Woolgrower company marks ten years - 17 May 2010
Celebrating its first ten years, a farmer owned company, created to improve returns by bringing woolgrowers closer to their customers, has brought around 400 farmers on board, supplying wool with an export value of some $10 million per annum.
Recognising this success, others in the wool industry are taking the same approach.
In the late 1990s, Mid Canterbury farmer Tim Wilkinson’s increasing frustration at the inability of the wool industry to focus on the end users of its product, and the consequent reduction in returns for his wool, motivated him, and others to take matters into their own hands.
Ten years later the philosophies they put into practice, and have honed since, have won the approval of farmers and are now beginning to gain wider acceptance, with others in the sector adopting them as the way to turn around an industry that has been in the doldrums for at least a generation.
Along with a handful of like-minded woolgrowers, in 2000 Tim Wilkinson formed a company to give farmers critical mass when selling their wool, while ensuring their raw product could meet the growing sophistication of its market.
“From the McKinsey Report, commissioned in 1999, it became clear that growers of strong wool should take action on their own behalf.
“We needed to differentiate our product and we needed to maximise commercial benefit back inside the farm gate. To achieve that, we recognised that farmers had to act collectively and establish more direct links with the manufacturers who process our wool.
“Merino growers and their customers had developed a similar model.
“A number of us were involved in a nationwide campaign to create an integrated business for strong wool from the farm gate to the end user. When that did not come to fruition, we decided to go it alone on a smaller scale,” he said.
Forming a company, Canterbury Romney, they contracted farmers to aggregate their clip and consign their wool direct to processors, rather than selling through brokers or at auction.
“Initially Canterbury Romney supplied to Feltex in the North Island. While this wool was type specific and attracted good premiums, we could not take all the wool from a grower’s shed. It made better business sense to process our wool in the South Island, offering our growers the chance to market their entire clip. For that reason we established a partnership with New Zealand Wool Services International Ltd (WSI), supplying to their scour at Kaputone, just north of Christchurch.
“That relationship has remained ever since, going from strength to strength, growing beyond Canterbury to the wider South Island, contracting over 400 farmers, and becoming the prototype for WSI’s Purelana direct supply initiative,” he said.
WSI marketing manager Malcolm Ching has worked alongside Canterbury Romney to develop the partnership since Tim Wilkinson first approached him. He says the merino example is frequently cited as the model for New Zealand’s coarse woolgrowers, but it has proved more difficult to apply for fibre destined for carpet production.
“Carpet is a long-term investment, whereas the design or fashion garments created from merino fibre raw product are relatively short-term purchase decisions. Respective manufacturers of fashion apparel and carpets are influenced by different trend cycles and work to very different time frames. Influencing the latter to change their manufacturing practices is a much longer process than has been the case for merino with the fashion industry.
“To overcome that, we must generate better recognition of wool as a special, superior and environmentally sustainable fibre, which is why we developed Purelana as a branded product providing manufacturers whose focus is on quality with assurance of a premium standard, traceability and a consequential marketing advantage.
“Delivering all of this to our customers requires guaranteed supply. Canterbury Romney provides that, and three years ago we began applying the procurement model we have developed with them over the past decade to our Purelana brand. It has been interesting to see other scoured wool brands that have been introduced elsewhere since then have emphasised similar qualities in their marketing,” he said.
Milton Hulme, managing director of Woolrite, acts on behalf of Canterbury Romney and WSI, dealing day to day with the farmers who consign their wool via the partnership. He says the arrangement has stood the test of time.
“Farmers are loyal when they know and trust a system. Canterbury Romney’s principles are keeping it simple and direct, cutting administration costs to ensure growers maximise revenue. When they understand that and see it working, farmers have been supportive. Achieving a favourable price is important as well, of course, but if the price wasn’t right, Canterbury Romney would never have made it off the ground,” he said.
Tim Wilkinson says it is ironic that it has taken the rest of the wool industry so long to move in a positive direction around procurement systems and marketing initiatives.
“Ideally, back in 2000, when the McKinsey Report was published, differences within the industry would have been set aside and everyone could have focused on the job of restructuring systems that were not working in our best interests. Unfortunately, the decisive leadership and effective strategies needed to make that happen were lacking and the marketing of New Zealand’s strong wool has continued to languish as a consequence.
“Recent talk of a concerted effort to create demand for wool is certainly helpful. That will only be possible if appropriate procurement systems are in place, with widespread grower support. What Canterbury Romney and WSI have done, through the Purelana brand, demonstrates that it is possible to develop efficient systems that can serve the best interests of growers at the supply end, while creating a story that appeals to the end users of wool.
“Seeing others take a similar path is gratifying, though industry restructuring to create a more cohesive and functional wool sector is really what is required above and beyond this improved marketing and customer focus,” he said.
WSI exports around 40 per cent of New Zealand’s coarse wool clip to around 30 countries and owns two of the country’s five operational wool scours, at Kaputone north of Christchurch and Whakatu in Hawkes Bay.
Further Information:
Tim Wilkinson, Chairman, Canterbury Romney – 027 203 6791 or 03 303 7058
Malcolm Ching, Marketing Manager, NZ Wool Services – 021 330 392 or 03 357 8711