• No results found

These observations were drawn from the following conclu- sions of the Battelle investigation :

Markets

None of the existing markets for New Zealand wool is vigorous.

The situation is weakest in the United States where the recent recession has severely depr,esscd wool markets. There arc signs of recovery and long-term trends for textile products are favourable, but wool may not share in this growth unless its competitive posture is improved.

In the United Kingdom, the use of wool is slowly declining and it appears this will continue through the next decade.

In Europe trends are mixed, with wool use declining in France and the Netherlands, levelling in Italy, showing a slight increase in Belgium and an increase in Germany.

In Japan, wool use has increased over the last decade, is down in the past year but may increase gradually in the future.

Carpet production, the largest end u e, will increase in most parts of the world, but wool may not take part in this increase.

Wool use in carpets in the United States will probably con- tinue to decline, although carpet production is expected to re- sume growth at a moderate pace.

The use of carpet wool in the United Kingdom is expected to decrease a production trends away from woven constructions.

In Europe the picture is somewhat brighter, with projections indicating increases in wool use in France and Germany, and wool holding its own in other countries.

The Japanese now use little wool in carpets, but carpet pro- duction is expected to increase dramatically in the coming two decades.

The second largest end use for New Zealand wool is woollen-' system fabrics. Production of these has levdled out or declined in all countries except Japan, and wool as a percentage of all fibres has also declined.

The use .of ew Zealand wool in knitwear is relatively small, but significant and is tending to increase.

From its survey of the markets, Battelle concludes that despite an eroding market position, there is still latent consumer demand for wool.

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Competition

Synthetic fibre compet1t1on continues to be strong. New wool-like products are being introduced, such as the third gen- eration nylons.

ew competitive devices, such as integration into the textile industry, are being advanced.

Promotion, advertising and other marketing techniques are still being strongly pursued.

However, price cutting seems to have slackened, especially in Europe.

But the actual prices at which synthetic fibre transactions take place are very difficult to determine.

The economies of scale of production still exist. New plants will be larger, demanding larger markets to assure higher throughputs.

Costs of synthetic inputs have increased, but the majority of lhese are by-products of other processes that would have little or no value except as inputs to the plastics industry.

So while synthetic prices have firmed, and the rapid price decreases have probably levelled out, it is unlikely that actual price increases will occur in the long run.

Marketing System

The grower is the first link in the wool marketing chain. His net income from wool continues to decline, he is becoming gradually more meat than wool oriented, he is less interested in wool preparation, he has little direct knowledge of existing marketing conditions. The delay in receiving his cheque for wool put through auction, together with his flagging interest in wool, is turning him increasingly to private selling.

The br.okers arc fragmented, quite insulated from the user marketplace, and very conservative. They are making changes to promote efficiency of handling and they do move a large volume of wool.

The auction has both advantages and disadvantages. It is an equitable system of valuing a large volume, diverse product such as wool and it makes price and volume information readily available. However, it makes prices fluctuate, it introduces supply timing and delivery problems, it creates conditions in which larger purchases tend to cost more per unit than smaller

purchases, and it serves as a barrier to communication between buyer and seller on other than price and volume information.

The wool trade is fragmented, made up mainly of relatively small firms compared with synthetic competition, highly con- servative and oriented mainly to traditional wool users. It is not generally attuned to the technology of the textile industry, but is highly skilled in the traditional complexities of wool. It is highly skilled im the logistics of wool shipping and is the major contact of New Zealand with the textile industry, but is not generally highly skilled in using modern marketing techniques.

The International Wool Secretariat can be viewed as part of ew Zealand's wool marketing system. It is engaged prim- arily in consumer promotion of wool and secondly in wool research and development. Ho,wever, it is not involved to any great extent in the advertising and promotion of wool at any levels other than the consumer and is not involved in raw wool marketing.

Handling and Distribution

The handling and distribution system effectively moves a large volume of wool, but the current system has no central control, so changes arc slow and difficult to effect.

Costs are increasing at virtually all stages. Some efficiencies are being introduced but will have a relatively minor effect on the overall cost picture.

Private selling is increasing, threatening the proper func- tioning of the auction. It offers rnme advantage to grower and buyer but the private selling system may incur many of the costs and problems of the auction system if it expands much beyond current levels. The fact that private selling has increased sub- stantially in recent years is an indictment of the auction system.

The current system is responsible for wool availability and delivery problems experienced by mills.

Wool Pricing and Price Levels

Wool prices are fixed at auction, but many factors existing before that time are actually responsible for bidding strategies and limits. Consumer incomes and purchasing decisions are a very important factor in prices, as are fashion changes, which are becoming more volatile.

nthctic competition has been dcprc,,ing prices at all market levels, and the textile indw.tl) hac; been tending to discount wool fo1 it"> difficult) of procc.-,in~ and m,mufacturing, its dcliverr problems, its quality incon,istt·ncy, its price \'ariabilit~, it<: lack of cutomc1 ""IYiccs and it:. lack of \Olumc discount.

Change'\ in the struC'lurc of the textile industry will make the actual price paid le~s important to the user than n stable price and consistent quality .

. \naly-.i<; indintes that uncfrr the curren< system wool prices ar,· likcl> to increase 'er) gra<lualh mer the comin~ decade, but b) 1980 will still not ha\'e reached levels fil\·ourablc to gro\\ en..

B.\Trt:LLE·s rt:'\Ol~G-,

The Baucllr report ~ummariscs ih findings in eight points:

(I) Wool is being scvc1dy threatened in its marketplace.

New Zealand wool tend~ to be faring better than the wool industz: in general, but th~ ma) be largely a result of the current lo" .. price levels.

(2) \\'ool i'> not re.~ndin~ to the thrcall', and the current ma1 kcting ":·stem i" main I} responsible for this lac;k of rcspon..c. The fibre docs ha' e ~ome technical problem~, but it also has some adrnntage'i mer it, competitor<\ and some of the problems ca:i be overcome. There appear.

to be a latent demand for wool p1uducts among consumers even in the United States where wool is in its most clcprcs."Cd state.

( 3) Wool L'> being pr~cntt·d to the L<~~"' ilc industry in a manner that places it in a poor compctiti'c position. Compared

\\ ith synthetics. it hai. no price 'tability, poor <lclivel)

!'C'hedulc.s, high product rnriability and no volume dis- counting. The wool trade offer.; the industl) liulr tech- nical sen kc, little a.i;.-.i,tance in end product marketing, product development or market de\ elopment, tradr fin- ancing that is often Jc.,s competitive. and little in the wa>

of product guarantees.

( 4) Change'> arc taking place in the current system, but both the using industry and the competition are moving much more rapidly.

i3

( 5) Strong changes in the marketing system are necessary to make wool into a more competitive industrial fibre.

( 6) The changes needed include reduction of the fragmenta- tion in the system with more centralised decision making;

more direct contact with the marketplace for wool to give the New Zealand wool industry a marketing orientation and provide information to utilise in effectively meeting change in the marketplace; more price stability and volume discounting which undoubtedly means replacement of the auction system and will make for more effective plan- ning by wool suppliers, marketers and users; and more centralisation to provide the New Zealand industry with more bargaining power in dealing with a more central-•

ised using industry.

( 7) The types of reforms in wool marketing already discussed in New Zealand and elsewhere will not solve the major problems of wool quickly enough. Continuing the pro- gramme of reducing valuing and handling costs is too slow, misses many of the major problem areas and can effect only small savings. Changing the wool selling system to an acquisition scheme will change the timing of pay- ments to farmers and can be a focal point for effecting some handling and shipping changes, but it misses dealing with the key marketing problems, and cost saving poten- tials arc not great enough to make up for market threats.

(8) A system is therefore called for that preserves the good features of the current system and replaces the bad features with more direct marketing that is highly oriented to the requirements of users.

Since the Wool Board announced its marketing plan on 26th August this has met with little valid objection lo broad principles. Crowers approve, buyers and merchants are wary and worried. None are yet optimistic about wool's future but all see the establishment of a marketing authority as necessary. The Meat and Wool Council of Federated Farmers on the 12th October accepted the scheme subject to the corporations' chairman of the directorate being appointed by the Wool Board, in agreement with the Minister of Agriculture instead of "appointed by the Minister of Agricul ture in agreement with the Wool Board". Government on the 26th October announced that a company would be set up by the Wool Board under the Wool Industry Act 1944 to study how the corporation is to work and to produce a draft of its legislation. The company will not have powers to trade but it is expected that the corporation will be operative early in 1972. Until then, status quo.-Ed.

NEW ZEALAND WOOL BOARD .MARKETING PLAN

Preamble

This plan for New Zealand wool marketing was unani- mously approved by the New Zealand Wool Board at an ordinary meeting on August 26, 1971. A summary of the proposals was released to the press the preceding day; this plan supersedes the summary.

The Board will be discussing the plan with Government, woolgrowers and the wool trade. It hopes that the proposed M arkcting Corporation will be constituted as soon as possible.

Over recem years, a number of organisations and manr specialists in wool, economics, statistics and other fields have contributed to the study of wool marketing. The Board acknowledges their ~ sistancc and most recent)}, that of the Battclle Memorial lmtitute and Dr. Ivan Kinne, of its Columbus staff.

Introduction

J.

ACLAND, K.B.E., Chairman.

The Wool Board in 1970 engaged the Battelle Memorial Institute of Columbus, Ohio, to investigate the marketing of

1 cw Zealand wool, including:

( I ) The organisational structure and financial needs in New Zealand.

(2) The relation hip and the effectiveness of communication between wool marketin~ and \\OOI production.

(3) The pricing mechanism of New Zealand wool.

( 4) The marketing procel>Se after wool is sold b} the growers, including the role of the international merchanting houses (up to the point at which wool loses its identity).

( 5) Alternative courses of action to effect improvements.

The Board has considered and accepted Battclle's findings.

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Recommendation

The Wool Bo:ird recommends the establishment of an organ- isation with broad powers to improve the marketing of New Zealand wool throughout the world.

Title

The title of the organisation will be the i\ew Zealand Wool Marketing Corporation.

Objectives

The Corporation's objectives will be similar to those stated in the report of the Wool Marketing Committee, November 1968.

(I) To obtain optimum long-term returns for New Zealand wool growers and the New Zealand wool industry in general.

(2) To do this by marketing New Zealand's wool to the best advantage in competition with other textile fibres.

(3) To develop a marketing system attuned to the requirements of the world's textile industry.

( 4) To bring about efTiciences in handling and distribution and to keep these and related costs to a minimum consistent with objectives ( 2) and ( 3).

( 5) To provide a Aow of information on market requirements to help guide the planning of wool production and pre- paration.

Functions

The Corporation will be directly involved in:

(I) Wool marketing from the woolshed to the end user.

(2) The development of greater efficiency in wool preparation, handling, selling and shipping.

( 3) Transpon negotiations.

( 4) The development of existing and new market-. for New Zealand·s wools.

Nature of the Organisation

The title of the Corporation has been chosen to suggest its nature: commercial in outlook, flexible in its planning and operations, "marketing oriented" and profit seeking.

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It will be a statutory organisation acting on behalf of wool·

growers and Government. It will have adequate Government financial backing but operate "at arms length" from Govern- ment. Through the Wool Board growers will have adequate representation on the Corporation.

The Corporation will have a policy-making directorate. lts staff will have considerable Aexibility in operational decision making.

The Corporation will have wide statutory powers for use when necc.5.5ary in the fulfilment of its objectives. But it will, ro far as possible, attain thc~e objectives through normal com- mercial operations, testing and proving procedures against com- petition. It will have the capability of enforcing change where change is needed, but will preserve and trengthen existing institutions where appropriate.

Statutory Powers

The Corporation will require new legislation since neither the Wool Industry Act nor the Wool Commi.sion Act encom- passes the concept of a marketing organisation.

It must have considerable autonomy. Its powers should be broad and few operational procedures should be specified. The legislation should include normal safeguards of the public in- terest and also safeguards in the use of public funds. But at the same time, the legislation should recognise the need for the Corporation to make quick and independent decisions.

The Board suggest the Corporation should ha,·e power to:

(I) Purchase all cla"5Cs of shorn wool, slipe or pulled wool.

(2) Market and/or process the wool in any manner thought to be in the best interests of New Zealand's wool.

(3) Engage in any preparation, handling, disposal, transport, processing or marketing activity considered appropriate, and en ure that other parties carry out these functions in accordance with its directions, including the right to lic- ense certain agencies to carry out any or all of these activities.

( 4) Take over any classes of wool as it feels appropriate.

( 5) Take over any or all operations from preparation through to marketing as may be required.

These powers should be tempered by requiring:

(I) Mutually acceptable bargaining procedure:; to establish pricing schedules for wool if the Corporation is to procure or acquire it.

( 2) The establishment of a mechanism for equitably determin- ing values for commercial operations should they be appro- priated by the Corporation.

(3) Ministerial and/or Wool Board approval for certain types of major action.

Establishment of the Corporation

A Pro Tern directorate will be set up as soon as possible to initiate the establishment of the Corporation.

It will consist of a chairman and at least two, but not more than three, other members. They will be nominated by the Wool Board and approved by Government and will be respons- ible jointly to the Board and Government.

Its duties will be:

{I) To establish a liaison with the wool trade and the industry in New Zealand and overseas and to consult on operations that would be beneficial to the marketing of New Zealand's wools.

( 2} To finalise plans for the establishment of the Corporation and to present them to Government and the Wool Board.

( 3) To assist in drafting legislation.

( 4) To initiate the appointment of the directors and senior staff of the Corporation.

The Chairman mu t be able to give considerable part of his time to the work of the Pro Tern Directorate and must be experienced in organising and operating significant commercial enterprises. Ideally, he should be acquainted with New Zealand wools and textiles. The other members should also have appro- priate stature and experience.

The Pro Tern Directorate will have the services of a full- time secretary and such other staff as are needed.

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Organisation and Structure of the Corporation

The Directorate of the Corporation will be:

Chairman- Independent; appointed by the Minister of Agri- culture in agreement with the Wool Board. He shall be ex-officio a non-voting member of the Board and shall have appropriate business experience.

3 members-Sitting woolgrowers' representatives on the Wool Board, appointed by the Board.

2 members--With appropriate business experience, appointed by Government.

member- A public servant, appointed by Government.

member (non-voting)-Nominated by the Directorate of the Corporation and approved by Government to provide specialised expertise as deemed appropriate.

The term of each voting member of the directorate shall be five years, some original members accepting shorter terms so that a regular rotation is established. This will be determined by the Pro Tern Directorate.

The Directorate of the Corporation should be responsible for policy. Its members should have experience in evaluating business operations and making business decisions.

The chief executive of the Corporation will be designated general manager. He will have overall responsibility for the entire operation and specific responsibility for the international and marketing operations of the Corporation. A deputy general manager will handle New Zealand operations.

The general manager will have demonstrated his ability to organise and manage a commercial operation that could achieve more than $200 million in annual sales. He should have know- ledge of export operations and preferably- but not necessarily- of the textile industry and wool. He should be dynamic, and should have demonstrated ability in establishing good relation- ships with people of different nationalities.

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