WHEN the New Zealand wool industry was being crippled by the fluctuating prices in the 1990s, fine wool growers banded together to redefine the industry’s business model in order to survive.
In 1995, The New Zealand Merino Company (NZM) was founded as a sales, marketing, and innovation company which has shattered the traditional supply chain by connecting woolgrowers with consumers.
The challenges of the past two decades has resulted in the NZ flock falling by 3500 sheep per day since 1990.
“We needed a disruptive force to change things and that disruptive force was a group of growers that together thought they could take their wool to the world,” NZM global partnerships manager Dave Maslen said during a presentation at LambEx, Albury, NSW.
NZM now transacts about 75 per cent of all Merino wool grown in New Zealand with turnover of more than $115 million.
More than 50pc of this volume changes hands through direct supply contracts, some of which extend up to five years.
There is really strong desire and demand for wool which is an exciting time but these brands need confidence that it’ll be produced in a way that will meet their own corporate responsibilities.
- Dave Maslen, NZM
Mr Maslen said NZM has built a global brand based on this collaboration between woolgrowers and brands that share the same values.
He said the result of validated storytelling, with product quality, environment and animal welfare, has secured NZM highly coveted contracts.
“People are voting with their wallets, making it abundantly clear that authenticity, value and personalisation win,” he said.
“We knew we had an amazing story which resonated with consumers, but we were lacking the sophistication in the middle to properly tell that story.
“It’s this sophistication that now lies at the heart of our business model”
Price premiums can’t be guaranteed with a good story alone, Mr Maslen said, it was about understanding the needs of end users and brands and crafting a value proposition for them.
Production assurance program ZQ Merino has been key to this – a program which provides customers with certainty that a high standard of product quality, animal welfare and health, environmental, economic and social values were adhered to.
The outcome has been a marketing story which provides price stability to woolgrowers and assurance to brands to purchase their wool via sustainable priced contracts.
In recent years, demand for ZQ accredited wool has seen NZM purchase volumes of Australian Merino wool to service the growing demand, and to supplement supply from New Zealand.
“It is about providing a product that the customer is actually looking for,” Mr Maslen said.
“It is a high intensity model in terms of the people involved and the sophistication that goes in to it but in NZ it is certainly what has driven the ability for our growers to take out new contracts.”
Mr Maslen said there was no reason Australia couldn’t put a similar model in place.
“There is an opportunity for NZM to work more closely with Australian growers from a procurement and sales perspective, where there is alignment of values, philosophy and a belief in the need for investment in markets, marketing, innovation and customisation.
“We can collectively learn from the mistakes and successes we’ve made, and build a model from there, meaning we're not starting from scratch.”
He said this may require a cultural shift for some, and close collaboration between players, including woolgrowers, shearers, industry groups, processors, designers, and manufacturers.
“There is really strong desire and demand for wool which is an exciting time but these brands need confidence that it’ll be produced in a way that will meet their own corporate responsibilities,” Mr Maslen said.
“If we can’t meet those standards then we will struggle to grow our businesses beyond the commodity market.”