Vertical integration with joint-venture finance: an alternative business model for the sheep industry

Page last updated: Thursday, 16 November 2017 - 12:24pm

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What are the benefits of the vertically-integrated company model to the WA sheep industry?

By integrating the supply chain, many of the expenses incurred each time the product changes hands can be eliminated. Identifying the areas in the supply chain where more of the retail dollar can be retained is an essential step towards passing it back to farmers to grow the industry. If customer demands are consistently met, price becomes significantly less important, thus boosting profits allowing profit trickle down to producers.

The vertically-integrated model using joint-venture finance meets the objectives of economies of scale, farm productivity improvement, capital attraction and new value chain design. The vertically-integrated company structure is being used by progressive companies to reduce risk at both ends of their business and maximise returns. Existing processors are ideally placed to adopt all or parts of this collaborative model to expand and grow the WA sheepmeat industry.

The integrated structure could be modified by existing processors to fund expansion and growth. It may also be used by existing players to fund productive asset acquisition on an individual or collective basis. A collaborative approach will ensure planned growth for the industry.

However, existing processors must embrace specialist marketing to maximise returns.  A sustainable competitive advantage incorporating quality, traceability and cost efficiency is essential. Also vital for future success is a collaborative relationship up and down the supply chain. 

The vertically-integrated company model is suitable for the major Australian supermarket chains, foreign state-owned enterprises, foreign retailers or any combination of the above. It addresses the major concerns of foreign investors including sustainability, live export risks, climate change, quality and pricing issues.

Contact information

Tamara Alexander