26 Mar 2010

Meat company consortium shelved

1:33 pm on 26 March 2010

A proposed consortium of New Zealand meat companies to boost sales into China has fallen over.

Several meat exporters, Meat and Wool New Zealand and Trade and Enterprise have been exploring the feasibility of an emerging markets consortium.

It would focus on putting high value meat products into China, instead of relying on the low value cuts that make up the bulk of the trade now.

It was modelled on the New Zealand Lamb Company consortium that sells lamb in North America.

One participant, the Alliance meat co-operative, says it withdrew from the project because the business case simply doesn't stack up.

Chief executive Grant Cuff says early projections indicated the potential to earn $24 million over a five to 10-year period by supplying up to 10,000 of super-quality lamb to the top hotels and restaurants in China.

But he says after more detailed investigations in China, those figures had dropped to selling less than 900 tonnes over 10 years, for a loss of $6 million to $7 million.

Mr Cuff says using the North American lamb company as a model is irrelevant, because that was developed over a 20-year period as a Meat Board monopoly.

Another participant, Silver Fern Farms, is disappointed the project has been shelved. Chief executive Keith Cooper says the industry needs to take the long term view in developing the trade to China.

John Gregan of the farmer action group, MIAG, that campaigned for meat company mergers two years ago, says he's not surprised that the latest collaboration attempt has also fallen over.

He says it is always difficult to get companies to work together, which is why consolidation is the only way forward.