APPROVAL GIVEN

Taranaki Daily News, 28 October 1935, Page 6

APPROVAL GIVEN

MARKETING SCHEME SUPPORT FROM TARANAKI SALE OF DAIRY PRODUCE ADDRESS BY MR. H. DAVIS DEFEAT OF AMENDMENT The plan for marketing dairy produce in Great Britain on the group system as proposed by the New Zealand Dairy Board was approved at Stratford on Saturday by a meeting of 250 farmers representative of the province; The scheme was explained by the London manager of the board, Mr. H. E. Davis, who is speaking at dairying centres throughout New Zealand. He’said that importers at London, working under a competitive system which had been described not as marketing but as “murder,” had actually asked that they be “saved from themselves.” Mr. T. A. Winks, Ararata, presided, and in addition to those of Mr. Davis, explanations were given by Mr. A. Linton, ward member on the Dairy Board, and Mr. T. C. A. BraSh, secretary of the board. The chairman introduced Mr. Davis as a man who had made a complete study of conditions in Britain and as one who had the reputation of being a sound and level-headed man. Mr. Linton apologised for the absence of the chairman of the board, Mr. A. J. Murdoch, who could not leave Wellington, and of Mr. C. A. Marchant, Government nominee on the board, who was at Christchurch with the Executive Commission in connection with zoning. \ Mr. Linton went back to the time when the present marketing regulations were introduced to reduce speculation, improve distribution and to obtain information on how to produce was marketed. He did not propose ,to deal with the first two points but on the third the board decided the only way to go into the matter to the best advantage was to get the London manager to visit New Zealand and explain the position. On his arrival Mr. Davis met the board and the matter was thoroughly discussed for several days. The upshot was -the plan recommended to and approved by the annual conference of delegates of the dairy industry at Wellington in September. The object of the meeting was to give farmers any information that they might desire on the plan. THE MAIN ISSUE. “One of the meetings in the north was stormy. Their attitude was that I was a fine fellow but they did not want to listen to me,” Mr. Davis remarked. “The subjects that I could deal with would cover a very large field. I discussed advertising in the north and as New Zealand puts up £37,000 for advertising

it is an important subject to the industry that I have found it unwise to waste time on subsidiary points.” The vital period in the history of the New Zealand dairy industry was 1923-24, Mr. Davis said. It was in 1923 that the New Zealand industry really began to develop following the setback of the war and production jumped substantially and had done since.' At that time Brinishmade cheese did not come into competition with, New Zealand, but now the milk marketing plan was stimulating the production of British factory cheese which was coming into competition with New Zealand cheese. So far the British cheese was of poor quality because in Britain they had neither the technique nor the staffs necessary to make a good factory cheese, particularly as the production increased so rapidly—2s per cent, last year. The product never brought more than 44s a cwt.,. while New Zealand had been up to 61s. Much of the British cheese sold at 2&s. “You have been trying to market your ever-increasing supplies at a time of severe economic slump,” Mr. Davis continued. “Those are the conditions that the importers have been facing. Gross prices were cut in half and so have their amounts realised on commissions so that they have been trying to increase sales to maintain their gross incomes. Much the same set of buyers is available now as before, but once a period of glutted markets is reached there is unholy competition to get rid of the produce because the individual importer is afraid that he will be caught by lower prices. That is what goes on in Tooley Street and they cannot help it.” Over the past three or four years the glutting of the market occurred when New Zealand supplies were at the peak, he went on. Importers described it not as marketing but as “murder.” In April of 1933 cheese was selling at 40s and butter at 60s when Mr. W. lorns arrived at London. The importers told him then that the competitive system prevented their “getting together and sticking together,” and he went so far as to ask that the importers be “saved from themselves.” That was the origin of the marketing regulations that caused dissatisfaction in Tooley Street. EFFECT OF FALLING PRICES. Whenever prices were falling wholesalers and retailers were reluctant to buy. Wholesalers would go to London from the provinces on, say, a Wednesday and buy their requirements. In many cases they would find by the time they returned that the market had slipped 2s or 3s. They complained and said they could not make a profit on New Zealand produce under those conditions and would have to deal elsewhere. Retailers were in much the same position. If a certain retailer bought on a Wednesday and found that his competitor had bought 2s or 3s cheaper two days later he was naturally upset about it. One retailer, with 1500 shops, complained that the system under which Tooley Street worked was wrong. He said that as soon as the market quietened the merchant became frightened and, though he might think that the price would not fall, he could not afford to take the risk. He unloaded on to the market and the price fell. It all came back to the question of competitive returns —whether importer A could do better than importer B. If the importers thought an agent had a large consignment of produce coming in and knew that the agent thought the market would not hold, the importers had to “play the agent’s game.” Those were not the conditions generally but they often occurred over January, February and March when the effect was worst for New Zealand. Storage accommodation in New Zealand was limited and restricted the shipping programme, but it had done good. Australia started regulating shipments in 1934 and carried on in 1935. New Zea-

land took the chance offered to sell to the U.S.A, and the Australians thought New Zealand had access to something they had not. were held throughout the country and it was decided to rush the British market .while New Zealand played with the. States. They lifted the supply to Britain from 3000 tons a week to up to 5000 tons and the price dropped. That showed what could be done. Australia realised the error and had since promised not to repeat it, but that remained to be seen. There were over 80,000 retail shops and ■ 1500 wholesalers in Britain. Firms varied in size from 4000 retail shops to one small shop. If the ‘big men” got news of a drought in New Zealand or Australia they bought their requirements for two or three weeks ahead. Quiet buying should be met by quiet offering but that did not occur. Then there was the man who bought only to put the produce back on the market to try to make a profit. Supposing that the natural consumption could absorb 10,000 tons of New Zealand cheese a week and 11,000 or 12,000 tons were offered the person who took the balance was the speculator and that balance had a serious effect on the general market price. Irregularity of'offering, buying and arrival were the three 1 big problems. CO-OPERATIVE MARKETING. i For many years, he said, he had been writing to the board suggesting that cooperative manufacture be enlarged into co-operative marketing. Instead of acting separately companies would act in groups and there would be no alteration in the channels of disposal or attempt to biterfere with the market price; that would 1 be fatal. New Zealand did not want competition among its 500 companies as well as on the market. There were op- ’ erators in Britain who were not rnter- ■ ested in the quality of New Zealand produce but were solely interested in ’ making money from buying and selling, ’ they did not represent a channel of dis- ’ posal and merely caused an adverse ’ backwash. If they were eliminated no 1 harm would -be done. The only way to raise prices was to increase consumption 1 and the more the channels of distnbu1 tion were improved the more the prices would rise. . 1 The trouble over the price dropping • caused difficulties, particularly in the industrial areas such as Lancashire, and 1 it was discouraging to .find that after having persuaded retailers there to sell 1 New Zealand produce one week, they • had slipped back a few weeks later to Continental makes. : The proposal was that there should be ’ seven groups in New Zealand, but whe- • ther there would be two or one in Tara--1 naki was a matter for Taranaki to de- ■ cide. Each group would have its own ' group brand and each factory would preserve its registration number. Produce would be graded as was the case 1 to-day, and a premium would be paid for quality before the butter and cheese left the country. Every group would have an executive of seven men, four • appointed by the companies, two by the Dairy Board and one board member. As the groups gradually become more conversant with their work more power would be delegated to them by the board. There would have to be one supervising authority over the groups to see that one did not operate to the disadvantage of the others. The objective was a brand for each group, and he considered that once the brands became known in Britain benefit would be derived. That was the only way to get anywhere and to take advantage of the package or packet trade. It had not been possible to do that with factory brands because one factory output was not enough to cover a large, useful section of the consuming public. Though 90 per cent, of New Zealand produce was sold on, Government grading in certain instances individual factories had worked up a goodwill for a brand, and he saw no reason why that should not be retained under the group brand till the latter became established. He would like to see the groups making closer contacts with the big selling groups in Britain. It could not be done by companies, but it could by groups. PUBLIC GOODWILL. In reply to a question, he said the Fern Leaf brand had no goodwill with the British public. It was useful in Tooley Street, and for that reason was retained, but the group brand should aim at getting public goodwill. Mr. G. Gibson: What if one group rose to a premium? “That is what 'we want,” Mr. Davis retorted. “If a premium is commanded it will be because of quality, advertising or salesmanship, and if by those means, cither singly or collectively, one group gets a premium the other groups will be stimulated to attain premiums. Mr. Gibson: Would the group get the premium?—Yes, and the authority would see that the group was not victimised by the others. Mr. J. B. Hine: What would be the difference' between group marketing and the present system?—Each group will work with four or five agents and there will be consultations between the agents who are selling the produce. That will cut out the insane competition that has been going on. Mr. Davis went on to say that the tendency throughout the world was to sell most foodstuffs in pats, packets or packages. England was more conservative, but other foods were being sold that way and the method would spread. It was hoped the groups would be far enough advanced by then to take advantage of it. For instance, about 5000 tons were sold under the Anchor brand ir 11b. and Alb. pats, and British people bad told him that they did not buy New Zealand butter but “Anchor.” QUESTION OF OFFERS. Could offers at a certain figure be accepted? Mr. P. Thomson asked. There was no suggestion that legitimate f.o.b. trading should be stopped, Mr. Davis replied. Unrestricted 'f.o.b. selling sometimes served only the speculators, who had no interest in placing the produce on the market. Mr. L. E. Hann pointed out that there was a big company group in the Waikato that had been.and was selling unde: its own brand. The new groups would have to start from the bottom. Was that fair? he asked. “Anchor” had an advantage, certainly, Mr. Davis said, but that, was the fault cf the rest of New Zealand. The others would have to start some time, and the longer they delayed the harder it would be to catch up. “Get after them right away,” he advised. . . Companies would not be penalised in iespect of waxed and unwaxed cheese, Mr. T. C. A. Brash, secretary of the Dairy Board, told a questioner. Mr. Linton explained that the board had considered the questions of vacuum products and unpasteurised cheese, but had not yet reached a decision. Separate pools were a possibility. ENGLISH NAMES PREFERABLE. Mr. Hall suggested English names for brands—not Maori “tongue twisters.” Mr. Davis admitted that English people had trouble to pronounce Maori ; names, and such names were not pronounced alike in two districts. An un- : registered brand was no good. Mr. T. T. Murray remarked that finest . cheese did not always command a premium on the London market and sug- ; gested that there should be one export quality between the gradings of, say, 89-92. “I am glad to ihear that view,” Mr. . Davis said. “You will have to come to . one export quality, but means will have • to be devised to watch quality. The

Danes use one quality and the old Dane j knows a whole lot about marketing.” i “The distribution of butter in New Zealand is out of our jurisdiction,” Mr. Linton said. “We should conclude our operations at the factory door,” he continued. “The original intention was to sell only first grade butter in New Zea- 1 land, but I think that second grade will be permitted, probably under a differently coloured wrapper at, say, Id less.” Mi. Thomson asked what was the attitude of Tooley Street and the trade in England to group marketing. Mr. Davis had quoted the dissatisfaction following purchases on a falling market, but the traders must have made money on the rises. What was the general reaction to the plan? Some of the firms favoured the plan, Mr/ Davis replied. Others were “sitting on the fence.” The majority would welcome continuity of supply, but the speculator would sow dissension if he could. The trade, once assured of no interference with distribution along the usual channels, would be favourable. The scheme would be inaugurated by the board on August 1, 1936, not before. From then on the process of delegation of authority to the group executives would be gradually undertaken. It would be suicidal to interfere with the Waikato group, Mr. Davis told Mr. J. Browning. Replying to Mr. Marx, Mr. Linton said the board had no power to permit factories to alter allocations. Was it not a fact that the Waikato group was handicapped by the operations of independent companies? Mr. Blyde asked. Mr. Linton: Yes. Mr. J. S. Tosland, Pihama, moved that the meeting support the proposal outlined by Mr. Davis. He said the matter of pools and groups could be dealt with by the companies. Mr. A. B. Muggeridge seconded. APPROVAL OF PLAN. He would like to see the meeting adopt the plan, said Mr. J. S. Hickey. Even from what Mr. Davis had said it was evident that what New Zealand had been doing to raise quality had been nullified by defects at the other end. “Many of us have heard this for the first time and we should have a chance to discuss it with our directors,” said Mr. J. Browning. The chairman: The proposals have been accepted by the board and approved by the conference at Wellington. Mr. G. Gibson left his seat in the hall and started to walk to the table. “You cannot make a speech,” the chairman stated. Mr. Gibson: Well, I want to oppose this

motion and I think I have a right to do so. “Well go ahead,” the chairman said. Mr. Gibson referred to the experiment of 1926-27 and without going into detail he claimed that that essay at control of prices had a disturbing effect. The wool industry was recovering without any organisation. The plan was launched without warning and the delegates at Wellington made their minds up on it in the luncheon adjournment. “Over a spot, probably,” came a comment from the hall. “Maybe two,” Mr. Gibson amended. What right, he asked, had those delegates to make decisions about what should be done with farmers’ produce? If the group system was so good why had the Danes not adopted it. The group already in existence had not made a great success of its operations. In 1929 there was only one factory in Taranaki and Manawatu that did not pay more than the combine. Mr. Davis had not said that in respect of the plan they had the confidence of the merchants, importers, wholesalers and retailers in Britain. AMENDMENT MOVED. He moved an amendment that while the meeting welcomed a voluntary scheme that could be arranged in harmony with the importers and others interested, it declined to consent to a plan that denied companies the right to dispose of their produce. Mr. L. E. Hann seconded. “We propose that you should extend the principle of co-operation to marketing,” Mr. Davis answered. “You regard Tooley Street as sacrosanet. You delegate power to your directors to dispose of your produce, why not to a group executive? Wool is an international commod -1 y and there is no comparison between wool and dairy produce. Denmark, which had the British market organised long before New Zealand’s entry into the field, had not had the need for compulsion, and she had built up a remarkable system of group marketing on a voluntary basis, added Mr. Davis. In Germany, however, she had needed a greater degree of compulsion, and no individual Danish factory could sell when and where it liked in this field. Continuance of the milk marketing plan was voted for by 86 per cent, of the farmers of England and Scotland.” Mr. Linton thought it must be obvious that for one reason alone an authority should have power over the groups—allocations by groups to individual firms. The position might easily arise where a few firms would get nearly all the produce and starve the other channels of distribution. Eh told Mr. H. Graham ‘that the

beard would, over tlie initial period, control f.o.b. selling. It had not been decided for what period the groups would be elected. The amendment was defeated on the" /

voices and the mbtion to support the proposals was carried the same way. Thanks were given Messrs. Davis and Linton for their explanations and Mr. Winks for presiding.