Rural delivery: Slim chances for repeat of GlobalCo

By GUENTHER MUELLER-HEUMANN*

The establishment of Global Dairy Co as a monolithic international marketing organisation is a victory of marketing common sense over absurd economic theory.

But can the GlobalCo model be used for other sectors of the New Zealand agricultural export industry?

Wrightson has made moves to set up a majority farmer-owned strong wool company without involvement by the Wool Board. And a woolgrower group headed by Sir Brian Lochore has been keen to establish a farmer-owned company to act as a woolbroker.

Wool Board chairman Bruce Munro has supported both initiatives because they could mean "the emergence of a long-term GlobalCo approach".

But is the GlobalCo concept applicable to the marketing of strong wools, once the flagship of New Zealand's agricultural exports but now less than a tenth of all pastoral sector exports?

Strong wool is an industrial commodity which is very difficult to market.

In the fine wool sector the South Island Merino people have achieved a near-miracle getting their product - and to a limited extent their brand - recognised by some Italian processors and fashion firms.

This was mainly due to a combination of unique product quality factors, including brighter colour and less contamination than in the huge amount of Merino wool offered by Australia.

These basic product differences have given Merino farmers a great platform on which to build a marketing strategy. Branding alone would not have worked.

Branding in strong wools is even more difficult without a distinct product advantage, because the immediate customer is a wool expert who is guided more by the objective quality than responding to some image built into a brand.

Further, the traditional channels are totally different in wool from other agricultural exports, especially as the wool auctioning system has in the past killed any impetus to add further value.

Some ideas about adding value have been totally unrealistic. Remember Sir Wallace Rowling's mission to set up carpet manufacturing plants all over the United States?

Cutting out the woolbroker middleman was another important building block for the successful strategy of the Merino people.

The Wool Board's generic wool promotion under the international Wool Mark and later our own "brand" was highly ineffective compared with the product quality-related effort of the Otago Merino strategists.

It took an amazingly long time for our Wool Board to realise that most people do not wear a (strong wool) carpet and to pull out of the Australia-dominated IWS Wool Mark system.

Apart from the shift from wool to dairy and meat, which has increasingly marginalised our strong wool industry, there is one important aspect which will make any move towards the GlobalCo concept in strong wools incredibly difficult: farmer ownership.

A major reason GlobalCo was a relatively easy option is that in the dairy industry farmers' product ownership does not end at the farm gate.

Our dairy farmers are indeed the "lucky farmers" of our lot. Not only do they have a product which can relatively easily be turned into consumer goods with much added value, but most of that added value goes back into the pockets of the dairy farmers who own their industry.

Today, the GlobalCo concept is much closer to an organisation like South Island meat co-operative PPCS, which is farmer-owned and controls about a quarter of our meat export sector, than it is to the strong wool industry, whose farmers own more or less nothing past the farm gate.

Even if Wrightson or Sir Brian Lochore's group came up with a great marketing concept (after almost 200 years of non-marketing), would our strong wool farmers be willing and financially able to raise the capital required after decades of poor prices?

* Guenther Mueller-Heumann is Otago University emeritus professor of marketing.