CEO Direct Channel Podcast to industry #9

A few weeks ago I talked about the role of WAFIC as a peak body and whether we were currently meeting the breadth of industry needs – and also mentioned some possible areas where we could be placing more attention.
I floated the possibility of taking a closer look at trade and markets – but intriguingly I’ve since received some feedback that this is something we should be steering well clear of.

I was told that we should simply focus on catching fish and the supply chain should be left to the supply chain, and processing should be left to the processors, and marketing and trade should be left to the sellers.  I do appreciate these views but I’d like to elaborate my thoughts.

I’ve spent the majority of my working life involved in primary industries, particularly agriculture.  About 25 years ago various agricultural sectors were really struggling – the orange farmers were pouring fresh orange juice across the car park at Parliament House in response to the importation of cheap Brazilian concentrate;  pork farmers were rallying against the importation of cheap Danish hams; and even the Tasmanian salmon industry was protesting against the import of Canadian and Scottish smoked salmon products.

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If you look at these industries today, they are all doing exceptionally well – in fact almost every single agricultural sector is experiencing really high returns.

What had happened to those industries in the old days was that they had maintained a focus on production alone and had not taken an interest in working together as an industry to ensure their supply chains were fit-for-purpose and their production and marketing frameworks were aligned.  Their market focus – and particularly export focus – had flown out the window.

What happened was they produced what they preferred to produce, often what was the easiest to produce – then after the farm gate each step of the value chain was ignored, to be delivered by a provider who had no particular stake in maximising returns or creating future opportunities for producers.  The exporters simply did their bit and collected a toll for doing it.

And the industry organisations – the agricultural equivalents of WAFIC and WRLC – focused solely on production.

Now these industries were able to cover over these inefficiencies during the good times but when tougher global cycles were experienced, many Aussie farmers were caught and had to walk off the land.

Australia had failed to keep up with technological change, we had failed to listen to changes in market demands – and we had taken our eyes off what our competitors were doing.

A great example is NZ.  After the UK joined the European Common Market in the early 1970s, NZs farmers were devastated.  Their cosy dairy and lamb export arrangements were destroyed overnight and they were left without anywhere to sell their goods.

But they responded, they responded because they simply had to.  They started exporting high quality frozen lamb products to places all over the world.  I remember seeing some in northern Iraq in the 1980s – the country was at war with Iran at the time and I couldn’t figure out how the hell they had got their product in.

Then in the 1990s, the Kiwis were landing superior quality dairy products into the Australian market for cheaper than what we could produce – and they were unsubsidised.  I’ve even seen frozen Kiwi ice cream being scooped into cones in tropical third-world Cambodia.  For New Zealanders, from the producer through to the consumer, the industry has a supply chain trail that is aligned with their production interests and vice versa.

And look at Kiwifruit – actually a Chinese gooseberry, but commandeered and renamed by NZ and turned into a global marketing phenomenon.

I could also give many examples of how the Chilean government in the depths of the post-Pinochet period were able to generate products to meet northern hemisphere counter-seasonal demand – from a half-frozen mountainous country with just a narrow strip of arable land.

The point is that all the market success stories of the world carry a common theme, it’s called market focus.

What does this mean for seafood you might ask.  Am I saying we should tell the Geraldton Fishing Coop or other exporters how to do their business?  Most certainly not – that is their domain and should remain so.

But let’s go back to the agricultural analogy.

There are lots of marketers and exporters and freight forwarders who are out there doing a good job.  But they are focusing on their business not yours.

The National Farmers Federation (the NFF) is a strong industry body which has its own internal expertise in relation to trade and markets.  They have a Trade Access Committee and each of the states also has similar arrangements in place.  They focus on the resolution of trade disputes, providing inputs to trade policy to ensure the industry’s interests are protected, working with DFAT and Austrade to open and diversify new market opportunities, making submissions to Free Trade Agreement negotiations to ensure their interests are optimised – and so on.

But that’s just one small part.

Each state has it’s WAFIC equivalent – locally it’s WAFarmers – but above and beyond this they have their Trade Access Committees, Grain Trade Australia, Grain Industry Association of WA, Meat & Livestock Australia, and so on and so on.

Grain Trade Australia alone looks at things like developing standard contractual terms & conditions; Codes of Practice; export certification requirements, risk analyses; inspection protocols; quarantine standards; Quality Assurance; health & safety standards; Country of Origin labelling; chains of custody; international standards & accreditations; testing & sampling; product residues & heavy metal limits; trade policies; export strategy development; food regulations; post-harvest regulations & quality standards; and consumer protection.

So they address potentially discriminating barriers to trade and ensure that our market access is assured and improved.

In comparison, what do we as a fishing or seafood industry have?

The sound of crickets.

Well not quite, the Seafood Trade Advisory Group has done some good work managing trade disputes – but its resources are extremely limited.

But for that whole of industry focus – we as an industry have way too little happening at a national or state level – and I’m sorry, but this is a major failing.

Yes, individual exporters must abide by the regulatory framework, but they do not play a part in actually setting or adjusting the framework – as this would be a clear conflict of interest.

So it’s us who need to do something about this – we must be cognisant of the external things which have a core impact on our industry and ensure we address them.  And part of this is ensuring that our reputation as a reliable supplier to international markets is best protected.

For instance, many of the international organisations that are currently starting to influence trade are environmental activists.

They get out there and spread stories about northern hemisphere shark finning and then they say that Australia is doing the same – and this often goes unchallenged – because Australia doesn’t have a voice – these goons start concocting nonsense stories about unsustainable activity in Australian waters – tainting our international image – and these stories spread like a cancer through social media and before we know it, not only are our overseas markets being negatively impacted, but also domestic political decisions are being made which significantly impact upon our perfectly legitimate local practices.

The ‘Fins Naturally Attached’ movement is a clear example.

And then what happens?

A fair whack of local people get to believe this rubbish and then place pressure on politicians to make things tougher for us.  And in turn, this has investment impacts as the banks assess that our risk profile is forever rising.

So the seafood industry needs to increase surety and confidence of Australian products in international markets – and we need to give banking and financial services the confidence that our industry is the real deal and worthy of support.

What I’ve discussed today is what happens when we turn a blind eye to what’s happening in the trade and market domain.  It not only bites us there, but it also comes back to bite us here.

So ladies and gents we’ve got to be across this, we can’t leave it to the various individual exporters and freight forwarders because some might do it and some might not – they have no real incentive to invest time and money in this space – their job is to do their best within the current system – not to take on the role of fixing the whole system for the industry’s good.

‘Industry good’ work can only be conducted by the industry itself.  It’s a form of stewardship and we’re supposed to be the industry’s custodians.

Now when I made my recent comments about the need for WAFIC – and our industry – to start taking a closer interest in trade and markets and supply chains, I wasn’t suggesting that we (like agriculture) set up new institutions employing hundreds of people – quite the contrary in fact, I’m walking into a new WAFIC operating platform and the reality is that we’re going to be spending a whole lot less money next year than we were spending last year.

So I’ve been looking to apply for funds from government to help us do this – but guess what, when you look at the primary industry grant programs they rarely say they are available for fisheries. Agriculture yes – but fishing, not often.

Why is this?  Because we as an industry have fallen off the radar – agriculture is now the only show in town.  And that’s because agriculture has learned from the scars of the past – and they invest heavily in participation – they have their voice heard at every level – and we need to learn from this.

Now what I’ve discussed today is probably way more applicable to the Rock Lobster industry than a fisher who catches crabs at Mandurah and flogs them on the local market – but the general same principles still apply.  The key principle is about producers taking a keen interest and having a say in the framework around the supply chain and end market.

The seafood industry can no longer afford to do what it has been doing and neglect to grasp one of the most important elements of our business – the operating environment.

What I’m saying is that a healthy industry body like WAFIC should take a healthy interest in trade and market factors related to the broader industry good – while leaving the supply chain specialists to do their thing.

There is nothing to fear by us taking an interest in trade and markets – any fears should revolve about not doing it.

However, that certainly doesn’t mean us not focusing on our core knitting – which is resource access security and serving the immediate needs of our members – and these values (please be assured) will always be our priority.