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The Pamphlet Collection of Sir Robert Stout: Volume 73

The Frozen Meat Trade and its Expansion

page break

The Frozen Meat Trade and its Expansion.

The fall in prices of the staple articles of export suffered by this Colony in common with the rest of the world has exercised the possessors of busy brains for some time past, but, while the unpleasant fact has been deplored in all quarters, no remedy or counteracting influence has been suggested possessing the potentialities of success. Opinions have been expressed and

Necessity for, but absence of defined scheme for development of Frozen Meat Trade.

conversational suggestions made, but nothing tangibly practical has been formulated or put forward in such a manner that it could be debated with a view to its adoption, either in globo or in a modified form. In order that the subject may be discussed and grappled with in a business-like way, I have set myself the task of committing to paper a scheme which I have the temerity to think is, if bold, certainly comprehensive, feasible, and opportune.
My observations will apply more or less to all departments of

Possibilities of Expansion.

our export trade, but I shall deal more particularly with the Frozen Meat Trade, because I look upon that as affording possibilities of almost indefinite expansion, and because, from its rapid growth and connection with the other chief productions of our Colony, it is preeminently the one which more seriously affects the prosperity of New Zealand. Indeed, so important has this staple product become that it might without exaggeration be said that the very existence of the Colony depends upon it; for the

Modern v. Ancient farming.

modern sheep-farmer, unlike his prototype of twenty years ago, must no longer look to wool alone but also to the carcase of the sheep to provide him with the means of keeping a home over his head. In the past, wool no doubt has proved the mainstay of the Colony, but its production has been so enormously increased in page 2 other countries, and there are so many restrictive tariffs militating against its consumption, that it seems to have for the time got beyond the limits of legitimate demand, added to which the price of cotton has fallen to threepence per lb., and the improvements in machinery for working up worn-out woollen material with admixtures

[unclear: riotive] [unclear: ence] on [unclear: umption] of wool.

have largely interfered with its use. On the other hand, the consumption of frozen meat must advance with the increase of population and the purchasing power of the people. It cannot be doubted that the teeming millions, ever increasing, of European and Asiatic States will only too gladly hail the time when commercial enterprise and productive evolution shall place it within their power to purchase frozen meat.
If, then, the matter is so important to the people on the other side of the world, how much more so is it to the farmers—nay, to every colonist—on this side? Viewing it from another aspect,

[unclear: onial] importance Frozen Meat.

let any man pause for a moment to consider the effect on this Colony of a stoppage of the industry through a serious and sustained glut in Great Britain or through a collapse on the part of the freezing companies! Would not paralysis fall on the whole trade of the Colony? If this be admitted, as it must be, does not then the converse hold good, viz., that a great expansion of the industry would enormously conduce to the general prosperity of the Colony? Of course, there can be but one answer. It is to show how this expansion can be effected that I have written this paper.
Assuming that we have recognised the potentialities of the

[unclear: isastrous] com-[unclear: tition] among [unclear: llers].

trade, we must set to work to devise the most effective means by which the best results can accrue to grower, seller, and consumer alike. The haphazard development of the trade so far, with the multiplication of financially weak freezing companies, the absence of cool storage at the ports of delivery, the vast number of consignees, excessive cost of freight and insurance, and last, but not least, the insane competition between sellers instead of buyers, has been the reverse of conducive to economy and expansion, and if the trade is to become the factor in New Zealand production which we have a right to expect, a radical change in our present wasteful and costly methods must be made.
page 3
That the present method of sending meat Home on c.i.f. terms direct, or to the broker, has proved disastrous to the grower,

Cost, insurance, and freight terms.

experience has amply shown; and it must be obvious that in an overstocked market, with little or no cool storage, buyers must

The Smithfield Ring.

have all the advantage. As a matter of fact, the practice plays directly into the hands of the ring of butchers who rule Smithfield, who, by keeping their purchases down to the lowest limits until a number of steamers arrive, can cause a glut and lower prices at will.
Some eight or nine years ago, when Mr. Gear of Wellington, Mr. Postlethwaite of Geraldine, and myself were in London, we took

Experience of Colonial meat exporters when in London.

great pains to ascertain the methods of the Smitlifield dealers. We spent considerable time among them, and had special facilities for gaining information which would not be available to visitors content to drop into the market for a day or two and depend upon their own unaided powers of observation, added to which our letters of introduction were exceptionally influential. It struck us then, and our belief has since been strengthened by information from other sources, that our meat was not getting fair play at the hands of the butchers, and that no attempt was being made to push its sale or popularise its use amongst unreasonably prejudiced people.
At the time of our visit these butchers were by no means considered

Smith field Morality.

rich as a class, but since then many of them have become exceedingly wealthy and owe their accumulations of wealth mainly to the expansion of the Frozen Meat Trade and the unfair practice of selling New Zealand meat as prime English or Welsh mutton. I do not mean to insinuate that this wealth has been made altogether dishonestly according to the commercial ethics of the day, but I contend that if the industry had been conducted on sounder and more equitable business lines, a great proportion of that accumulated wealth would have found its way into the pockets of the New Zealand sheep-grower. It is well to remember that the morality of Smitlifield is altogether different to what the New Zealand farmer has been accustomed, and that it has peculiar customs and traditions which have been handed down from generation to generation. This is mentioned here because it has a very important bearing on the industry, especially in relation to the question of c.i.f. terms and open consignments.
page 4
Again, owing to the lack of enterprise on the part of the

[unclear: t] of cool age.

Dock Companies, which apparently have no conception of the vast dimensions to which the trade is destined to rise, no effort has been made to provide adequate cool storage, and as there are at times as many as twenty-six steamers with frozen produce arriving in port, within the month a glut necessarily takes place. The natural result is competition between sellers frantic to quit, instead

[unclear: ct] of com-[unclear: tion] between [unclear: rs].

of healthy rivalry and competition between buyers. All the dealers have to do is to abstain from buying more than is absolutely required for immediate use, and the accumulation of stocks forces the sellers to quit at any sacrifice. For this reason it must be patent to everyone that the present systems can never give the best results to growers.

[unclear: o] many con-[unclear: ees], advantages concentration.

Moreover, there are too many consignees for the trade to be successfully developed or profitably carried on upon the present lines. If concentrated in the hands of one person of large experience and business acumen, combined with adequate financial backing, who necessarily would be working with responsible advisers, the effect on prices could not fail to be very marked. As true as this is of meat, it is equally true of butter, of which I can speak authoritatively from my own experience. At present the producer draws against his consignment, the consignee cannot hold in the absence of the cool storage and perhaps because of limited capital, a glut ensues, prices fall, and the dealers have it all their own way. And, commercially, rightly so, for the folly is ours in not awakening to a proper sense of the position. What has been lost to the Colony generally and the grower in particular by these anomalies not being realised and adjusted earlier, it would be difficult to estimate; but now that the trade is threatened by greater outside competition and lower prices, it behoves us to make a sustained effort to place it on a common sense foundation, or the position will become worse. It must not be forgotten that New Zealand frozen meat was the first in the market, that it is admittedly the best, and that it rests with ourselves to sustain its repute and find wider markets. This can only be done by united effort and much capital.

[unclear: ffeet] of combin[unclear: aion] in other [unclear: duatries].

As an illustration of what can be done by combination among producers who have previously suffered by want of cohesion, I page 5 may be permitted to cite two industries winch have attained a rank unattainable by isolated effort, viz., the Wine industry of California and the Tea Trade of Ceylon and India. These industries were brought forcibly to my mind during a conversation I had the other day with Mr. Postlethwaite, of Greraldine, who had just returned to this Colony from California. The enormous development of the Wine Industry was touched upon, and I then adverted to what we had advocated in connection with frozen meat eight or nine years before. A few years ago the Californian

The Wine Industri of California.

vinegrowers had perforce to sell their wines to the middlemen at any price the latter chose to offer, with the inevitable result that the trade languished and got into a deplorable condition, whereupon a great effort was made to put it on a more equitable basis. The culmination of this effort was a binding agreement to concentrate the Wine Industry throughout the State into the hands of one central authority in San Francisco, resulting in the grower then obtaining prices 50 per cent, higher than those prevailing before the agreement. In addition to this the output has been enormously increased by the opening of branch depots in the chief States of the Union and elsewhere. The wine is still sold to the middleman, but instead of being disposed of in casks to be adulterated or tampered with, it is put up in bottles and guaranteed pure and good to the consumer, who is not dealt with direct, but through the merchant. The sole aim of the growers was to get a large fighting and advertising fund by which they could insist on their wine getting fair play at the hands of the trade, and their success has been greater than the most sanguine ever expected.
Similarly has the tea trade of India and Ceylon been developed.

Indian and the Ceylon Tea Trade.

Some time ago the tea-growers met together and determined to force their teas upon the American market, which had been monopolised by the light straw-coloured teas from Japan and certain parts of China. A voluntary levy was made by the growers, and £30,000 collected in Ceylon to make a large and attractive show at the Chicago Exhibition. A special levy was made by the Indian Tea Association and a large sum subscribed. So gratifying was the success attained through this aid that still another levy was made equal to half the previous amount for advertising and pushing the tea throughout the American States, page 6 with the result that at the close of the Exhibition 6,000 regular wholesale customers had been obtained, and the teas had advanced to front rank. Since that time the Teas have gone steadily up and attained the highest prices in the market, while the supply is now not equal to the demand. These two illustrations will demonstrate what can be done by judicious advertising and business energy with an article intrinsically good.

Now, if the foregoing can be accomplished in regard to Wine and Tea, what might not be done with Frozen Meat and the other staple products of New Zealand? These possibilities are what we have to consider if we desire our Colony to prosper. I discussed this matter with Mr. Postlethwaite a fortnight ago, and as the result of his advice I now bring forward a scheme based somewhat on the same lines as that which Mr. Gear, Mr Postlethwaite, and myself discussed eight or nine years ago, as the outcome of our visit to London.

[unclear: ancial] weakness [unclear: reezing] Com-[unclear: es].

Obviously the first essential in any scheme of the magnitude required is capital, and plenty of it. This is the first and greatest difficulty, but I intend to show that it is not insurmountable. The isolated efforts made to expand the trade in the past have resulted in the formation of many freezing companies, mostly all now too financially weak to hope to successfully grapple with it, whilst the permanent charges incidental to so many different concerns must necessarily have a disastrous effect on the returns all round. Again, I contend that any scheme to give the best possible results to all interested must be worked more or less on a co-operative

[unclear: lated] efforts [unclear: rt] disaster.

basis. It is manifestly selfish—nay, suicidal—on the part of growers to hold aloof and permit any of their number almost single-handed to make experiments which may prove disastrous through insufficiency of capital, but which may prove of immense profit to the whole industry. Take, for example, the experiments in the export of live cattle made by enterprising men in the adjoining colonies. Failure may result through the want of

[unclear: e] cattle ex-[unclear: iments].

means, and the individual grazier ruined, while the trade is strangled at its birth—a trade which, under more favourable circumstances and united effort, might be made a gigantic success almost from initiation. In such a case even should failure occur, the loss would be spread over so many as to be hardly felt. page 7 Over-caution on the part of growers in such cases is neither commendable nor wise.
The scheme I formulate is that a company be formed to take over all the existing freezing companies in the Colony, on the basis of valuation, the whole to be worked as one concern under one management, and the present shareholders to rank as shareholders in the new company. Such a company could not be expected to carry on its operations on the scale contemplated with a capital of less than from two to four millions, and to raise this money is a difficulty only second in magnitude to the development of the trade that would follow. Assuming, for the purpose of illustration, that the paid-up capital of the existing companies amounts to £, I would propose to raise another £

Capital required.

in shares to be partly paid-up, in order to provide sufficient liquid assets to meet emergencies arising out of the extended operations, the details of which will be touched upon later. It may here be assumed that the farmers, recognising, as did the vine-growers of California and the tea-growers of India and Ceylon, the advantages likely to accrue from combination in the cheapening of freights and insurance, the opening of new markets, and the reduction in brokerage commission, would be prepared to make the necessary effort to subscribe the capital required. In addition to the capital indicated, large though it be, it would be desirable to have a further sum available in view of the extended operations considered essential to command success. To provide this I would propose

Colonial Guaranteed Debenture.

that power be obtained to raise £2,000,000 at Home on debentures guaranteed by the Colony at say 3½ per cent, the interest and sinking fund to be secured by a tax of not exceeding 3d. per head on the flocks of the Colony. There is nothing very startling in this proposal, as will be seen after a little reflection. This tax, if levied up to its maximum, would not represent in twenty years the difference

Fall in price of sheep.

between the price of sheep last year and this. Moreover, there is every reason to believe that the mere establishment of the company would send up sheep to a value more than four times the amount of the tax. That there is ample precedent to invite the support of the State will be presumably admitted. I submit that, important as State aid may have been in the direotion in which it has already been given, it was in no sense of such vast consequence to the page 8 community as is the proposal now under consideration, for the very existence of New Zealand depends on the success of the sheep-farming

[unclear: e] guarantee.

industry. Its collapse would mean irretrievable ruin to all, from the wealthiest to the poorest. In seeking the support of the State, it is not contemplated that its guarantee should be given without tangible and ample security being offered. The flockowner at first might reasonably be expected to object to being singled out for special taxation; but when it is pointed out to him that the operations of the company could not fail to reduce the cost of working expenses, interest, freight, insurance, brokerage, storage, etc., by a halfpenny per lb. at least—probably in time by more—and that the increased demand consequent on the development

[unclear: set] advantages rower.

of the business would afford an outlet for all the sheep he could raise, he would indeed be obtuse if he could not see that he has everything to gain and nothing to lose by the scheme. As I before explained, so far as the general taxpayer is concerned, he can offer no objection, for, while he would receive indirect benefit by the sympathetic expansion of trade following the impetus given to the farming industry, he would not be called upon to pay the interest on the guaranteed debentures, and would therefore only reap benefit from the scheme.

[unclear: cation] of sheep

The fund created by the Sheep Tax would he drawn upon to pay per cent, on the share capital paid up, supposing the profits of the Company to be not sufficient at first to do this; and also say per cent, for depreciation of works. Moreover, the interest to shareholders could be limited to per cent., and any balance, after meeting the charges for sinking fund on the guaranteed debentures, go towards a fund administered by the Agricultural Department for coping with diseases in sheep—a matter which is worthy of more consideration than it receives, for, according to Captain Russell, the loss to Hawkes Bay farmers alone from this cause amounts to no less a sum than £60,000 per annum. The total

[unclear: eep] tax at 3d. per [unclear: d] would yield 50,000.

number of sheep in the Colony is, roughly, 20,000,000. A tax of 3d. per head would bring in £250,000. A rise in the price of sheep of only 6d. per head would give £500,000. At a glance it

[unclear: e] of only 6d. per 1d would yield 90,000.

will thus be seen who will reap the chief advantage in a scheme of this kind. But, in taking power to raise by taxation 3d. per head on the flocks of the Colony, it is not for a single moment contemplated page 9 that anything like the whole tax would ever be required to be levied, for the interest charges and sinking fund under any circumstances could not exceed say £
The fairness of the tax will be more apparent when we come

Fairness of Proposed tax.

to consider its incidence as compared with the bonus system, whether as applied to butter (as in Victoria) or anything else. The bonus system allows the Government to impose burdens on the general taxpayer for the sole benefit of some particular industry. The tax proposed under this scheme would fall solely on the shoulders of those who reap the direct benefit.

The Company would necessarily be controlled by a Committee or Board. Under certain circumstances it might be considered, also, that, the State should have representation if its guarantee were given; but I would point out that, as in the case of the Loans to Local Bodies, the bondholders would have power under the law to appoint a receiver to collect the tax in the event of default, and that in that manner the State would have almost entire control.

Having dealt with the money question, which of course is

Plan of Action.

subject to modification, I now propose to touch upon what I conceive to be the proper aims and scope of the Company, together with its mode of procedure. The first step after its formation would be the appointment of a capable man of business to proceed to London and open up negotiations with the Smithfield butchers, with the view of getting our meat on the London Market freed from the restrictions which have hitherto hampered its sale. He would at once show them our strong financial position, and impress them with the determination of the growers to get fair play for their product. He would offer to erect the necessary cool storage, not only in London, but in any of the centres of Great Britain and Ireland where the influence of the trade might extend, provided that they would lease the same at fair interest on cost. Further, it would be stated that provision would be made for cargo steamers to call at the different ports at regular intervals to discharge meat, in a somewhat similar manner to that in which they call at New Zealand ports to take it on board. This would obviate the necessity of so many handlings, save railway charges, and insure the meat receiving careful treatment in all weathers. page 10 An offer would also be made to spend a certain sum per annum in

[unclear: Sing].

advertising the meat, so that say "Red Star Mutton" would become as widely known as "Pear's Soap," "Coleman's Mustard," &c. The advertising could be done on railway stations, hoardings, &c., and by means of lectures specially intended to bring home to the working classes of Great Britain the desirableness of encouraging the consumption of colonial products, if they themselves hoped in return to find ready markets for their own manufactures. In this relation it may be mentioned that the trade between the Mother Country and her colonies is now regarded as of the first

[unclear: ming] [unclear: ice].

importance by English manufacturers. By these means much of the unreasoning prejudice and hostility of the British public would be combatted and overcome. It must be conceded that advertising in this manner could not fail to be quite as successful as the means adopted by the various proprietaries whose wares are so persistently and successfully pushed all over the world. Indeed, it is hardly credible, or creditable, that some such methods have not before been adopted by those concerned in the Frozen Meat Industry. The meat once popularised, and the facilities for supply improved,

[unclear: ment] with [unclear: field].

demand would of necessity follow. The Smithfield people would be required to take so many carcases per month, or per annum, in return for our concession in dealing direct and solely through them, and the prices for first and second grade meat would be fixed upon a mutually arranged basis of values.

If the negotiations with the Smithfield butchers proved successful, the greater and most difficult portion of our task would be accomplished, because the amount of capital required would not be nearly so great as under the alternative scheme to be proposed. Assuming, however, that the Smithfield dealers refused to meet us, we would open stores in Smithfield, and fight them on level terms. In addition to selling New Zealand mutton, we could deal in English, Scotch, and Welsh stock, taking care that the profits on the British product should be so low that we should become an un-pleasant thorn in the sides of the hostile butchers, who, if they saw we had plenty of capital at our command, would quickly want to come to terms with us. Of this I am convinced from what I know of their character. In addition, cool stores could be opened in all the large centres of Great Britain for the convenience of local page 11 butchers, and in the event of these declining to take the meat up, shops would be opened, and Home and foreign meat sold at as near cost as possible, in order that the monopoly could be broken down, the New Zealand product popularised, and a regular market secured.

Thus, if the first scheme did not succeed through the hostility

Alternative Scheme.

of the English Meat Trade, the second could not fail, for there can be no doubt that if the butchers saw that we meant business, and were financially strong enough to break up their monopoly, which has existed for so many generations, they would in self-defence readily fall in with any reasonable terms offered, and it would then only be necessary for us to set up a Committee in London to see that the trade was energetically pushed, and to act as a Board of Advice. It might probably be considered advisable to adopt the second course first, leaving the butchers themselves to make overtures; but this is a matter which the management of the Company could be left to deal with.
With a further view to extend our trade, I should favour the

Travelling Exhibition.

fitting up of a large steamer for an "All the World Tour." This idea I have also heard enunciated by Mr. Gale, and seen in the N.Z. Mail. The primary object of the tour would be to let the different countries of the world have ocular proof of the productive capabilities and possibilities of New Zealand. In addition to Frozen Meat, Butter, Tinned Goods, and other food products being carried, samples of Wool, Grain, Gum, Flax, Gold, Coal, Woods, and any and every other natural product of the Colony might be shown, the intention being to make the steamer as much like an itinerant exhibition as possible. At each port touched a banquet might be given, composed almost entirely of New Zealand produce, to the chief magnates of the place, and arrangements made for throwing the vessel open for public inspection. To help defray expenses, provision might also be made for carrying tourists,

An effective object lesson.

and as the tour would be of so unique and comprehensive a character, the return from this source alone could not fail to be very large, while each of the tourists would (unwittingly perhaps), act as an informal advertising agent. The question of route is a matter of detail which may very well be left for further consideration, but I might suggest that it include page 12 South America, Japan, China, and other Eastern Countries, together with the larger Islands of the world. For although all our products might not find ready sale at all the ports touched, yet so varied are they that it would be strange if one or other of

[unclear: cket.]

them would not find a market. As a national advertisement alone this "All the World Tour" would be of immense value, because, unlike ordinary International Exhibitions, where the visitor is bewildered and almost nauseated by the similarity of the exhibits, and is in consequence apt to overlook the name of the exhibiting State, the very novelty of the floating show and the absence of competing exhibits would leave indelible impression?. In this way new markets might be opened, to which direct communication might be had, thus giving a great impetus to the shipping and insurance business, as well as to the mercantile, banking, and producing interests.

Struggles of [unclear: nit] under

Not the least remarkable feature in industrial development is the easy manner in which initial difficulties are forgotten and indifference displayed when trade possibilities are descanted upon. How many foresaw, for instance, the great expansion of trade destined to follow the establishment of the Frozen Meat industry, and how few even remember the first difficulties encountered by those who promulgated the idea and risked their money in the venture? Fewer still probably pause to consider how disastrous it would be to this Colony if the industry collapsed from any

[unclear: itous] result [unclear: en] Meat [unclear: ry] collapsed.

cause. Yet it is not easy to see that the whole trade of New Zealand would fall with it? If this be admitted, as it must be, can it be doubted that the converse holds good, viz., that if the output were multiplied threefold (as it might readily be) every industry in the Colony would respond in sympathy? What is true of the Meat Industry is iu some measure true in respect of every other natural product of the Colony, and in these days of universal industrial activity, a nation, like the astute business man, must be quick to seize opportunities and capture markets, without which it cannot hope to become prosperous.
In conclusion I would emphasise the fact that the scheme

[unclear: sion.]

though admittedly comprehensive and bold, possesses potentialities of success almost beyond present day calculation. Its adoption would at once infuse new life aud activity into the people through- page 13 out the whole Colony, and at a time, too, when every industry is a normally depressed and the outlook exceedingly dark. Under is revivifying influence the sheep farmer would gain heart and vigour and every industry awaken in unison. With the capital indicated, with the expenses of export reduced to a minimum by a concentration of consignees, with a substantial reduction in freights and insurance, and with ample storage accommodation and strong financial position, success would be assured from the start, and the Colony be sent to the forefront among the producing nations of the world.

To the farmer who might at first fear the burden of a possible special tax, I would say, Ponder well the advantage of a certain rise in the price of sheep, and an increasing demand for fat stock. To the Legislature which might hesitate to give the rating power suggested, I would say, Look at the bonus system of Victoria and other countries, where the tax falls on the shoulder of the general taxpayer while a particular industry alone reaps the benefit; also bear in mind the principle underlying the taxing powers granted to Harbour Boards, County Councils, City Corporations, and other bodies; and above all consider what such a scheme, if carried out, would represent to the chief industries of the Colony. To the general taxpayer I would say, Such a scheme will cost you nothing, while its results must be more beneficial than the ordinary mind can at first estimate. Reflection will demonstrate that its effects will be more far-reaching and lastingly beneficial than any policy brought forward for the development of the country within the last twenty years, while its cost to the general taxpayer will be nil.

While the scheme is admittedly of great magnitude, and the difficulties in the way numerous and requiring the best business acumen to overcome, I submit that it is opportune, feasible, and capable of accomplishment; and, in view of its vast importance, is deserving of serious consideration and exhaustive discussion.

March, 1895.

Edwards, Kussell & Co., Ltd., Printers, Brandon Street.