MR. DAVIS REVIEWS DAIRY INDUSTRY

Northern Advocate, 21 October 1935, Page 6

MR. DAVIS REVIEWS DAIRY INDUSTRY

Address In Whangarei

MARKETING AND ADVERTISING DIFFICULTIES AND WEAKNESSES Introduced by Mr A. J- Murdoch, M.P., chairman of the New Zealand Dairy Control Board, as “the father ol the pool marketing proposals which will be put into operation on August 31 next,” Mr H. E. Davis, London manager of the board, gave a most interesting address to representatives of North Auckland Dairy Companies at Whangarei today. Mr Davis dealt at length with export marketing and advertising, clearing up many points, which have perplexed the industry, and answering questions, in a free and logical manner. Mr E. S. Tremaine, chairman or the' Whangarei Dairy Company, presided. , , ; At the outset, Mr Murdoch explained that the new Dairy Board, desiring first-hand knowledge of what was happening at the other side of the world, had invited Mr Davis to, New Zealand, first to confer with the board, and then to discuss problems with dairymen throughout the Dominion. Marketing Difficulties. Mr Davis said that marketing difficulties on the United Kingdom market had arisen mainly in the years 192324, when of butter had increased from 254,000 tons (N.Z. 56,000) to 485,000 (N.Z. 124,000), while economic conditions had become so difficult and purchasing power had been greatly reduced. . Sales under these conditions of increased supplies and- contracted demand were possible only with almost continuously falling prices, leading to an anxiety on the part of importers to sell at a figure which would at least bear comparison with their competitors Five hundred individual dairy companies in New Zealand used 30 different agents in the United Kingdom, who had to face competition, not only from the 18 other producing countries, but from other agents competing for the same supply. In the absence of effective consultatioh between the numerous ismporters, who after all, were responsible only to their individual factories, this anxiety to equal, or better, competitors’ returns naturally tended, in certain instances, to create an unsound condition in Tooley Street, arising from the importers’ fear that any endeavour on their part to support an existing price level, or hold off from a weak market, might result in missed sales and the acceptance of a still lower price in a few days’ time. Weakness of Position. Leading importers recognised the weakness of such a position, but under the keen competitive system of obtaining supplies from factories, f which, in turn, could only judge by price return in comparison with other agents, they were powerless to take action. “The importers are good, shrewd businessmen of the best British type,” Mr Davis said, “but they have got to play to the rules, and these rules are largely set by yourselves.” During the past four /ears, he continued, every firm in Tooley Street had approached him, expressing the belief that,the price for New Zealand produce' was ridiculously low, and asking for a concerted effort to cure the position. Many meetings of importers had been convened by the board’s London office in an endeavour to obtain some stability when these conditions! arose, but the absence of any authority whatever on the part of the industry’s representatives in London nullified the effect of any concerted efforts which importers might have agreed to make.

Seasonal Production.

The difficulties were accentuated by the seasonal nature of our production, and, although this was governed by regulated shipments, of necessity more New Zealand butter must be shipped in the five months of heavy production than could be consumed- - unless at ridiculously low prices. For instance, there might be a definite demand for 7000 boxes, but 8000 might arrive. Without any authority to hold the extra 1000 boxes, it was forced into sale, which ' could only be done by meeting a purely speculative demand from someone who was willing to carry stocks. The market price of the whole of our produce sold was thus frequently governed by the price level at which some interests could be persuaded to buy the surplus in the hope of realising a profit in the months to come, after all charges were met. * Then there was not a regular demand on the Tooley Street market. After large buyers had met their requirements, a period of quiet aften followed, but under today’s insane conditions the agent must continue selling every day because his competitor was doing the same. Wholesalers, too, frequently complained that after their requirements had been purchased, the price had been further forced down before they reached their homes, with an unsettling effect on business. “Every section of the trade at Home has expressed dissatisfaction with existing conditions,” Mr Davis went on, “and when they are unanimous in telling us that the policy is wrong, we should take notice.” There is only one way to end this insane scramble for United Kingdom markets, and that is for you at this end to come together and eliminate inter-factory competition for output and price. That is the seed of the group marketing plan.” Board’s Proposals. Mr Davis then proceeded to briefly outline the proposals adopted by the New Zealand Control Board, whereby produce would be pooled and sold according to grade, with premiums for higher quality. During the first year of operation, the board would launch the scheme and be responsible for its administration, but the idea was for each group gradually to take over organisation and selling of its own produce. Tooley Street’s Position. During the meeting. Mr Davis received a telegram from Marton inferring that the scheme was designed to put Tooley Street out of action. The speaker gave any such suggestion an emphatic denial. For a start, the allocation of outputs to agents by

the board, a policy which had evoked no complaints irom the London end—would continue. When the group system was finalised, the factory representatives would have the say as to how the produce was to be handled. “So long as Tooley Street fits into the link and provides the best distribution for the goods which you have sweated blood to make,” Mr Davis said, “we do not want any alteration. While our goods are reaching the consumer in the best possible condition, we do not seek a change. That is not always the case, and I know of a concern in Copenhagen which regularly purchases from 80,000 to 90,000 boxes of our butter made in November and sold'in the English market the following December. While the Tooley Street importers remain efficient and reliable men, there is no cause for the New Zealand industry to break with them, and the steps we are taking to provide them with assured and regular supplies will assist.” Need For Combination. Mr Edwards: “I have to thank Mtr Davis for a most interesting address. Most of the arguments he has used were placed before us by Mr W. Grounds when chairman of the board, and it is rather a pity that those sitting here helped to put him out.” Mr Edwards thought one group covering the whole of the Dominion would be preferable to seven. “Why have 49 of us interfering with the handling and disposal of our butter, when we should have nothing to do with it after it leaves the factory door?” he asked. “The company representatives have proved that we cannot manage our own affairs, and the Dairy Board should have the exclusive handling of our produce.” Mr Davis said that two important points were raised in the question. After six months’ trial in 1926-27, the Dominion pool had broken down. This had attached a stigma to such efforts by New Zealand. The interests which had fought such a pool would again be in the field against it; whether with equal success, would depend upon how closely the industry, if faced with such a position, would cling together. Then there was the other important consideration that the Dairy Board, if constituted the only selling authority for the whole industry, would be handicapped in dealing with various types of sellers. For instance, businesses of the co-operative type, private traders and multiple stores, were keenly competitive. In the distribution of our produce it was desirable to get as close as possible to the ultimate consumer, and groups, working through their recognised agents, might easily establish this desirable closer connection.