I’d like to start this column by saying sorry. A retraction if you like. In my previous article on the perils of gender diversity, I mistakenly stated that my father was 84. He is in fact 83. I also stated that he got beaten in an arm wrestle by his 60-year-old female neighbour. Apparently it was, in fact, a draw.
Naturally, I would like to express my apologies to the offended party and confirm that all other statements made in the article were 100% correct, for the most part.
And so on to the main subject: Americans.
I like Americans and recently I met a few more of them. They were from Texas, to be exact, where they drive trucks three times too big and have a habit of losing their guns in the seat pockets.
But Texas is also the land of big business. In my travels there I met a gentlemen named Andrew Volleman. Andrew and his family moved from their home in the Netherlands to Texas in 1993, in search of opportunities to grow their dairy business and allow future generations of Vollemans to take their place within it.
Starting with 100 cows, the Vollemans now milk 5000 a day, supplying their own brand of milk in glass bottles across the state.
The glass bottles were important to the Vollemans as they wanted to demonstrate their commitment to sustainability and also stand out in the marketplace. The big sticking point with this was the supermarkets, who were happy to sell the Vollemans’ milk, but not collect their empty bottles.
Ultimately, the Volleman’s Family Farm brand was so strong that the supermarkets gave in to consumer demand and started collecting the Vollemans’ bottles and processing the customers’ $2 deposit. A big turnaround from a previous “hard no”. The Volleman’s brand is now so strong that in 2021 it was appointed the official milk supplier of the Dallas Cowboys.
There were a lot of things I took from the Volleman’s story but two stood out.
The first is that supermarkets can be brought to heel if your brand is strong enough and consumer demand is great enough.
The second is that scale was a strong component of that success. It enabled the Vollemans to access the capital and bring on the marketing muscle necessary to build a highly successful brand.
Moving nearly 12,000km southwest from Texas we find ourselves back in our wee land of milk and honey, New Zealand. Scale and capital are not two things that you readily associate with our fine young country.
They are, in fact, the two things that are badly holding us back. However, looking forward I think that may be about to change.
NZ farmers are continuing to get bigger because they have no choice. We have few strong brands so the only way to stay in business is to chase profitability via economies of scale.
But continuing to grow within the context of increasing market and climatic volatility is going to require the support of increasingly large and sophisticated investors.
These investors will see the value in food production investments, especially within a world increasingly focused on food security, but these same investors won’t tolerate the poor and lumpy economic returns that the average farmer does. Nor will they accept the terms of trade currently offered by our four major banks.
These investors will start chasing market power like the Vollemans did.
My guess is that they will look to where they can create market power within their various parts of the sector. They may look to form new and stronger co-operatives, or create products instead of commodities, or create brands that are so strong that value is captured by the grower and not the retailer.
They may also drive to create the formation of lending institutions such as Germany’s Rentenbank, which supports the development of agribusiness through low-interest loans.
I have no clue what approaches they will eventually employ, but I know for certain that they won’t accept the status quo.
No one wants to see vast tracts of NZ farmland empty of the small towns and communities that were once such an important part of its fabric. Unfortunately, the great land consolidation ship has sailed, and I doubt there’s anything that’s going to turn it back.
But if it’s any comfort, it may ultimately drive the change that is so badly needed by the sector and return the profitability back to those who actually own the means of production.
We just need to hang on until it does.
