In mid-1997 group of high-profile Wairarapa stud stock breeders ap-peared unexpectedly at farming newspaper’s meet-the-clients function in Wellington. As the evening wore on their reason for being in Wellington became apparent. The afternoon had been spent at the Porirua head office of Wrightson “telling Greg Kay that he was stuffing our company”.
Wrightson’s then CEO Greg Kay, and his management team, were battling through ‘Project Transformation’ and its divisionalisation of the rural services company. Extensive reforms were designed to get the ‘stock and station agency’ into shape to trade profitably in the new millennium – to give business rooted in the 19th century 21st century perspective.
The Wairarapa tweed coats gathered their anecdotes and grievances, elbowed their way past the WINZ and Housing Commission clients in Porirua Mall, and confronted Kay. The rationalisation of Wrightson’s North Island stud stock agency division, requiring stalwarts like Bruce Orr and Kevin Ryan to drive 100,000 kilometres or more year, seemed to be top of the complaints list. Wrightson was, afterall, people business, founded on relationships and assurances.
General satisfaction was expressed that Kay had heard them out, but he gave no commitment to moderate the reformation. Change manager Kay set his course resolutely until Wrightson made $10 million loss and its share price sank to 30c.
In few months Wrightson was to sell its valuable finance division to Dutch agricultural specialist Rabobank for $300 million. “Opinions still differ over whether that was strategic or survival,” says Wrightson’s current managing director Dr Allan Freeth, in an understated way.
While not wanting to whitewash his part in the “transformation”, Freeth became increasingly uneasy about the implementation of huge changes. “During 1997/98 restructuring started going wrong, agriculture was doing badly, and when we centralised accounts at Porirua we couldn’t get them out on time at first,” says Freeth.
“Revenue headed down, arrears and debtors went up, and we lost lot of client business.” There was no doubt, at that time or today, that the traditional stock and station agency way of doing business had to change, but the implementation went wrong.
“The power of the company lay in the bundled businesses and the way the synergies ran across those businesses,” says Freeth. “That tight bundling was used in the rationale for pulling them apart, to let them stand on their own feet and bear their own costs and make true profits or losses, but it wasn’t really understood how those strengths came together. And, I am sorry to admit, no-one really looked at the company from the point-of-view of the client,” adds Freeth.
New divisional commanders, Freeth included, wanted their own offices, and costs blew out. Divisionalisation broke the fundamental revenue strengths of the company. It gave clients opportunities and reasons for splitting their business and allocating part to Wrightson’s rivals, Williams & Kettle, Pyne Gould Guinness, Reid Farmers, Farmlands, and Anchormart.
“Wrightson’s maturity as an organisation demanded lot of leadership. Clients wanted to see the boss and staff needed direction,” remembers Freeth. “We became like school with poor headmaster, with outbreaks of divisional antagonism and rivalry.”
Freeth recalls pivotal day when the management team voted against the consultant’s recommendation that Porirua call centre handle all national enquiries, like bank or utility company. “I asked if it was being seriously suggested that some 20-year-old would answer query about finance and then respond to another question on the genetics of bull?” From that time the tide of ‘Transformation’ turned.
In July 1998 long-time chairman Sir Ron Trotter retired and Nelson orchardist John Palmer, now also chairman of Air New Zealand, took the chair at Wrightson. Freeth was appointed chief executive officer in April 1999 and managing director in November 2000.
Wrightson was put back together again – ‘Project Transformation’ gave way to ‘One Wrightson’, to which has now been added the ‘Solutions Strategy’. District managers were reappointed, and the focus of divisional managers changed to ‘business’ management.
“We are customer-centric, building on the cross-sell opportunities and the synergies between 10 core business units,” says Freeth. These core units are rural supplies, wool, livestock, seed and grain, research, forestry, insurance (with an embryonic return of farmer-financing), agricultural consultancy, real estate and animal nutrition.
“We now have matrix which is the reverse of the former one, but this is less than ideal, because each staff member has two bosses, the local and the divisional,” he says. “A district manager is in charge of bundle of Wrightson businesses and decision-making power is available to the customers – but not over marketing, credit or IT, which stay with the centralised administration.”
With that re-transformation in train, Wrightson’s brains trust turned to the future of this most traditional business.
“John Palmer and I kept saying ‘there’s no future in just selling drum of drench’.
“In fact, farmers resent someone coming up the drive just to sell them drench,” says Alan Freeth. “But they do say ‘I’ve got this paddock where the such and such level is low, I can’t get the farmhand to work, and I need someone to organise my marketing’.”
Allan Freeth, with PhD in population genetics, BSc honours in zoology and an MBA from Canterbury, returned to Australia, where he did post-graduate study, and toured laboratories involved in biotechnology. “I realised we were in danger of missing the boat, being under-prepared for the future of farming,” he says. “On the plane back I wrote down the ‘Solutions’ concepts and went straight into management meeting, where it took me three hours to explain my thinking, and another three hours for them to question it rigorously. At the end of that time we agreed and I took it to the board.”
Soon after, Freeth shook hands with Jim Watson of Genesis on biotechnology partnership quest to unlock the genetic potential of pasture plants.The ‘Solutions’ approach to the client offers mix of technology, advice, genetics and products, in packages such as the ‘Economic Farm Solution’ or the ‘Integrated Fibre Management’ package for wool producers.
“Eighteen months ago ‘Solutions’ was just lot of words – now managers come forward with tailored solutions, for different farming industries and districts. We have maize silages, elite pastures, whole farm systems, wool marketing options, integrated livestock management (supplying lambs to Progressive), and others,” says Freeth.
‘Solutions’ account for 15 percent of revenue (total $704 million in 2000/01) and Freeth wants it up to 35-40 percent. At that level it will provide ‘buffer’ against the commodity prices’ cycles and the fluctuating fortunes of farmers.
“I think it is fair to say that the jury is still out on the ‘Solutions Strategy’ – analysts like what we say, but believe we are probably still too exposed to the commodity cycle,” he says. That commodity cycle has doubled Wrightson’s share price in the past 12 months (around $1.15 today) while lifting profitability and share prices for the whole rural servicing industry.
A recent faltering of investors’ confidence in the rural sector prompted Wrightson to issue its first nine month financial report, to March 31. Net profit after tax increased 45 percent to $16.6 million, compared to $11.7 million for the same period last year.
“The board expects the current momentum to be reflected in the group’s full-year result, to be announced in late August,” chairman John Palmer noted at the time. When coupled with the board’s policy of paying 60-80 percent of net profit in dividends, 10c for the full year appears assured.
The market has rediscovered the so-called sunset agricultural industries,
