The marketing facts of life from Mr Mellon

Press, 25 May 1984, Page 16

The marketing facts of life from Mr Mellon

When a" primary product has been further processed and differentiated from its commodity origins, a statutory marketing authority should hand control back to private enterprise, meat and wool farmers have been told.

This was one of the points made by the Christchurch marketing and business consultant, Mr Michael Mellon, to the annual conference of the meat and wool section of North Canterbury Federated Farmers.

Mr Mellon was the guest speaker at the conference, which was attended by a number of present and former members of the Meat and Wool Boards.

Farmers who were hoping for a ringing defence of private enterprises in primary product export marketing would have been disappointed. “Perfect competition is for some of you, I know, a belief held with religious fervour,” Mr Mellon said.

“But the first thing I do when I get hold of a product is take it out of ‘perfect competition.’ ”

He said farmers had consistently turned their backs on the skills of marketers and industrialists and taken refuge in commodity trading. Often this arose out of a continued belief in auctioning as a “free” or “pure” market. “Auctions are an anathema to marketing management,” he said.

"Farmers are not noted for being the greatest gamblers. Yet from the outside it often appears that they are prepared to gamble on the prices for their fine products. “They can’t go on excusing themselves by saying that primary production is a gamble. “Auctions might be an acceptable means of rationing in a commodity shortage but we have a problem of abundance. “We must find the techniques to avoid being relegated to Third World status of price takers and bulk commodity sellers. “Perfect competition is completely impracticable for today’s problem of abundance.”

He diverted to castigate fanners for their attitudes "to the people who pay you cash.”

He wasn’t talking about a

cavalier attitude on the part of farmers but rather an obsequious one. Margins in farming service industries in New Zealand were up to three times those in other countries, he claimed.

Farmers often bought as consumers and sold as wholesalers.

“Don’t give the person who pays you cash any more control over you than you would give your shearing contractor,” he warned. The flow of cash was only one of three flows in a business transaction — the other two were products and information.

New Zealand persisted in giving away “perfect price information” by publishing the Smithfield imported lamb prices. The sooner this was stopped by the Meat Board the better, as the board needed to play a “cunning strategic game.” Mr Mellon then applauded the intervention by the Meat Board in the export sheepmeats carcase trade and the limitations it had imposed on “intermediaries” in this trade, who at one stage he called parasites.

“I know of no other way of breaking out of commodity trading, assuming of course you want to break out, and I realise that desire is not unanimous.

"But once a product has been differentiated it does not need total board control and the marketers can be allowed back in for a go.” He defined adequately differentiated in the meat industry as being portion control, further processed products with a brand image and not just a generic image.

In this context he also referred to a current battle between the newly-formed Berryfruit Licensing Authority and Barker’s Wines and Fruit Processors, of Geraldine, with whom Mr Mellon is working. Although Barkers’s was the only significant exporter of processsed blackcurrant products, in the form of its juice drinks, the company was not prepared to apply for a licence from the authority. It took this stand, Mr Mellon explained, because it was exporting a fully dif-. ferentiated product from the bulk, frozen currants, the trade in which the authority had been formed to regulate. Instead the authority had claimed jurisdiction over all berry fruit exports, unprocessed and processed.

Mr Mellon contended that the authority had no business regulating the export of juices, berryfruit pies, ice cream containing fruit, alcholic liquers, etc. Mr Mellon also majored in his speech on producer board accountability.

As well as financial audits the boards should have regular marketing audits by competent analysts, he said. The results of such audits should be considered confidentially first by the members of the boards, who needed to “keep their distance” from the executives. Corrective action should be taken and then a “purged version” of the report should be presented to farmers. He acknowledged that the question of how much to tell the public was always a very difficult one. However it was faced and dealt with regularly by directors of public companies. “For the sake of our meat marketing we cannot afford the sort of washing of dirty linen in public that has gone on in the last 12 months,” he said.

He suggested that meat and wool councillors or electoral committee members might act as private scrutineers of the peformances of the boards. Farmers would then have to have confidence that the scrutineers were doing their job.

In any case the electoral committee members should have training in asking perceptive questions.