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kellogg 2015

Feeding the dragon.

Executive summary

The emergence of China as the largest consumer of food and beverage products has been a significant global mega-trend, one which has far reaching implications around the globe and in the international food and beverage industry. These developments will have a significant impact on food and beverage exporting countries, such as New Zealand, and will present opportunities for exporting firms to increase the value of their production.

This report investigates the Critical Success Factors of global firms which have achieved success in the China marketplace, and compares them against three of New Zealand’s food and beverage industries which have exports destined for China. The three industries include the Dairy, Red Meat, and Kiwifruit industries, which are important contributors to New Zealand’s total exports and have a significant proportion of their exports destined for China.

The Critical Success Factors chosen are characteristics, conditions, or variables of effective export marketing strategies, being; Understanding of the market, Selling and distribution channels, Promotion of a brand, and Collaboration.

Using these Critical Success Factors, this report compares the habits, trends and practices of recommended practice firms against three of New Zealand’s food and beverage industries. The report found that across the three New Zealand industries there are vast differences in approach amongst individual firms but also across each industry. The results of each industry could be linked back to the structure of the industry, as well as the culture of the industry. Of the three New Zealand industries, the Dairy industry was found to have the strongest coverage over all four Critical Success Factors, and also displays characteristics most in line with the recommended practice firms. There are factors in this industry which lead towards this, such as the industry being dominated by one large firm which has the resources, scale, and experience to lead the industry.

The Red Meat industry has traditionally been characterised by strong competition and barriers to collaboration within the industry, and this factor was quite evident during the discussions with firms in this industry. Though there are four large firms and a number of smaller firms in the industry which are selling similar products to the same markets, there is a lack of cohesion, industry collaboration and resource sharing, and an inability for branding due to each firm being unable to differentiate from another.

The Kiwifruit industry stood out as displaying strong habits in promotion of a brand and understanding of the market, which has been a result of the industry investing significantly in these two areas and having a focused approach of one product, one brand. This focus is further strengthened due to the structure of the industry being a single desk operator, which allows one firm to be responsible for all marketing, selling and distribution of product, and also allows it to gain scale benefits which are also similar to Dairy.

This report finds that three of New Zealand’s food and beverage industries involved in this research have shown habits which are consistent with international firms which achieved sustained success in China. Each of the three industries have areas to continue to develop across the Critical Success Factors of effective export marketing strategies to ensure they are cementing themselves in the China food and beverage supply chain, and in order to maximise the opportunities presented by the emergence of China as a consumer of sophisticated food and beverage products.

Jason Te Brake

Future challenges and opportunities for hill country farming on the East Coast.

Executive summary

Hill country farming on the East Coast of the North Island is becoming increasingly exposed to global and national economic, social, environmental and regulatory trends and pressure is building towards significant change from the status quo. So what will hill country farming on the East Coast of the North Island look like in 2050 and what are the challenges and opportunities hill country farmers and communities will face between then and now?

This research sought answers to those questions by asking the opinion of thought – leaders involved in roles that support the East Coast hill country. The results paint a picture of a complex, dynamic, connected and increasingly changing hill country environment where the future challenges appear daunting but the opportunities present a strong case for optimism. Overcoming these challenges and seizing the opportunities will require significant adaptation by hill country farmers and changes in land use and farm practices are inevitable.

Key to successfully navigating this change will be changing mindsets and attitudes towards change, improving governance and developing leadership capacities among rural communities; challenging yet necessary steps to positive change. Leveraging the story of hill country farming could protect demand for its produce and possibly add value, however this story needs to be backed with credible and trusted assurances around the safety, integrity and responsibility of hill country food production. Hill country farmers should strive to excel in this regard in order to maintain our current point of difference with most international competitors.

Achieving this across the East Coast hill country will require much higher levels of knowledge sharing and cooperation between farmers and other farmers, rural service providers, rural communities, businesses, industry bodies and policy makers. Supporting institutions should invest in developing approaches to achieve this and ensure close attention is paid to the diversity of people, place, needs and motivations that exist throughout the hill country.

This report concludes with three broad recommendations for actions that could be taken to support a healthy and vibrant future for the East Coast hill country. They are:

  • Develop a holistic understanding of the macro-context within which hill country farming operates, including expected trends and changes in the long-term. Use this understanding to create a broad vision and direction for hill country farming that;
    • Promotes open-mindedness, systems thinking, and long term decision making; and
    • Strives towards ambitious goal s for food safety, integrity, resource sustainability and ethics
  • Broaden and improve the measures we rely on to inform on-farm, local, regional and industry level decisions, including aspects that will be important to consumers and society long term, and m ore nuanced aspects of our farming systems.
  • Engage, support and empower farmers and rural communities to share knowledge, ideas and co-create solutions that are appropriate in terms of scale and time frame.

Farmers need to be making smart, holistic, long-term decisions about the land uses and practices they employ, among other things. These recommendations may go some way to supporting farmers to make decisions with the best possible understanding of their context, in order to give hill country farming its best chance for the future.

Sam Lang

The Role of Lamb Producer Groups in the NZ Industry.

Executive summary

This report was undertaken to provide a greater understanding of the positive role lamb producer groups have in the New Zealand sheep meat industry, due to the repeated negative comments about the industry and its performance publically and in the media.

The majority of research used in the report was completed by qualitative interviews with all key stakeholders of a producer group, in this case the Waitrose Lamb Producer Group which involves a UK retailer, a processor and farmer suppliers from New Zealand.

The customer, processor and farmers were interviewed to reveal their views on strengths, weaknesses, opportunities and threats of being involved with a lamb producer group.

As a result of the valuable discussions that were had with each link of the value chain, this study has identified a number of key factors which determine the current strengths of a lamb producer group and the opportunities that are going to enable the producer group to meet future demands of the consumer.

The key strengths were identified as below:

  • Transparency of information shared throughout the supply chain.
  • Relationships throughout the producer group – It brings openness, frankness, trust and collaboration.
  • Linking the farmer directly to the market provides valuable market intelligence and understanding of the customer and their expectations.
  • Data gathering, sharing and benchmarking drives continuous performance from the farmers.
  • There is certainty of supply for both the customer and processor at least 12 months in advance.

The key opportunities were identified as below:

  • Further utilise existing research data to help improve on.
  • Farm performance through efficient production and cost savings.
  • Benchmark more vigorously within the group.
  • Reduce wastage throughout the supply chain to unlock additional margin.
  • Better utilise producer group lambs for the existing programme or other key customers that have the same consumer requirements.
  • Stay ahead by being involved with research & development projects that differentiate the processor by creating a point of difference.
  • Provide more transparency of margin within the group to build more confidence and trust from all stakeholders.
  • Develop longer term price contracts for the farmer.

The producer group model enables the value chain to better handle the peaks and troughs during the season, which in turn helps to reduce volatility in the schedule pricing. The farmer and processor need to be satisfied with their margins and this must continue to be shared on a fair basis. The customer will continually pay a premium if the farmers and the processor can consistently produce safe, high quality product that complies with the specific requirements including strict farm assurance and animal welfare standards.

Developing more lamb producer groups is not the only solution; however they go a long way in helping to improve the current stat e of the NZ sheep meat industry through collaboration and vertical alignment.

In summary, lamb producer groups in the New Zealand sheep meat industry have a role for the future development of value creation to increase not only overall returns, but most importantly profitability and stability for the farmers and processors.

Landon Jones