Kiwifruit is New Zealand's biggest horticultural export.
The board of Zespri is about to decide whether to try a second time to get growers to approve increased offshore growing, but it seems the kiwifruit marketer’s “hard sell” of the proposal has yet to convince all orchardists.
Zespri’s draft proposal is for New Zealand growers to support the growing of up to 420 additional hectares a year of SunGold fruit over six years in Italy, France, Japan, South Korea and Greece.
The board is to decide this month whether to put it to a November vote, which will need 75% grower support.
Industry participants told the Herald Zespri is doing “a hard sell” and “badgering” on the proposal, even visiting individual growers to make its case. Several pages of Zespri’s October industry newsletter are devoted to answering “frequently asked” grower questions about it. (One grower noted the lobbying is not surprising given Zespri has lost two producer votes in recent years - a third loss would strain its credibility.)
The proposal is subject to annual review by the board to confirm demand remains ahead of supply and annual reporting to growers.
Grower-owned Zespri failed in late 2022 to get support to expand plantings of its bestseller SunGold in overseas countries excluding China and Chile by up to 10,000ha.
The aim of expansion is to support the marketer’s strategy of being able to offer the world Zespri-branded fruit 12 months of the year. In New Zealand, kiwifruit is a seasonal crop. The current approved offshore maximum of 5000ha has been allocated.
In 2022, then-chief executive Dan Mathieson said the vote was close, but growers who did not own shares did not seem to believe more offshore plantings would deliver enough benefit to them.
While Zespri in its latest industry newsletter said there was “growing support from the industry” for the proposal and recognition of the benefits of being able to offer a 12-month supply, the sentiment cited by Mathieson lingers.
One industry participant told the Herald that cornerstone, long-term growers don’t like the proposal, believing it was good for shareholders but offered little benefit for growers who don’t own shares.
Fewer than 50% of Zespri’s kiwifruit suppliers own shares, a number the marketer is working to lift.
One participant, who declined to be named, claimed the offshore proposal was simply a marketing strategy, enabling Zespri to sell more fruit and reap more commissions.
But Zespri in the newsletter said offshore growing delivered “significant” benefits to New Zealand growers.
”Based on the benefits we can quantify (our ability to maintain our pricing, efficiency of advertising/promotional spend; rebalanced overheads) the estimated value at stake for growers is between 63c and $1.32 per tray for SunGold, and between 47c and 96c for green (in 2023).
”The key driver is maintaining our value proposition to support our pricing premium. A price premium is the additional amount a consumer is willing to pay for a product in comparison to competitors.
”If we don’t expand supply, our value proposition will erode over time and this price premium may be at risk therefore having a negative impact on grower returns. We are seeing growing competition and more (offshore) hectares will help to support and position and your returns.”
Zespri said while the debate was about expanded SunGold growing, there was an impact on green returns because “we know we that we achieve a premium for Green also due to leveraging the premium we achieve with SunGold”.
”Without enough SunGold supply, we will not be able to maintain the current premium we have on Green (consumer pricing is currently 22% above the competition for Green in the New Zealand season - excluding Greater China, noting pricing is at the sole discretion of retailers).”
Zespri, which posted FY24 global sales of $3.99 billion, is a regulated entity, permitted to export all New Zealand kiwifruit, except to Australia.
Its total FY24 revenue was $4.2b, including growing licence income.
Grower advocate NZ Kiwifruit Growers Inc (NZKGI) said it would tell growers its position on the proposal in the “near future”.
”The purpose of this communication is two-fold. Firstly, to support growers who may be looking for direction in which way to vote, and secondly, to support growers with information surrounding ZGS (Zespri’s overseas growing operations) so that they can make a more informed decision about how they will vote,” Colin Bond, chief executive said.
Zespri sought to allay growers’ concerns in its latest industry newsletter.
On the potential for oversupply, the company responded this was why the draft resolution allowed for an annual release of hectares to be guided by an annual review of supply and demand.
”Based on current modelling, if we release 420ha each year for the next six years, we’ll be meeting 60% of demand in the 2033-34 season, leaving a very safe gap between supply and demand. That also factors in an increase in average (offshore) yields from around 6250 trays per hectare to our target ambition of 9250.”
Zespri said offshore SunGold growers did not pay the same for a growing licence as New Zealand orchardists.
“We need (them) to support New Zealand returns and we wouldn’t get them if we charged them a significant upfront cost - the model and the customs are different in Europe.
“(They) do not buy a licence to grow SunGold, they do not own it, and they cannot sell it. Only New Zealand growers can own shares in Zespri and participate in producer votes.”
Zespri contracts its existing 1500 offshore growers. Its revenue from New Zealand licence sales in FY24 was $212.4 million, well down on the previous year’s $302.6m due to a restricted sale.
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the $26 billion dairy industry, agribusiness, exporting and the logistics sector and supply chains.
Jason Te Brake, Peter Newbold, Chris Russell, Jo Luxton, Mike Petersen.