Nov 12, 2013 | Category, Change, Governance, Leadership, Strategy
Years ago there was a line in the film “Breaker Morant” where the breaker, played by Bryan Brown said of a young ladies virtue “another slice off a cut loaf will not be missed” .
I never forgot the line, and have used it often, usually to make the point that a collection of small, and in themselves insignificant changes all added up eventually make a big difference. Just like a loaf, one slice may not be missed, but lose some more, and soon enough you have no loaf left.
The treasurer approved the takeover of Warnambool Cheese and Butter (WCB) earlier today by the Canadian group Saputo, should the current take-over squabble turn out in their favour
The original Saputo offer of $7.00/share has now been upped to a current $8.00 with current share price well north, there is anticipation of further action by Bega Murray Golbourn, or Fonterra.
It is now inevitable that WCB will cease to be an independent dairy processor, it just remains to be determined if it will be owned domestically or by an international entity.
The WCB directors have done a pretty good job by their shareholders, their shares are now trading at 8.50, after being stuck around $4 for a considerable period up till July, after some pretty crap results. This is despite being a strategic supplier in an industry with demand growing strongly, particularly in Asia.
There is a bit to go, but WCB is as good as no more. Now to the offer of ADM for Graincorp, a decision slated for December 17, and feted as the more important of the two decisions due to the competitive stranglehold Graincorp has on grain handling infrastructure in the eastern states. If nothing else, the pathetic blustering of Warren Truss , and acerbic one-liners from Barnaby Joyce will be worth waiting for.
The real concern however, is the long term impact of having major food producing industries controlled overseas. Without being in the least bit xenophobic, and recognising that Australia simply does not generate enough capital to fund all the demand for capital in the economy, it cannot be healthy for the prospects of our grandchildren to be so beholden to the overseas boardrooms who control the food supply chains.
Stop the presses:
Murray Goulburn has made a further offer for WCB on Thursday 14th of $9/share, a substantial premium over the current Saputo $8/share offer, and over the closing price of $8.50 on the exchange. This is pretty heady stuff for a business that has consistently failed to deliver adequate returns to shareholders for some years, and it is hard to see how Saputo can go much further without the rationalisation benefits that MG would have.
Stop the presses, again!
It is Sunday 17th, not a day of rest in the dairy industry. Murray Goulburn has indicated that they will beat the latest Saputo offer, price to be announced, but they have the hurdle of competition policy to jump, stupid as that is in these circumstances. So, the deliriously happy WCB shareholders have the choice of taking the unconditional Saputo offer now, or waiting a bit to see what MG has in store. Meanwhile, Bega have upped their bid, but it is below the Saputo bid, so is essentially irrelevant. However, what is not irrelevant is the Bega shareholding in WCB, which along with that of MG and Fonterra add up to around 40% of WCB.
Whatever happens to WCB this coming week, Bega will come into play as soon as the dust has settled, perhaps sooner, as it is one of the very few Australian dairy assets left bigger than a paddock with a few cows and a bathtub.
Oct 10, 2013 | Change, Governance, Leadership, Marketing, Strategy
Canadian dairy processor Saputo looks set to take control of Warrnambool Cheese and Butter (WCB) with a $7 a share offer valuing the company at $370 million, which trumps an existing cash and shares offer from Bega Cheese which values WCB at 320 million.
$7 a share is a substantial premium over the Bega offer price for WCB, and appears to be a very full price on any conventional analysis. Trouble is however, that conventional analysis has some difficulty factoring in the strategic value of the business, one of only three substantial dairy businesses left in Australian hands.
WCB’s performance was woeful a few years ago, being on its knees in 2009 after a trading loss of $20 million on $441 million turnover, and having unsustainable gearing. Since then there has been improved but patchy performance, $8.8 million profit in 2010, peaking at $18.5 in 2011, down to $15.2 in 2012, and down again in 2013 to $7.5 million.
WCB has flown a bit under the radar as the dairy industry has been convulsed by take-overs and mergers in the last 25 years, and is now one of just three locally owned dairy businesses with any scale. The other two, Bega and Murray Goulburn have both tried to find a way to consolidate with WCB, and the Bega Chairman has been on the WCB board for several years, so should know the business inside out.
With 2 billion rapidly emerging middle class consumers on our doorstep in Asia, whose consumption of dairy products is rapidly increasing, the strategic value of WCB to the Australian economy is significant. However, the reality is that without a better offer, and subject to FIRB approval, (should not be a problem) WCB will be sold to Saputo.
Part of the challenge is the disconnect between the domestic market where the retail oligopoly is the price setter, and export markets where Australian dairy produce is a price taker. Inability to generate anything more than the cost of capital, at best, domestically, and subject to big fluctuations in international commodity prices and exchange rates, and not being a low cost producer, Australian returns in the industry have been very inconsistent. Now however, with the emergence of the Asian consumer, there is long term potential for value added margins. What is needed is patience, operational and business model innovation, and some really good leadership.
Pity we are no good at that
Also sitting on the desk of the new treasurer is the proposed takeover of Graincorp, by US company Archer Daniels Midland. Graincorp handles 90% of Eastern Australia’s grain exports, and roughly 75% of the crop, so is pretty central to the success of the Australian grains industry. A similarly strategic Australian asset that seems destined to be run for the benefit of others.
What do these North Americans see that we cannot?
Vale the Australian owned food processing industry.
Aug 29, 2013 | Collaboration, Governance, Leadership, Management, Strategy
Everyone knows herding cats is impossible, right?
Quite often this is a metaphor used to apply to NGO’s and voluntary organisations, bureaucracies, particularly local government, farmers, and children. Getting them to one place, at one time, in an organised and disciplined manner seems impossible.
I have used it plenty of times, not always kindly.
However, a recent experience has led me to a different conclusion, cats are actually pretty easy to herd, it just requires a bit of good management.
- Make sure they are hungry
- Show them a feed.
Done, herded.
It is the same with any of the metaphorical cats. Make sure they are hungry for what you have, can deliver, or represent, then demonstrate how to get to the prize.
Mostly people are motivated by things other than money and rules that dictate their behavior, offering responsibility and accountability for their actions, and a reason why things need to happen in a particular way goes a long way towards herding them. However, it is not really herding, as you need to be out in front persuading the “cats” by one means or another, to follow.
It is simply called “leadership”, and leaders are not always the ones at the top of the now almost redundant, formal, old fashioned management pyramid. Now they are those that care, put themselves out beyond their comfort zone, confront scared cows and take a photo of the elephant in the rooom and throw darts at it.
Aug 8, 2013 | Governance, Leadership, Marketing, Personal Rant
I have come to the conclusion that the crop of marketing and strategy development people looking after the current crop of Canberra wallies are about as useful as Harold Holts flippers.
After watching a host of political advertising last night, even on the ABC, (heaven help us, is there no refuge) I realised as well that:
- I am either a cynical old bastard, or the marketing and strategy people who “advise” our pollies think we are all truly, truly stupid enough to believe the patronising, paternalistic slogans they are delivering after the shenanigans of the last decade, and that,
- We are all so cynical, and feel so betrayed by our so called political leaders, simply because of years of shitty marketing.
Well, I am a marketing consultant, so you would expect that may influence the way I see things.
Consider what both leaders of the big parties are doing, although I do not exclude the dills from the edges who are at least as loopy.
After a decade of slight of hand, ducking responsibility, blame shifting, non-core promises, and outright bullshit, they now tell us what they are going to do, and expect us to believe it, and run to the ballot box in joy.
They tell us what they are going to do this time around, (while pouring scorn on the other lot, with access to exactly the same information), but do not tell us how they are going to do it, or why it is important.
This is a commodity sales pitch based on the political equivalent of sticker price, and we all know that commoditization and brand building, which necessarily includes trust based on behavioral standards are mutually exclusive.
Where is the value proposition?
When you think of really great marketing, it is based on explaining “Why“. The classic Apple ‘Think Different” commercial which set the tone of Apple brand building until very recently. Owning an “Apple” meant something, it conveyed a Why. It is not a computer, or an ipod, ipad, it is an “Apple”. Surely there are enough examples of great marketing around that they could have learnt something?
Is it so hard for someone to at least try to articulate the “why” they deserve our vote, the value they put on it, and how they will use it to build a better place for us, and our children?
Jul 16, 2013 | Governance, Leadership, Strategy
For a long time now I have advocated the notion that to get something back, you first need to put something in. Time, effort, knowledge, care, whatever. What you put in is less important that that simple act of being generous, and contributing.
It has always seemed to work for me, although the effort to get momentum going has often led to a few moments when I wonder if there is really a return on the effort.
What I have realised is that the crucial element of success is how, and to whom you make the offer.
Assisting those who want your assistance is not as effective as offering it to those who deserve it.
Wanting has become an expectation that something will just arrive, no cost, no obligation, whereas “deserve” inherently acknowledges a moral debt, and that your generosity will at some point be repaid.
Jul 5, 2013 | Change, Leadership, Personal Rant
Very few people have heard of Douglas Engelbart, who died on July 4, but it was he that thought up much of the stuff we accept as normal, every day tools and devices.
His relative obscurity is in stark contrast to the billionaires who brought commercial success to many of his ideas, Bill Gates, Steve Jobs, Larry Elllison, et al.
This presentation, now called the “mother of all presentations” given in December 1968 is almost the public unveiling of computing as we now know it.
Vale Doug, and those who like him beaver away to make all our lives better, without accumulating the celebrity and bling that seems to be expected these days with every idea that sounds good to its urger.
