H.—3o.

PART 11. PROBLEMS OF EXPORT MARKETING. MARKETING IN THE UNITED KINGDOM. 53. Introduction : The Commission desires at the outset to point out that, owing to the fact that it was unable to obtain direct evidence regarding many important aspects of marketing in the United Kingdom, its conclusions and proposals are tentative, and are in the nature of suggestions as to the lines on which further inquiries should be made. Eor all practical purposes, New Zealand has had in the past, and still has, only one market for butter and cheese—the United Kingdom market. This part of our report is therefore devoted to a consideration of matters affecting marketing in the United Kingdom. In another section we deal with alternative markets. 54. Absolute and Limited Control by Dairy-produce Control Board : The desire of the producers to extend their co-operative interests into the sphere of overseas marketing, and the failure of the dairy-factory companies to evolve a comprehensive and orderly system of marketing, led to the setting-up of the Dairy-produce Control Board in 1923. After making a survey of the position, the Board decided in 1926 to assume absolute control of export marketing. The Board's action, principally because it included fixation of prices, met with strong opposition in the United Kingdom, and absolute control was abandoned on Ist October, 1927, after it had been in operation for thirteen months. Since that time, the Board has exercised a limited control over export dairy-produce, and under its statutory powers it has arranged shipping contracts, regulated shipments, supervised storage and transport conditions, including the regulation and checking of temperatures in freezing-chambers in ships, improved storage and handling facilities in the United Kingdom, effected marine insurances, assisted dairy research, extended sales by advertising and displays arranged by its London agency, and maintained contact between exporters and importers of dairy-produce. 55. Early Policy of Export Marketing : In the earlier years of export marketing of New Zealand dairy-produce, sales were made principally on a f.o.b. or c.i.f. basis. The dairy-factory companies had, in consequence, only an indirect interest in the prices realized in the United Kingdom, for they had parted with the ownership of the produce before it left New Zealand. Their direct interest lay in obtaining the best prices possible from local exporting firms and British importing firms. As production increased and the export trade developed, consignments to selling-agents in the United Kingdom increased in volume and relative importance, and at the present time the greater part of our butter and cheese goes forward on consignment, and remains the property of the dairy-factory companies until it is sold. The reason for the expansion of consignments relatively to sales is that the rapid increase in the volume of dairy-produce available for export outstripped the capacity of merchants to make direct purchases on a f.o.b. or c.i.f. basis. For the last five seasons the percentages of butter and cheese sold f.o.b. or c.i.f. and shipped on consignment averaged respectively — Per Cent. Butter sold f.o.b. or c.i.f. .. .. .. .. .. .. 16-8 Butter shipped on consignment .. .. . . . . .. 83-2 Cheese sold f.o.b. or c.i.f. .. .. .. . . .. .. 11-3 Cheese shipped on consignment .. .. .. .. .. 88-7 The ratio of f.o.b. and c.i.f. sales to consignment shipments is not constant from season to season or from month to month. It varies seasonally in accordance with the expected movement of prices on the London market. The percentages of butter and cheese sold f.o.b. or c.i.f. during the 1933-34 season were lower than the average for the five-yearly period, being 15 and 7 respectively. This no doubt was due to the fact that prices were at a low level, and to the consequent disinclination of dairy-factory companies to make sales at prevailing levels. Not unnaturally, they preferred to risk the market, in the hope of obtaining better prices when the produce arrived in the United Kingdom. The consistently low levels of prices and the uncertainty of the market had also the effect of causing traders to refrain from forward buying. 56. Outline of Existing System of Export Marketing : The greater part of the New Zealand butter and cheese shipped to the United Kingdom goes to London, but during recent years rapidly increasing quantities have been shipped to west coast ports, and during the present year a direct shipment was made to the east coast port of Hull. London and the southern counties have long been regarded as the special market for New Zealand and Australian dairy-produce, and the Midland and northern counties have been regarded as the Danish market. The Commission considers it desirable that the policy of making regular direct shipments to west and east coast ports should be continued and expanded, with the object of giving the best possible service to importers whose natural channels of trade are through those ports, and thereby increasing our field of distribution. Traders in the areas served by such ports as Avonmouth, Liverpool, Manchester, Glasgow, and Hull are unanimous in desiring direct shipments and decentralization of distribution. It appears to be desirable to do all that is possible, without overloading the capacity of these outlets, to meet the wishes and requirements of traders in these areas in an endeavour to compete with Danish and other European producers.

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