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Maximising Merino

by fatweb

By Melinda Collins

Kiwi ingenuity; it’s world famous. Perhaps one of the strongest examples is how Kiwis took some domestic cows in the 1800s and turned them into today’s multi-billion dollar dairy industry. In the early 2000s, those dairy products equated to New Zealand’s leading export earner, sold to 140 countries throughout the world. And now we’re doing it again. With a rapidly strengthening profile, both here and overseas, merino wool has established itself as an essentially Kiwi commodity.

Farmed fashion

According to New Zealand Merino Company (NZM) CEO John Brakenridge, as little as 15 years ago, merino wool was sold as nothing more than a commodity blend.

“When we suggested selling it in its 100 percent form, people said no. We (NZM) took merino, partnered with the likes of Icebreaker and unlocked new markets and new potential for it.

“New Zealand is very good at producing commodity products, but in terms of marketing them around the world, we leave a lot to be desired.” That’s where NZM comes in. NZM began as a joint venture between New Zealand’s merino growers through Merino Growers Investment Limited (MGIL) and PGG Wrightson Ltd.

Earlier this year MGIL purchased PGG Wrightson’s stake to take full ownership of the company. Launched in 1996, the organisation was designed to increase demand for New Zealand merino globally by working with supply chain partners to champion the unique attributes of the fibre, undertake research and development to enhance all aspects of the merino offering from on-farm practices to garment production, and to broker merino for growers to ensure the best possible sustainable price to keep the merino tradition passing from generation to generation of farming family.

“We’re competing against cotton and synthetics such as polyester so we’ve got to be very good at what we do,” Brackenridge says of the value-adding proposition.

It helps that wool is not just grandma’s zany knitted jumpers anymore; wool today is one of the most desired fibres, taking pride of place at the height of fashion.

Modern production methods have created merino wool products that are itch-free and machine washable. A natural temperature regulator, hypoallergenic, odour free, stain resistant, durable, animal friendly and environmentally sustainable, merino wool is one of the most versatile and practical natural fibres in the world. So it’s little wonder it has developed into a $150 million industry.

However, like all commodity markets, wool has the potential for boom bust cycles, much like what was experienced in 2009. According to Federated Farmers, the sheep population in New Zealand had dropped by 50 percent from 70 million down to 35 million.

Federated Farmers president Don Nicholson described the industry at the time as dire. “With the cost of production and harvesting the wool, some farmers are not breaking even.” Sheep farmers were experiencing their worst returns for almost five decades.

But a shining light for the industry came in the form of NZM. The organisation has established three-year supply contracts in New Zealand dollars for a substantial amount of fibre, giving confidence to both growers and the end market by insulating the industry against its boom bust potential.

“For the people in the supply chain, no matter the part they play, this is probably the best part of their business, because of the certainty and the consistency,” he says.

Historically, merino farmers sold their wool at auction to a wool processor, who sold to a spinner, who sold to a knitter or weaver, who sold to a retail brand. Each person in the supply chain would jealously guard their customers and argue each week over price, convinced that others in the chain were making more money.

An independent validation by McKinsey and Co found NZM is adding value for growers to the tune of $10 million to $15 million annually.

“Everybody in that supply chain needs to exist, but they need to exist collaboratively,” Brakenridge says.

“We target the retail brand, back-fill the supply chain, and that supply chain works together. If New Zealand and our grower/suppliers are going to get more money, that can only happen if you’ve got more money happening at retail and you’ve got a more effective and efficient supply chain.”

The company’s strategy has been to grow new categories for merino wool, for use in active outdoor wear, through partnerships with retail brands like Icebreaker, Smartwool and Ibex.

The jewel in the merino crown has always been wool. But thanks to NZM, the country is seeing substantial gains made in the name of sheep.

“Sheep are a multi-faceted animal. We realised there was much more value for the farmer and for the country.”


Haute cuisine

Much like the luxury fashion world embraced merino’s fine quality, so too has the culinary world. NZM formed a joint venture with Silver Fern Farms to create a luxury meat brand, Silere alpine origin merino, which is now being sold to discerning consumers throughout the world.

The partnership, Alpine Origin Merino, is an important component in the aspiration to double the current $150 million merino industry over the next five years by unlocking the value of merino meat and co-products such as leather and lanolin, alongside NZM’s initiatives to add value to fibre.

Brakenridge says high country farmers have always known about the superior qualities of merino meat. “It’s one of the high country’s best kept secrets. The merino breed of sheep is at home with the variable terrain and diet of New Zealand’s high country. These characteristics are reflected in a distinct flavour and silky texture that is lean and healthy,” he says.

As a first step to the world’s premium markets, Alpine Origin Merino has partnered with a selection of New Zealand’s top restaurants to feature Silere alpine origin merino on their menus, testing merino with discerning global consumers during the Rugby World Cup.

“Merino has the potential to be a culinary sensation in select global markets, just as we have seen with the rising popularity of Wagyu beef in recent years. Until now merino has not been differentiated in the way.

“The chefs we have spoken to unanimously agree that Silere alpine origin merino is a superb product – their feedback has been exceptional. We’re confident international visitors dining at our partner restaurants will agree and we’ll be seeking their feedback,” Brakenridge says.

In partnership with the Government’s Primary Growth Partnership fund, Alpine Origin Merino expects to unlock significant additional value in merino sheep, particularly for farmers.

Silver Fern Farms CEO Keith Cooper says the merino meat project is part of a wider programme to maximise the value of New Zealand sheep. “Our goal is to turn the traditionally volume-based sales approach characteristic of the New Zealand lamb industry on its head by pursuing premium opportunities in higher-value micro-markets.

“Part of this shift in thinking involves adding value to cuts traditionally perceived as lesser value. We need to challenge the thinking that we can only ever achieve top dollar for racks and loins,” Cooper says.

Ethical business

It’s not just the fashion and culinary worlds which are seeing the value of merino. NZM is also adding value to the entire supply chain by adding ethics. The Zque brand of merino fibre has credentials supporting its economic and environmental sustainability, as well as animal welfare and traceability standards.

“Retail brands are increasingly wanting to ensure their products are sourced sustainably and ethically, while being able to tell the story of where the products came from. NZM is the best in the world at providing brands which are in-line with those principles.”

An accreditation program, Zque ensures five key factors are taken into account in producing quality merino products, ensuring sustainability of the merino wool trade and being ethically responsible at the same time. Developed to guarantee the integrity of merino products, Zque products includes assurance that production systems meet suitable standards for livestock stewardship, management of the environment and socially responsible practices, and that the resulting products are of the highest quality.

Specifically, Zque:

  • Encourages the production of ‘fit for purpose’ New Zealand merino fibre through systems with enhanced animal welfare, environmental, social and economic values
  • Provides extra confidence for customers as to the quality and integrity of New Zealand merino fibre accredited under the Zque programme
  • Provides a framework for further innovation of the programme and grower recognition in the future.

And it’s not about to go out of fashion anytime soon.

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