Supermarket contract points to the future

Supermarket contract points to the future

It appears the seed of the Primary Growth Partnership could very well have been sown by the Rissington/SFF/Marks and Spencer contract that has existed for 5 years.

However the worrying aspect to this plan is the premium, once firmly established in this contract, has been removed.

While the farmer involved believes he gets a premium for other aspects to the scheme, are supermarkets getting their cake and eating it too?

Changing to a system such as this, requires a huge comittment for all the farmers involved, and they should be compensated accordingly.

A few months back, Sam and Hannah Morrah got up early  to sit in an office and talk to the people who buy their meat on the other side of the world reports The Dom Post. It is with the agriculture manager and meat buyer for British supermarket chain Marks & Spencer, the supply chain manager for NZ meat processor and exporter SFF, and other farmers in the North and South islands. This close connection between farmer and retailer is unique to just 46 farmers in New Zealand, part of a special contract that aims to deliver year-round supplies of chilled lamb to Marks & Spencer's stores.

The contract was launched by Hawke's Bay-based livestock genetics company Rissington Breedline four years ago, and the farmers all use Rissington breeds that produce a big, fast-growing, meaty lamb. Under the contract, the Morrahs' lambs have to meet strict quality specifications of weight and fat cover and the promised numbers have to be delivered at contracted times.

For Mr Morrah, who is entering his second season as a Marks & Spencer supplier, the frankness of the discussions at their first meeting was refreshing in an industry noted for its distrust. The Marks & Spencer managers also passed on customer feedback from lamb promotions. It is an example of the dedication that contributed to the couple winning Marks & Spencer's Future of Farming Award for its top food supplier this year. The company asks its suppliers to abide by its sustainability principles, what it calls Plan A, and the Morrahs were able to show how they deal with drought, and that they apply fertiliser using a nutrient budget, recycle plastic waste, have fenced off native bush and waterways, go to great lengths to ensure the animals are well cared for and look after their staff.

The Mark & Spencer contract specifies lamb carcass weights from 17.4kg to 20.9kg and the Morrahs have had to plant special forage crops to get those weights. Although more money was the main reason for the change, he was also attracted by being in the vanguard of innovation."This is the way the industry should be going. In Rissington, we have one of the better genetic companies and we believe Silver Fern is on the right track by getting closer to the customer."

Someone has to make the commitment and it may as well be the farmer. That's what we did, signed up to supply set numbers at set times of the year. "If another 150 or even 250 could do that, ride it out for a couple of seasons while the high- paying markets are found, then the industry might be on its way back to profitability." He adds wistfully: "Still, it would be quite nice to be acknowledged for your commitment to the processor with a competitive price, plus a top-up at the end of the season so you don't come out worse off than the spot supplier."

 

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To be frank I dont see what they are doing is particularily special apart from the fact that they know exactly where their product ends up and they are jumping through more hoops. Its esentially a marketing gimmick to encourage use of Rissington genetics. If theirs no price premium wheres their advantage over anyone else who are essentially running the same system but maybe useing different(possibly superior) genetics

Annon, I completely agree with you. The model described above is exactly the way things are going. My main point though is the only actual winners in the above model are Rissington whos genetics are to be used but no premium is returned to the farmer. Thats not a win win. Changing the meat industry is incredibly simple. Financially incentivise a certain model and we will fall over ourselves to supply.

As your,re aware chipper we have two sizeable farmer owned co ops now. Now that SFF have reduced their debt I could see no reason for them not joining up with Alliance. This would simplify processing space reduction, gain some market clout. Then it will be up to us to give it our support and therefore a chance at making some real progress. The real danger looming I believe is a big international player like JBS coming in for a slice of the lamb action , inflating prices in the short term to buy some business. This might work in our favour in the short term but would weaken our co ops so that long term we are at the multinationals behest. Lets get our house in order first and avoid being picked off.

OK chipper, heres the oil. SFF and Alliance are 100% farmer owned co operatives. Both are headquartered based in the south of NZ but have a national footprint. Alliance is the biggest exporter of sheepmeat in the world and SFF is number two( I think). Together they represent about 55%of total NZ kill. They operate many plants in proximity to one another which operate at less than peak capacity much of the time, they sell to  much the same supermarket clients, many of their shareholders hold shares in both, many supply both and they both agree on the market led philosophy etc etc. A couple of years ago there was a movement aimed at a merger but it failed supposedly because of SFF carrying to much debt at the time primarily. Frustratingly underlying this is a history of intense rivalry and farmer politics and tribalism. As  a business model this seems to make no sense to me especially now SFF has dramatically reduced its debt.

No not exactly. It has been mooted and attempts a couple of years back failed. There are two other significant players Affco and CMP which are privately owned as well as a number of small operations. The dairy boys had the advantage of it being totally farmer owned and marketing through the dairy board so the creation of fonterra was a logical progression of that. The meat thing is alot more complicated but the merger of Alliance and SFF would seem a logical first step to me.