Alliance Group out to entice new and shore up old suppliers

Chief executive David Surveyor told Rural News the meat processor and exporter wants to return to its roots as a cooperative and will emphasise during the roadshows its cooperative principles and a new strategy it believes will get better returns to farmer shareholders.

"We are a 100% New Zealand-owned company and we exist for the benefit of our farmers," he says. "The message we will give is that farmers are at the absolute heart of every decision we make."

Surveyor says New Zealand farmers fundamentally understand that it is useful for them to have ownership in the value chain and the ability to influence the value chain for the red meat sector.

"Because we are a co-op, if you think about all the various participants in the value chain, we are the only ones who are absolutely thinking about the whole value chain and how to get more money into the farmers' pockets.

"Others, quite reasonably, are thinking about their own position. That whole cooperative ethos is really important to how we run our business and our farmers get and understand that.

"Or, at least, we are here for cooperatively minded farmers. There will be some who, quite rightly, have their own view on how they want to operate."

Survey says they will hold 24 events across the North and South Island as compared to nine last year. They are encouraging smaller groups so they can have closer discussions and answer questions.

The cooperative principles will be the first of three main topics that will be talked about including rolling out, in a detailed sense, what their principles are.

"These principles we have spent quite some time thinking through and we've done market research to road test them and make sure they work for them. We are now going to take these out to farmers and give them the message that we're in partnership with them."

Surveyor says they have spent a lot of this year thinking about company strategy. "We've really got clear how we drive forward the economics of our business and create a model that perpetually builds velocity into the way we operate.

"The strategy has two key parts: first, capturing more market value for our product; making sure we match our product to the market we are in; ensuring we continue to develop new markets; investing in new product development, product life extension, packing and brands, etc.

"We intend to use the gains generated by capturing more value-added market and putting that into higher livestock prices for our farmers. That will pull through more volumes for our plants and we will reinvest the gains from that in our whole sales and market journey and back into more livestock value for our farmers."

An example of value is improving product shelf life. They have been able to extend the chilled life by an extra week. That gives economic value in sales, particularly in their UK markets, because chilled is a higher value product than frozen, and they also get the operational benefits of having a week longer to produce chilled product.

The second part of this model is reducing costs. "If you want to be successful you have to get at the right end of the cost curve in a highly competitive market," Surveyor says.

"We are investing in building our capability to get to lower cost; we will use that lower cost once again to pay farmers higher prices for their livestock; that will pull through more volumes and allow us to get the benefit of that to continually reinvest.

"We have these two virtuous loops we are creating in the way we run the business."

Decisions made in July and August on automation and the Smithfield and Pukeuri plants will improve the yield from the animals, with the benefit going back to farmers.

Surveyor took up the chief executive position in January and says the in-depth look at the company's strategy has been valuable.

"It has helped us [see clearly] how we will make more money for farmers – whether in livestock payments or distribution prices we will be able to make over time. It has uncovered some of the opportunity we have had to improve the capability of our business. We are adding some people into our business to bring particular skills.

"The other insight is the importance of engaging our farmers. They are both our suppliers and our owners and we need to make sure we are really connected with them."

The roadshows will also see the co-op commit to giving regular market updates "so farmers get some sense of how the world is progressing as we move through the season".

"I think it will be a better season than last for sheepmeat."