As we are moving into the prime retail selling season for fur in our important markets around the world, I wanted to take the time to tell you more about us – ALC. Often times, we don’t toot our own horn the way we should. While competitive forces around us continue to offer lower selling commissions and higher rebates to attract your business, I thought it would be important for you to know some facts about your ownership at ALC.
The Blackglama and American Legend brands have consistently received a price premium over all other competitive brands. Often times, statistics can be very misleading. For example, one of your neighbors who ships to our competition might have overall bigger mink than you do, but you might have similar or better quality mink than he does. You might hear that he had a “better sale” than you did because his “average price” was higher than yours. Well, bigger mink of the same quality will usually draw more money. But, that doesn’t mean your neighbor had a better sale than you did. On a size-by-size basis, you more than likely had a much better sale than he did. But the “average” will suggest otherwise.
Thus, we have taken the initiative to remove “mink size” from the equation and instead have looked at the prices of mink per square inch of pelt. Over the past 5 years – fiscal years 2007 through 2011, did you know that if you compared the price of our branded mink (both Blackglama and American Legend) with our North American competitor’s branded mink, we have sold at a 5.5% premium? I will be more than happy to sit with any of you and disclose these numbers, just so you know we aren’t tinkering with the data.
When running this same comparison with our European competitor’s velvet type mink, you’ll see that the premium has been well over 10%, and if you remove exchange rate fluctuations due to a weakening US dollar, that premium is closer to 20%.
Since we have become a stock cooperative in FY 2007, we have rebated back to you – in the form of either cash or stock ownership – almost $35 million. This is over a five year period of time. It is also over a total membership revenue of $724 million. If you do the math, you will see that’s 4.8%, which makes the average effective owner selling fee less than 1%.
We have revised some of our bylaws so that it is much easier to redeem your equity once you decide to retire, sell your farm, hand your farm down, or even ship elsewhere. We want you shipping with us because you want to ship with us, not because you feel handcuffed.
Each year we have an income stream related to the sales of “non-patronage activity.” We normally retain these earnings into what we call “unallocated equity.” While this equity truly is unallocated, it still is owned by you, and will be allocated to your accounts in the future as our board deems appropriate. With all of our branding activities happening, we expect this to continue to grow.
In the end, having consumers that desire and covet your brand is far more sustainable than having retailers carry your brand because you paid them to do so. This is not only true for mink, but for all things. Our brands are desired. Blackglama, in particular, is not only desired, but coveted as well. And with our efforts around building it into a true luxury brand, this will only increase. And as this increases, so will the premium you receive for it in our auction room. Our buyers know this, and they embrace it as well. They know that as consumers pay a premium for our brand, they will also enjoy higher margins with their business, even after paying you a premium.
Our buyers continue to enjoy buying your farm lots. They have grown familiar with your crops year after year and know what to expect when they purchase your mink in our auction room.
Our competition believes that placing your mink in “collections” and marketing these collections to consumers is the proper course of action. It’s a little confusing, even internally to our industry since some of these collections are named after individuals who no longer raise mink. As much as I would love to place each of your individual names on our Blackglama brand, that would create too much confusion in consumers’ minds. It would not only cost a fortune to market so many individual brands, it would also seriously dilute the equity that has been built, over decades, of our Blackglama brand.
Let me summarize by simply saying this: After rebates, our net selling price for you has been less than 1% of your hammer revenues, AND you’ve been receiving a 5.5% premium. This nets out to the equivalent of selling for free AND receiving a 4.5% premium in your pocket. If our competition sold your mink for free, AND guaranteed you a 3.5% rebate, you’d still be 1% behind.
I just wanted to put into perspective certain things I’ve seen and heard from our competition recently, whether it’s their willingness to sell your mink for a low fee, or whether they have decided to “guarantee” a future rebate by handcuffing you to sell with them. I appreciate the support, loyalty, and friendship I’ve received from each of you over the last three years. Our future together is very bright.
I look forward to seeing you all and sharing any of this data with you if you’re interested.