'Last chance' for strongwool export sector

By PHILIPPA STEVENSON agricultural editor

Wrightson claims renewed talks with heavyweight woolgrowers could be the last chance to preserve the strong wool sector as a major exporting force.

The rural services company last month walked from the Wool Board's bid to establish StrongWools NZ, a company intended to knit together the bulk of suppliers of the $700 million strong wool clip with marketers and customers.

Wrightson managing director Allan Freeth said the company baled out when it found the deal lacking commercial reality and sprouting freeloaders. It has continued with a joint venture in the smaller fine wool sector.

The company rejected the involvement of woolbrokers in the new set-up and the board's championing of its Fernmark brand, Dr Freeth said.

Fernmark - involving a farm-to-market quality control programme - should not necessarily set wool specifications, he said.

"You'd be working to the specifications of the client and the customer. That's the most important specification, and in most cases the big carpet manufacturers and processors, their brand is much more important to them than any supply brand. They don't want to give that up."

Dr Freeth said his criticism of the StrongWools concept had prompted major growers to approach Wrightson, which was now considering whether to establish a majority grower-owned strong wool company without Wool Board involvement.

The big growers talking to Wrightson were frustrated with a leadership vacuum in the industry and wanted the company to fill the void, he said.

He expected progress on any new deal within three weeks as much work to define a company had been done.

Wrightson had an operational wool business, business plans and was already moving 20 per cent of its volume through integrated fibre management. The next phase would be to seek investors and suppliers.

"If we don't get it together this time - within the next six months or so - the opportunity will have gone past," Dr Freeth said.

Without a strong company the industry would further fragment into farm brands and small marketing companies, he predicted.

"I think it's pretty serious, particularly when you contrast the wool industry with the milk industry. The problem is that already farmers are talking about wool as a by-product. [They are] already investing in genetics which is about meat not wool."

Another woolgrower group, headed by Sir Brian Lochore, is also still seeking support for a farmer-owned company to act as a woolbroker for strong wools, mostly used in carpets.

The Wool Board, meanwhile, is approaching customers to see if they are interested in a commercial franchise arrangement to use the Fernmark brand and intellectual property, including that developed by the Wool Research Organisation.

Board chairman Bruce Munro said there had been a "very positive" response from customers consisting of all the board's major partners. He expected to announce details soon.

The board is under pressure to cut the deals after reducing the farmer levies that fund it from 5 per cent to 2 per cent and using reserves to keep its promotional arm, Wools of New Zealand, operating.

Mr Munro said he supported the Wrightson and Lochore initiatives.

If one or a number of viable procurement business emerged they could "one day back-integrate into the assets that are being preserved along the value chain," he said

"It will be the emergence of a longterm GlobalCo approach."

Mr Munro said the failed StrongWools proposal had been the industry's bid for integration along the lines of the dairy industry's mega-merger but "there was no acceptance of it in the value chain, or across the New Zealand farming base either, and therefore there was no pathway towards it."

The new moves were a sensible approach to possibly achieving it down the track.