Affco 20 Questions

10-09-2007 | webmaster

So, what are they thinking? TDF put together a list of questions which have been answered by AFFCO CEO Stuart Weston and his team.
TDF: You’ve decided to start processing venison at your Rangiuru plant, from 21 August…

Yes, we started processing that week, and the first consignments were air freighted to customers in Europe.
TDF: How long did it take you to get things organised to start processing venison from the time that you decided to do so?

The opportunity had been considered over a fairly long period, and was influenced both by the requests we were receiving from customers and interest shown by farmer suppliers.
TDF: Why are you doing it at your Rangiuru plant?

It is a well located plant with a skilled workforce which is pleased of the opportunity for additional work. We are using the facilities in the beef plant, and the major notable changes are in the stock yards to cater for deer.
TDF: What chains are you using at Rangiuru to slaughter and bone/cut the venison carcases?

Basically the beef facilities.
TDF: Who are your customers (eg retailers, distributors)?

The product is featuring in retail, and naturally we are working with distributors. For commercial reasons it is not appropriate to provide a list of our customers.
TDF: What are the main countries where your venison will be sold?

We are focussing on our existing customers in Europe, North America and Asia.
TDF: What brand, if any, are you selling the venison under?

Our product is being packed under the AFFCO brand. You will find it in some of the same supermarkets you will find AFFCO branded lamb.
TDF: How many deer do you expect to/want to process a week?

We know supply is tight for everyone, so it is not a matter of how much you want or expect. The plant has the potential to process 2,000 deer a week, although we are realistic enough to anticipate less than half of this to start with.
TDF: What effect will this have on the amount of other stock you can process through that plant?

We have a plan for managing this, but you will also be aware that with current milk prices, the industry is not getting the volume of stock that it is accustomed to from the dairy industry. AFFCO has a network of beef plants, and we are currently upgrading our beef processing facility at Wairoa, which will enhance its throughput and efficiency. This will not process deer, but it will help with processing options.
TDF: What is your thinking behind the decision to start processing venison?

It is very straight forward. Venison extends the suite of products we offer our European customers. The demand is there. It also allows us to provide a wider service to farmer suppliers.
TDF: And, what’s the thinking behind the timing – why start processing venison now?

Until mid this year, AFFCO could have been described as being in a rebuilding position, during which we have been internally focussed on getting our plants and processes right. We're just about through this process, and wanting to build the business. The timing is more about AFFCO coming into a new age rather than any other stimulus.
TDF: Why not last season, or the previous one, for example?

As above.
TDF: Why are you offering 20 cents above the schedule (until the end of pre-Christmas chilled orders in Nov)?

It is a way of highlighting to deer farmers that AFFCO is back in the venison business. We were happy to treat that as promotional cost. The context for this was also that a very large processor was out there grumpily telling deer farmers, ‘stick with us or else’.
TDF: Isn’t it a bit open-ended and hard to budget if you say simply that you’ll pay 20c more than anyone else?

We know that existing processors make margin, in fact a fairly healthy one given the small number servicing deer farmers. As a business we have a similar interest from servicing customers and suppliers, but we have been happy to relinquish some of that margin to re-acquaint ourselves with the deer/venison business, and also to reflect the serious nature of obtaining commitments from our customers, rather than the price on the day.

AFFCO is in a sound position. We have a strong balance sheet, and it is important that suppliers and potential suppliers know this. At the same time at the venison development, we announced we would be paying for all livestock within five working days of processing, from September 1, 2007, for a period of three months. This recognised many farmers have had a tough time and are tight on funds. We were also encouraging farmers to pre-book their processing requirement.
TDF: Obviously, price is just one element of the contract with a farmer – what are the other key conditions you’re offering?

We have a strong commitment to service. We do not take our suppliers for granted and we don’t threaten them with ‘or-else’s’.
TDF: What would you say to people who say you’re splintering supply?

We are supplying reputable customers. If supply increases exposure for New Zealand venison, we think this can only be a good thing.

We have been surprised (but shouldn’t have been) by some of the comments made to the effect that we would splinter supply. Such comments are untrue and appear orchestrated.

AFFCO has entered the market openly and transparently. We are a responsible marketer without the pressure, financial or otherwise, to quit stock in a way that disrupts the market.

We were not in the market when it collapsed, so it seems a bit rich for those that were to associate our entry which such events. We are confident that deer farmers are clear about this.
TDF: What would you say to people who say you could be starting another procurement battle by pricing aggressively – which could tip another painful boom-bust cycle?

The boom/bust happened because of undisciplined market activity and weak market signals back to deer farmers. Currently neither is evident. AFFCO has been in the venison business before and we are a responsible marketer.
TDF: For people who are looking for a commitment to market development, what do you believe AFFCO offers and will offer in future?

At the time of the market bust options for the product were very limited – Germany was the only market of any significance. The market options are now much wider including North America and Asia. There is simply no need to target competitors’ customers and offer cheaper prices just to get a foot in the door.

AFFCO is working with its existing lamb and beef customers around the world and they are very happy to now have a full suite of NZ products they can buy from one supplier. We can service our customers with lamb, mutton, beef, goat, venison and veal on a direct, one-on-one relationship. In North America, we are the only New Zealand packer that can provide a mix of its own branded lamb and venison in the same container.

AFFCO is not involved in any exclusive marketing arrangements, and frankly our customers welcome this because they do not have to deal with a number of New Zealand companies in order to get their goods. We are a one-stop, one-brand shop.

Also we're already actively involved with customer events such as the Anuga international food trade show (next month), and we will leverage our ability to supply venison at this event.
TDF: AFFCO went out of venison 12 years ago – for reasons that must have made sense at the time – what’s changed (including any company and/or industry factors)?

At the time of exiting the venison industry (1995) it was being mooted that venison would be allowed to be processed on a beef chain sooner or later which proved to be correct. Also at that time AFFCO had to take the carcases to Tauranga for further processing which added cost not margin to the process. It was a difficult period for the company and after reviewing its business, the decision was made that venison was not seen as core business.

Currently we are a much stronger company, which has made a huge investment in its processing assets so that it can deliver in the marketplace.
TDF: To what extent do you expect to get supply from existing suppliers (ie of other stock)?

Our decision to start processing venison at Rangiuru was partly due to the interest from existing suppliers who had to take their deer to another processor. We are currently getting supply from those farmers as well as those who have not dealt with AFFCO previously or, at least, for a long time.
TDF: What response have you had from farmers so far?

Very encouraging.

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