Shadbolt shares WNZ's brand plan with wool growers

JON MORGAN
Last updated 16:06 22/11/2012
Mark Shadbolt
SELLING POINT: Mark Shadbolt said prices for woollen rugs in warehouses went as high as $197,770. "The only way we can capture these benefits is to get ourselves organised."

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Sheep farmers are hearing of big opportunities to sell their wool in China and the Islamic world at meetings being held around the country.

The meetings are to promote Wools of New Zealand's prospectus asking wool growers to invest at least $5 million to buy shares in the company and to commit wool for deals to high-end users such as airlines, hotels, luxury apartments and cruise ships.

WNZ chairman Mark Shadbolt told a meeting in Feilding that the Dometex carpet fair in Turkey this year offered an introduction to Middle Eastern buyers and makers of wool carpets for the world's 30,000 mosques.

Their carpets used 5 kilograms of wool a square metre, much more than the Western World's 2kg.

China equity manager David Mahon said, via a video clip, that New Zealand wool was highly regarded.

"Ten years ago there was no wooden-flooring market in China - it's now a 100 billion renminbi [$19.7b] business - and there is the beginning of a rug market into ordinary middle- class homes. The producers of those rugs face a similar growth opportunity as those in the early days of flooring.

"New Zealand has a chance to convert its strong wool into a very high value furnishing product," he said.

Shadbolt said prices for woollen rugs in warehouses went as high as 1 million renminbi ($197,770). "The only way we can capture these benefits is to get ourselves organised."

Specialist brands were gaining as much as 60c a kilogram for premium wool destined for carpets, rugs, clothing, furnishing and bedding.

Other products being developed by WNZ that bound gold and silver to wool for luxury fashion items and used natural glues for carpet backing promised to earn more.

Shadbolt described the use of branding as a "pull strategy", where the company found what customers wanted and pulled their standard through the value chain from growers. "It's quite different from a push strategy, where you and I push wool on to the market and we don't know where it goes."

Wool not needed for the brands would be sold through the grower's designated broker into the auction system.

"It will be freedom of choice for you. Wherever you sell your wool today, that will still happen. We want to work with the current industry; we don't want to duplicate what they're doing."

WNZ was bought last year from PGG Wrightson after a failed attempt to set up a wool co-operative.

Shadbolt, who was supported by directors Phil Guscott, a Wairarapa farmer and co-founder of Lean Meats, and Craig Hickson, owner of Progressive Meats, said the new company was designed to strengthen WNZ's brands and market connections.

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WNZ was already operating, providing $1m in revenue, which meant the new company would have a "rolling start".

The recent drop in lamb prices and low wool returns showed that current business models were not sustainable for the sheep industry.

"We have to take a determined and committed approach to developing new models in the industry that provide on- going commercial viability for growers and the industry."

A simple company structure was proposed that would include only those growers who committed before the December 14 closing date.

The $5m threshold was pitched low to win support and it was hoped $10m would be raised. It was assumed at least 2000 growers would sign up.

As much as $2m of the capital would be used to meet establishment costs, including $550,000 spent on the prospectus, and to repay borrowing taken out to buy the business from PGG Wrightson last year.

This was $1.8m, of which $1.2m was put up by Hickson.

Shareholders would have to join a quality assurance programme that offered traceability of wool back to the originating farm.

A development fee of 15c a kg would also be paid by shareholders, raising about $3m in the first year, and would be supported by $1m of commercial revenue. This would finance daily operations.

- The Dominion Post

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