been true cooperatives. Alliance
Both would take non shareholders’ stock for processing, sometimes ahead of loyal supplier shareholders. Traders in prime livestock played one co-op off against
o ther - much to the annoyance of shareholders. And so it goes on.
refusal by exporters to cooperate in the
market place that reflects badly on the
sophistication of the export
industry. They still seem to believe the
‘enemy’ is within.
The highest level of cooperation must occur in
the marketing of all NZ meat
protein as the first vital step
towards re-establishing the sheep
The finance and investment industry reports regularly as to
returns back to their investors.
There needs to be a mechanism set up within the
industry to inform all producers who is performing within the market place. Tell the
producers which companies are “cooperative” and who isn’t, then maybe, just maybe sensible decisions will be
made as to whom farmers should supply on a long term basis.
The question of whe
to merge or not to merge can then be
made with hard data readily available, which currently is not the case.
The solution to
sheep industry’s woes comes with the
right structure and an agreed strategy in equal measure. Mergers or takeovers
will then occur but only for the right reasons and with the
right people at the helm. It behoves
us all to remember the Greek economy
and its failure to change. There will however be no bailout for the sheep industry.