Consultant: dairy co-op moves will benefit economy

By Philippa Stevenson

agricultural editor

Controversial dairy industry restructuring has scored well with the author of a landmark report which sought to highlight industry failings.

Denis Hussey, director of Australian business consultancy ACIL, produced the study on agricultural marketing regulation for the Business Roundtable in 1992.

He immediately became to New Zealand farmers what Denis Conner is to the country's yachties - the man they loved to hate.

In Canberra yesterday Mr Hussey said the dairy industry strategy looked to be tackling the two issues highlighted by his report - the export monopoly and the bundling of returns to farmers from off-farm investment with those from milk.

"It looks like what is being proposed will address both. Once those changes are made, this industry will have much better prospects of maintaining and enhancing its competitive position than ever in the past," he said.

Mr Hussey said the uniting of most of the country's dairy companies with their export marketer, the Dairy Board, into a mega co-op promised to be good for New Zealand.

"To the extent that there are benefits in size in some areas of the market, and in some products, then that's beneficial to New Zealand."

He did not believe that having one major player in New Zealand's dairy industry would be either anti-competitive or uncompetitive, "because you are dealing with the international export market ... as long as you've got no barriers to any other player setting up [in New Zealand]".

The mega co-op's success could be judged by the usual commercial indicators - mainly returns to its owners.

"They are immediately comparable with returns from any other form of investment in the economy. And the returns farmers are getting from this entity when it buys their milk are comparable with other things done with the land, and what they used to get," he said.

However, it was unrealistic for farmers to think they, alone, could fund the industry's projected growth.

"It's a bit of a fairytale, and unfortunate that people are still inclined to believe they can actually do it and continue to grow and be competitive."

The Dairy Board may have brand dominance in some markets, but for any brand to stay on top, "you've got to keep ploughing the money in," he said.

"Brands don't seem to coast for long. If you don't grow your business as fast as the competitors, you're dead. And you don't grow a business without money. And if you just rely on dairy farmers for the money, then that says to me, you're dead."

Mr Hussey said farmers had shown they could choose highly competent people to run and grow their businesses, but sole farmer-control inevitably led to personal conflicts.

It was now showing in the challenge for Dairy Board chairman John Storey's directorship of New Zealand Dairy Group.

"While it is set up like it is, you will have this mix of commerce and politics. While they can say they want the best people, and the best directors, it doesn't always happen because of the politics that is involved."

Mr Hussey said if politics and emotion were to block the proposals because groups of farmers wanted to own everything, it would "be pretty sad for the industry.

"It probably won't stop the inevitable. It will just delay it."