B+LNZ Farmer Consultation 2016

Monday, 25 July 2016

Overview

Two topics are the main feature of this year's B+LNZ consultation with farmers:

The proposed new approach to Market Development
The review of the B+LNZ Constitution.

How to have your say

There is more information on this webpage – and we encourage you to attend a consultation meeting.

B+LNZ farmer directors will be speaking at meetings in all regions from late July until the end of August.
Check the events calendar to find out about meetings in your area:

We’re keen to hear what you think. When you're ready, you can lodge your views online:

Online feedback form

Market Development

After a thorough review, we’re proposing a new approach to market development that will see our activity shift from market maintenance in traditional markets to targeting new segments in both new and traditional markets. Good knowledge of customers and market information will underpin the work.

The independent review of Beef + Lamb New Zealand’s promotion activities began last year. It started with the question: “Is there a role for Beef + Lamb New Zealand in market development using farmer investment?”

We committed to do this review during the 2015 Sheepmeat and Beef Levy Referendum. The view of the Board then was it was time to exit promotion and refocus behind the farm gate. However, after numerous interviews, farmer focus groups then follow up interviews with farmers, exporters, importers and those at the consumer coal face, the overwhelming answer has been: “Yes, there is a role for B+LNZ – but different to the way we have been doing it”.

We’ve taken this feedback on board and embarked on a very thorough process to develop a business plan in conjunction with individual farmers, meat exporters, government agencies, and other sector stakeholders, to flesh out what that future role looks like.

Now it is time to test our fully developed business plan with you. It has an overriding principle of achieving a premium for quality, growing the size of the sector and creating market opportunities.

The plan has four key components:

1. Market intelligence

Better knowing customers and markets and their attitudes to our products – and ensuring that knowledge is shared right through the value chain.

2. Our story

Our ‘business as usual’ story is exceptional – yet a continual theme in the review from people involved right through the supply chain was that we haven’t told the story well. The passion, integrity and values we farmers exercise in producing our products is second to none. We need to tell that story. This will be the basis of building a red meat sector story that differentiates New Zealand farmers and our products from those in other countries. The story will evolve and keep New Zealand at the forefront of the international meat trade. A key aspect of this story is that our claims will be underpinned by verifiable on-farm and in-plant information.

3. New markets – new segments

One of the current global food trends is the increase in snack foods – and major companies like Hershey, Mars and Nestle have all started to acquire companies that produce healthier snacks. There is a long-term consumer shift to eating healthier snacks and meat snacks are showing the greatest category increase with health-conscious consumers. This is the sort of opportunity we’ll be looking at. Led by good market intelligence, we will build a business case and partner with specific meat exporters to develop new markets and new value opportunities. Underpinning this will be our unique farm production story.

4. Crisis and issues management

Food safety scares, biosecurity issues or animal welfare concerns are a constant threat. The sector must be nimble, with industry-wide coordinated plans to address key international and domestic industry and market risks.

Constitution review

During last year’s sheepmeat and beef referendum, we committed to undertake a review of the Beef + Lamb New Zealand Constitution.

Established by the farmer referendum in 2003, it’s due for a review. For example, changes include removing references to goats where there is no longer a levy stream. Of a more significant nature is whether farmers wish to retain on the Board the two industry directorships that are nominated to our Board by the Meat Industry Association (MIA). These positions are currently held by Mark Clarkson, Managing Director of ANZCO Foods Ltd, and Sam Lewis, Chairman of Affco New Zealand Ltd.

The Constitution gives discretion to the six farmer directors on the Beef + Lamb New Zealand Board about accepting the MIA recommendation and farmer directors control majority votes around the board table, six to two.

The Constitution says appointees must act in the interests of sheep and beef farmers. It’s the farmer directors’ view that over the years, the MIA appointees have in fact brought valuable insights from beyond the farmgate that have been of significant value.

In this review, the question we are posing to farmers is whether or not to continue to have industry-nominated directors on the Beef + Lamb New Zealand Board. If there’s sufficient support for these positions, the Constitution will remain unchanged.

The table below lays out the pros and cons of the Constitution governance structure.

Three possible options for the B+LNZ governance structure

	Pros	Cons
Current situation Two industry-nominated directors on Board and provision to appoint an additional independent director (never been utilised) (6 farmer directors + 2 industry directors + 1 independent).	Brings valuable insight of beyond farm gate issues impacting the red meat sector, strengthening the governance decisions made. B+LNZ would struggle to find this expertise outside of the pool of NZ processors and exporters. Like farmers, industry-appointed directors are aware of profitability across the value chain and competing uses of land. Industry directors on the Board help build greater understanding of processor issues with farmer directors and gain better understanding relating to farming challenges which they convey to the processing sector. Experienced in senior executive or governance roles. B+LNZ farmer-elected directors have the option to decline nominations from the Meat Industry Association, and also control majority votes around the Board table six to two. *Industry-nominated directors under the NZ Meat Board (NZMB) Act also sit on the NZMB as do the six farmer directors, providing some synergies and cost savings. B+LNZ director fees paid to industry directors ($32,300 per director) would require fees of $45,000 to $50,000 per director to attract experienced independent directors, if replaced, based on market rates.	Perception amongst some farmers that these directors put processor interests ahead of farmer interests. Occasionally industry directors are removed from decision-making process due to conflicts of interest. Nominated currently by the Meat Industry Association as the representative “industry organisation”, this could be an issue if, for example, MIA ceased to exist and no other obvious organisation reasonably representing the meat industry replaced it. **The cost of additional director fees to have industry-nominated directors.
Remove meat industry directors, replaced by appointing two independent directors and retain provision for a third independent director (6 farmer directors + 3 appointed independent directors).	Opportunity to appoint additional skillsets that complement farmer director skillsets – eg: marketing, IT, R&D, procurement, processing, finance etc. Removes perception of conflicts of interest industry-nominated directors have in governing B+LNZ.	Would be looking for skillsets similar to industry-nominated directors. Such people generally have conflicts that need managing anyway. Current Constitution allows the Board to appoint one additional director with specialist skills, but the Board hasn’t felt the need to fill that position. Creates possible gap between on-farm priorities and beyond farm gate considerations. Would require amendment to NZMB Act to remove legislative requirement for industry-appointed directors from B+LNZ on the NZMB. *Greater cost in director fees to attract suitable independent directors (as noted earlier).
Industry directors are not replaced and fill the independent director slot under current constitution making a Board of seven (6 farmer directors + 1 independent director).	**Saving on director fees A Board of seven is smaller and easier to manage than a Board of eight.	Removes valuable skills and expertise, leading to less robust governance decisions. Requires consequential amendment to NZMB legislation (Meat Board Act 2004) to remove provision for industry-appointed B+LNZ directors to also sit on the NZMB. *Higher director fees per person required than currently expended on industry directors to recruit a suitably experienced independent director, resulting in minimal cost savings.

Pros

Cons

Current situation

Two industry-nominated directors on Board and provision to appoint an additional independent director (never been utilised) (6 farmer directors + 2 industry directors + 1 independent).

Brings valuable insight of beyond farm gate issues impacting the red meat sector, strengthening the governance decisions made. B+LNZ would struggle to find this expertise outside of the pool of NZ processors and exporters.
Like farmers, industry-appointed directors are aware of profitability across the value chain and competing uses of land.
Industry directors on the Board help build greater understanding of processor issues with farmer directors and gain better understanding relating to farming challenges which they convey to the processing sector.
Experienced in senior executive or governance roles.
B+LNZ farmer-elected directors have the option to decline nominations from the Meat Industry Association, and also control majority votes around the Board table six to two.
*Industry-nominated directors under the NZ Meat Board (NZMB) Act also sit on the NZMB as do the six farmer directors, providing some synergies and cost savings.
B+LNZ director fees paid to industry directors ($32,300 per director) would require fees of $45,000 to $50,000 per director to attract experienced independent directors, if replaced, based on market rates.

Perception amongst some farmers that these directors put processor interests ahead of farmer interests.
Occasionally industry directors are removed from decision-making process due to conflicts of interest.
Nominated currently by the Meat Industry Association as the representative “industry organisation”, this could be an issue if, for example, MIA ceased to exist and no other obvious organisation reasonably representing the meat industry replaced it.
**The cost of additional director fees to have industry-nominated directors.

Remove meat industry directors, replaced by appointing two independent directors and retain provision for a third independent director (6 farmer directors + 3 appointed independent directors).

Opportunity to appoint additional skillsets that complement farmer director skillsets – eg: marketing, IT, R&D, procurement, processing, finance etc.
Removes perception of conflicts of interest industry-nominated directors have in governing B+LNZ.

Would be looking for skillsets similar to industry-nominated directors. Such people generally have conflicts that need managing anyway.
Current Constitution allows the Board to appoint one additional director with specialist skills, but the Board hasn’t felt the need to fill that position.
Creates possible gap between on-farm priorities and beyond farm gate considerations.
*Would require amendment to NZMB Act to remove legislative requirement for industry-appointed directors from B+LNZ on the NZMB.
**Greater cost in director fees to attract suitable independent directors (as noted earlier).

Industry directors are not replaced and fill the independent director slot under current constitution making a Board of seven (6 farmer directors + 1 independent director).

**Saving on director fees
A Board of seven is smaller and easier to manage than a Board of eight.

Removes valuable skills and expertise, leading to less robust governance decisions.
*Requires consequential amendment to NZMB legislation (Meat Board Act 2004) to remove provision for industry-appointed B+LNZ directors to also sit on the NZMB.
**Higher director fees per person required than currently expended on industry directors to recruit a suitably experienced independent director, resulting in minimal cost savings.

*The NZMB Act 2004 was passed into legislation to align with the B+LNZ Constitution voted in by farmers in 2003. The NZMB currently governs $80m of reserves and administers NZ’s country-specific quotas into the EU and USA. The NZMB Act requires the Board be governed by 10 directors – two appointed by government and eight from B+LNZ (under the Act, two B+LNZ directors must be industry-nominated directors).

**B+LNZ directors, including industry-nominated directors, receive fees of $32,300 from B+LNZ and the NZMB directors receive fees of $16,300.

More information

B+LNZ levy payers were mailed a printed copy of this information in early August. If you didn't get yours, download the PDF below or call us on 0800 233 352 and we'll mail another copy to you.

We've also made a podcast available, where James Parsons discusses the two key areas in this year's farmer consultation:

Downloads	Size
Red Meat Sector Market Development Action Plan (Summary)	2.21 MB
Marked-up copy of the Constitution, showing proposed changes	432.25 KB
B+LNZ Farmer Consultation 2016 (brochure)	471.5 KB