Alliance Committed to Co-operative Model

While Silver Fern Farms is open to PGG Wrigthson’s offer to take a 50% stake in the company, Alliance Group remains committed to the co-operative model.

Alliance Group chairman Owen Poole said given recent strong feedback from farmer owners, it wanted to keep control of the meat processor with about $1.1 billion in annual sales.

Poole said yesterday Alliance did not want to comment on any industry consolidation discussions it may be involved in.

Last week, listed PGG Wrightson (PGGW) announced it wanted to take 50 per cent ownership of Silver Fern Farms (SFF), formerly PPCS, for $220m, but the plan is dependent on a 75 per cent approval vote by SFF farmers.

Poole did point to media-based “rumours” that this week it would meet Affco, another processor, for informal talks, but he would not comment further.

Last week SFF chair Eion Garden said his company didn’t have a Plan B. Is this a hint from Poole that Alliance might be coming up with one?

Alliance’s board will meet in Invercargill tomorrow.

Poole said any board decisions by the Invercargill co-operative on a response to the PGGW-SFF plan would be kept behind closed doors.

However, the board would give a response at a series of farmer meetings next month.

Poole expected annual farmer returns to improve 30 per cent next season starting from October 1, compared with the existing season, taking some pressure off farmers.

That will take the price of a lamb to somewhere between $75 and $80. Still not at the $100 which is what farmers say they need,  but a definite improvement on last season’s prices of $50 to $60 a head.

He had proposed four months ago a merger of the biggest meat companies to control 80% of the nation’s lamb and beef produce, but talks with SFF fell apart.

Poole said yesterday that 80 per cent level remained the key for any aggregation.

Farmers that had phoned him were strongly against any move away from the co-operative standard.

Alliance shareholders and supplying farmers had been concerned about the new developments, particularly if it would take an industry player away from co-operative status.

This would make the 80 per cent consolidation level widely accepted as a minimum that much harder to reach, he said.

“(But) if there’s opportunity for aggregation under an open model, then we’ve got a very open model.”

He added his phone had been extraordinarily busy from concerned farmers with no enthusiasm at all for the idea of corporate involvement in Alliance ownership.

Fonterra shareholders aren’t keen on diluting farmer ownership of their company. The grapevine is suggesting SFF shareholders are yet to be convinced that losing farmer control will be the best option for the meat industry too. What they say now is not necessarily a reflection on how they will vote later in the year and someone could come up with a Plan B before then anyway.

3 Responses to Alliance Committed to Co-operative Model

  1. I’ve wondered if farmer co-ops in NZ wouldn’t be well served by setting up a direct-sales group (phone and web sales) to sell whole and part beasts directly to consumers at a price better than they can get from the usual distribution networks. That would put some downward pressure on the prices distributors set….and give consumers with freezers an option for saving money on their meat purchase….without having to involve the co-op in retailing. Someone wanting to buy could have it delivered to a local butcher who would cut it up for them – if they needed that.

    I’d happily pay $150 / frozen or chilled lamb or $1500 for a full frozen / chilled cattle beast…and save money overall.

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  2. rayinnz says:

    Good idea Steve
    It was possible to get cuts delivered from PPCS via their mail oder division
    Or rather it was , I am not sure if that stayed with the name change
    They weren’t inexpensive but were top quality, the venision was to die for
    Try a google search and if you live close to a Works they often sell meat direct form their own shop

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  3. homepaddock says:

    Gourmet Direct does this though it’s aimed at ready-to-cook cuts at the top end of the market. If you’re looking at whole sheep/cattle do you need the co-op for that? Why not cut out the middle men and get a butcher to do it.

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