Exporters told to change tack

Tony Nowell

A "business as usual" approach to food and beverage exports could be a recipe for disaster, a report says.

A discussion document on the industry's future by the Food and Beverage Taskforce - a group set up last December to identify growth opportunities - outlines three possible scenarios facing the industry.

The "business as usual" approach assumes continued growth at the 5 per cent rate achieved during the last decade. However, this would need to be underpinned by a constant rise in commodity prices and a steady flow of innovative products.

Taskforce co-chairman Tony Nowell said although the sector had performed well during the last decade, a more-of-the-same approach was a "high-risk position".

"I think it's a fool's paradise if we think we can just continue what we're doing today and everything will be fine."

Nowell - who is also managing director of Griffin's Foods - says New Zealand is heading towards the second scenario referred to as "margin squeeze", with producers caught in a pincer movement between aggressive retailers in key markets and new low-cost competitors.

To avoid being squeezed, he says, the sector will have to adopt a "transformation" strategy.

This would mean the development of a broader range of products, more effort placed on increased productivity, better aligned scientific research, investment in skills and a more organised governmental role in industry development.

And there was no time to waste.

"We are already losing our place in the global market - that's the message," he says.

The kiwifruit industry, described as a star performer by Nowell, is now the second-biggest global exporter. It used to be the biggest but it's losing market share to competition from Italy, France, Chile and China.

The dairy industry is another sector that could find itself up against growing competition from areas including South America, which enjoys good conditions and is "slowly coming on stream". The global market place is changing with population, income and consumption growing strongly in the developing world.

Just over 40 per cent of food and beverage exports went to traditional markets in the Northern Hemisphere.

However, Nowell warns that although performing "relatively well" in traditional low-growth markets exporters are doing "much less well" in emerging high-growth economies.

Southeast Asian and Chinese markets in particular were identified as growing strongly.

"I think it's a major concern for New Zealand considering the importance of the industry to the country and the economy."

The report says the sector employs more than 400,000 people - one in every five New Zealanders - and last year generated total sales of $27.7 billion.

Food and beverage exports have doubled during the previous decade to $15.3 billion last year, accounting for more than half of all export earnings.

"It is at the centre of production, employment and export earnings and is a driving force in New Zealand's international reputation for innovation and quality," Nowell said.

He added international trade restrictions needed addressing but companies must also work harder to better understand emerging markets, commercialise and promote their products.

"We are not as a general industry very good at all at understanding, scoping and developing export markets," he said.

The taskforce is seeking feedback on the discussion document from sector participants including businesses, trade unions, research establishments and training providers.

TRADING ISSUES

* New Zealand exports $15 billion of food and beverages a year.

* Traditional markets are a low- growth option.

* Margins squeezed by retailers and competition.