MG Marketing is a New Zealand produce merchant which conducted its first produce auction ninety years ago to the day, on 5 November, Guy Fawkes Day, in Wellington. Today the business, a Cooperative owned by growers is headquartered in Christchurch but is active from Auckland to Invercargill and at quite a few places in between, and also has branches in Sydney, Melbourne, Adelaide and Brisbane - and Bakersfield, California.
How did it get there?
In 1923, many of the growers supplying Wellington were based in the Hutt Valley. They sent their produce to several Wellington produce merchants for auction who charged a 10% commission which growers deemed excessive. When the Wellington merchants advised growers that commissions were to rise further, from 10% to 12.5%, accompanied by new rules governing the sale of the containers the produce was sent to market in, growers decided to take the future into their own hands. After several months of intense debate, the establishment of an emergency grower committee, boycotts and the appointment of a sympathetic auction house as sole provider, Market Gardeners Ltd, as the company was originally known, decided to get into the auction business itself - and the rest is history.
Like all other produce merchants in business in 1951, the year the New Zealand Government created Fruit Distributors Ltd (FDL) as the sole importer of produce, MG Marketing was reliant on an allocated banana quota based on sales performance. With that came an initial shareholding in FDL itself. By 1985 MG Marketing held around 13.5% of shares, Turners & Growers more than 60%, with the balance sitting with a number of smaller merchants. Turners & Growers were effectively controlling the company - and he who controlled the company had his hand planted firmly on the banana allocation key! In addition to having to cope with supermarkets getting restless and the pending deregulation of the banana market, MG Marketing had to constantly fight for a fair allocation of green bananas to its ripening rooms. A further disadvantage for the business was that it was at that time focusing on the South Island and the lower North Island from a trading perspective and had no trading floor in Auckland, the largest city in the country. That led, at times, to a slightly distorted view of the overall produce landscape from a strategic perspective, as the leverage in the supplier/retailer relationship was tilting in favour of the retailer at a far greater pace in Auckland as was the case in Christchurch.
"75 years of Market Gardeners Ltd" (East, C.C., 1998) includes this quote for 1985:
"LD Nathan Ltd, (Woolworths), and Progressive Enterprises Ltd, (Foodtown), were starting to seriously challenge the central marketing system. It was reported that Nathans had influenced the Government to examine the future role of Fruit Distributors Ltd. Foodtown was expanding into the lower part of the North Island and it was noted that they did not make a practice of attending daily auctions to acquire their produce."
Well, that challenge to the central marketing systems was in full swing by 1991 and bananas were in the thick of it. MG Marketing were busy considering their options in a deregulated environment, ranging from forming joint ventures with either Turners & Growers or Chiquita/Kiwi Harvest, to entering into direct negotiations with Chiquita USA itself. By 1992, the banana sourcing question was reaching a crisis point of sorts. With Foodtown and Woolworths supporting Chiquita bananas, the market for Bonita fruit had shrunk considerably and the FDL majority shareholder did not not feel inclined to release too much fruit to its main competitor, MG Marketing. Not a good position to be in. Here is C. East (1998) again:
"The board, having been alerted by management, were very much aware what the erosion of the banana supply to the supermarket chains meant to the company. Not only were bananas the most profitable line, but were also a 'lead product' from which followed the supply of other fruit and produce."
In 1994, after a certain amount of financial wrangling, MG Marketing sold its shares in Fruit Distributors Ltd. Joint venture discussions with Dole, which had meanwhile entered the market were successfully concluded and in 1995, the joint venture succeeded to the Chiquita assets, as that company exited the New Zealand market.
MG Marketing Ltd have capitalised on the position they established in 1995 through their joint venture with Dole. The generational change at the CEO level was managed very professionally and the fact that the board has been relatively stable in terms of composition in the years since, undoubtedly helps. The company's foray into the Australian banana business has provided the odd challenge or three but one assumes MG Marketing is well positioned in the New Zealand market right now, to cope with the retailers flexing their importing muscles and the main competition coming to grips with their German owners.
& others in due course