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ALTERNATIVE STRATEGIC RESPONSES TO ANIMAL
WELFARE ADVOCACY:
A CASE STUDY OF MERINO WOOL AND MULESING

presented by

ROSS K. BOWMAR

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ALTERNATIVE STRATEGIC RESPONSES TO ANIMAL WELFARE
ADVOCACY:
A CASE STUDY OF MERINO WOOL AND MULESING
By

Ross K. Bowmar

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTER OF SCIENCE
Agricultural, Food and Resource Economics

2009

ABSTRACT
ALTERNATIVE STRATEGIC RESPONSES TO ANIMAL WELFARE
ADVOCACY:
A CASE STUDY OF MERINO WOOL AND MULESING
By

Ross K. Bowmar

Consumers, managers and policy makers are becoming increasingly concerned
about animal welfare issues. A key driver has been animal welfare advocacy groups
whose campaigns have directly challenged not only farmers’ practices, but also their
consumers at the retail interface. This shift has forced producers to defend their
traditional practices against foreign consumers and media with limited knowledge of the
rational for these practices. Advocacy groups have successfully exploited this disconnect
to their advantage and the detriment of many channel stakeholders.

As a result channel stakeholders are now searching to identify the appropriate
strategic responses to different animal welfare challenges, as an inappropriate response
can have adverse performance and viability implications. The challenge is little research
has been conducted on the alternative strategic responses available to channel
stakeholders. This thesis attempts to begin filling this knowledge gap by conducting a
comparative institutional analysis of PETA’s demands to cease mulesing and the
alternative strategic responses the Australian and New Zealand merino wool industries
took and the resulting implications. The findings suggest that the industry, institutional
and market interactions are complex and directly constrain and determine the set of

alternative strategic responses available to deal with animal welfare issues.

Copyright by
ROSS BOWMAR
2009

ACKNOWLEDGEMENTS

. I would like to thank my committee, namely Dr. Hamish GOW, Dr. Brent Ross,
Dr Glynn Tonsor and Dr. Linda Kalof, for their guidance in this research. Special thanks
to Dr. Gow, my research advisor and major professor. His encouragement, advice, and
friendship have been invaluable in my graduate career thus far.

Similarly, the participants at the Socially Sustainable Egg Production, NBC 63
and Food Distribution Research Society conferences who provided early feedback that
has greatly strengthened this thesis. Especially, Professors Janice Swanson, Paul
Thompson, Dan Sumner, Harry Kaiser and many others.

Thanks is also due to all of the graduate students, faculty and friends whom have
provided me enormous support and encouragement during my student worked with at
Michigan State. More generally, I would like to thank all of my friends for all of their
support and encouragement. Special thanks needs to go to Josh, Karen, Laura and Joey,
thanks for teaching me through trial and error American English. Not to mention your
willingness to undertake sight seeing trips and ability to provide insights on America.
Similarly to my office mates Alex and Domenico for installing in me a smidgen of your
great realm of knowledge and for providing a laugh on those late office nights.

Another special thanks to Hamish and Julia for taking me in when I first arrived
and Whilst incapacitated only 15 days later. Lastly thank you for giving up your couch
and feeding me on many a freezing Michigan night, it is greatly appreciated. Also thanks
to Brent and Paula who assisted me in times of need. The following groups and
organizations are also worthy of thanks. The Michigan State University Woman’s Rugby

team for making the place feel a little bit more like home and giving me an excuse to get

iv

out of the office. The residents of university apartments for providing me the opportunity
to serve as co-chair of the council of residents.

A big thank you must be extended to my parents and family for always only being
a Skype call away and for providing the foundation on which I have been able to
capitalize on a world of opportunities. Also my girlfi'iend Jess for being considerate of
my work needs after flying round the World to visit. Your compassion and friendship is
greatly appreciated.

Finally best of luck to my fellow masters students as you complete your studies in
the coming year whilst I undertake a future career with Archer Daniel Midland Company

as a commodity merchandiser.

TABLE OF CONTENTS

LIST OF TABLES ............................................................................................................ vii
LIST OF FIGURES ......................................................................................................... viii
CHAPTER 1: GENERAL INTRODUCTION ................................................................... 1

CHAPTER 2: ALTERNATIVE STRATEGIC RESPONSES TO ANIMAL WELFARE
ADVOCACY: THE CASE OF PETA, MERINO WOOL AND THE PRACTICE OF

MULESING ........................................................................................................................ 5
2.1 Introduction ............................................................................................................... 5
2.2 Methodology ............................................................................................................. 9
2.3 Data Collection ....................................................................................................... 11
2.4 The Merino Wool Indusz and Mulesing .............................................................. 13
2.5 PETA and their campaign to Boycott Australian Wool .......................................... 16
2.6 Different Responses to the PETA threat! Australia vs. New Zealand .................... 18

2. 6. I The Australian Merino Wool Industry Response ............................................. 18
2. 6. 2 The New Zealand Merino Wool Industry Response ......................................... 23
2.7 Comparative Institutional Analysis: Why different responses to the same issue? . 32
2. 7.] Comparing the Australian and New Zealand Merino Industries ..................... 33
2.7.2 Discussion of Responses .................................................................................. 45
2.8 Conclusion .............................................................................................................. 47

CHAPTER 3: SUMMARY AND FURTHER RESEARCH ............................................ 49

APPENDIX ....................................................................................................................... 55
APPENDIX 1 — BOYCOTI’ A USTRALIAN WOOL CAMPAIGN ................................. 56
APPENDIX 2 — FLYSTRIKE ........................................................................................ 56
APPENDDI 3 — MULESING ......................................................................................... 57
APPENDIX 4 — PETA SUPPORT FOR NE W ZEAIAND ............................................ 57

REFERENCES ................................................................................................................. 58

vi

LIST OF TABLES

Table 1. Australian Mulesing Timeline January 2004 to December 2007 . . . . . . . ....52
Table 2. Australian Mulesing Tirneline January 2008 to December 2009 . . . . . . . ....53

Table 3. Analysis of Differences Between the Australian and New Zealand
Situations .................................................................................. 54

vii

LIST OF FIGURES

Figure l. Lexisnexis results for “mulesing” in major US. and World Publications ....... 12

viii

CHAPTER 1: GENERAL INTRODUCTION

Consumers growing awareness and concerns about animal welfare issues are
having an increasing impact on their purchasing decisions. These concerns result from a
growing multi-generational societal disconnect that has developed over the past century
between consumers understanding of the products they eat and wear and the processes by
which they are produced (Olin, 1999). This societal disconnect has been accelerated by:
increasing industrialization of agriculture; continued urbanization of consumers; and the
rapid expansion of access to modern communications technology and related media
(Olin, 1999; Evans, 2007). Recognizing that these transformational processes were
occurring, animal welfare advocacy groups have successfully exploited them to influence
consumers purchasing and political decisions and challenge traditional agricultural
practices.

Animal welfare advocacy groups construct influence through a variety of
campaign techniques, including mainstream media, celebrity spokespeople, boycotts and
demonstrations. Often these campaigns use graphically shocking material to appeal to the
public’s emotions and generate support for change (see appendix 1). As a result, in the
USA, alone we have seen a substantial increase in the number, success and impact off
advocacy group challenges on animal agriculture. Recent examples include the
Proposition Two referendum in California over the space provided in cages for hens
(Sumner, et.al. 2008) and Humane Society United States (HSUS) 2009 threats in
Michigan to impose a similar proposition on gestation creates and cages in the laying
hen, veal and pork industries (Byrum, 2009). In both cases the advocacy group

successfully forced the alteration of regulations and legislation, thereby forcing farmers

to change their production practices. The costs of these regulatory changes are still to be
determined, but recent economic estimates indicate that they will at the least substantially
increase the cost of production, if not the extinction of these industries within each
affected state (Sumner et a1, 2008). Such challenges are not limited to the United States,
other examples include challenges to the practice of mulesing in Australasia and
confinement agriculture in Europe and New Zealand (PETA, 2008d;
www.savethesheep.com)

As a result farmers, associations and channel stakeholders are actively searching
to identify the appropriate strategic responses available to them to deal with these animal
welfare advocacy attacks. But to date this research has primarily focused on: technical
responses, such as stress relief and alternative practices; consumer responses, such as
willingness to pay; and the implications for public policy.

The initial results of this study were presented and debated at three international
interdisciplinary conferences. These conferences drew experts from across the animal
science, animal welfare, food safety, food manufacturing and distribution, and
economics: the Socially Sustainable Egg Production group (November 2008), provided
an interdisciplinary multi-university research group whose work to present has
predominantly focused on technical issues, such as development of alternative practices,
willingness to pay and perceptions; the Commodity Promotion Research Committee
(NBC-63) and Food and Agricultural Policy Section of the Agricultural and Applied

Economics Association (F AMPS) conference (February 2009) Whose research focused

on Promotion Through Consumer Information of Food Credence Attributes]; and the

 

Credence attributes are those that are unable to be easily identified and are independent of the
consumer’s post consumption experience (Darby and Kami, 1973).

2

most recently the Food Distribution Research Society conference (November 2009) on
Values Based Food Supply Chains: The Role of Transparency, Trust and Consumer
Activism. These conferences and presented papers provided a wealth of knowledge
studies however they failed to address the questions about how firms and industries
should strategically respond to these animal welfare issues, particularly attacks that
challenge the status quo; animal production practices that have passed the test of time as
they have been developed and successfully proven over multiple generations. This call to
arms was reinforced by Jim Byrum President of Michigan Agri-Business Association at
his public address at Michigan State University on the reality of discussion with HSUS,
and the negotiated agreement with the Michigan Pork and Egg Producers on animal care;
in which he personally appealed for MSU researchers to assist in finding appropriate
strategic responses for industry to deal with animal welfare issues. I

This study begins to fill the literature gap on identifying the alternative strategic
responses available to farmers, value chain stakeholders and industry for dealing with the
various animal welfare issues that they are currently and likely to confront in the future.
The choice of appropriate strategic response to each animal welfare issues is likely to
have important implications for a firm’s, value chain’s and an industry’s short-term
performance and long-term viability. Thus identifying the alternative strategic responses
available to stakeholders for dealing with animal welfare issues and defending against
advocacy group attacks has become an increasing priority of both managers and policy
makers alike.
This thesis conducts a comparative institutional analysis using the instrumental animal
welfare case of PETA’s campaign to end the practice of mulesing in the merino wool

industry. Specifically, this thesis will analyze the alternative strategic responses of the

Australian and New Zealand merino wool industries and their respective farmer
associations to PETA’s demands, and the resulting debate, actions and implications. The
findings indicate that the relative industry, institutional and market characteristics and
their associated interactions are extremely complex however they help explain the
constraints that determine the strategic responses available to industry to deal with this

specific animal welfare issue.

CHAPTER 2: ALTERNATIVE STRATEGIC RESPONSES TO ANIMAL
WELFARE ADVOCACY: THE CASE OF PETA, MERINO WOOL AND THE

PRACTICE OF MULESING

2.1 Introduction

Increasingly the global food and fiber industry is being challenged by various
consumer advocacy groups about the appropriateness of the animal production and
processing practices used by industry members to produce the raw inputs. These
advocacy groups believe that suppliers should be held responsible and accountable for
ensuring that the products consumers purchase are produced in a manner that meets their
respective group’s ethical, environmental and social standards (Thomas, 2006; Innes,
2006). These advocacy group criticisms often call for radical changes to the traditional
animal production practices that farmers and other channel members have used and
trusted for years, as they have passed the test of time while being passed from generation
to generation. The forms of criticisms and challenges often differ dramatically between

advocacy group depending on their groups beliefs about animal rights and animal
welfare2 (Guither & Curtis, 1933; Guither, 1998).
A key factor behind this growing disconnect between urban consumers and rural

agricultural populations has been the recent industrial transformation of animal

agriculture from a family enterprise emphasizing animal husbandry to an industrial

 

2 Animal rights and animal welfare have related but different focuses. Animal rights activists are
concerned with ending the human exploitation of animals whereas animal welfare activists are
concerned with preventing the cruelty and suffering of animals (Guither and Curtis, 1983;
Guither, 1998).

activity involving animal production (Rollin, 1996). This shift has created huge economic
benefits in lowering the cost of food to consumers but at the same time it has resulted in
the creation of a psychological disconnect between the packaged food we eat and clothes

we wear and the production practices used to create them (Olin, 1999).

This growing separation and disconnect between consumers knowledge of their
food and their associated production practices has created an opportunity for various
groups, including activists, to fill the gap in the provision of both positive and negative
information about these food products and their associated credence attributes3
(F eddersen & Gilligan, 2001). As a result, various private and public groups, including

advocacy groups, are conducting campaigns challenging the validity of traditional

agricultural production practices.

Traditionally, campaigns directly challenged those conducting the undesirable
practice. Today however the campaigns indirectly target the practice through boycotts at
the consumer and retailer interface. The move to an indirect nature has allowed campaign
focus to shift from the domestic to foreign market place. In the foreign market place
campaigns gain greater traction as the population has a reduced understanding of the
rational for these practices and direct economic effects cannot be felt. As opposed to the
domestic market where people may have a greater understanding of the problem and

awareness of the tradeoffs between the economy and animal welfare.

As a result farmers and agribusiness increasingly find themselves defending their

traditional production practices in the foreign public domain. Often this defense is

 

Credence attributes are those attribute that are not easily identified by consumers and are

independent of the consumer’s post consumption experience (Darby and Kami, 1973). Examples
include organic, range free, and fair trade attributes.

6

centered on economic merits as advocacy campaigns call for the adoption of
uneconomically viable animal welfare specifications. However, the economic factor
gains little traction in the consumers mind, despite the fact it may result in industry
extinction. Recent examples of such challenges include the Proposition Two referendum
in California over the space provided in cages for hens (Sumner, et.al. 2008) and HSUS
2009 threats in Ohio and Michigan to impose a similar proposition on gestation creates

and cages in the laying hen, veal and pork industries (Byrum, 2009).

To effectively counteract these advocacy actions, industry and policy makers
require a better understanding of strategic options available to address them. However,
existing literature has focused on technical solutions and the consumer and policy
implications of the solutions. But the question remains on how farmers, value chains and
agribusiness industries should strategically respond when actually faced with a challenge
of their traditional practices. The challenge relates to the complex interactions between
the relevant actors, institutions and business environment. Thus leading scholars, Olin
(1999), Andrews and Edwards (2004) and laid (2008) argued for more case based

research on advocacy groups and their interactions with their selected targets.

Recognizing this gap, this chapter conducts a comparative institutional analysis
(Aoki, 2001) of the instrumental case of the alternative responses by the Australian and
New Zealand merino industries to the advocacy campaign by People for the Ethical
Treatment of Animals (PETA) against the practice of mulesing (see appendix 1).
Beginning in January 2004, PETA has successfirlly targeted the merino wool industry’s
use of mulesing by encouraging consumers in Europe and North American to directly

boycott clothing retailers and manufacturers who did not purchase mulesing-free wool for

the production of their garments (www.savethesheep.com). The boycott had a substantial
impact on international retailers and manufacturers with many publically announcing that
they would immediately cease purchasing mulesed wool. This created substantial turmoil

throughout the global merino wool industry.

Both the Australian and New Zealand merino industries quickly responded by
publically announcing that they would commit to end mulesing by 2010, however each
industry followed very different strategies in an attempt to achieve this goal and with
very different results. The Australian merino industry took a very public, adversarial and
legalistic approach of directly challenging PETA in court while concurrently searching
for alternative technical solutions to mulesing. Both of these approaches have failed and
the Australian industry remains in a protracted internal and external fight about what are
the appropriate next steps. Conversely, the New Zealand merino industry cooperated with
their channel partners to privately diffuse the issue and co-collaborate in the creation of a
certified responsible farming accreditation program. Collectively, all of the channel
partners are now exploiting market opportunities that have resulted. Thus a paradox
exists: why did the merino growers and their respective grower associations from two
neighboring countries with very similar cultures take very different strategic responses to
the same animal welfare advocacy problem - ending the practice of mulesing — and end

up with two very different outcomes?

Using a grounded theory methodology (Glaser and Strauss, 1967; Strauss and
Corbin, 1994) this paper analyzing the instrumental case described above. First, the
PETA campaign and then the responses of the Australian and New Zealand merino wool

industries are synthesized and analyzed. The critical factors are then separated out under

four broad groupings of characteristics (industry, institutional and market factors and
approach to PETA pressure). Eight propositions are then developed from the econorrrics,
sociology and management literature to explain the different observed responses and
outcomes. The resulting propositions indicate a complex question and one that requires

further research.

The remainder of this chapter is structured as follows. Section two provides an
overview of the grounded theory methodology study and section three discusses how the
data was collected for the analysis. An introduction to merino sheep, wool and mulesing
is provided in section four. This is followed in sections five and six which provide
detailed descriptions of PETA and their “Boycott Australian Wool” campaign and the
responses of the Australian and New Zealand merino wool industries respectively.
Section seven then conducts a grounded theory analysis of the case by synthesizing and
characterizing the two responses and then subsequently mapping the key findings to
existing theory to develop explanations for the observed responses and outcomes, before
developing a series of testable research propositions. Finally, section eight develops a

series of conclusions and opportunities for future research.

2.2 Methodology

To analyze the paradox presented in this instrumental case, a comparative
institutional analysis (Aoki, 2001) is employed using grounded theory. “Grounded
Theory” is a general qualitative research methodology that follows an inductive theory
development process rather than deductive theory testing process (Glaser and Strauss,
1967; Strauss and Corbin, 1994; Dey, 1999). Research methodologists argue that

grounded theory is the most appropriate research method for conducting exploratory,

discovery, and inductive logic research for analyzing instrumental cases such as this
(Patton, 1987; Westgren and Zering, 1998; Yin, 2003). This inductive research approach
uses an iterative process that sequentially rotates between data collection,
conceptualization, and analysis until the observed relationships can be theoretically
explained (Strauss and Corbin, 1994; Dey, 1999). The process allows new theoretical
constructs to be generated from the data or if existing theories appear relevant to the area,
then these may be extended or modified as the data are played against them (Strauss and

Corbin, 1994).

Grounded theorists argue that it is an interpretive process that must include the
perspectives of those studied in order to reduce researcher bias (Strauss and Corbin,
1994). Such interpretations are sought for gaining a greater understanding of the actions
of those being studied. However those who use grounded theory procedures must also
accept responsibility for interpreting what is observed, heard, or read, and not merely

voicing the viewpoint of those studied (Strauss and Corbin, 1994).

Limitations exist in grounded theory development as it is limited by the scope and
nature of the case study and there is also a possibility for unfocused relationships to
develop between variables and factors for unskilled researchers (Glaser and Strauss,
1967). Nevertheless, the methodology is superior to the alternatives as it allows for
topics to be examined in a natural, whole agricultural system context (Woodford, 2000).
Thereby providing the researcher greater likelihood of capturing all of the interactions
between various characteristics and their associated interactions. Furthermore, as
Eisenhardt (1989) states, the process of building theories from a grounded case study

research approach is especially appropriate to exploring new topic areas. Additionally,

10

these forms of qualitative institutional analyses can often be carried out without the need
of elaborate mathematical apparatus or marginal calculation while the specific issues and
problems get appropriately fi'amed for later analytical and empirical research (Simon
1978 in Williamson 1991). Accordingly, Eisenhardt states that convincing grounding in

the evidence is the key criteria for evaluating this type of research.

Data sources for grounded theory are the same as for other methods of qualitative
research (Strauss and Corbin, 1994; Yin, 2003) and can comprise archival records,
interviews and surveys. Once collected the raw data is synthesized, categorized,

conceptualized, analyzed and mapped to existing theory (Yin, 2003).

2.3 Data Collection

Data used for this study was archival records collected from publically available
sources. These sources included news articles, journal articles, newsletters, industry
reports and publications and general web content. The sources were primarily identified
through intemet search engines. A google alert was established using the term ‘mulesing’
which provided daily updates on publically available material entering the web. Contacts
within industry informed the researcher of additional forms of publically available

information.

Additionally LexisNexis computer software was used to conduct a detailed
archival search. LexisNexis offers a widely used, searchable, and identically named
archive of content from newspapers, magazines, legal documents, journal articles and
other printed sources (www.1exisnexis.com). This search allowed holistic identification

and location of all the relevant sources of information available related to merino sheep

11

and mulesing. An example search and the results by year for the term “mulesing” is
presented in Figure 1 below. Other search terms used were “wool”, “merino”, “lamb”,
“sheep”, “clothing”, “animal care”, “animal husbandry”, “animal welfare” and “animal
well-being”.

Figure 1. Lexisnexis results for “mulesing” in major US. and World
Publications

 

6001

500

 

400

 

300

 

 

No. articles identified

 

 

2003 2004 2005 2006 2007 2008 2009

Year

 

 

 

Once initial raw data was sourced, observations were synthesized out and
categorized under key concepts. These concepts were analyzed and mapped into the
literature from a wide range of scholarly fields, including economics, sociology, political
science, and animal science, in search of existing theories to explain the concepts
identified. Concepts that appeared to be explained by existing literature were further
investigated and strengthened through further data collection. Those concepts that
appeared to be unexplained were further investigated to provide insight. All concepts

were then framed as testable research propositions to develop a pathway for future

research. The process of writing this thesis followed a grounded theory research process
that involved an iterative process of confinle returning to data collection up to the

point the final words were written.

2.4 The Merino Wool Industry and Mulesing

The Merino breed of sheep is famous for its ability to thrive in extreme climates.
As a result of their unique genetic traits and extreme environment, merino sheep produce
a superfine, sofi wool that is capable of being spun and woven into the highest quality of
yarns and fabrics suitable in the high-end fashion industry (Australian Wool Corporation,
1990). The problem however is that merino sheep are prone to flystrike due to a
combination of their naturally wrinkled skin and the natural environment in which they

often live (see appendix 2).

Flystrike is the common name given to the consequents of the Lucilia cuprina fly
laying clusters of about 250 eggs in damp fleece usually around the breech of merino
sheep. The flies are attracted by the ammonium in urine (Dorrian, 2006). The eggs
subsequently hatch into larvae (maggots) which feed off the flesh of the sheep in order to
grow. This feeding creates painful wounds, causing the sheep considerable pain, stress
and suffering from blood poisoning and infection. And in many cases a lonely death if
not treated early, as affected sheep with self-ostracize themselves from the flock once
flystruck in an attempt to protect their peers. This self-ostracization makes it difficult for
farmers to find affected animals on large properties where merino sheep often graze
(N SW Department of Primary Industries, 2005; Primary Industries Ministerial Council,

2006)

13

The practice of mulesing (see appendix 3) was developed in the early 1900’s to
reduce the risk of flystrike. It is named after Mr. J .W.H. Mules who found the practice
by mistake while shearing a ewe with blade shears. During the sharing process he
happened to remove skin from the sheep’s hind end and later noticed that this sheep did
not get flystruck. After performing this procedure on his other sheep, Mules noticed that
it prevented the occurrence of flystrike (Ellis, 2005). The procedure was refined and
experimented with to demonstrate that it reduced flystrike. It was approved for use in
Australia in the 19308. It is thought that Lucilia cuprina, the fly primarily responsible for
flystrike, was introduced into Australia in the nineteenth century from South Africa. It
was only in the 19805 that the fly first appeared in New Zealand. Prior to this time
flystrike was caused by other species of fly in New Zealand but not with the intensity of
Lucilia cuprina.

Today, mulesing is defined as a surgical procedure involving the removal of strips
of wrinkled wool-bearing skin from around the breech (backside) of merino sheep. The
procedure creates a bare skin area, devoid of wrinkles or skin folds (Lee and Fisher,
2007). Consequently, less wool is available for contamination with either urine or faeces,
and therefore the sheep is less attractive to flies (Lee & Fisher, 2007). The practice is
performed as part of an integrated flystrike management system including crutching,
shearing, worm control and strategic use of chemical, genetic selection and grazing
management (Bayer Australia Ltd, 2008). Mulesing may be carried out up to 12 months
of age, but preferably at lamb marking (2 to 12 weeks of age) in order to provide
protection against breech and tail strike as early as possible in the life of the sheep and to
confer lifetime protection (N SW Department of Primary Industries, 2005). Codes of

practice and legislation have been developed that describe and mandate how and by

14

whom the procedure should be undertaken, usually a professional mulesing contractor
who has completed the mandatory accreditation and training program (Primary Industries

Ministerial Council, 2006).

Research has found the procedure can cause initial stress and discomfort to lambs
for two weeks by which time healing is almost, if not entirely, complete (Shutt et a1.
1987, Fell & Shutt 1989). Infections are rare and antiseptics are only applied when
needed, but anesthesia and painkillers are not currently required (N SW Department of

Primary Industries, 2005; Primary Industries Ministerial Council, 2006).

Alternative flystrike control methods are currently under development. These
include: clips, needle-less intraderrnal, breeding breech-strike resistant sheep, integrated
parasite management, blowfly genome project, and biocontrol of blowflies (AWI

Limited, 2008).

At present, the Australian Government, the Royal Society for the Prevention of
Cruelty to Animals (RSPCA) Australia and the Australian Veterinary Association accept
mulesing as a necessary sheep husbandry procedure to prevent flystrike, as current
scientific research shows it to be the most practical, effective and humane method
available to many woolgrowers (www.woolisbest, 2008). It is estimated by the National
Farmers Federation (www.nff.org.au) that without mulesing 3,000,000 sheep would die
of flystrike each year. Animal rights activists disagree considering mulesing to be

inhumane and unnecessary (PETA, 2004; www.savethesheep.com).

15

2.5 PETA and their campaign to Boycott Australian Wool

People for the Ethical treatment of Animals (PETA) is an international animal
rights movement based in the USA, with over two million global members and supporters
and annual revenues exceeding $31 million USD. They focus on four main areas where
they believe the largest number of animals suffer the most intensely for the longest
periods of time: animals raised on factory farms; animals used for laboratory testing;
animals used in the clothing trade; and in the entertainment industry (PETA, 2008a).
PETA works through public education, cruelty investigations, research, animal rescue,
legislation, special events, celebrity involvement, and protest campaigns. There
campaigns have a proven track record, as previously they have been successful in getting
firms such as McDonalds to change their procurement specifications afier short and

virulent boycott efforts (Zwerdling, 2002)

In January 2004, PETA began a campaign against the practice of mulesing on
merino sheep by pressuring overseas apparel retailers to cease selling products containing
Australia Wool fiom mulesed sheep (Weekly Times, 2009). The “Boycott Australian
Wool” (exhibits in Appendix 1) campaign’s purpose was to end the practice of mulesing.
They used an extensive radio, TV and print media campaign, public protests and well
known celebrities to draw negative attention to the Australian wool growers’ mulesing
practices. As a result of the pressure, growing consumer concerns and increased media
Visibility, American fashion retailer Abercrombie & Fitch Co, boycotted the use of
Australian wool in October 2004 (Associated Press, 2007). Since then numerous other

companies across the globe have individually and collectively joined the boycott,

16

including major retailers and branded manufacturers such as H&M, Perry Ellis, HUGO

BOSS amongst others (www.savethesheep.com).

In a February 2008 statement, Frank Henke, Global Director of Social and

Environmental Affairs for Adidas, told PETA:

“Adidas has given a clear briefing to its development and sourcing teams to not
use merino wool fiom sources where mulesing practices are applied Clip-mulesing is
also rejected by our internal policy... we would select another material unless we obtain

clear confirmationfiom the source that mulesing practices were stopped” (PETA,

2008c).

Similar sentiment was held by the Swedish retailer H&M who felt the AWI
phasing out of mulesing was taking too long so it publically decided to buy only

mulesing-free merino in a press release 8 February 2008:

“H&M does not accept mulesing, the surgical procedure carried out on merino
sheep in Australia in order to prevent flystrike. The company has decided to direct its
buying towards other countries of origin and other suppliers in Australia that can
guarantee mulesing-flee merino wool. H&M has worked for the abolition of mulesing for
several years. Since 2005 there has been an agreement between the National Retail
Federation (NRF), of which H&M is a member, and the Australian wool industry
(Australian Wool Innovation) which means that mulesing will be replaced by more
animal-fiiendly methods by 2010. The decision to concentrate our buying on products
that use mulesing-flee merino wool was taken because the company feels that the phase-

out of the practice is proceeding too slowly. ” (H&M, 2008).

17

Following H&M’s announcement, 17 other major Swedish retailers made the
same pledge and a coalition of 31 European retailers have since announced that they are

considering or have decided to stop using wool from mulesed sheep (PETA, 2008b).

Initially some retailers, including Benetton, refused to back the campaign; instead
they chose to support the Australian Wool Innovation’s (AWI) legal and technological
initiatives. These initiatives failed to change consumer perceptions or diminish support
of the animal welfare groups’ calls for change. Thus these actions ultimately hurt both
Benetton and AW] (Associated Press, 2007). Since then Benetton has tried to distance
itself from the Australian Wool industry without adhering to PETA’s demands (United

Colors of Benetton, 2008).

Conversely, PETA has also run campaigns supporting those who they View as
taking a more proactive move away from the practices they see as cruel. In July 2007,
PETA carried out a demonstration outside the New Zealand Consulate-General's office in
Sydney, Australia, in support of the New Zealand Merino Industry (see exhibit in
Appendix 4), their growers and the New Zealand Merino Company and thanked them for

their efforts towards the cessation of the practice of mulesing (PETA, 2008c).

2.6 Different Responses to the PETA threat! Australia vs. New Zealand

2.6.1 The Australian Merino Wool Industry Response

Merino wool production and marketing is an important sector within Australia’s
rural economy. In 2006/2007, the industry produced over $3 billion (AUD) in export

earnings, second only to beef exports. The industry is comprised of 30,000 growers

18

farming 88 million merino sheep. Australia is the largest producer of wool, accounting
for 80% of global merino wool production. China is the most significant market taking
67% of the clip, which is primarily used in manufacturing garments that are sold in the

western world (AWI, 2008).

Most Australian wool (approximately 85%) is bought and sold through five open
cry auction centers, the remaining 15% is sold ‘privately’ on-farm or to local wool
handling facilities. Two major wool brokers handle up to 50% of the wool with the

remainder handled by 40 to 50 smaller, independent handlers (AWI, 2008).

Australian Wool Innovation (AWI) is the Australian wool industry’s primary
research and development organization (www.wool.com). This is a grower owned
company legislated and formed by government statute. AWI receives a 2% grower levy
from the sale of all shom greasy wool in Australia to then reinvest for the wool growers
into research and development, innovation, and marketing. The Australian government
then matches the wool growers levy contribution, capped at 0.5% of the gross national
value of wool production (AWI, 2009, www.wool.com).

In response to the campaign Boycott Australia Wool, launched by PETA in
January 2004 (see table 1 and table 2 for tirneline of events to date), AWI initiated the
formation of an industry working group to consider a coordinated industry response to
mulesing. The entity was referred to as the Australian Wool and Sheep Industry
Taskforce (AWSIT). This group initially consisted of representatives from: AWI,
Australian Wool Industries Secretariat (AWIS) / Federation of Australian Wool
Organizations (F AWO), International Wool Textile Organization (IWTO), The

Woolrnark Company (TWC) and WoolProducers. The group later expanded to include

19

the National Farmers’ Federation (N FF), Meat & Livestock Australia (MLA), Sheepmeat
Council of Australia (SCA), LiveCorp and the Australian Government, when PETA
included live sheep exports in its campaign (AWSIT, 2006).

On behalf of the industry, AWSIT made a public commitment to retailers on
November 8th 2004 to phase out the current practice of mulesing by December 31St 2010
(AWGA, November 8, 2004). According to AWI this commitment remains firmly in
place and the industry is on track to deliver alternative methods for flystrike prevention
by the end of December 2010 (www.woolisbest, 2008).

However, between 2004/5 and 2006/7, Australian Wool Innovation (AWI) Ltd
has so far unsuccessfully spent over A$10 million in the development of alternative
flyslrike prevention methods to ensure that Australia's sheep flock remains protected
against flystrike after mulesing is phased out (www.woolisbest.com). As of 2008, only
23 percent of Australian merino wool growers had committed to stop mulesing by the end
of 2010 (AWI, May, 2008). Hence the industry remains under a cloud of speculation and

faces continuing boycotts concerning their lack of commitment to the proposal.

This AWI commitment came after the Australian wool industry was stunned by
the October 18th 2004 news that Abercrombie and Fitch, the US fashion retailer, had
boycotted Australian merino fiber in all of its 749 stores (AWGA, October 18, 2004).
The industry was divided on what was the appropriate strategic response to the problem.

A full spectrum of opinions existed. They ranged from the Australian Wool Growers

Association (AWGA)4, at one end, who led a wool industry delegation to meet with

PETA in New York to try and collaborate to co-create shared goals in finding alternative

 

AWGA is a self formed minority group of merino growers.

20

preventive measures to the threat of blowfly strike until the practice of mulesing could be

phased outs, to the AW] controlled taskforce at the other end who fully opposed the right
of any external organization (including PETA) to demand the imposition of controls or
restrictions on how their members operated and adamantly defended in their View the
rights of their grower members to conduct mulesing. This polarization of opinions about
the appropriate strategic response escalated the already prevalent tension between the
various Australian wool industry groups (AWGA, November 11, November 20, 2004,
August 25, 2005). A public debate ensued as evident by continual referral to mulesing

fiom varying perspectives in publically available media (AWGA, October 31, 2004).

In the end and without consulting the other non taskforce stakeholders, AWI
decided to directly challenge the PETA attacks by pursuing an aggressive legal response
(AWGA, November 14, 2004). The filing was on the grounds of a secondary boycott,
provisions of the Trade Practices Act, section 45D and 45DB (AWGA, November 9,
2004). AWI were trying to remove the right for PETA to campaign for the boycott of
mulesed wool (AWGA, November 9, 2004). AWI chairman said “We cannot stand by as
the livelihood of Australia’s woolgrowers is threatened by these people peddling
innuendo, half-truths and deception. They are damaging the industry. We believe what
they are doing is illegal and we will ask the court to protect the Australian Merino wool

industry” (AWGA, November 9, 2004).

Many groups opposed the filing, as clothing retailers had come under increasing
market pressure. Clothing retailers had previously requested that the wool industry

quietly and professionally handle the matter out of the public and media domain, arguing

 

PETA and AWGA agreed on a proposed timeline for the phase out of mulesing however it was
dismissed by AW] and later AWGA were consigned to the fact it was unreasonable.

21

that this aggressive response was just fueling the debate. This View was supported by
PETA who stated “the legal action in fact assisted the organization in keeping the story

alive and generating publicity” (AWGA March 7, 2005).

The initial wool industry injunction was thrown out of court in 2005, however
even then AWI did not give up and over the ensuing six months they unsuccessfully tried
filing five other versions of the claim. AWI abandoned its allegations and legal actions
against PETA in February 2006 and a settlement was finally reached between the AWI
board and PETA in July 2007. The agreement was in effect an injunction against PETA
targeting individual retailers according to the Chairman of AWI at the 2007 AGM.
However, despite this agreement the international Boycott Australian Wool campaign

continues on the PETA and related animal rights websites.

The chairman of AWI stated at the AGM in 2007 that “the current Australian
wool price, and the extremely strong futures market in the face of an extremely strong
Australian dollar, I think is testament to the fact that the market for Australian Merino

wool is unimpeded and has been unimpeded in the last few years by these activities. I

think this is unarguable” (McLachlan, 2007).

Prior to these revelations, AWI had also been investing woolgrower levy funds in
a strategic initiative to develop alternative technical solutions to mulesing. With their
public commitment to phase out mulesing, finding a technical solution was rapidly
becoming the priority as the legal strategy faulted (Colditz, 2006). Their challenge was
that many of the proposed technical solutions (although technically viable) were not

viewed by the various animal rights groups as suitable alternatives to mulesing, i.e. clip

22

mulesing6. Some solutions did gain positive support by animal rights groups, such as

pain relief, but they faced immense farmer resistance due to the costs and management

challenges involved in implementation.

Additionally, AWI launched an unsuccessful marketing campaign aimed at
repairing the Australian wool industry’s tarnished image and to defend itself against the
increasingly visual and brutally graphic attacks of animal welfare organizations about
mulesing. The campaign included the “fly on the shoulder” advertising campaign in the
US and European fashion industry print media. The problem was that the advertising
campaign brought greater unwanted attention to an already volatile debate to an apparel
industry that was generally unaware of and uneducated about the issue, previously. The
negative promotion immediately led to questions about what mulesing is, thereby further
fueling the debate about the rights and wrongs of these production practices amongst a
community of socially concerned (and possibly ill-informed) industry leaders. The

campaign was a public relations disaster (AWGA, 2005; ABC Rural, 2005).

As of 2008 PETA has vowed to “keep all campaign options open” if the mulesing

deadline of December 31St 2010 is not adhered to (The New Zealand Farmers Weekly,

2008)

2.6.2 The New Zealand Merino Wool Industry Response

In contrast to Australia, the New Zealand (NZ) merino industry is relatively small,

consisting of approximately 700 Merino growers managing 33 million sheep or about 5%

 

CleS restnct blood crrculatron resulting In removal of skin to give the same result as surgical
mulesing.

23

of the NZ flock and accounting for 1.5% of the global merino wool produced. About
97% of the merino growers are in the South Island (McKinsey and Company, 2000); this
is densely located compared to the Australian industry.

Over the 1990’s the New Zealand merino industry completed a substantial and
politically charged institutional transformation where they moved from the traditional
highly-adversarial, commodity-based market structure driven by auctions and wool
brokers — very similar to Australia’s current model — to a market aligned and vertically
integrated business structure comprising detailed market knowledge, long-term
collaborative brand partnerships and contractual relationships. This transformation was
driven by the NZ merino growers need increase returns for their higher quality merino
wool by creating greater market identification and value for their customers. At the time,
markets were discounting NZ merino wool by as much as 20% compared to their
Australian counterparts. This was occurring for a number of reasons: the New Zealand
wool market support programs had finally collapsed in 1989/1990 following the
government removal of agricultural supports in 1984; the New Zealand Wool Board
(NZWB) had lefi the International Wool Board in the early 1990’s and with it lost the use
rights to the “Woolmark” brand - traditionally seen within the market as the identifier for
high quality clothing wools; New Zealand was seen as primarily a producer of coarse
cross-bred carpet wools by global cliental; the NZWB was controlled by a large majority
block of coarse cross-breed wool growers for whom wool production was a residual
product to their main income source - meat production; the majority of wool producers
(actually cross-bred lamb producers) wanted to minimize their investments in marketing
and market development and focus their limited investments on creating a branded carpet

wool industry, not high end clothing which is merino wools best use; crossed bred fleeces

24

had substantial contaminants (natural and artificial); high quality NZ merino wool was
being pooled with lower quality cross-bred wool; and the merino growers livelihoods
depended on wool sales, whereas wool sales were only a secondary revenue to cross-
breed lamb producers.

At the beginning of the 19908 a few NZ merino growers recognized that they had
a superior product that could gain a premium if marketed correctly. However, the NZ

merino growers could not survive with the market structure and associated discounted

prices at this time7. If they did not act immediately the whole NZ merino industry would
be gone within a few years. Their challenge however was that they had no easy available
market mechanisms by which to signal their high quality NZ merino wool to the
marketplace or similarly allow buyers to screen for NZ merino wool. Thus a decade long
process of transformation began.

The transformation involved a series of incremental organizational changes as the
NZ merino growers attempted to move out from under the umbrella of the ‘public’
statutory control of the New Zealand Wool Board (N ZWB) and create their own
organization. The first step was the creation of Merino New Zealand Incorporated (MN Z
Inc); a NZ merino grower controlled ‘industry good’ organization specific to merino
industry but still within the NZWB. MNZ Inc was established to focus on promotion and
management of the merino sectors special characteristics and to maximize opportunities
for improving returns to merino growers. MNZ Inc acted as a facilitator in the market,
working along-side traditional merino grower servicing and broking companies. The new

organization successfully undertook increased commercial responsibility under the

 

7 . . . .
NZ merino growers receive about 70 % of their Income from wool sales, whereas cross-bred

lamb producers hope to receive sufficient revenue from their wool sales to cover the costs of
sharing.

25

NZWB. This process led to the NZ merino industry completely separating from the
NZWB in 1998 and forming their own legal entity Merino New Zealand Limited (MNZ
Ltd). This new organization took over the majority of MNZ Inc’s functions. Finally in
2001, MNZ Ltd and Wrightson Ltd’s fine wool business entered into a commercial joint
venture, which led to the privatization of the activities of MNZ Ltd. This merger
established the New Zealand Merino Company (N ZMC), a privately held joint venture
that leveraged MNZ Ltd’s marketing expertise and supply chain knowledge, with

Wrightson’s grower relationships and selling expertise, and the NZWB owned New

Zealand MerinoTM brand (Stevenson, 2004).

Today the integrated model is coordinated by The New Zealand Merino Company

(N ZMC), a joint venture between the New Zealand merino growers and PGGWrightson8
(a publicly listed farming services company). The NZMC acts as both a traditional wool
broker but also increasingly as an integrated marketing facilitator assisting their
international clients (branded fabric and clothing manufactures and retailers) in creating
sustainable and mutually beneficial brand partnerships with NZ Merino growers. The
NZMC also works to provide access to appropriate R&D, processing, procurement and

marketing support to their clients (Stevenson, 2004).

Today the NZMC markets 90% of the national merino clip with over 50 percent
marketed on long-term contracts with various high-end, branded, and exclusive specialty
garment retailers and manufacturers (Stevenson, 2004). The NZMC takes a four percent

levy on all wool sold (Stevenson, 2004).

 

PGGWrightson was the entity created as a result of a merger between Pyne Gould Guinness
Ltd and Wrightson Ltd in 2005.

26

The new integrated approach has resulted in the underlying philosophy of many
NZ merino wool growers changing from being adversarial price takers into collaborative
brand partners as they have learnt to realign their businesses to their client’s requirements
and strive to achieve collective success for both themselves and their clients (Stevenson,
2004). The NZMC and their professional staff have been a critical knowledge and
facilitation link between consumers, the branded retailers and manufacturers and their

contracted wool growers (Stevenson, 2004). This alignment process has been a long and

difficult process, but extremely successful with the likes of SmartwoolTM and

IcebreakerTM now entering into their second set of long-term five year contracts directly

with growers (MAF, 2005).

When the mulesing issue arose in January 2004, the NZMC had already
established strong, direct relationships between international retailers and manufacturing
clients and their “brand partner” growers through these integrated long-term contractual
relationships. These long standing contractual relationships allowed both NZMC and the
growers to gain first hand knowledge of their international clients and their international
customers’ needs. Through these relationships they learnt that mulesing was only the tip
of the iceberg, international consumers were becoming increasingly conscious and
discriminate about their purchasing decisions based on a broad range of social, ethical
and environmental issues. Consequently, the CEO and staff of the NZMC recognized
that they needed to adopt a broader approach to the issue. As John Brackenridge, CEO of
the NZMC stated “our differentiation needs to be bigger than non-mulesing” (Otago

Daily Times, 2008).

27

However, like the Australian wool industry, the NZMC only adopted a policy
deadline 2010 for the phase out of mulesing and only after the Australian industry had
publically announced their intentions. The NZMC aclmowledged that farmers should not
be expected to immediately cease the practice of mulesing until viable alternatives were
found. Consequently, the industry has invested in research and development of
alternative methods of flystrike prevention, including trialing of pasture species, chemical

trials, pesticide management and overall farm input management (Stevenson, 2004).

The introduction of the 2010 deadline still however created dissonance Within the
New Zealand merino industry. This was overcome to some extent by the NZMC
facilitating a series of informational meetings between the growers and their overseas
clients relating to the market demands. The dissonance was further overcome by the
announcement of a $30 million dollar contract from Smartwool to buy wool from New
Zealand farmers who ended the practice of mulesing by the end of 2005 (MAP, 2005).
The negative market publicity and resulting retailer and manufacturer responses created
by the Boycott Australian Wool campaign over mulesing also proved to be the catalyst
for the NZMC to develop and implement an ethically, social, environmentally
responsible and sustainable private standard that could be branded and used to support

their clients procurement and market needs. Thus the une program was born.

The une program9 was a natural evolutionary extension to many of the NZMC
client, grower and market coordination, development and facilitation programs. As the
NZMC state, the program is designed to create “a new fiber category uneTM ethical

wool” (NZMC, 2009, www.zque.co.nz) that combines natural performance advantages of

 

Further details on the une program can be found at www.zque.co.nz.

28

NZ merino wool with a collaboratively created accreditation program that meets
international standards and best practices for ensuring environmental, social and
economic sustainability, animal welfare (non-mulesed) and traceability back to the

source.

The une program was designed in collaboration with the NZMC’s international
clients (consumers, retailers and manufacturers) to provide them with a credible and
enforceable product and process governance system that ensures participating NZ merino
growers have the appropriate incentives to adopt and use the internationally demanded
best management practices in the production of une certified wool. To enter into the
une accreditation program merino growers have to meet all of the specifications
outlined for practices for each of the brand programs aspects. These specifications are
built on international consumer and industry needs, existing New Zealand government
legislation, international organizations standards and alignment with third party
accreditation requirements already in place Within the New Zealand meat industry. The
cost for NZ merino growers participating in the une programme are absorbed by the

NZMC. The une program has the following major components:

Forward contracts — Long-term forward contracts are used to establish and define the
legal basis for product specifications, production and delivery requirements,
pricing and any other relevant factors between the client and NZ merino
growers. The contract provides both client and growers a level of price and
supply and demand security. Growers are only allowed to contract up to a

percentage of the average annual production of the specified grade of wool.

29

Performance Requirements - une fiber is sourced from specific growers to optimize
attributes according to fiber requirements of manufacturer and retailer brand
partners. This produces ‘fit for purpose’ merino wool that optimizing the clients

processing and product performance.

Animal welfare — The une specifications are based on the NZ Animal Welfare Act
(1999). This legislation defines minimum standards and obligations of people
who own or are in charge of animals and the best management practices for the
provision of an animal’s physical health and behavioral needs. Additionally,
une Merino fiber is selected from properties that have never mulesed, or that

have stopped mulesing.

Environmental stewardship - based on the Resource Management Act (1991). This
legislation establishes rules to protect the environment through: sustainable
management of natural and physical resources; governing the use and
development of our land, air and water resources; and managing the

environmental effects of human activities.

Responsibility — based on the Health and Safety Employment Act (1992) and
Employment Relations Act (2000). These legislations are linked with the social
and economic welfare of farmers, farm workers and communities. As well as the

health and safety of those living, working and visiting accredited farms.

Traceability — une provides a transparent traceability scheme that allows customers to
identify and track une fiber fiom the retailer to the farm gate. This is provided
through barcodes attached to apparel products. When scanned products can be

linked back to a particular farm.

30

Accreditation — third party auditing to gain program accreditation provides extra
transparency demanded by both consumers and the NZMC brand partners.
Auditing is undertaken by AsureQuality, an internationally recognized assurance
organization compliant with ISO Guide 65 and ISO 9001 standards, and
accredited with the Joint Accreditation System of Australia and New Zealand
(JAS-ANZ). The retailer is provided with a certificate of une certification
signed by the CEO of NZMC and AsureQuality. ASURE is a State Owned
Enterprise that has been designing, developing and delivering farm assurance
since 1994. Farmers are provided a manual from AsureQuality. To become a
part of the programme all farmers are initially audited on inception.
Furthermore, farmers are required to submit an annual self audit and a further
12% of farms are monitored at random annually. A veterinarian assesses the
flock during auditing to assess whether the animals have been mulesed. This

equates to three layers of verification.

Since its introduction 200 farms have joined the une program. This accounts for
approximately 66% of wool marketed through the NZMC (NZ Herald, 10/9/09). The
price farmers receive through the une programme is linked into their existing client
contracts. Some, but not all, clients are willing to pay a premium for une wool. REDA,
an Italian fashion house, was willing to pay a 20 per cent premium above auction price
(NZ Herald, 10/9/09). This potential une brand price premium was marketed to
growers as a means to assist them offsetting the increased costs associated with non-

mulesing flystrike prevention methods.

31

 

Industry commentators argue that the size, previous transformation process and
current innovation and client driven market structure of the New Zealand merino wool
industry have all assisted in the diffusion of the mulesing issue and generally held market
belief that mulesing is not and has not been carried out in New Zealand. It is estimated
that prior to 2004 approximately 50% of New Zealand merino growers practiced
mulesing. Today, however, over 70% of NZ merino wool growers have stopped
mulesing or have never mulesed. These figures are larger when taken on a percentage of
wool clip basis, as the majority of the large high country sheep stations are on NZMC
contracts. This significant increase has come about since the adoption of the 2010 target,
alignment of market contracts and the development of une accreditation program. In the
future, the NZMC would like to see formal legislation that bans the practice of mulesing
in New Zealand. At the moment the ceasing of mulesing is voluntary and there is still a
risk that the few who continue may severely damage or ruin the international markets
perceptions for the majority. However, these combined activities have mitigated the
negative attention from advocacy rights groups related to mulesing to such an extent that
PETA today is actively holding up the New Zealand merino industry as a poster child

(see appendix 4) despite the practice continuing to be conducted in New Zealand.

2.7 Comparative Institutional Analysis: Why different responses to the same issue?

This instrumental case showcases an important paradox about why the merino
wools growers and their respective associations from two countries with similar cultures,
histories and traditional market structures have responded in such very different ways to

the same animal welfare threat with very different results and consequences. When first

32

confronted with this case it is difficult to understand how this can occur. However, upon
further research and analysis it becomes clear that there are a number of important
differences that can be shown between the Australian and New Zealand merino industries
that provide important insights into why these two industries have followed their

respective strategic responses and thus outcomes.

The analysis conducted will be broken into two parts. The first part will
synthesize and define the relatiVe differences between the two industries and how they
operate. The second section analyzes and develops propositions, based upon existing
literature from the economics, sociology and management fields, to explain how these

two different responses and observed outcomes may have resulted.

2. 7.] Comparing the Australian and New Zealand Merino Industries

A synthesized comparison of the relative similarities and differences between the
two merino industries characteristics discussed in the first section are presented Table 3.
The table is structured with each analyzed characteristic shown in the left column and the
relative Australian and New Zealand generalized characteristic shown in the middle and
right columns respectively.

The Australian Merino wool industry represents 80 per cent of global merino
wool production. Approximately 30,000 farmers account for this production. These
famers are dispersed across a continent roughly the size of North America. Due to the
size and geographic expansiveness of the industry various industry groups exist.
Additionally, due to size the industry is of economic significance to the national
economy. This economic significance has led to high government involvement and

politicization. The industry lacks cohesiveness as a result of the various sub-groups and

33

politicization. The industry structure has been stable for sometime and has not undergone
a recent transformation.

Conversely, the New Zealand Merino wool industry represents a minor 1.5
percent of global merino wool production. Approximately 700 farmers account for this
production. These farmers are densely concentrated in the South Island of New Zealand.
The small size of the industry means it constitutes minor economic significance to the
national economy. In addition, the industry is totally devoid of government support as a
result of previous government economic reforms. The industry underwent a total
transformation in the 1990’s by which it moved away from a structure similar to
Australia’s current structure. The size and previous transformation of the industry has
facilitated the development of industry cohesiveness.

Industry characteristics can directly affect the institutional structure of the
industry. The size of the Australian merino industry has facilitated the development of a
commodity focused value chain institutional structure. This structure is characterized by
numerous ownership changes and arm-lengths relationships in autonomous spot market
auctions. These markets are coordinated by wool-brokers. The brokers facilitate transfer
of ownership to the next agent in the chain. Hence, the structure facilitates the
development an adversarial price based value chain philosophy. This philosophy means
farmers focus on price taking. This focus facilitates a farmer philosophy of a wool grower
of a commodity product.

Conversely, the previous industry transformation of the New Zealand merino
industry has led to consumer experience focused value chain institutional structure. The
structure is characterized by vertical integration and a single ownership change between

farmer and final branded manufacturer. This structure is coordinated by the NZMC.

34

Long-term contracts have become the norm for NZMC to facilitate ownership transfer.
The long-term nature of contracts has facilitated the development of a value chain focus
of building partnerships. Consequently within the value chain interaction is a
collaborative mutually beneficial process. As a result, farmers see themselves as partners
in a consumer experience. This has changed farmer philosophy to that of brand partners
in delivering an integrated experience.

Institutional characteristics of the value chain directly effect how the industry
engages with the market. The institutional structure of the Australian merino industry
means minimal information feedback loops exist from the market to growers. Third party
news media deliver the information that is received. This information is an aggregated
and pooled price signal. Growers respond to these price signals by adjusting their
practices. Responding to price only facilitates low sensitivity and consumer awareness to
other market factors beyond price. As the value chain is focused on price the grower
advocates AWI are focused on production technical innovation that could reduce costs.
The focus on technical solutions comes at trade off to the development of marketing
expertise.

Conversely, the New Zealand merino indusuy is characterized by integral
information feedback loops from the market to growers. Information is dispersed to
growers through brand partner meetings with retailers and manufacturers. The
information provided is client attribute specific. Consequently, growers are responding to
consumer needs and technical specifications. This facilitates the development of a high
sensitivity to consumer needs. As the value chain is focused on meeting consumer needs
the grower advocates NZMC role is to coordinate the market driven model. Therefore,

marketing expertise is an integral part of the NZMC business model.

35

It is appropriate to synthesis out the differences relating specifically to the
strategic response to challenge of mulesing by PETA. Given this analysis thus far has
examined industry, institutional and market engagement characteristics of the industry
which would exist regardless of an advocacy attack or not.

A narrow and defensive approach was taken by the Australian merino wool
industry in response to the pressure surrounding the controversy of mulesing. In
particular this involved taking an aggressive legal response and publically defending the
practice of mulesing. Whilst industry groups independently and insular of each other
publically debated the case for mulesing. In addition, the development of technical
solutions to mulesing characterized the industry.

Conversely, the New Zealand merino industry took an open and expansive
approach in response to the pressure surrounding the controversy of mulesing. This
allowed the threat to be reframed as market opportunity. The issue of mulesing therefore
was able to be privately diffused. This process was conducted in a collaborative manner
open to all industry participants. In addition, the development of consumer solutions

characterized the industry.

5.6.2 Explaining Their Ditferent Responses and Outcomes

The Australian merino wool industry dominates the global merino industry with
80% market share , thereby dwarfmg the New Zealand merino wool industry along with
all other countries. Based on relative market share alone, PETA’s targeting of the
Australian merino industry provides the opportunity to impact and change merino

industry practices in the largest production region and thereby if successful reduce pain

36

and suffering for the greatest number of animals (PETA, 2008a). Whereas, an attack on
New Zealand or any other country by comparison would only have small marginal
impact on changing global industry practices. Innes (2006) in his study of boycotts and
advocacy target choice within a dualistic market comprising a large and small agent,
shows that advocacy groups who have limited resources with which to launch an
effective boycott against the whole industry may instead choose to launch a persistent
targeted boycott against the larger firm as their market will suffer the most and thereby
have the greatest impact. Innes shows that even though the boycott cannot prompt, the
targeted firm to adopt the desired practices; it can reduce demand for the firm’s product

thereby reducing the extent of the undesirable production practice.

Proposition 1: Resource constrained advocacy groups will target
firms or industries where they can have the greatest impact due to size

of production or consumer market share.

Australia’s 30,000 merino growers and numerous production areas are
geographically dispersed across an incredibly large, expansive and desolate continent.
Farmers often use helicopters and light aircraft to not only get to town but muster the
sheep. Similarly, shortwave radio and satellite phones are often the only forms of reliable
telecommunications in many areas. Comparatively New Zealand’s 700 or so merino
growers are primarily concentrated in one major production area - the South Island high
country - and within a few hours drive of each other. The size, geographic dispersion and
difficulty of communicating within Australia’s merino industry are likely to allow

differing opinions and divisions to arise between pockets of farmers. As a result there are

37

likely to be larger hurdles to be overcome in creating a unified consensus between
geographically dispersed growers on any national industry level response to external
and/or internal issues, including advocacy groups. In comparison New Zealand’s small
size, tightly knit grower community (geographically, socially and economically) and their
integrated value chain structure presents quite the opposite platform for collective
responses to external issues. The relatively open structure of the Australian merino
growers as opposed to the tight structure of the New Zealand merino growers presented
PETA with an opportunity to exploit the natural conflict between the Australian industry
stakeholders. The difficulty of obtaining a consensus agreement among large socially,
economically and geographically diverse populations has been a common problem

tackled in the economics, law, political science and sociology literature.

Of most relevance to this set of problems is the collective action literature (Olsen,
1965, Taylor, 1982, Dawes, 1980, Bendor & Mookherjee, 1987) which argues that small
groups are more effective and likely to realize collective goals. However, Olsen (1965)
also notes that some large groups (farmers’ organizations amongst them) have been
effective and viable for prolonged periods. Olsen argues that this results from individual
contributions aimed at selective rewards (i.e. enhanced wool product returns) and that

collective action is achieved as a byproduct (Olsen, 1965).

Proposition 2: The success of collective industry responses is
negatively correlated to the constituents’ size and economic,

geographic, and social dispersion.

Proposition 3: Advocacy groups’ success is positively correlated to the

level of barriers to collective action that the constituents face.

38

An alternative explanation for the strategies pursued relates to the relative
differences in strengths of collective action within each industry. This literature (Bendor
and Mookherjee, 1987, Myatt and Wallace, 2008) argues that strength of collective action
is a flmction of size and that there exists a critical threshold for group size below which
cooperation cannot be sustained. The size of this critical threshold is a function of the

costs and benefits of participation within the organization, as well as the discount factor.

Applying their theory one can argue that the increased costs of production or
reduced returns associated with the Australian wool industry deploying any chosen
strategy caused the critical level of support within the industry for that strategic response
to fall below the required threshold for a unified industry response as various factions and
individuals defected. Effectively, they argue at some point for each individual the
combined costs (new and old) will exceed the original benefits that validated the
collective body’s initial formulation, thus they will defect. When sufficient individuals
defect, the industry body will collapse. However, provided the combined costs (new and
old) do not outweigh the original benefits that validated the initial formation of the
collective body, the collective body will continue to exist. In this scenario the reduction
in the strength of collective action is likely to result in an internal battle within the
industry collective body. This is illustrated by the protracted battle within the Australian

industry.

Therefore we propose that there exists a threshold (percentage of growers) of
collective action that the industry must meet in order to facilitate the development of a

single best response to third party advocacy group’s actions. If the strength of collective

39

action falls below this threshold then the subsequent discontent that develops would most
likely reduce the welfare of the industry as a whole. We argue that the Australian wool
industry was unable to reach the required collective action threshold to facilitate the
development of a single strategic response, whilst the New Zealand industry did. A
number of factors may influence the threshold (table 3). For example, the previous
collective action by the New Zealand merino growers to gain independence and
transform from a commodity industry to a vertically integrated, market-driven, high value
consumer product industry may have created sufficient strength of collective action to
exceed the threshold to provide the required unity to facilitate the agreement on a single
best response. In other words, New Zealand had built up significant social capital to

allow adoption of further collective action seamlessly.

Proposition 4: A collective action size thresholdexists that must be

passed to enable a unanimous single industry response.

Proposition 5: Previous successful collective action lowers the discount

rate thereby increasing the net benefits for collective action.

The Australian wool industry is highly politicized and over the years has gained
substantial support by government (AWI, 2009). As a result it has become divided and
fractionated into numerous industry bodies with each group of individuals looking to
increase their individual rent seeking power, not necessarily the collective welfare of the
industry. Contrastingly, New Zealand growers operate within a highly volatile,
international free market totally devoid of government support; this individual survival

need has forced them to collaborate horizontally and vertically in the development of a

40

highly vertically integrated and focused market orientation that is collective across all

growers.

The Australian Wool Industry’s history of collective action proves that politicized
industries can collaborate; the problem is that tensions between growers only emerge
when the collective body is forced to confront change or other definitions of farming
practices reach a certain threshold (McEachern, 1992). This creates conflict, the
development of contradictory messages and further polarization of associations or
organizations (McEachern, 1992). Similarly, Williamson (1991, p.278) argues that some
issues require coordinated responses and that failures of coordination may arise because
“autonomous parties read and react to signals differently, even though their purpose is to
achieve a timely and compatible combined response”. Despite Australian growers
wanting the optimal outcome they were unable to co-ordinate themselves due to reacting
differently to the signals they received. Alternatively New Zealand’s previous industry
transformation meant they had developed internal mechanism to deliver a clear concise

message to the market place.

Proposition 6: Greater market independence, high market volatility
and limited government involvement reduces the threshold required

to achieve collective action and obtain a unified industry response.

Recent research indicates that the institutional structure of the value chains can

have an important impact on farmer’s individual and collective responses. For example,
Solar & Valceschini (1997) found that the form of collaboration between farmers affects

their transactions with downstream value chain partners. Related to this, Cook and

41

Constantine (1999) found that the internal organization of a co-operative association is an
important determinate of collective action. Therefore, it is important to determine if and
how the different institutional structures of each value chain effect the strength of

collective action or any other phenomena that may emerge.

The Australian Merino wool industry is predominantly focused on commodity
production and therefore their farm philosophy is to make business decisions on the basis
of pooled commodity price signals. Accordingly, the value chain structure has developed
to facilitate the movement of large volumes of product primarily based on price, with
third party brokers commonly taking ownership and often at multiple stages through the
value chain. This creates an environment in which incentive misalignment can occur
between different levels of the value chain as asymmetric information arise as the product
is sold as a pooled bundle of attributes in autonomous spot markets. For example, wool
brokers have few incentives to supply growers with specific attribute and market
information if they can extract a greater margin by withholding this information when the
desired attributes are already present. As a result discontent can develop vertically and
horizontally between the different value chain members as to what is the optimal strategy
for dealing with third party issue groups; it is difficult to find a pareto optimal alignment

of incentives.

The New Zealand merino wool industry, due to its transformation over the late
90s and early 20003, has substantially greater value chain integration and direct linkages
to retailers and final consumers. Through the development and extensive use of these
long-term contractual arrangements with retailers and manufacturers, New Zealand

merino growers have become more aligned and in tune with their specific contract

42

partners needs and tastes and preferences of their customers. As a result there has been a
reversal in the way that New Zealand merino growers perceive themselves; no longer do
they perceive themselves as wool growers selling into an autonomous commodity market,
instead they perceive themselves as brand partners of the final manufacturer and retailer,
responsible for collaborating on the development of best industry practice to ensure they
are delivering the optimum consumer experience (Stevenson, 2004). The integrated
market driven approach of the NZMC as market coordinator coupled with the growers
change in philosophy to brand partners has bound everyone together to ensure a single
focus on meeting the specific consumer experience needs of their branded garment
manufacturer and retailer partners. This integrated value chain approach focused on
ensuring that the final consumer experience needs are met has allowed the NZMC to

develop and implement the earlier described solution.

These findings relate to recent research that indicates value chain structures need
to be designed to be able to respond cheaply to widely diverse consumer requirements
and quality objectives that vary with time and between geographic regions (Solar and

Valceschini, 1997). We extend this to proposition 7.

Proposition 7: The institutional structure of value chains directly
affects the range and form of strategic responses available to growers

and related associations.

Both the Australian and New Zealand merino wool industries different market
orientations in how are organized to engage with their value chain and consumer markets;

Australia is production driven and New Zealand market driven. This difference in market

43

orientation is defined by Haines (1999) ensures that a business activity is demand led not
production driven or vice versa in the case of production. As stated previously, the
Australian merino industry is predominately based upon an autonomous, supply push,
spot auction market system comprising many buyers and sellers, whereas the New
Zealand merino industry has recently shifted to a vertically integrated, consumer driven,
market pull system. Thus the two systems are substantially different in the manner that
growers philosophically and physically engage with the consumer market. This results in
very different information flows and perspectives about how to respond to different

market issues and events.

Australian farmers predominately sell their wool through spot auction markets.
As a result the market information they receive is pooled price signals from the auction
and the third party media vendors relative to the classes of wool or aggregated bundles of
attributes. This system provides farmers with very little specific information or feedback
about the relative value of the individual wool attributes that make up their pooled
offering. Hence, the value of individual attributes or credence attributes are often lost in
the feedback loop between the consumer market and the farmer. Consequently, farmers
only retroactively respond to the pooled price signals they receive from the pooled bundle
of attributes, as opposed to proactively examining the value that consumers and retailers
assign to the individual attributes. This results in farmers adopting a highly production
and cost-based focus to their business. Thus, within growers’ associations funded by
levies, management will be immense pressure to only adopt and support strategies that
reduce costs or increase productivity. This may provide an internal reason why AWI
focused on a technological solution and aggressively fought the PETA actions as they

believed they could satisfy constituents with the argument for the accrual of short-term

44

costs as supposedly these responses would yield immediate benefits with the withdrawal

of the advocacy pressure.

Alternatively, New Zealand growers operate in a highly vertically integrated,
market driven system where the retailer and garment manufacturer representatives
regularly provide growers market and consumer research on exactly what attributes
consumers’ value. The direct transfer of specific attribute and consumer knowledge
ensures growers know exactly what attributes are consumers are requiring, why and how
much each attribute is worth. This process also ensures farmers understand market
dynamics and trends, thereby allowing them to make changes to their production system
in anticipation of market changes and potential price premiums; the exact opposite from
the commodity market system. This system ensures that farmers have a full
understanding about consumer trends and what retailers require now and in the future.
Consequently, growers are more responsive to consumer needs and associated technical
specifications. Therefore, when the agreement was made to phase out mulesing, growers
were content as viewed the situation as long-term investment in meeting with changing

customer demand despite the associated immediate increased cost.

Proposition 8: The form of grower and industry market orientation
directly affects the level, speed and form of individual and collective

grower response.

2. 7.2 Discussion of Responses

Given the above discussion why did the two industries pursue their respective
strategies? The resulting narrow and aggressively defensive response of the AWI resulted

45

from a combination of factors: industry characteristics, institutional structure and market
engagement. Combined these factors resulted in a strategy being pursued that may have
been sub-optimal; however this depends on whose perspective (AWGA March 7 2005;
McLachlan, 2007). Furthermore, it is fair to argue that a focus on technical solutions at

the neglect of consumer solutions may lead to unacceptable solutions, such as clip

mulesing1 0, being developed. Additionally it would appear fiom the findings of Peterson
et al (2008) that bringing a contentious animal welfare issue to the forefront of the mind

of otherwise unassuming consumers does little to create value in the chain.

Alternatively, the NZMC was able to refrarne the potential threat and diffuse the
issue through an open and collaborative approach held privately Within the industry. This
led to the development of a consumer acceptable accreditation program, which has since
been used to gain a competitive edge in the marketplace and received unrequested
positive support from PETA. However, it is not clear from this study whether this was the
optimum strategy to pursue; obviously in the short-run there is an associated increase in
animal health costs as a result of change of practice, but due to the potential for

premiums from mules-free wool that have since developed this may well be the case.

However, because there are linkages between the industry, institutional and
market engagement characteristics one should not jump to the conclusion that the
Australian merino industry would have been better off pursuing the same approach as
New Zealand. One could in fact argue that this strategy was in fact not even possible
given the characteristics associated with the Australian merino wool industry. However,

this does not imply that Australia could not learn by observing the characteristics of the

 

O . . . . . .
Viewed to not reduce pain from traditional surgical mulesing by PETA.

46

New Zealand industry or vice versa and make institutional changes where possible to
ensure the industry is best set to dealing with third party issue groups as they arise. But
as Williamson (1991) states exact replication of individual practices (characteristics) will
be suboptimal, if linkages are important, and that piecemeal proposals that ignore the
supporting institutions are fraught with hazard when engaging in economic reforms.
Therefore it is too early in this exploratory research to draw conclusions on what was

and/or would be the optimal strategy to deal with third party advocacy groups.

2.8 Conclusion

This paper conducts a comparative institutional analysis of the instrumental case
about how the same industry in two similar countries responded differently to same
advocacy attack over the same issue with very different consequences. Specifically the
chapter analyzes the respective responses of the AWI and NZMC to PETA’s Boycott
Australian Wool campaign against mulesing: AWI aggressively attacked PETA’s
campaign without success, whereas the NZMC successfully deflected PETA with the
creation of a branded and accredited ethical and responsible agricultural production

program.

The findings contribute to existing literature by illustrating that the interactions
between advocacy groups and target industries are complex and that the outcomes are
affected by industry, institutional and marketing characteristics and their corresponding
information flows. The analysis indicates that there are a range of possible theoretical
and empirical explanations for the different observed responses, thus supporting the use
of this methodology. Whether or not all possible explanations and theories were

examined is a subjective manner and a limitation inherent of grounded theory as the

47

process is one that can be infinite. The same argument is for theories that were
dismissed, one cannot list these only conclude that given the resources available to the

researcher the theories identified appeared to best fit with the phenomena observed.

This discussion was hindered by the innate one shot game nature of the decision
to pursue a given strategy, and therefore it would be subjective to draw conclusions on
what would have been the optimal strategy for either industry to pursue. Nevertheless this
study highlights the complexity of the issue and clearly points out that the decision to
choose a given strategy may be a function of the aforementioned characteristics.
Therefore, it would be insightful for industries to have an understanding of the influence
of these characteristics over the available strategies to deal with third party issue groups
when conflicts arise and more importantly what available strategy is most likely to give

the optimal outcome.

This presents an argument for further case based research as it likely to lead to
synthesis of characteristics potentially overlooked in this paper and will provide
additional insights in to the relevant importance of the Outlined characteristics. By
framing up a series of research propositions we have attempted to lay the foundation for
this future research. The results from such research will provide value to firms and
industries in the form of both proactive and reactive strategies that can be pursued to
facilitate the optimal outcome. Additionally, once further case research is conducted it
would be beneficial to build an economic framework to facilitate further theoretical and
empirical work. It would be premature to develop such a model in these early

exploratory stages as the complexity of the issue is immense.

48

CHAPTER 3: SUMMARY AND FURTHER RESEARCH

This thesis has presented the analysis of an instrumental case showing how the
same industry in two different countries responded so differently to the same animal
welfare advocacy issue. Our findings make a valuable contribution to existing literature
by illustrating that the interactions between advocacy groups and target industries are
complex and that the outcomes are affected by industry, institutional and marketing
characteristics and their corresponding information flows.

This idea is worthy of further explanatory work and should be considered the
starting block in compiling a ‘tool box’ of appropriate strategic responses to adversarial
issues. Such a ‘tool box’ would be invaluable to indusu'y in a world facing increasing
number of advocacy challenges as it should facilitate the adoption of more optimal
strategies given greater understanding of their likely outcomes. ‘

To compile this ‘tool box’ a number of conceptual and empirical studies need to
be undertaken. These studies should look to identify the relative significance of the
characteristics identified in the paper. It is not suggested that the findings of this study be
generalized until such work is done given the complex interactions of characteristics and
the innate one shot game nature of the decision to pursue a given strategy. Nevertheless

this study highlights the complexity of the issue.

This presents an argument for further case based research as it likely to lead to
synthesis of characteristics potentially overlooked in this paper and will provide
additional insights in to the relevant importance of the outlined characteristics. These

results would provide valuable insights to firms and industries about what proactive and

49

reactive strategies they could pursue to facilitate an optimal outcome to animal welfare
issues.

Additionally, further research should be conducted to gain a greater understanding
of the longitudinal dynamics with respect to the channel members’ responses to advocacy
issues and related outcomes over time. This would provide manager and policy makers
alike further insights in to the common precursors that drive various responses. Such an
approach would allow industry to benchmark their current situation against various
potential scenarios and begin to develop institutional form and strategies for dealing with
possible eventualities.

Future research needs to take an integrative approach and study all of the
members along the value chain from input suppliers to end consumer. Such a study
would yield insight as to the alignment of incentives between stakeholders when it came
to developing strategic responses. Of particular benefit would be the ability to analyze
how and why advocacy groups strategic targeted specific channel, members and location.

This would allow the development of proactive rather than reactive strategies.

Additionally, once further case research is conducted it would be beneficial to
build an economic framework to facilitate further theoretical and empirical work.
However at this exploratory stage it would be premature to develop such as the
complexity of the issue remain immense.

Undoubtedly product characteristics and industry characteristics have an influence
on producer decisions. Central to this question is the vagueness surrounding the notions
of niche and commodity markets and where exactly the line is drawn. In fact it could be
argued that neither of these markets exists in a pure form. Rather the focus should be on

understanding the value proposition for agribusiness firms. This approach would likely

50

yield innovations, both in terms of differentiation and cost leadership, or in other words
the delivery of the greatest value at the lowest cost. This equates to profit.

For all the talk on the development of strategies to deal with advocacy groups,
sight should not be lost of the root cause, MGSD. If this problem could be solved for
agribusiness the likelihood of advocacy towards their activities would be significantly
reduced. Consequently, the development of a so called tool box of strategic responses

may not be necessary.

Arguably the greatest contribution this thesis is the identification of the complex

 

interactions surrounding strategic responses to animal welfare issues and consequently

the identification of a gold mine of further research questions.

51

Table 1. Australian MulesirggTimeline January 2004 to December 2007.

 

Year

Month

Event

 

2004

January

First murmurs of a campaign by PETA

 

2004

November

First boycotts of mulesed wool by retailers

 

Wool and Sheep Industry Taskforce agrees on the December 2010
deadline to end surgical mulesing.

 

AWI awards a contract to technology company Norwood Abbey to
develop a cost-effective application for chemical mulesing.

 

2005

January

AWI launches legal action against PETA under the secondary boycott
rovisions of the Trade Practices Act.

 

February

AWI begins the first of its formal hearing against PETA in the Federal
Court in Sydney.

 

PETA begins an anti-Australian wool billboard campaign in the US.

 

May

Australian Wool Growers Association promotes the new analgesic
spray Tri-Solfen as a pain-relief solution to surgical mulesing.

 

Elders, including almost 100 growers, join the AWI legal challenge
Iagainst PETA.

 

June

AWGA chairman Chick Olsson leads a delegation to the US to strike
Ia deal with PETA.

 

September

AWI wins court approval to pursue its Federal Court action against
PETA.

 

PETA claims that its protests have forced Italian fashion giant
Benetton to reconsider using Australian Merino wool.

 

AWGA acknowledges that its deal with PETA was unworkable.

 

October

AWI announced a five-year $2 million project to development sheep
resistant to fly-strike.

 

November

AWI releases details of development work on anti-fly-strike clips as
ian alternative to surgical mulesigg.

 

2006

February

Cojak, the bare-breech Merino ram, synonymous with the search for a
genetic solution to mulesing, dies at the age of seven.

 

April

Trial results find that anti-fly-strike clips are more favorable for
weight gain than surgical mulesing.

 

 

AWI abandons trials on the chemical mulesing compound
collangenase.

 

Aggust

University of Adelaide research Professor Philip Hynd says selection
for bare-breech trait that best log-term option to surgical mulesing.

 

2007

March

PETA sprays red paint ‘bloody Burberry’ on the windows of London
retailer Burbury.

 

June

AWI and PETA agree to a settlement following mediation. AWI
agrees to halt its Federal Court claims against PETA, who in turn
agree to cease harassing retailers of wool until December 2010.

 

 

 

November

AWGA chairman Chick Olsson and Dubbo sheep processor Roger
Fletcher elected to AWI board. Both opposed to the December 2010
deadline.

 

 

 

Source: Weekly Times, 2009

52

 

Table 2. Australian Mulesing Timeline January 2008 to December 2009.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Swedish global retailer H&M insists that all of its wool apparel
2008 February must be made from non-mulesed wool.
The head of the Italian menswear group Zegna, Count Paolo
Zegna, pleads with Australian wool growers to stick to the
April December 2010 deadline.
2008 May AWI rejects peace deal with PETA.
AWI director Chick Olsson claimed the December 2010 end to
June surgical mulesing was a proposal not a deadline.
AWGA president Martin Oppenheimer declares that AWl’s next
August annual meeting will be a ‘referendum’ on mulesing.
The US National Retail Federation re-affirms demand that
September Australia adhere to its 2010 deadline.
Candidates opposed to the December 2010 deadline win control of
November the AWI board.
Leader Products announces commercial release of anti-fly-strike
2009 April clips.
UK retailer Marks and Spencer says mulesing deadline is not
June negotiable.
One of the world largest wool processors, the Chinese Sunshine
July Group, demands Australia abandon muleflg.
AWI says Australia won’t be able to meet the mulesinLdeadline.
Cobbett Technologies says a chemical mulesing treatment
September Skintraction could be available by October next year.
Sheep Genetics releases program for selectianor bare-breech trait.
Source: Weekly Times, 2009

53

 

 

Table 3. Australian and New Zealand Merino Industry Characteristics

 

 

 

 

 

 

 

 

 

Characteristic I Australia I New Zealand
Industry Characteristics

Size (global market share) 80% 1.50%
Farmer population 30000 700

Member Geographic spread Dispersed Concentrated
Economic significance Important Minor
Government involvement Highly politicized Free Market
Industry Cohesiveness Divided Unified
Previous Transformation No Yes

 

 

Institutional Differences

 

Value Chain Structure

Numerous Spot Markets

Vertically migrated

 

Ownership Charges in Chain

Numerous

Sirmle

 

Value Chain Interaction

Arms Length

Collaborative

 

Value Chain Philosophy

Adversarial - Price
Based

Mutually Beneficial
Partnerships

 

Value Chain Focus

Commodity Production

Consumer Experience

 

 

 

 

 

Market Structure Spot market - Auctions Long-term Contracts
Coordinators Wool brokers NZ Merino Company

Final Branded
Buyer Next aggnt in chain Manufacturer

Partners Consumer
Farmer focus Price takers Experience

Wool Grower Brand Partners

Farmer philosophy (Commodity) (Integrated Experience)

 

Market Engagement Differences

 

Source of Market Knowledge

3rd Party Information

Brand Partner (Retailer
or Manufacturer)

 

Delivery

News Media

Brand Partner Meetings

 

Feedback Loops

Minimal

Integral

 

lnforrnation Provided

Aggregated and Pooled

 

Client Attribute Specific

 

Consumer Needs and

 

 

 

 

Grower responds to Price Sigals Technical Specs
Consumer Needs Awareness Low Sensitivity High Sensitivity
Grower Advocates AWI NZMC
Production
Technological Market Driven
Role Innovation Coordination
Marketigqéxpertise Limited Integral

 

Approach to the Pressure

 

Response:

Narrow and Defensive

Open and Expansive

 

 

Solutions

Aggressive Legal
Action / Perspective Defense Market Opportunity
Technical Solutions - Consumer Solutions -

Clips

Accreditation Program

 

Nature

Independent and Insular

Collaborative and Open

 

 

 

Publicly Defend

 

 

Privater Diffuse

 

54

 

APPENDIX

55

 

APPENDIX 1 — BOYCOTTAUSTRALMN WOOL CAMPAIGN

j _. I.Did your sweater

:cause a bloody butt?

SaveTheSheep.com PETA

 

Source: www.savethesheep.corn/photo.asp

   
 
 

a» Pink Calls for Boycott
.\ r aft: of Australian Lamb
' ' ‘r E- Mutilations for Wool

Sta rMax. In c.

Source: www.savethesheep.com/photo.asp

APPENDDA’ 2— FL YSIRIKE

 

Source: liveexportshame.com

56

APPENDDf 3 - MULESHVG

 

Source: http://www.savethesheep.com/photo.asp

APPENDIX4 —PETA SUPPORT FOR NEWZEAMND

“9W

. ThankS {"347

1,, ch'1 “it“; _
/’I' I

    

Source: http://blog.peta.org/archives/mulesing/

57

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58

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