Research versus promotion:

28 May, 2003 10:00 PM
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McLachlan backs AWI's strong research stand

By JAMES NASON

IT HAS been three years since woolgrowers cut funding for wool promotion and opted to focus their entire levy budget on research, development and innovation instead.

Where millions of dollars were once spent on marketing the Woolmark, grower hopes are now firmly pinned on research initiatives to create innovative new wool fabrics and to breed Merinos that are easier to manage, resistant to disease and parasites and capable of producing more meat.

Some say the decision to cut promotion was foolish. They argue that wool's meagre share of the world fibre market will only plummet further if the industry does not continue to bombard consumers with messages of wool's wonderful qualities.

Numerous economic studies have concluded that promotion leads to distinct increases in demand for agricultural product, but at the same time show these benefits are impossible to measure, and indeed, it is difficult to tell which sector of the value pipeline actually benefits from it.

On the reverse side of the coin, others argue that wool promotion - or at least generic wool promotion - simply does not work. Consumers do not go out and buy a garment because it is made from wool, they buy a garment that suits their look, is comfortable and easy to care for and favourably priced, regardless of what fabric it contains. And increasingly, that means garments made from synthetics.

AWI chairman Ian McLachlan is a strong critic of generic promotion. He is, afterall, the man who chaired the Industry Task Force in 1999 which recommended growers abandon generic promotion funding, largely because promotional work was already being done in a more targeted, brand-specific fashion by businesses at the other end of the wool pipeline.

Mr McLachlan told the International Wool Textile Organisation conference in Argentina two weeks ago that collective grower expenditure was only justified when there was a failure in the market to fund a particular activity - whether wool research or promotion.

And AWI sees no failure in the marketplace with regard to wool promotion. Promoted products may not always be called "wool", and they may not in fact be "pure wool", but wool products are being promoted in the market in some form or another everywhere, every day, Mr McLachlan said.

For example, one Japanese manufacturer alone spent more in one year promoting his woollen suits than the entire Australian wool levy generated in 1998 for the purpose of promoting wool throughout the world.

"AWI will not become involved in projects that can, or should be, undertaken by business interests operating in the commercial marketplace," Mr McLachlan told the IWTO conference.

The field of research, however, is a different story. If Australia's wool industry did not fund any large measure of research into wool and it's products, no one would, Mr McLachlan said.

Honing in on this market failure, the McLachlan Task Force had advocated a collective system of levies for research only, leaving royalties from the wool mark symbol, in the main, to self-fund the Woolmark Company.

But where in the past only $15-$20 million had been channelled into research, it was now almost three times that amount.

The greatest problem with past research and development funding was the big gap between successful research and actual commercialisation and adoption of that research, Mr McLachlan said.

Past barriers to successful commercialisation included the failure of the various extension services to get results of on-farm research out to growers. Current adoption of successful technologies in the area of pasture management for example is constrained to 5-10pc.

AWI also recognised a failure to get enough new processing and productivity improvements into wool processing, and the "quite monumental" difficulty of getting research into, and successful funding of, new uses for wool. "That is, to create a greater demand for the product."

Mr McLachlan told processors at IWTO there was reason for great optimism in the wool industry. The production sector was now unshackled by the interference of a stockpile or reserve price schemes, and Government-control. While AWI still receives some taxpayer levy help, the Government no longer exercises as much power over the industry as it has in the past.

Following last year's election of five new directors on a platform of improving corporate Governance at AWI, Mr McLachlan said the new board had implemented several initiatives to ensure that formal and correct procedures were in place for contracts, advance payments, ownership of Intellectual Property, and monthly reporting procedures of actual expenditure on projects.

In a bid to avoid duplication of research efforts, AWI had recently become a core funding partner in the Australian Sheep Cooperative Research Centre, investing $450,000 a year for five years to help boost industry education.

AWI had also commenced the development of a risk management plan to help the board manage the company's exposure to any risks it faces.

Further developments included the appointment of Dr Len Stephens as AWI's new chief executive officer - "a man of experience, vision, and practical research and development experience" who had recorded a high strike rate of commercial adoption during his time with Meat and Livestock Australia.

"In short, we want to ensure that every dollar of woolgrowers' money is spent appropriately, is accounted for, and will return a benefit to woolgrowers," Mr McLachlan said.

In addition to on-farm research initiatives such as the Paired Paddock Program, AWI was embarking on exciting off-farm research into areas such as sportswear, fashion, homewares, textiles and industrial products.

Products already at market included Driza-Bone vests with non-woven wool linings, and a collaboration with a multinational pharmaceutical company to explore the application of wool in medical textiles.

"Our focus at AWI is clear: we will continue to drive research, development and innovation at all ends of the pipeline to deliver clear commercial outcomes to the Australian woolgrower and meet the demands of our international markets.

In other developments at IWTO, Mr McLachlan also:

* Welcomed the appointment of Spain's Juan Casanovas as the new president of IWTO and well known Australian wool exporter, processor and grower Michael Lempriere as vice-president;

* Poured cold water on processor demands for controls to be placed on te flow of raw wool to auction. "We are in a free market..., the flow of product will be dictated by the market, and I think we can safely say no future Australian Government will ever introduce any control on supply. It will not happen."

* Encouraged IWTO members to engage in "wool innovation inspiration forums" to collectively devise solutions to remedy disadvantages in the wool business, improve processing performance and generate new product ideas.

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