Richard Young vividly remembers the induction for new directors the evening before his first meeting as an elected member of the Silver Fern Farms board.
It was 2013 and the newly elected directors were taken through the co-operative’s accounts ahead of the annual meeting the next day.
It was not pretty.
The company was heavily in debt and haemorrhaging cash because of high inventory levels and debt servicing, funding three-year lamb contracts on a falling market, a fire at the Te Aroha plant and the legacy of the Richmond purchase.
Young recalls banks were losing confident and demanding answers.
He and Dan Jex-Blake were elected with the backing of Meat Industry Excellence to push for a merger of the two co-operatives and to start rationalising the industry.
But as soon as Young saw the accounts he knew his priority had to change.
“It was abundantly clear Alliance shareholders would not buy into the idea given SFF’s problems.”
Failure would mean a fire sale with no control over the company’s fate.
“When facing something that grim you have got to think not only about the shareholders but the 7000 employees and what a wrong move will mean.”
At the time the two co-operatives were talking about rationalisation though that never eventuated as SFF fought for survival.
Subsequently, the two co-ops have parked decades of antagonism and are working together on mutually beneficial projects such as health and safety.
Young never once thought “Why am I doing this” and he never once thought about stepping into the chairman’s job, a position held by Rob Hewett since 2013.
They were grim, dark days trying to find a way out of SFF’s financial problems, culminating in Shanghai Maling offering $311 million for a half share in the company.
It was vastly superior to any other offer on the table and ensured SFF stayed a single entity, was debt-free with spare capital to invest in maintenance and the Plate to Pasture marketing strategy.
And through Shanghai Maling it had direct access to retail links and opportunities in China.
The agreement means Shanghai Maling and SFF Co-op jointly own the processing and marketing arm of SFF.
Now Young has replaced Hewett as head of a company entering a new phase of targeting and dealing more closely with its customers.
But the focus is also on improving profitability.
SFF reported a miserly net profit before tax of just $6.3 million on sales of $2.4 billion for 2018.
Young says SFF has set itself three financial goals by 2023: aggregated profit over five years of $150m, a 10% return on equity and being industry leader in safety, quality and sustainability.
Exports to China hit $500m last year and will break $600m this year and the United States is showing significant potential as consumers there seek grass-fed beef free of hormones and antibiotics.
“It’s not just around high-end steaks. It is also 100% grass-fed burger patties and grinding meat where we are getting traction.”
As a mature market it is costly and time-consuming developing relationships with consumers but Young says that is being done through the NZ Lamb Company, which is building a new plant on the US east coast where retail packs of beef, lamb and venison can be processed.
In China SFF is bypassing the traditional traders and trying to move further down the value chain to connect more with wholesalers, distributors and end users.
Young followed a traditional shearing and farm working pathway into farming, accumulating enough cash to 26 years ago buy his uncle’s 125ha farm in the foothills of the Blue Mountains near Tapanui.
A farmer’s son, Young studied commerce at Otago University before shearing his way into farm ownership.
He and wife Kerry now farm 300ha on which they run sheep, cattle and grow crops.
In those early days Young was involved in the administration of local community entities such as school boards and the golf club but a back injury requiring eight months rehabilitation forced him to question life if he could no longer farm.
He took a Kellogg Rural Leadership course and has since completed several governance and public speaking courses.
That coincided with farmer frustration at the performance of the meat industry, leading to the launch of MIE.
Young’s involvement in MIE followed a letter to the editor of the Farmers Weekly in which he questioned a Red Meat Profit Partnership report claiming the biggest gains in red meat profitability would come from behind the farm gate.
“I thought we have made really good gains behind the farm gate and I felt the sector past the farm gate was letting us down.”
Those contemplating a national movement to change the meat industry agreed and Young was appointed chairman.
Its focus narrowed to the two farmer owned co-operatives, entities MIE believed could be influenced by having sympathetic directors elected to the respective boards.
In 2013 Jex-Blake and Young were elected to the SFF board and Donald Morrison to Alliance. The following year they were joined by Fiona Hancox and Russell Drummond was elected to the Alliance board.
More than being an agitator Young says involvement in MIE ignited his passion for the meat industry and for SFF.
While MIE did not achieve structural change it succeeded in raising awareness the industry model was broken.
The meat industry still faces issues of over-capacity and competition for land use, this time from forestry, which will add to that surplus capacity.
Young paid tribute to Hewett who he says has done an admirable job as chairman along with fellow directors and staff who have all contributed to transforming the fortunes of SFF.
He describes himself as a farmer who has benefited from the challenges of buying and developing a farming business and along the way he has acquired business skills he says too few farmers realise they have.
