AUSTRALIAN Wool Innovation would not change its 60 percent marketing 40pc research and development expenditure split under a 1.5pc levy regimen, AWI chairman Wal Merriman said today.
Despite his long-held personal support for a strong AWI marketing program, Mr Merriman ruled out decreasing AWI’s research and development expenditure in favour of wool promotion if growers vote for a 1.5pc levy for 2019-22.
AWI is fighting a campaign by peak grower body WoolProducers Australia and the independent Australian Wool Growers Association to drop the current 2pc levy to 1.5pc in 2019-22 via the WoolPoll 2018 ballot which closes on November 2.
Mr Merriman last week claimed AWI would become technically insolvent if the levy was cut by 25pc and AWI chief executive officer Stuart McCullough has stated several times a reduced levy would mean cuts across all AWI projects, including marketing, on-farm and off-farm research and development.
“We can’t do anything other than what Stuart said, cuts across the board.”
Mr Merriman said AWI could not propose a cut in non-marketing programs in favour of marketing, because it has gone into the current WoolPoll ballot with a 60:40 split.
“We can’t, because we’re on the 60:40 split, so we can’t change that.
“Because the growers have voted on it – they’ve been given this proposition of all the different percentages at a 60:40 split and that binds this board then.”
Mr Merriman said he was aware that other industry bodies maintained that AWI’s shareholders had never voted on what AWI’s marketing versus research and development expenditure split should be.
“But they voted the board in and that’s the board’s position.”
Mr Merriman said if the AWI board proposed a change in the expenditure split before WoolPoll, “that would be different”.
“Not when the growers have voted on this at a WoolPoll – the board wouldn’t trash growers’ rights like that.
“If the board wanted to do that – say if they brought in a 90:10 or something – I’m sure that is not achievable,” he said.
“The board wouldn’t and can’t – we’ve made an undertaking to the shareholders at whatever percentage they give at 60:40.
“I certainly have a preference, but it will not happen, because we’ve gone to the shareholding with a 60:40 split and at whatever percentage they want to give.”
International processor concern at levy cut and ‘controversies’
AWI’s concern about a 1.5pc levy result in the current WoolPoll ballot and any cuts in wool marketing funding was mirrored by another international buyer and processor this week, when Italian processor Giovanni Schneider urged growers to vote for a 2pc levy.
Mr Schneider said he has been reading in the Australian rural media about the controversy among wool growers regarding the levy to fund AWI’s on and off-farm R&D as well as marketing investments for the next three years.
“I’m really surprised that a few groups of wool growers are supporting a reduction of the levy to 1.5pc.
“A levy of only 1.5% would have, in my opinion, negative consequences in the long term,” he wrote.
“We all must acknowledge that thanks to the effective global marketing strategy of the Woolmark Company, wool is now globally regarded as cool and trendy, in addition to being again an important driver in the sportswear market.
“We must also consider that the high level of raw wool prices has finally been reflected at retail with higher retail prices (around +20pc),” Mr Schneider said.
“This means in return that we now need even more marketing to support these increasing prices at the consumer level.”
Mr Schneider is a principal of the G. Schneider Group and he said as an international early-stage processor, the group promotes and sells wool, especially Australian wool, every day to spinners, weavers, brands and retailers.
“However, our efforts need the strong and effective support that The Woolmark Company can provide.
“Other textile fibres continue to shout their messages and it is important that our positive message for wool can be heard as well in today’s noisy world,” he said.
“For the future of our wonderful fibre, I would recommend all wool growers to think about this and keep voting for a 2pc levy.”
Mr Schneider’s letter follows a letter from fellow Italian Count Paolo Zegna who wrote, after New Zealand banned mulesing, that he found the “tone of conflict” between wool-producing countries and “controversies among wool grower communities very sad and short-sighted.”
“Along the good lines followed in recent years by those who have heavily and successfully invested to promote it, among which The Woolmark Company (AWI) is the most significant example, I personally think that everyone who wants to help raise the global market’s appreciation of the work of thousands of wool growers should avoid feeding pointless and dangerous controversies that will only sully the image of wool, when it deserves exactly the opposite.”
International Wool Textile Organisation president and AWI consultant Peter Ackroyd also recently voiced his and Campaign For Wool patron Prince Charles’ concern at any cuts in wool promotional funding in a letter to wool growers.
Mr Merriman said he recently returned from China, “where there is a lot of talk about what they see will be a lack of funding for marketing”.
@ Peter Small: We, as wool buyers, ultimately pay the 2 percent levy when we buy your wool. Trust me, earnings have been hard for everyone in the past few years, but if we could enjoy a couple of good years, this is thanks to the rising demand coming from marketing activities.
@ Tom Casey: Selling a sweater at $US40 is much harder than selling one at $US20. Wool has become a premium fibre and needs large marketing investments. Imagine how much money Leipzig is spending to promote Lycra?
@Andrew Farran: Research and development is more effective when it is co-ordinated with marketing initiatives. Years ago, lots of money was spent in R&D initiatives which have been abandoned as marketing didn’t follow.
Be lively and alert and don’t let them pull the wool over growers’ eyes.
R and D is what makes the product viable. Supply will follow as a matter of course.
1.5 percent of $20 is a lot more than 2pc of $8. It’s a bit like agents’ fees; they still seem to live well when stock prices halve.
It’s all very well for Count Paolo Zegna and Mr Schneider to be telling wool growers to pay 2 percent of their hard-earned gross income to an outfit like AWI. I am sure their advice would be more reticent if they were the ones paying the 2pc. Of course, all the textile industry love the “honey pot” we create. Great for those with long sticky fingers.
I would have thought that the textile industry would have been far more concerned about supply than any other matter. And that means a massive new look investment in on farm research. Or isn’t the textile industry concerned about supply?