PPCS chief executive Keith Cooper has delivered a broadside to shareholders for dumping company chairman Reese Hart, saying such a reaction reflected poorly on the industry.
In an address to about 100 shareholders at yesterday's annual meeting in Dunedin, Mr Cooper said the co-operative business structure allowed shareholders to vent their dissatisfaction at the board for low product returns, even though the reasons for lower returns were beyond its control.
‘‘This is a poor reflection on what is a substantial New Zealand business. This situation does not occur in other non-cooperative businesses.''
He was commenting on the recent board elections in which Mr Hart, who has chaired the Dunedin meat company for the past two years, was unseated by Herstall Ulrich. Mr Ulrich received 53% of the votes and Mr Hart 47%.
Mr Cooper said such a reaction could have unintended consequences.
‘‘Co-operative shareholders run the risk that they turn the co-op' model into a third-world business model in the eyes of the wider community.''
Some shareholders at the meeting said privately that they felt Mr Ulrich, a member of the ginger group the Meat Industry Action Group, should have stepped aside once the Alliance Group had announced plans to pursue a meat mega-company, an initiative similar to one which Mr Hart tried to instigate.
Mr Hart said PPCS supported the Alliance concept, having pursued industry rationalisation and consolidation since 2006 when it started discussing the issue with Alliance.
But he warned shareholders that pitfalls could become apparent when more detail was released.
‘‘The broad policy is fine and we do support it. It has to be 80% [of the New Zealand livestock kill], but it has to be an improvement on the model that we have got.''
The meat mega-company could not be an enlarged version of the existing industry procurement, processing and marketing model, a concept many in the industry believe to
be flawed.
Mr Hart said PPCS's support was also predicated on an assessment of the meat megacompany's success, confirmation of expected benefits and that PPCS shareholders have all the information to make a decision.
He also said the Meat Board's $59 million contingency reserve should be contributed to industry restructuring and said farmers should note that in 1984 ANZCO was established by then Meat Board with farmer levies and it was ironic meat producers could be buying it back again to join the meat megacompany.
Overcapacity was continuously blamed for industry problems, yet ANZCO, Affco and Alliance had all built new plants in the past five years, he said.
‘‘As a farmer co-operative, we have no interest in maintaining the status quo if change will provide improved returns to our supplier-shareholders.
Yet, we are equally certain that the cost of industry reform cannot be borne disproportionately by PPCS shareholders.''
There was widespread support at the meeting for Alliance's concept, but Mr Hart's concerns were also acknowledged by shareholders.
Mr Cooper said PPCS had to continue running its business, but he also warned that he has seen advice the concept had a 50% chance of success and that it was optimistic to think it could be operating within two years, let alone within one.
While supporting the initiative, he said it had to address problems inside the farm gate and in the market.
‘‘I certainly see merit in it, but we have got to do something different with the 80% and not rely on the 80% to deliver us gains.''
Mr Cooper also announced plans to reduce PPCS's reliance on the United Kingdom market for lamb legs, saying the days of the traditional leg roast were coming to an end.
The company was developing subprimal, portion-controlled cuts that were easy to cook, and consistent with the changing demands of consumers.
The new cuts were favourably received in trials at the Anuga Food Festival last year and would require farmers to supply heavier lambs, over 20kg, which would create higher per unit returns and greater efficiencies.