Change way to go, meat sector told

Eoin Garden
Eoin Garden
There is no place for looking back, regrets, accusations or ''if only's'' in the red meat sector - it is time to embrace change, outgoing Silver Fern Farms chairman Eoin Garden says.

At the company's annual meeting in Dunedin yesterday, Mr Garden spoke of the focus and debate on industry structure and the suggestion that a merger of Silver Fern Farms and Alliance Group should be ''the first step to a great outcome''.

Silver Fern Farms was having ongoing discussions with Alliance Group but it should not be a discussion about who had excess capacity, balance sheets and equity, brands or even about a merger, he said.

''It should be, in my view, about what does `great' look like and what would be the model for the structure we need to deliver `great'.''

Change did not necessarily mean a merger but it could well be a much more innovative structure.

''It's no good consummating a merger and just creating more of what we've already got.''

Competition from the dairy industry was not a threat to farmers, the real threat would be a reluctance to grasp the opportunities and change, he said.

Silver Fern Farms reported a $28.6 million net operating loss after tax for the year ended September. The company was focused on debt reduction, primarily to reduce the interest burden on the business, chief executive Keith Cooper said.

Kurow farmer Walter Cameron said the company's accounts were ''worrying'' and other meat companies had this year made profits, albeit very small.

While Mr Cameron believed the company's branding strategy was ''great'', the model did not allow it to work. With total branded product less than 1% of total volume product, he questioned whether the strategy was correct when it was costing ''$17 million out of the bottom line to do that''.

When competitors were in better financial positions, he believed every idea and strategy should be given a ''hell of a good think''.

Mr Garden said when the branded proportion of total volume product reached 10% ''that's when the rubber will really hit the road'' and the balance sheet would be ''so different''.

In the three years that the company had branded product in the New Zealand retail market, there had been a 30% year-on-year increase in volume and a 28% year-on-year increase in value, which was ''spectacular''. The company's investment in branding in the marketplace was global.

Consumers should be ''front of mind'' always and investment in the marketplace would deliver far greater returns than simply producing more product on-farm, he said.

Both the company and the industry faced significant challenges. A successful co-operative in the future would have shareholders who were seriously committed, both financially and with the supply of their livestock.

The company's board and management were ''absolutely focused'' on controlling costs and creating more value from the marketplace, he said.

West Otago farmer Allan Richardson believed more energy should be put into industry consolidation, while Alex de Boer, of Owaka, believed the company had to get back to a profitable state and then start looking at ''fancy markets''.

Mr Cooper said the company's overall strategy was one of value creation; positioning better quality products it knew the consumer wanted to pay more for.

It was looking for more product, it needed more supply and it had assets it needed to better utilise, he said.

New chairman Rob Hewett said it was a board view that the company had to get extra value out of the marketplace, and he was convinced its strategy was the right one. Mr de Boer raised the salaries paid to staff, including the increase in the number of those paid over $100,000.

Mr Garden said a big proportion of senior management salaries was an at-risk component and the at-risk component in this year's accounts related to payment of that from the 2012 year.

The at-risk component for the 2013 year meant senior management staff had taken a reduction in salary, he said.

Mr Garden congratulated new directors Richard Young and Dan Jex-Blake, and thanked outgoing director David Shaw, who unsuccessfully sought re-election.

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