Shift to branded sales 'essential'

SUE O'DOWD
Last updated 08:01 29/11/2012

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The biggest risk facing New Zealand's wool industry is for sheep farmers to do nothing, says Wools of New Zealand (WNZ) chairman Mark Shadbolt.

WNZ is on a campaign to raise $5 million of capital to commercialise it into a sales and marketing company.

Shadbolt, who addressed about 20 farmers in Stratford last week as part of a national roadshow, was part of the failed $65m capital-raising by the Wool Partners Co-operative that secured about $38m from sheep farmers in 2010.

The funds raised will pay back $550,000 needed to launch the prospectus and capital- raising, plus $1.8m of loans incurred when WNZ was purchased from PGG Wrightson last year. The remainder will be used to develop marketing and royalty earning programmes around the company's brands.

Shadbolt said the new company was open to all strong wool growers but would not be a co-operative.

"Why do we sell wool as a commodity? New Zealand strong wool is the best in the world and should be treated as a niche product.

"Growers need to appreciate that a branded strategy is essential, because it focuses on what the consumer wants."

They needed signals from the market identifying what customers wanted and what they were prepared to pay, he said.

"The closer you get to the market, the more likely you are to capture value - we don't do that today. We have to understand what customers want and get that information to growers. We'll produce what they want and negotiate a price for that."

At present, farmers were paid at the front gate or at auction. "Where does your wool go? Nobody knows."

An evolutionary shift from commodity sales to branded sales was required, Shadbolt said. "It's about you as shareholders owning the brand and the asset. We want to protect and build the value of the Wools of New Zealand brand.

"There's no quick fix - it will take time, and that's why we need investment."

Growers are invited to subscribe a minimum of 5000 shares at a ratio of $1 for every two kilograms of their annual strong wool production. In addition, shareholders will pay 15c/kg of their total annual production for market development. Shadbolt expected that WNZ would pay no dividends in the first five years.

"We need to get on with the job. We've had 20 years to make our minds up and do something.

"Ultimately, it's about improving shareholders' returns for wool. We don't want wool to sit at $3 a kg.

"The biggest risk is doing nothing. We can leave it to others and blame others, or we can back this once and for all for a long and viable future for the sheep industry."

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He urged supporters of the venture to send their payments as soon as possible, but said no payments would be banked until after December 6. The closing date of December 14 would not be extended.

- © Fairfax NZ News

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