In today's fast-moving consumer goods environment, a quality product isn't always enough to charge a high price. Instead, a growing number of educated consumers are just as interested in the product life-cycle and expect ethical standards to be upheld throughout the production process as they are in the quality of the end result.
We're now starting to see those attitudes spill into the agri sector too. Consumers want to know how producers are growing their crops, farming livestock and manufacturing goods, and they want to buy from those who prioritise similar values.
The practices consumers value will differ from buyer to buyer, providing producers with a complex matrix of challenges and opportunities.
Not all goods will suit all consumers, and producers shouldn't aim to satisfy everyone. But if they want to extract more value for their goods then targeting a niche group of these consumers and really understanding what makes them tick will help guide the decisions they make on the farm or orchard.
New Zealand lies a long way from our customers both geographically and culturally.
Our export markets have diversified and Asia is now our most valuable export destination.
Traditionally the excess meat and butter produced in New Zealand was simply exported back to Britain, a market we knew well. But now many of our goods are consumed by people who speak a different language and have very different cultural values.
Transcending the knowledge gap between our producers and consumers and identifying with individual consumer groups is the key to unlocking additional value.
What was once an insurmountable task is now relatively easy thanks to advancing technology.
Blockchain technology has the potential to trace movement of products from the farm through to the consumer.
This type of technology empowers both producers and consumers.
It allows consumers to trace their food back to the farm, or group of farms it was supplied from providing an opportunity for producers to be rewarded for superior on-farm practices.
While there is currently little evidence of this happening locally the value of transparency and aligned values will only increase as consumer expectations evolve.
In New Zealand, and increasingly across the world, environmental compliance is becoming an expectation. Government and lenders are working with local producers on how to best make the transition to economically sustainable, resilient businesses that can confidently farm well into the future.
Generally, New Zealand producers are working hard to minimise environmental impacts, but a stronger commitment to compliance is needed to drive a higher price among the international communities who value it.
Today's increasingly connected world also allows producers to share their on-farm experiences with interested audiences; if a picture says a thousand words then a video must be worth at least a million.
But before producers get excited about telling their stories we need to listen to our consumers.
The more we understand our consumers, the better we can tailor our practices to their values.
Travelling abroad and inviting tourists on to our farms is a great way to learn about consumers.
In New Zealand we typically think of our consumers as foreigners, but we can also glean insights from the diverse views of our domestic population.
Views tend to differ between groups of differing socio economic class, cultures, age groups, regions and even religious beliefs.
This is one of the reasons local farmers markets have been so successful and are gaining in popularity.
Markets create an opportunity for consumers and producers to connect and understand each other's preferences and values.
Many of our farming and agri sectors have lost their connection with consumers due to the majority of their goods being processed in factories and then exported off-shore. The only connection with consumer desires is fed to farmers through the price they are paid for their products. In the case of milk this tends to be a standard price so long as minimum quality criteria is met.
Beef is graded simply by the type of animal, while the price differentials that were once in play for differing grades of lamb have tended to diminish over time due to procurement pressure between processors.
This means even the price paid is not always an appropriate indicator of whether the product supplied lines up with the consumer's quality expectations.
Consumers want more than just a quality product. Today, consumers want clarity on how their goods were grown or produced; they want to know if they were produced with kindness. Is the farmer kind to their animals, kind to their staff, and kind to the environment?
Processors are attempting to bridge the divide between consumers and producers through farm/orchard assurance programmes.
These set standards and farms are audited to ensure they are compliant. This then provides consumers with some of the knowledge they are seeking but it is still very data-centric and tends to be a "one-size fits all" process. This approach doesn't fully tap into consumers' emotional needs, like a video of lamb frolicking in a paddock does.
Traceability from the end consumer back to the producer is key to building trust and is a pathway to extract higher value for goods.
Food security is a huge concern in many markets hence the need for transparent supply chain structures. This provides a way to deliver the factual data about the quality of the product and how it was produced.
Linking on-farm stories to consumer products really becomes the new "value-add" route.
Capturing clients' emotional needs is a way to extract more value.
People tend to buy on emotions, not on data — justifying purchase decisions by the feeling they get when selecting or consuming a particular product.
Traditionally our primary producers have looked to marketing models where everyone is generally treated the same.
At present there are a few incentives available to out of season supply or for scale of supply, but there are limited incentives available for how products are supplied. Goods are pooled and marketed collectively, largely by co-operatives or by companies who follow a similar sales model to the co-ops.
To be successful in the future our primary sectors need to have minimum standards that all producers must comply with, but we must also be prepared to pay those who are doing an outstanding job a higher rate.
Accepting that different rates will be paid based on how a product is produced rather than just on the end quality of the product will stand our primary producers in good stead to capture more value in the future.
The ability to adapt practices to meet consumer demands is key to survival.
• Susan Kilsby is an ANZ Agriculture Economist
