Bumper kiwifruit harvest set to get under way in March after two grim years of weather and quality issues.
Bumper kiwifruit harvest set to get under way in March after two grim years of weather and quality issues.
As the valuable kiwifruit export industry recovers its mojo after a gruelling two years, the low level of share investment in Zespri by growers is shaping up as one of the biggest challenges for the dominant marketer.
Less than 50 per cent of Zespri’s 2800 kiwifruit suppliers now own sharesin the single-desk marketer, which is entitled by law to export all New Zealand kiwifruit, except to Australia.
As Zespri launches initiatives and grower information sessions about owning shares, Craigs Investment Partners research analyst David Harris said industry alignment between growers and shareholders “is one of the biggest issues Zespri faces”.
Grower advocate NZKGI (NZ Kiwifruit Growers Inc) told the Herald the industry “recognises there is an alignment issue with growers’ ownership of Zespri”.
Zespri is a Bay of Plenty-based corporate owned by past and current kiwifruit growers.
While growers don’t have to own Zespri shares to supply the exporter, one of the arguments is they miss out on plump returns from Zespri businesses outside its basic fruit returns obligation. For Zespri itself, the cost of the imbalance has been seen in two industry producer votes on strategic expansion proposals. The votes, requiring 75 per cent grower support, were lost.
Harris said a successful vote for one of the proposals, to expand Zespri’s overseas grown gold fruit branded supply from 5000 hectares to 15,000ha, “would add significant value to Zespri, so the outcome has been disappointing for shareholders”. (The other proposal concerned Zespri fruit growing in China).
“The idea of having a Zespri global supply is to get Zespri fruit on to shelves all year round. The advantage is it doesn’t allow competitors to come in during the New Zealand off-season and fill the gap. It keeps competitors off the shelves.
“The other point is they spend a lot of money on promotion trying to get New Zealand fruit back on [retail] shelves. If you’re there all year, it brings down those promotional marketing costs as well.”
David Harris, research analyst, Craigs Investment Partners.
Harris said Zespri, which reported global sales of $4 billion in FY23 and is eyeing demand in 2030 and beyond, believed the current grower-imposed 5000ha overseas production limit “is not anywhere near enough to meet demand and really opens the doors for competitors”.
Harris believed access to capital was one reason why more growers don’t buy shares in New Zealand’s No 1 horticulture export business.
Growers developing their orchards and businesses often didn’t have money left to buy shares, he said.
“Others have limited access to capital. Iwi growers for example own a lot of land but not necessarily a lot of capital.”
Green fruit growers wanting to convert to higher returning gold fruit vines had to buy a gold licence from Zespri - “licences cost a lot of money”.
“Then a lot of cooperative-style packhouses require you to own shares in the packhouse to get your fruit packed.
“There’s not a lot of surplus capital floating around the industry.”
As part of a first proposal to strengthen grower shareholding, Zespri has suggested giving growers the option of receiving their June loyalty payment as shares, with the January payment remaining cash. The proposal is subject to Industry Advisory Council approval. A second initiative would enable shareholders to receive dividend payments as shares. Both would be available from 2025.
Harris said this first stage was “a great start”. Information was still limited and could be some time off with the announcement chief executive Dan Mathieson would leave the job after this season was completed.
Colin Bond, chief executive of industry grower advocate NZKGI (NZ Kiwifruit Growers Inc) said, “We recognise that growers have diverse investment opportunities, if they have capital available, including the purchase of plant cultivars as well as other investments outside our industry”.
New Zealand Kiwifruit Growers Incorporated chief executive Colin Bond. Photo / Quinn O'Connell
“While NZKGI is focused on ensuring that growers are enabled to procure Zespri shares, it is ultimately the growers’ decision if they choose to...”
Bond agreed access to capital was one reason for the imbalance but growers may also prefer to make more diverse investments, to mitigate risk for example.
He said by increasing the number of grower shareholders, the industry would band together more cohesively - “especially around important decisions that are made about Zespri’s core functions”.
“Growers are then able to share the collective success of these decisions with dividends....NZKGI is of the position that Zespri should be owned by New Zealand growers.”
Asked what further initiatives were needed, Bond said NZKGI recognised Zespri had a challenge to convince growers to buy shares to ensure the company and its decisions reflected growers’ perspective.
“NZKGI remains in ongoing dialogue with Zespri on this topic and continues to challenge them to ensure they are taking all reasonable opportunities which are in growers’ interests.”
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.
