Prime Movers sector report: Marketing

The agricultural sector has ridden the knowledge wave since well before the phrase was coined. Agriculture editor PHILIPPA STEVENSON reports on an award-winning company buzzing with the latest possibilities.

New Zealand's agricultural sector is poised for a transformation from commodity shipper to high-tech product marketer. The value of the proteins, minerals, vitamins and other building blocks of our major exports of milk, meat, wool and wood have the potential to far outstrip the returns from the raw product.

Biotechnology is already identifying how some plants and animals within a group do better or have different traits.

Even without genetic modification, scientific discoveries could speed up and finely target conventional plant and animal breeding to provide disease resistance, better growth and more desired products.

What keen observers or forward-thinking individuals once had a gut feeling about, scientists with microscopes and powerful analytical equipment are beginning to put names and processes to.

Take nutraceutical company Comvita, tucked away in the Bay of Plenty. There could not be a better example of the change and how it could pay dividends.

That's a fairly weighty charge for a small company operating out of tiny Paengaroa - a pinpoint on the map near Te Puke in the Bay of Plenty.

But it's unlikely to daunt this enterprise based on a tiny insect and its amazing ability to convert plant nectar into a gloriously rich food beloved by beings as different as humans and bears.

It is a business built on the unswerving belief of its 92-year-old founder, beekeeper Claude Stratford, in the health-giving properties of bee products.

It's a credo he's held for 50 years, even when most people thought there were little more use for honey than just being applied to toast.

Said chief executive Graeme Boyd, "Comvita started off quite alternative. It was way ahead of its time and now it's come of age."

To succeed, other businesses needed to have vision, conviction and stay focused. The belief would pay off, he said.

In an investment prospectus released last month, Comvita said developments in the past decade, such as the $2.5 million renovation of the Paengaroa Tavern complex for a new factory and tourist sales complex, had helped the company make the transition from a "folksy" science business to a mainstream, technically competent one.

With a forecast after-tax profit of just over $1 million this year on revenue of $18.2 million, Comvita is New Zealand's largest bee product company with 72 staff - 11 with science or marketing degrees - and 50 healthcare products selling in more than 12 countries.

Last week, the company, which has about 100 shareholders, listed on the NZ Stock Exchange unlisted security market.

Honey for eating is just the start of what can be harvested - and what the company capitalises on - from hard-working honeybees.

Waikato University biochemist Dr Peter Molan, director of the university's honey research unit, has shown that New Zealand's unique manuka honey has healing properties unmatched by other honeys.

Its bacterial and fungi-killing abilities have led to the development of Comvita's wound and burn-care product Woundcare 18+.

Propolis, which bees source from the immune systems of trees to seal their hives to prevent infection, has been found to inhibit bacteria, fungi and viruses.

Comvita's propolis is sold as a remedy for coughs, colds, the flu and as an immune booster. In Asia it is highly regarded as an anti-carcinoma agent.

Bee pollen is marketed as a natural food source high in protein, and a number of vitamins and minerals.

Royal jelly, designed to feed the queen bee, is used to lower cholesterol and stimulate human metabolism. Bee venom products are used to suppress inflammation in sore joints.

The company believes it produces about half of locally-sourced apiculture derivatives - not including honey. Partly because of an expected long-term shortage of manuka honey, it has also diversified into a number of non-bee products such as selenium and colostrum.

This year's shortage of manuka honey resulted from widespread heavy rain during flowering which prevented bees from collecting nectar, but ongoing high demand is likely to keep supply tight, Boyd said.

The bee-killing varroa mite, found in New Zealand for the first time last year, had not yet affected honey supplies, but still could, he said.

Boyd said founder Stratford has always genuinely cared for the health of his customers, and customer focus is at the heart of a new international move for the company.

Domestic sales make up about 65 per cent of Comvita's gross revenue, but the figures obscure the products' true destination. More than half the turnover comes from sales to Asians, many making an initial purchase while visiting New Zealand or Australia.

Tourism is a key driver of Comvita's business and a third of its products are taken out of the country by tourists, mostly Asians. Another third comes from export sales.

Comvita products have sold in Britain for 15 years, after two enterprising ex-patriates offered to be the company's importers.

In Britain, as in New Zealand, dietary supplements are governed by legislation covering food.

Near neighbour Australia proved more difficult a destination because product listings there under the country's Therapeutic Goods Administration (TGA) come under medicines law and the "dietary supplements get absorbed into medical thinking", Boyd said.

Comvita chairman Bill Bracks chairs the National Nutritional Foods Association, which recently made a submission on the transtasman agency proposed to regulate complementary healthcare products and therapeutic goods. Proposed regulations would send some companies out of business, and New Zealand needed to avoid the "Australianisation" of the sector, Bracks said.

Unlike Britain, it regarded Australia as "close enough to do it ourselves" and took control of pricing, administration, training and distribution. The market went from nil in 1998 to its biggest destination in three years, Boyd said.

"The message from that was that it is better to do it yourself. You have the centre of knowledge, the passion, and people like to deal with the manufacturer."

This year, the company has extended the concept to Japan, where it has been selling products via a distributor for 10 years, most seriously since 1999.

Japanese tourists account for about 5 per cent of Comvita's sales within New Zealand. Products may sell for 10 times what they do here but there are 10 times the distribution problems, Boyd said.

Comvita cancelled a distribution agreement with its Japanese agent in March because, it said, the company lacked experience in natural health products and commitment to sales growth.

It has since employed three of the distributor's staff, and appointed a market manager. Mail order is likely to be the main marketing approach, and the company is relishing the thought of being in direct contact with its customers.

"I feel you need to get to the consumer," Boyd said. "We've dealt with the importer, the retailer but not the customer. Getting close to customers is the only way to meet, or lead, their needs."

Comvita has also seen the benefits of getting close to like-minded businesses - the much hailed cluster concept.

Before Boyd joined Comvita in 1998, the former ICI manager worked for a Bay of Plenty economic development agency researching the potential for a food and wood products company cluster.

The 45-member group that resulted from the work is known as Food BOP and has gained such advantages as discounted power, and savings on packaging and labelling.

It has also prompted the BOP Polytech to set up food technology and other training courses.

Facts:

Industry: Beekeeping

Export value: $50 million

Key markets: Asia, North America

Number of beekeepers: 200

Major areas: nationwide

Further reading:
nzherald.co.nz/primemovers