It Can Be Done

Posted on: Wednesday, 22 February 2017 at 5:08:46 PM

Article from the AICC(WA) seventh Dr Harold Clough AO OBE Annual Event, held at KPMG Perth on 16 February 2017, featuring keynote speaker Mr Graham Laitt, Managing Director Milne AgriGroup Pty Ltd (MAG) and AICC(WA)  President, on the topic “Mining to Dining”.

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From L to R – back row : Mr John Cluer, Chief Executive, Australia-Israel Chamber of Commerce (WA),Mr Stephen Quantrill, Executive Chairman, McRae Investments Pty Ltd, Dr Patricia V Kailis AM OBE, Founding Director, MG Kailis Group, Professor Dawn Freshwater, Vice Chancellor, The University of Western Australia, Mr Gary Smith, Chairman of Partners, WA, KPMG, Mr Geoff Simpson, Managing Partner, Perth, Allen & Overy, Professor Eeva Leinonen, Vice Chancellor, Murdoch University, Professor Deborah Terry AO, Vice Chancellor, Curtin University

Mr Graham Laitt, Managing Director, Milne AgriGroup Pty Ltd, Dr Harold Clough AO OBE, Chairman Emeritus, McRae Investments Pty Ltd and Mr Malcolm McCusker AC CVO QC

 

KPMG are long-standing hosts of the AICC(WA) Annual Executive Boardroom Lunch in honour of Dr Harold Clough AO OBE.  The Chairman of Partners, Mr Gary Smith paid tribute to special guest Dr Clough for his contribution to the business community and economic accomplishment in Western Australia.   Mr Smith set the scene for the keynote address by emphasising the need to broaden and diversify the local economy through agricultural development, whilst acknowledging the resources sector as the primary powerhouse of the Western Australian economy.

This sentiment was echoed by Mr Stephen Quantrill, Executive Chairman of McRae Investments, who on behalf of the Clough family introduced the keynote address by Mr Graham Laitt.  Noting that Mr Clough and Mr Laitt shared an entrepreneurial spirit that was “coded into their DNA”, Mr Quantrill went on to describe Mr Laitt as a person who “lived the spirit of the Start-Up Nation; Israel”.

  

Mr Gary Smith, Chairman of Partners, WA, KPMG

Mr Stephen Quantrill, Executive Chairman, McRae Investments Pty Ltd

Mr Laitt used his experience as CEO of Peters & Brownes in the 1990’s to illustrate the challenges faced by medium sized WA agribusinesses as they defend their home market and look for growth overseas. He explained how Peters and Brownes had been transformed from a company that outside consultants had described as “on the very of corporate disaster” into a large FMCG company in ice cream and dairy using innovation and export market development.  At the time Mr Laitt was appointed CEO of Peters & Brownes the company faced the perfect storm of constraints that limit WA agribusiness; small and concentrated local market, production constraints, freight limitations, and increasing competition.  

The company used innovation and export strategies to overcome the perfect storm and successfully compete with much larger multinationals. Mr Laitt referred to the success with ice cream exports to the Japanese market as one example.  In telling the story, he shared his insights into how sustainable business relationships are established, the cultural settings required and the direct and indirect benefits that flow. He illustrated how the innovation and export strategies had helped to retain a high performing team and build the business efficiencies that were all required to turn the business around.  The strategy resulted in the shipping of 60-70 containers a month, more than $100m of ice cream, being exported from Perth.  The virtuous cycle established lifted the professionalism of Peters & Brownes and led to it being licenced with Cadbury brand for ice cream (the importance of branding in consumable goods being paramount to success), and ultimately to Peters & Brownes becoming the largest ice cream producer in the region.   

 

Mr Graham Laitt, Managing Director, Milne AgriGroup Pty Ltd

Through the prism of this experience, Mr Laitt discussed the challenges for agribusiness development into the high growth Asian markets. He noted that the supply of goods to a specification often leads to a disconnect between producer and consumer, and in the context of an export market, condemns WA exporters to being price takers.  

As WA is not always able to be the lowest cost producer in competitive export markets, there is either a need to change that or to differentiate the product.

Mr Laitt suggested that long term relationships which are trustworthy can form the basis of differentiation if the other party has commercial interests that are aligned and the other party is expert in marketing to the consumers in the export market. Ultimately, if WA exporters are to succeed in differentiating their products they must find out what the consumers in target markets want and a way of communicating how the WA product satisfies those needs. Apart from Education and perhaps some Wine exports Mr Laitt said there were few examples of WA directly developing and exporting a consumer product tailored to consumers in an export market. He said that even “If you develop a good idea for a differentiated product, you need to be able to scale-up before international competition copies and arrives.”

Mr Laitt outlined his move to Milne Agrigroup (MAG) and the pursuit of agribusiness models that would target the consumer needs of Asia but also be scalable and sustainable in WA. He noted that the primary opportunity in China and many other Asian markets is their demand for food that is healthy and safe.  Consumers, particularly across Asia, are worried about food security, improper and unethical production, disease incubation, antibiotics, and food modification.  The geographic isolation, quality control, and regulation associated with WA production can deliver the confidence to Asian consumers that our agri exporters meet their needs and give us premium prices from these markets.   

“Innovation is our business” said Mr Laitt as he described the agribusiness models deployed across the pork, chicken and stock feed operations of the Milne Group.  “To change the rules we must be able to second guess the customers in the commodity supply chain and develop a product that consumers really want. How do we do that? How do we work out what they want and determine whether we can produce it at a profit?”

Using the business models of Mt Barker Free Range Chicken and Plantagenet Free Range Pork Mr Laitt described how MAG has used cooperative relationships with family farms to, differentiate based on high animal welfare and health status, increase scale, manage environmental constraints and build a sustainable business model. He explained how this had led to the development of a market leading brand in the case of chicken and to a unique national supply agreement in the case of the exclusive supply of free range pork to Coles. In the case of Stock feed Mr Laitt referred to Milne Feeds extensive R&D and development of advanced feed. In each case Mr Laitt said these business models having established sound domestic market positions were now poised to begin exporting – he said MAG will be launching its chicken and pork products in Hong Kong in the next few months and is developing North Asian markets for its feed solutions. Mr Laitt said that the search for differentiation was continuing with MAG having completed a substantial capital investment in an advanced development kitchen and meat value adding plant at Rockingham.  

 

From L to R – Mr Malcolm McCusker AC CVO QC, Dr Harold Clough AO OBE, Chairman Emeritus, McRae Investments Pty Ltd, Mr Graham Laitt, Managing Director, Milne AgriGroup Pty Ltd, Mr Stephen Quantrill, Executive Chairman, McRae Investments Pty Ltd and Mr Geoff Simpson, Managing Partner, Perth, Allen & Overy

 

Mr Laitt illustrated the work done by MAG in North West broadacre cropping and irrigation farming and commented that these models were relevant to the WA mining sector and that many if not all the northern mines will or already have water management issues. In agribusiness excess water is considered an opportunity but for Miners it is often a constraint or a problem. Mr Laitt said that while our WA billionaire Miners have diversified into agribusiness it is a diversification and for them and other miners, agribusiness is still not part of the core mining business. Miners are in primary extraction rather than primary production and the emphasis in mining planning development is on rehabilitation and conservation rather than development.

Mr Laitt argued that opportunities to develop sustainable agribusinesses in remote mining areas that would benefit the local economy and community are perhaps missed because of too narrow a focus.

Mr Laitt acknowledged that in the scheme of most Mineral Resource projects the agribusiness opportunities may seem small and high risk. He referred to the example of Israel’s remote area development where out of necessity viable and thriving communities have been built producing products in remote regions with poor soils, brackish and limited water. He said the models for our remote mine sites would likely be different but felt WA had as many opportunities but would need to develop these using innovation and a focus on export market opportunities. Mr Laitt cited examples of sunflowers, canola and lupins as crops that MAG has successfully grown in remote North West regions give the right soil and water. He said that a wider range of high value crops could be grown and that many of the variables involved in these areas can be controlled using greenhouses but, WA has only 44 hectares of greenhouses compared to Israel’s 26,000 hectares. 

Mr Laitt said the beef industry was the logical starting point for our Miners and it was pleasing to see many Miners now actively involved in the beef industry but he suggested they needed to look at using the remote areas for the breeding part of the model and then take the cattle to where the feeding cost was cheaper and they were closer to market.

Mr Laitt concluded saying that while it would not be correct to say we have moved from Mining to Dining we have made some progress. The State Government has invested substantially in funding research into the many agribusiness opportunities for WA and is now focussed on attracting the investment and other resources to realise these opportunities. Our Miners who have very good reasons to consider agribusiness as part of their business are a potential force in this development. The local entrepreneur Miners have made an important and substantial start on agribusiness development but the international Miners have not really given it the focus it needs to date.

 

Mr Laitt with Mr Geoff Simpson, Managing Partner, Perth, Allen & Overy

In proposing a vote of thanks, sponsor Geoff Simpson, Managing Partner, Perth, of legal firm Allen Overy, referred back to the achievements and legacy of Dr Harold Clough, AO OBE, to draw inspiration for agritech development.  Mr Simpson commended Mr Laitt for his leadership and clarity of vision for the agritech industry. 

With such a big gap to fill, Mining to Dining can be a reality.  Either miners should seek opportunities for themselves or support others to come in and create new industry and new economic stimulus.

 

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