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Is AWI’s marketing versus research & development spend split right?

by Terry Sim, 28 November 2018
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AWI chair Colette Garnsey

AUSTRALIAN Wool Innovation is prepared to consider changing its expenditure split between wool marketing and other research and development, company chair Colette Garnsey told shareholders last week.

At the AWI annual meeting in Sydney last Friday, Former AWI director and New South Wales wool grower Paul Cocking asked if the expenditure split between marketing versus research and development remained at 60:40, if there was a 5 percent variance allowance, and would growers get some input into its potential change.

“I’m interested if growers will get a say in that split in the future,” he said.

But Wally has already said no…

Despite former AWI chairman Wal Merriman last month maintaining before his resignation that the current budget expenditure split — 60 percent to marketing and 40pc to research and development – would not be changed under a 1.5pc levy, Ms Garnsey said it could be considered.

Mr Merriman told Sheep Central that AWI could not propose a cut in non-marketing programs in favour of marketing, because it went into the 2018 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,” he said last month, before growers voted to reduce the compulsory wool grower levy from 2pc now to 1.5pc from 2019-2022.

Current 60:40 split has ‘delivered enormous benefits’ – Garnsey

Ms Garnsey told AWI shareholders last Friday the 60:40 expenditure split had produced enormously valuable results for growers.

“The increased (marketing) investment that we’ve been able to put into the Northern Hemisphere cold climate countries has really delivered enormous benefits.

“It has really assisted with the demand that we are seeing; where wool is now on the world stage, it’s considered as a fibre of choice, consumers are asking for it and your wool is in the garments of some of the best brands and the most significant garment designers in the world,” she said.

“And I think that’s a significant achievement.

“The 60:40 we feel is right … and you can see there is a consistent solid investment in the R&D that is occurring in your company,” she said.

AWI chief executive officer Stuart McCullough said the company’s expenditure was “plus or minus one percent” of the 60:40 split.

Ms Garnsey indicated adhering to the 60:40 split “is a bit like landing a 767 on a five cent piece”.

“We haven’t had message from our grower base to change that split, but as I spoke earlier today, we will embrace far more consultation.

“And I think in these consultation forums that we will have over the course of the next, certainly the next few months and the next year, and over the next three year period, this is something that we are more than open to discussing with our growers,” she said.

“The strong sense that I have from my visits into rural Australia to be with our growers is – ‘don’t change it, continue to invest’.

“Now if those messages change, we are always going to listen to our shareholders – it’s your company and if you want us to change it, that’s something that we would consider, of course.”

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Reader's Comments


Comment
  • Peter Small November 28, 2018

    If the question is a shortage of supply, how could the answer be to keep the 60:40 split the same? Could someone please explain?

  • Peter Small November 29, 2018

    I assume that the supporters of the 60:40 split no longer read Sheep Central. Or they don’t have any concerns about supply. Perhaps I am wrong to assume that supply is a problem. Do we then keep on promoting wool even if there is no supply?

  • Martin Oppenheimer November 30, 2018

    Peter, stop asking logical questions. Unfortunately, there are currently no plans to increase production, other than increasing price, which is not working.
    There is a strategic planning void in the Australian wool industry.

  • Simon Wells November 30, 2018

    There’s not much the lavishly funded AWI has got right in recent years. May I respectfully suggest that all board members, highly paid AWI executives, and their supporters, have a couple of strips of bark removed from their posteriors, with the pain relief spray, in a couple of days it won’t hurt…

  • Peter Small November 30, 2018

    Martin, terribly grateful for your response. I was starting to think I had “lost the plot”. Wonder if any other growers have concerns? One issue I anguish over is not only declining supply generally, but also the decline of 21-24 micron quality Merino wool. Soon it will be hard to find 19.5 micron wool. Stud breeders know how to make the clip finer, but if the fashion industry shifts, do we know how to make the clip stronger without sacrificing quality? Of course, this terrible drought is the dominant factor at the moment, but declining production and the fining of the clip has been going on for many years, regardless of the seasons.

  • Andrew Michael December 1, 2018

    It’s interesting to read Martin and Peter’s comments regarding declining supply and quality. Most of Australia’s worst-affected drought area are predominantly Merino breeding country and the flock numbers have been decimated in these areas. Our great sheep industry has some outstanding breeding and production tools available, that hopefully producers will utilise to help when the seasons improve. Our sheep industries — meat and wool– are facing challenging production issues for the next few years. I would love to see our industry developed a greater unity. We have far to many fragmented sheep bodies.

  • Peter Small December 5, 2018

    There are so many issues aren’t there. Supply, the continuing fineness of the clip, the relevance of the 40/60 split and the capacity of the industry to fund research. And of course, the capacity of research institutions to respond. It’s not only the lack of research dollars, but it is the research personnel and the capacity of the industry to plan its strategic research direction. The worry with research is not only seeking solutions to problems we are aware of, but it’s what we don’t know. And that takes special leadership; not only industry, but scientific.

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