For as long as I can remember, the catch cry of New Zealand agricultural producers has been to “add value”. Governments and business circles have pointed the stick at the agricultural sector demanding we step up and add value to our commodity products by further processing and marketing before we on-sell that produce.
Dairy companies and Dairy Boards have invested in brands and marketing campaigns to establish a dominant market share in consumer products. The superior value from the consumer markets would add to the returns and enhance the value New Zealand dairy farmers would receive for their milk. Of even greater importance was the added value from consumer markets, which would come into their own in times of low commodity prices. The higher returns from the consumer markets would bolster the ailing commodity prices and provide stability against the rollercoaster nature of commodity returns.
The cost of developing and competing for, a dominant market share in the consumer sector, proved to be very high, with an extremely long payback period. The swings in global commodity pricing and the influence of a floating New Zealand dollar when adverse to New Zealand milk returns have not been able to be offset by the returns from the consumer markets.
The struggling returns from the consumer markets presented a dilemma in times of good commodity prices. Too many times, product and commitment were withdrawn from the consumer markets, to chase the spiking commodity prices. Add to this the recent massive increase in the production of raw milk in New Zealand and the role of adding value to New Zealand milk through consumer products becomes even more daunting.
Les Keeper
