Yorkshire farmers break from packer
A group of free range producers in Yorkshire are to launch a new egg marketing company to deal directly with retailers.
Eggsell Producers Ltd, a farmers' co-operative that will trade its first eggs next month, is the brainchild of two producers who have become disillusioned with supplying eggs to a major packer.
Between them Stewart Elliott and Ian Sinkler—both BFREPA members—have nearly 80,000 free range layers and a combination of dwindling returns and an unease over the restructuring of the industry following the formation of Noble Foods has led the two men to consider other marketing options for their eggs.
"Over the last two years there has been scant reward for what is a very demanding, seven day a week job," says Stewart. "The fact is we put up a new 16,000 bird house in 2005 and financed it over 10 years but we are not making much headway."
Stewart estimates that recent increases have only put the producer price back to a level it was in early 1999 and yet production costs have continued to soar.
"Are we supposed to be pleased with that?" he asks. "There has got to be a better way."
Against this background Stewart and Ian, who farm five miles apart near Beverley in East Yorkshire, looked at the alternatives on offer. Intent on bringing about a major change in the way they sold their eggs they dismissed switching packers. Both supplying Deans they could have taken advantage of the current demand for supplies and secured a deal with another packer.
"We could have sneaked another penny or two more but it wasn't going to make us a fortune," says Stewart. "We then considered building a packing centre but once we looked at the finance involved we quickly realised it was not an easy option and it was one that involved considerable risk."
Instead the two men have hatched a simple plan but one they believe will succeed. Their eggs—and those of other farmers supplying Eggsell—will be collected by existing packers who will grade, pack and deliver the eggs to retail outlets where the company wins new business. The packers undertaking the work will be paid an agreed price per dozen for the service.
Stewart told the Ranger that there was no shortage of medium-sized packers dotted around the UK and so far five had agreed to work with Eggsell.
But with no sales experience between them, Stewart and Ian have recognised whilst they may have escaped sinking money into an egg packing operation, they do need to invest in sales expertise. That they have done with the appointment of experienced sales executive Barry Jackson.
Such is Mr Jackson's confidence in the future of the co-operative that he is giving up a top role at Central Egg Agency to take up the position of managing director for Eggsell. According to Stewart he has been instrumental in getting the new company off the ground and will be responsible for its day to day running. Meanwhile Stewart and Ian have been busy canvassing fellow producers and as a result the co-operative now has 200,000 birds pledged to it.
So what's in it for the producers who pay £1 to become a member of Eggsell?
"Well for a start their £1 share gives them the same voting rights as every other member," explains Stewart, who has taken extensive legal advice over the setting up of the company.
"But the real benefit will come in the shape of an additional payment at the end of the trading year. We aim to match or slightly better current producer prices on a weekly basis but pay members a bonus every twelve months.
"We know exactly what it is going to cost to get the eggs graded and packed and because we'll be running a very lean operation we are confident there is a good margin to be made. If we manage to return, say, five pence a dozen to members at the end of the year that's over £1 a bird for no extra cost or effort on their part."
While Eggsell intends to trade in all egg types—including cage—Stewart says its free range members will benefit because they won't find themselves subsidising less profitable sales.
"Any profit will be ring-fenced according to the sales from which production method it is achieved so members' bonuses will relate exactly to the margin made on the sale of their eggs."
The company says its initial talks with supermarkets have been "very encouraging".
Not surprisingly the formation of Eggsell hasn't been welcomed by the major packers who fear the addition of another player in the market will simply put supermarkets in a position where they can drive down prices. But it's a criticism that Stewart rejects.
"The last thing we want to do is undercut the market—in fact we'd like to see prices increase further," he says. "What we aim to do is capitalise on the current trend of supermarkets wishing to work closer with farmers and reducing food miles by sourcing locally."
While the company will officially begin trading next month, Stewart acknowledges that it will be some time before it is in full swing, not least because both he and Ian are under contract with Deans.
"I've been supplying Deans for 18 years and have always had a good working relationship with them. Although both Ian and I would like to be released early we have no wish to break our contracts. But we do have some producers joining us with flocks which are not under contract so we should quickly be able to build volumes."
Whilst Deans have tried to persuade Stewart and Ian to stay, the pair are determined to make a go of Eggsell. "With the current demand for free range eggs there has never been a better opportunity for a venture of this kind," says Stewart. "It is now or never as far as we are concerned and if it succeeds it is sure to attract more producers."
