Growerco Abandons Wool Marketing Plans
Growerco has abandoned its plans to form a co-operative wool marketing company because of a lack of grower support.
Growerco chairman, Sir Brian Lochore, said today that the company was unlikely to have got the critical mass of wool it needed to reform the industry.
Growerco was intended to be a fully integrated supply, sales and marketing business as envisaged by the McKinsey Report.
The company estimated that it needed at least 50,000 tonnes of wool a year to create efficiencies in the wool pipeline and to reform the way wool is marketed internationally. It was seeking to get growers to commit a minimum of 40,000 tonnes in the first year.
"When we launched the proposal I said that there would be no point in going any further if we didn't get sufficient volume," Sir Brian said.
"Despite extensive advertising, spending two weeks travelling around the country talking to growers, and writing to every wool grower in New Zealand, we got a mere 12,000 tonnes firmly committed by just over 1,100 growers.
"Although there were indications of stronger support, there was still too big a gap to what we needed for Growerco to succeed.
"Despite the overwhelming grower support for the McKinsey strong wool recommendations, it's disappointing that so few growers were prepared to back a proposal that would have delivered the reform the industry needs."
The Growerco proposal grew out of a gathering Sir Brian called in June of around 40 wool industry participants, including breed group representatives, Federated Farmers, brokers, Hawkes Bay wool action group members, Wool Board delegates, and other growers.
"I called that meeting because of the void that existed after the Strong Wools*Wrightson proposition failed to gain the necessary approvals from the McKinsey Implementation Project Team.
"That meeting was unanimous that doing nothing was not an option. It appointed a committee to develop a plan that would reform the wool industry.
"We called these people back together again part way through the development of the proposal. They largely supported our plans, and instructed us to refine the proposal and take it to growers.
"The McKinsey Implementation Project Team recommended that the Wool Board support Growerco because it was representative of a wide group of grower interests, was national, and would implement the reforms McKinsey proposed and which growers voted overwhelmingly to support.
"We made every effort to ensure that every wool grower had an opportunity to participate."
The cost of developing the Growerco proposal was $491,000 up until the end of November, with a few invoices still to come in. This was less than the capped budget approved by the Board because Growerco never issued a prospectus.
"While we are grateful for the Board's support, Growerco has always been a grower initiative," Sir Brian said.
He said that Growerco recognised that it was going to be difficult launching a new company just before Christmas.
"However, there was a lot of frustration among growers that nothing was happening, and if we had waited until next year, that would have been another season gone, with nothing.
"We needed to gauge support for issuing a prospectus. There's clearly not enough, so it's time to call it quits."
Sir Brian said that growers must drive industry reform.
"Apathy, a reluctance to make decisions and the inability to look into the future are fundamental problems in the wool industry, particularly among growers.
"Reform of the industry needs to be based on a new selling system. The wool industry doesn't need another broker or exporter, and it must get away from trading on the spot market and taking a first-price mentality.
"Extra value can only be achieved through participation in the value chain. Growers need to move away from the spot market and embrace a new payment system that will reflect that participation."
"We have achieved that in the meat industry. However, the wool industry is now where we were 10 years ago with meat, where we mostly provided mostly frozen carcasses."
Sir Brian also said that those established players who opposed Growerco were simply trying to protect themselves against the inevitable.
"Our cause was not helped by the confusion of plans in the industry. Vested commercial interests, rather than a genuine grower-led attempt to reform the industry, drove competitive responses by others entering the market.
"Any effective, reforming business needs to be a global marketer along the lines of Fonterra or the large meat companies, which can take all the product farmers supply, and market it around the world.
"Growerco could have been that business. It's just a pity that more growers could not see that.
"I hope a grower-based, global wool marketer does emerge. It is the only hope for our industry, and prevent a world-class fibre becoming a nuisance by-product of meat production."