Alliance Group returns to profit after two years with $93m turnaround
After two years, Alliance Group has returned to profit.
How long have you been working on getting this approval to expanding the Chinese market?
Wayne Shaw: It's a long process we've been working through the last 12 months. We already have our Pukeuri plant approved, but obviously China is a very important market to Alliance so we had an interest in getting the Levin and Mataura plants approved for chilled beef production.
How does gaining approval to supply any foreign Chinese market work?
Generally speaking, the NZ authorities (MPI in this case) have agreements with their counterparts in other countries that set our protocols and process for achieving listings.
Alliance is responsible for making sure we meet Overseas Market Access Requirements. MPI will then audit the plant that has the application in and, subject to that plant meeting all requirements, they will then put a recommendation through to their Chinese counterparts to have the plant listed.
Who approached who for this deal; Chinese customers wanting NZ beef or NZ producers wanting market access?
A bit of both. We have established customers in China for both our high-quality beef and lamb. In the case of beef, New Zealand is quite unique, largely grass fed, differentiated from the rest of the world's largely grain fed supply. That is sought out by a number of customers.
In this case it was basically a two-way conversation between our sales team and retail channels within China. Our high-quality beef creates demand, and we've obviously got to identify the best outlets for our products.
Over recent years China's economy has seen an increasingly aging population, low consumer confidence, slow growth, and now US tariffs. While this new deal is good right now, is 'NZ meat' wise to be investing so heavily in China, versus other markets?
China has had its well-publicised challenges and is going through an economic reset, but the reality is China remains a critically important market for the New Zealand beef industry.
It is important in all industries to have a range of markets and that's absolutely true for Alliance. But China is a very large country, and I don't think they will be any less important for NZ going forward.
What will production look like at the Levin and Mataura plants going forwards?
Both Levin and Mataura have year-round production/processing of prime and manufacturing cattle, [and] chilled beef mainly comes from the steer, heifer cattle.
They'll continue producing some chilled production year-round. Obviously, a higher proportion of their processing numbers will be manufacturing type cattle as we go through the peak of the cull cow period which is coming up in a couple of months.
What does this deal mean for Alliance's future options?
When we're processing any species we're looking to optimise returns for our suppliers and farmers at all times. The more options we have, the greater probability of maximum returns.
If one market might be down in one area for one particular cut, then we've got other options. As well as already having access to chilled into the likes of the US, EU and domestic, having access to chilled beef in China gives us another very significant market to move product to, chilled products generally being a premium compared to frozen.
