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Self-promotion self-evident
5th September 2006
The AWI chairman’s attack on my recent comments on the Australian
Wool Innovation (AWI) lack of performance over the last three years as
being “divisive and ill-informed” illustrates a peak body
that is totally in contempt of its grassroots shareholders, and one that
will not face the consequences of its own actions.
For the record, I am, and have always been, a strong supporter of AWI,
however I cannot see how a company that has failed so many of its shareholders
in so many areas away from its core business (R&D) deserves any financial
support without a radical restructure plan.
In recent weeks I have been accused of not seeing the “big picture”
and to those people I can only say that they have they have a very jaundiced
political view of the wool industry.
In 2003 we could see the need for a targeted marketing program and with
our industry slipping and our marketing arm starved of funding; we advocated
a 0.5% levy for AWI for R&D, with a desire to shift a major portion
of the available funds into The Woolmark Company for marketing joint ventures.
Now we have an industry in freefall, and a lot of stakeholders in the
wool industry (not only growers) are calling for a radical overhaul.
In this month’s Farm Journal, Editor Pat Francis is seeing the big
picture and calling for change. He is quite rightly calling to “put
some financial clout in the hands of marketing experts and change the
proportion of levy distribution so 75% or more is used to promote Merino
fibre in conjunction with manufactures and retailers”. Of a 2% levy,
that leaves 0.5% for R&D, comparable to other industries and enough
money to pursue wool harvesting and mulesing in a logical, fully focused
manor, without the political angst.
This year’s woolpoll is already clouded with politics. As Andrew
Russell explained at the Hamilton Sheepvention breakfast in early August,
“with the honey pot (levy) comes politics. The bigger the honey
pot the more political it gets.” He also suggested he was not in
favour of “cold turkey (0%)” as a means of controlling political
allegiances.
The “big picture” as I see it is one of a GLOBAL wool industry;
where Australia’s considerable IP, genetics, and expertise, are
exploited internationally to lift consumer demand for woollen apparel
products. I believe we should have a dedicated R&D company, AWI, receiving
0.5% levy, TWC receiving 1.5% and an overriding council of international
natural fibre coalition, to give leadership, and set a global strategy.
At this years World Merino Conference, keynote speaker Michael Lempriere
suggested that leadership, direction, and customer focus was lacking in
the wool industry at the moment, with a clear correlation between reduced
consumer interest and the cessation of consumer marketing.
At the same conference, Laurence Modiano stated in a clear message against
the current industry leadership and direction “We have precious
little time to take our crippled, fossilised industry and prepare it for
change”.
I concur completely, as these themes ran strongly through my address to
growers and delegates at last September’s AGM.
Both gentlemen are visionary industry leaders. It is very short sighted
of us not to utilise people of this calibre for their global commercial
expertise.
In 2000 the then chair of the Interim AWS Advisory Board, David Webster,
said “Control of the industry has been placed fairly and squarely
in the hands of woolgrowers. Woolgrowers will have much more power than
normal shareholders because in this arrangement they have the power of
supply.” He goes on to say “Quite clearly, if the new company
does not perform, growers and shareholders have the power to pull the
rug out”.
By law, 0 (zero) is one of the options. What makes it a very real option
is AWI’s continuing denial that there is any problem at all with
the Merino wool industry.
The most recent comment by the AWI chairman that “it is not brilliant,
but is not too bad” illustrates how out of touch he is with the
real wool industry.
What he should be saying is “it is not brilliant, and we should
be doing a lot better”.
Putting AWI’s future even further at risk is CEO Len Stephens endorsement
of ACIL Tasman’s performance review. In his enthusiasm to embrace
the figures he proves he has no understanding of the content. The board
should have strongly advised against tabling such rubbish.
We know that AWI has spent more than the reported $162 mil because a substantial
amount of fiscal reserves have been spent also. We must at least get the
starting point right so we can all make an informed vote at woolpoll.
The campaign against animal rights group, PETA, has entered a new phase
and is not going well. CEO Len Stephens should bring us up to date with
the cost and current status of the court case before woolpoll. In the
ACIL Tasman review, it has been reported that the cost of the legal action
is around is around $5 mil, about the same costing that AWI put on the
action at the AGM one year ago. A lot has happened since then and you
can bet AWI’s lawyers and PR team have not been working for the
gracious experience and love for our industry. To see why this strategy
was dangerous and flawed from a marketing perspective, I urge every interested
person to read in full Andrew Russell’s very comprehensive industry
study and pay particular attention to pages 24 and 25.
This strategy was always going to fail, and the cost horrendous. To walk
away would have cost nothing and the mulesing deadline, fallout and panic
would never have happened.
My criticisms of AWI over the Benetton deal proved to be correct and the
spin that AWI has put on it has proved to be nonsense. That ACIL Tasman
has found that “other” 49 projects that AWI are investing
in their “off farm” portfolio are going to amount to “$55
mil in the next four years”. The Benetton deal, on today’s
price, would have been worth $16 mil over just two years of the project
if were able to double Benetton’s use of Australian Merino wool,
as claimed by AWI.
For AWI to brush off the Benetton failure as inconsequential was an outrage.
For ACIL Tasman to question the value of marketing programs is even more
outrageous.
The integration of TWC and AWI looks certain. In 2000, at the second reading
of the Wool Services Privatisation act, minister Truss stated, “that
AWRAPs successor will have two principal subsidiary companies. The creation
of the two subsidiaries allows for transparency and contestability in
the expenditure of levy funds”.
The technical and legal issues that will arise because of the proposed
merger are very complex. To say the signing of an MOU has “solved”
the problem and to vote at woolpoll as if the “issue does not exist”
is naive in the extreme.
That there was no debate about the future structure of the merged entities,
and no real solution to the UK pension fund issue was again to hold shareholders
of both companies’ in contempt.
The wake up call that has been sounded over the last three years unfortunately
has fallen on deaf ears at AWI. The latest production forecast maybe as
low as 350 million kgs, about half of just four years ago, and the EMI
is down more than $2.00 clean/kg since last Woolpoll.
There are a lot of growers who will vote 0% (zero), and that is their
call. We know at least one AWI board member voted for 0% at the 2003 woolpoll,
I am just reminding growers to look at their level of investment and vote
accordingly. Growers need some sound leadership and a fully committed
change of direction or growers will have little choice other than to exercise
the “rug out” option.
Will Crozier,
AWGA Director
Casterton VIC
03 5582 0281
0428 820 281
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