It will take 5 or 6 years to rebuild the flock says Wally Merriman

Don't take your eye off the need for wool marketing says Merriman

Sheep
THE BALANCE RIGHT: AWI director, Wally Merriman, says the company has got the balance right between investment in marketing and research.

THE BALANCE RIGHT: AWI director, Wally Merriman, says the company has got the balance right between investment in marketing and research.

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Sustained high wool prices are the key to rebuilding the Merino flock and that needs good marketing says former Australian Wool Innovation chairman, Wally Merriman.

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Wally Merriman, who is seeking re-election to the Australian Wool Innovation board, says the US-China trade war will hasten the relocation of wool processing capacity from China to cheaper manufacturing countries.

The former AWI chairman and principal of Merryville stud near Boorowa says the key centres for wool processing have shifted regularly during the past few decades.

Early-stage processing is now moving from more "expensive" China to countries like Vietnam, Laos, Cambodia, Myanmar and Ethiopia.

But Mr Merriman said China would remain a key consumer of Australian Merino wool.

As for the future of surgical mulesing, Mr Merriman said an AWI survey two years ago indicated many Merino producers would exit the industry if the practice was outlawed.

Consumer research also showed few shoppers were asking for clothes made from non-mulesed wool.

Mr Merriman is one of eight candidates vying to fill three vacancies on the AWI board on November 22.

We have sent all candidates a list of 10 questions to give voters an insight into their priorities if elected. Below are Mr Merriman's answers.

Question: If elected, what would be your major priorities as a director of AWI?

Answer: Briefly, my priorities would be marketing, research and the development of WoolQ.

Marketing

I think we should continue with our core programs i.e. Campaign for Wool, the International Woolmark Prize, the Athleisure Sport Program and men and women's fashion programs, particularly the programs in men's suiting.

When I was first elected to this board there was no marketing and we had a price to match.

Since marketing started in 2008, supply has remained static at around 350 million greasy kilograms and price has gone from 800c/kg to 2100c/kg.

We must continue to market our wool to support brands and retailers to achieve an increase in price. In future we will be moving more and more to the digital marketing and e-commerce space as we have done with Ali Baba in China.

China is a large market with good growth and I think we should be doing more marketing in China as well as America. They would be my priorities.

Research

I think the strategies for the company are on course and have been verified and shaped by industry through the ICC. Our strategies include:

1. Sheep Health Welfare

Thiscovers the programs of sheep health, welfare, vertebrate pests, reproduction and genetics.

2. Farm Automation Software

This is a new area for AWI and will be an important contributor to future labour saving devices as well as savings in infrastructure (digital fencing etc.). It will also apply to sheep identification, furthering genetic improvement.

3. Feedbase and Fibre Advocacy

This area covers feedbase and eco-credentials as well as fibre advocacy through our climate and sustainability work in conjunction with IWTO.

4. Wool Product Development

We need to continue to test the boundaries of wool use throughout the retail world.

The latest examples in this area are the Neualana product and wool runners with Adidas.

WoolQ

WoolQ is a digital platform for trading wool. It was a product of some 12 months consultation initiated by a group steered with the great assistance of Graeme Samuel who came to the conclusion that the company should explore the possibility of a wool exchange portal.

On a recent trip to China, at the recent Nanjing Wool Market, there were calls from major exporters in China for this program to be implemented and I think it should be implemented as soon as possible.

Q: Do you think AWI has now got the balance right between marketing and research?

A: Yes, I think the 60/40 marketing and research split is appropriate, particularly with the financial slowdown around the world. Marketing is very important to maintain price. Research, both on-farm and off-farm, is important and has been well funded during my time at AWI.

We must remember that if there is no money, we cannot do any research. We must have marketing to increase the price to give us more money to perform research.

An inconvenient truth for my critics is that in 2009-010 AWI spent $8.99 million on research. In 2018-2019 we spent some $43.7m on research, a record amount.

PAIN RELIEF: Wally Merriman says surgical mulesing with pain relief is now the best way to protect many sheep from flystrike.

PAIN RELIEF: Wally Merriman says surgical mulesing with pain relief is now the best way to protect many sheep from flystrike.

Q: What do you think should be AWI's main research targets?

A: We should continue with our marketing research with AC Neilson and other researchers, constantly identifying new countries and new brands that AWI can invest in.

We also need to research market trends in fashion and athleisure to make sure our 'Wool Lab' of new designs and new product is driven by this research.

Product development must also continue as we have to keep giving the consumer something new.

On-farm research I think is covered well under the current strategies of Sheep Health Welfare, Farm Automation Software, Feedbase Fibre Advocacy and Wool Product Development.

Q: How do you rate the AWI's current promotion and marketing strategy and what, if anything, would you do differently?

A: When I first came on the board there was no marketing. Since 2008 our marketing team has worked with hundreds of retailers and brands including top end brands in Prada, Max Mara, Ermenegildo Zegna, Loro Piana, Burberry, Ralph Lauren, Armani, Kent Curwen and Gieves Hawkes to name a few.

Also, there are the emerging Chinese brands of Icicle, Exhibition, JNBY and others and now in the sporting world with Adidas, Rapha, Lululemon and many others. These people invest their money in our programs which leverages the retailer/brand funds $4 to every $1 of woolgrower's funds.

Q: Do you think the AWI is now transparent enough with its levy payers?

A: Yes, I do.

Our corporate governance documentation is on the website and includes:

  • AWI Constitution
  • Board Charter
  • Charter of the Committees of the Board
  • Board Nomination Committee Charter
  • Code of Conduct and Business Ethics
  • Communications Strategy
  • Rules Procedures Governing the Election of Directors
  • Statutory Funding Agreement
  • Board and Company Diversity Policy
  • Whistleblower Policy
  • Corporate Governance Policy

There is also a risk management policy and framework, fraud control plan, an independent audit and since the review, a monitoring and evaluation framework to complement the monitoring and evaluation previously done by the company.

READ ABOUT THE OTHER CANDIDATES:

AWI complies with the "gold standard" ASX Corporate Governance principles. The review found there was nothing untoward in our corporate governance framework and also that there was no need for an oversight body as the shareholders vote to put their board in charge.

Our consultation program is vast with AWI spending $3 million on Lifetime Ewe Management, including the Industry Consultative Committee and larger Woolgrower Consultation Group. Additionally to that, there are all the state consultation groups which are used for feedback and reporting.

Q: The Merino flock has declined dramatically in size (thanks, in large part, to drought). What should be the AWI be doing to rebuild it?

A: The main factor that will increase the Merino flock is quite simply the price of wool. The only way to increase and support the price to my mind is marketing.

With a drop in price and the increase in the price of lamb and mutton, coupled with the drought, I think it will take 5-6 years of sustained wool prices and a breaking of the drought, for wool to recover to anything like a supply of 350 million greasy kg.

AWI has many consultation and advisory programs to help growers through this drought period.

Q: How important do you think it is to end surgical mulesing in the industry?

A: Two years ago AWI conducted stakeholder research that indicated that a disturbing number of Merino growers would leave Merinos if there is no mulesing.

The vast majority of people simply cannot protect their sheep from the ravages of flystrike without this tool. We now have pre- and post-anaesthesia and analgesia (to use with mulesing) and that is the best way to protect our sheep from flystrike.

I have always maintained that if the European processors want unmulesed wool they should offer significant price signals back down the supply chain. Our consumer research also shows there are very few people walking into retail and brand stores and asking for unmulesed wool.

Q: AWI is often portrayed negatively in the media. What do you think needs to happen to change that or is the company the victim of the "usual suspects" out to stir up trouble?

A: I think fair-minded people when reading their annual report and attending WoolPoll meetings will see that the company is doing a very good job for woolgrowers.

The usual suspects, as you call them, seem to have the ear of certain media outlets. They also seem to be concerned with "playing the man and not the ball". A few of them are either former board members or failed candidates.

Q: Does the Australian wool industry's heavy dependence on the Chinese market worry you?

A: The wool industry has seen, over the years, different countries dominating processing.

Twenty-five years ago it was Europe, England, France and Germany.

Through the stockpile years it was France and Germany. Italy took over from England, Korea and Japan also took business away from Europe and then the powerhouse of China has since taken it from Korea, Japan and Italy.

The early stage processing industry is now moving from China as China is becoming more "expensive".

The industry is moving to Vietnam, Laos, Cambodia, Myanmar and Ethiopia already. The Trump/China Trade War with tariffs on wool and goods, will hasten this process.

The European industry has moved to former communist block countries mainly Czechoslovakia. Out of all this, India's percentage is rising and we still have the great potential of Russia.

Separate to processing, China is one of our largest consumer markets. It still has good growth and more people are moving to the luxury bracket every year. It is an important consumer country for wool.

Q: Any other comments?

A: The wool industry is unique in the fact that AWI is a company and shareholders of the company vote for their representatives on the board.

It is a fair and equitable system where the person who pays the most levies has the most say.

Having said this, the smaller growers are very important to the outcome of the board. We have freedom of choice in this industry about who we elect to be our board representatives and I encourage everybody to vote to make sure you have your say on who you want on the board.

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