Federated Farmers: Working together

Catherine Beard

Everyone will be familiar with the Government's target to double exports from New Zealand by 2025. So what can the primary sector do that will help turbo charge the efforts, while earning more stable profitability for producers? How do you capture value and not just chase volume?

Personally I am a big fan of looking at what works well and copying it, or adapting it to your circumstances. Zespri has been an outstanding success story in the primary sector with one of the highest returns per hectare of any land use in New Zealand. With revenue of $1.5 billion, the company has a market share of 30 per cent in the global volume of kiwifruit, but the share in market value is 65 per cent. This difference is mostly caused by a market like China, for instance, where large volumes of low-grade kiwifruit flood the market.

So how does Zespri stand out from the competition and command a higher price? Through having developed a recognisable brand that stands for quality and consistency of product that meets/exceeds the consumers' expectations. The brand also stands for innovation and the investment in Zespri Gold has delivered high returns to growers. None of this happens overnight though, and there has been a commitment to on-going investment in R & D, the managing of grower expectations a slick supply chain that gets the product to the place it needs to be on time and in peak condition. All of this is guided at all times by what their customers want. Zespri does significant in-market research and customer feedback guides the strategy.

Building a brand requires ongoing commitment to the vision and investment and it is companies of scale that are more likely to be able to go the distance, hence the need for collaboration.

All our exporters in New Zealand are comparatively small fry when competing against the multi-nationals out there with deep pockets, so you either carve out a niche that is too specialised for the "big boys" to bother with, or you "collaborate on-shore to compete offshore". This has been our catch-cry at ExportNZ for a few years now and there are some encouraging signs it is getting through. New Zealand Trade and Enterprise now has some funding to support "coalitions of the willing". Multi-company coalitions will be eligible for funding of up to $900,000 per coalition over three years. It makes sense for New Zealand companies to stop thinking the local competitor is the competition when there is a bigger prize in overseas markets and some collaboration to help with brand building could be a win/win.

There are some encouraging examples emerging from land-based businesses, including in the wine industry, the joint efforts of the two largest avocado exporters under the umbrella of Avoco; NZ Merino is another example. Chief executive of Synlait, John Peno, said recently that developing a brand means shareholders have to be patient and their Chinese investors are patient and in it for the long term. Zespri growers have had to be patient and Maori Incorporations are investing for future generations, so they have patience and will be the agri-businesses of scale in the future.

In my view farmers need to be shareholders in the brand they are building; employ the best and then stick with the vision. Any brand needs to deliver product that stands apart from the competition and excite consumers -- if the companies you are shareholders of don't do this, you will always be at the mercy of commodity prices. Farmers/growers have successfully collaborated in the past to invest in processing plant, but the brand building end of the equation has not been tightly managed.