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Beyond the Bale : Jun 07 - Jul 07
By Nicole Baxter A southern NSW woolgrower group has improved its returns by up to 25 per cent by taking its clip straight to the customer, in this case a leading Australian sock manufacturer. During the past four years Boorowa-based WoolConnect Inc. has built a successful relationship with branded manufacturers, topmakers and spinners, lifting margins for those of its 66 members who have supplied wool. WoolConnect chairman and Boorowa wool producer John McGrath says the group has proved growers can successfully market their fibre directly to end users. According to WoolConnect director and Cowra wool producer Michael Flannery, Mr McGrath is the 'guru' behind the development of the marketing group, which evolved in response to the wool price slump of 2002. "We were sick of being at the mercy of the spot market so were keen to lock in a percentage of our clip to take the risk out of our marketing," Mr Flannery says. "A lot of the blending that takes place undoes all the work done on and off-farm to describe the product." Mr McGrath says wool is classed on the sheep's back, subjectively measured at shearing and objectively tested again by the Australian Wool Testing Authority (AWTA) before warehousing. "So by the time it hits the market, wool is a highly described product, placed into a commodity environment," he says. "Under the auction system, we provide all these benefits into the supply chain and are not rewarded. We wanted to capture some of this value." WoolConnect director and Reid's Flat commercial wool producer Pattianne Gay describes the marketing approach as a "demand-chain network" because customer orders drive the system. "We wanted to convert our selling from a supply-push to a demand-pull," she says. "By connecting to the customer to find out what they want, and by informing topmakers and spinners, we've created a demand-pull situation that provides a negotiated price and sustainable returns. We are now selling a package: a ser vice deal for branded manufacturers." To create demand for their wool, the group targeted branded manufacturers such as Humphrey Law, a Melbourne-based, high-quality sock manufacturer. "We went to branded manufacturers because it was at this level in the supply chain where we stood the greatest chance of creating efficiencies, minimising costs and improving returns for all supply-chain partners, and creating significant quality improvements for the customer's product," Mr McGrath says. "Many manufacturers see a lot of variability in yarn between batches, but what they get from us is consistency so they don't need to change their machine settings. "Our customers say: 'This is the first time somebody has asked me what I want.' I just say: 'It's in our interest to help your product sell.' " Rob Law from Humphrey Law agrees, saying that for the first time in Humphrey Law's 59 years of sock-making, the product quality is no longer controlled by topmakers' standard commodity top. "WoolConnect allows us to order the premium-quality product," he says. "We can now do the obvious and talk to the only people who really care and the only people who have no conflict of interest in a genuine quality guarantee -- the growers." According to Mr McGrath, topmakers and spinners, who work on a commission basis, are relieved of quality risk, the necessity of carrying inventory and the need to trade product because the batches are tailored to the customer's quantity and quality specifications. "They are receiving a consistent product which is creating greater efficiencies in their production line," he says. While the relationship is a shining example of what grower groups can achieve, this particular 'demand-pull marketing' was not achieved overnight. It started five years ago when the Boorowa Merino Breeders Association sought assistance from Agri-Chain Solutions, a subsidiary of Supermarket to Asia Ltd, which canvassed local growers for their interest in forming a producer- initiated marketing group. After 66 woolgrowers paid $500 to be involved and Agri-Chain Solutions matched the funds, WoolConnect Inc was formed. Everything changed when retailer Humphrey Law approached the group to source yarn for its fine-wool socks. After extensive negotiations a price was agreed and the group sourced a topmaker and spinner to process yarn to meet Humphrey 14 SUPPLY CHAIN BEYOND THE BALE Growers tap 'demand-pull' Smarter marketing, allowing growers to connect directly with end users, has lifted profits for a southern NSW grower group
Jun 07 - Jul 07 Supplement
Apr 07 - May 07