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Growing value for New Zealand’s Red Meat Industry: Ensuring we build quality and life long connections with consumers.

Executive Summary

A paradigm shift in the way we farm is occurring, one that emphasises the importance of producing more effectively, efficiently and responsibly, with a particular focus on protecting the environment. New Zealand farmers are confronting these changes now. Our geographic isolation no longer shelters us from the global and instant communication and information networks are now freely available. I believe that our opportunity is to leverage this increased public and consumer awareness of the environment and the growing desire of consumers to understand how their food is produced and where it comes from.

My aim in undertaking this study was to provide a pathway allowing farmers to better connect with consumers. If we are to set NZ product aside from our competitors in-market, it was my view that we needed not only a good story that engaged the consumer, but also a way of ensuring that the consumer can understand the way in which we treat both the animals and the land on which we farm them.

From this study, I believe we have a fantastic opportunity to future proof our businesses across the supply chain and to create a new level of connection with the consumer that will lead to gains in the value of the food we produce over time. As farmers, I believe that we need to step up now and own this as an opportunity. This has to be a ‘bottom, up’ process where we recognise the value that this will create for us as farmers, as food producers and as an industry over time. We must work together to develop a meaningful connection with the consumers who recognise our food for what it is; sustainably produced to the highest standards for the environment, animals and consumers.

The study commenced with extensive internet research and discussions with key NZ industry figures to understand the current status quo and current goals and initiatives. Initial thoughts were to implement the ‘Environmental Sustainability’ (such as Origin Green) approach as a means of connecting with the consumer, however this morphed into a wider discussion about what consumers desire from producers as I engaged with manufacturers, importers and distributors around the world. I began to understand that consumer perception is influenced by a number of factors including the manner in which product is presented and the way in which its claims are demonstrated.

Consumers are rightly demanding more knowledge and accountability from their food producers. It is almost mandatory for Country of Origin labelling. Why? Because we as consumers identify that the standards that are met and controls that are in place differ from country to country, and it gives us an idea of whether the food that we are eating is safe. As a small exporting nation that is reliant on the export of agricultural products, we cannot allow ourselves to have any doubt cast on the quality and safety of our produce. As we know, with the power of social media now, the implications of an error in judgement by a single farmer, can lead to challenges in ensuring our produce is accepted by consumers in global markets.

Certification of the farming system from both an environmental and animal welfare perspective gives us a starting point in terms of having a discussion with the consumer. As part of an overall strategy, it allows farmers the opportunity to provide visibility and assurance to our consumers of the production process their food has gone through and the impact of that process on the environment. It also connects consumers with their food ‘story’, something that has been lost as society has become more urbanised. For farmers, this creates a meaningful way in which we can differentiate our product from other producers. It also gives an opportunity to connect with the urban population of NZ, to show our commitment to maintaining our social licence to farm by working to improve the environment.

Growing value for New Zealand’s Red Meat Industry: Ensuring we build quality and life long connections with consumers – David Kidd

Developing an online sales strategy for New Zealand: How New Zealand agri-food producers can leverage mobile technology to add more value.

Executive Summary

New Zealand exported a total of $37 billion in agri-food products in 2015 – yet KPMG (2016) estimates those same products ultimately generated more than $0.25 trillion dollars in retail sales when sold to consumers around the world. The challenge was how we forge new pathways that will help us capture more share of the export pie? The aim of this report is to investigate how New Zealand could utilise e-commerce as a sales channel to get closer to our customers and provide less volatility in niche markets. My study involved immersing myself in global markets to observe how customer’s and consumers purchased our products, how we could get closer to them and how we could build world leading e-commerce solutions.  When I started my research into e-commerce sales I focused initially on the internet. However, this quickly changed to looking at mobile sales platforms and how they were disrupting our traditional supply chains.  How we buy and consume our food and beverage products is changing globally and traditional supermarkets are struggling to find ways to be relevant.

The key insights that I observed was the growth of mobile first e-commerce platforms globally, and the frequency of transactions involving food and drink products particularly in Asia n countries. One important statistic was that one in five Chinese e-shoppers wants to buy products from New Zealand which is currently 156 million people.  E-commerce was also the fastest growing sales channel globally with double digit growth. Another important statistic for New Zealand was the growth in B2B selling via e-commerce which will be twice the size in value of the B2C market by 2020.

Key elements of a successful online sales strategy that need to be considered are mobile first platforms, leveraging the dominant ecommerce marketplaces and accepting foreign forms of payment relevant to the market you are selling in. In addition to this, businesses need to consider both B2B and B2C strategies that are different but both online in nature. New Zealand agri-food companies also need to collaborate together to have ‘pop up stores’ in crucial New Zealand markets to attract customers to the online offering. The final finding is how you leverage existing companies with dominant ecommerce marketplaces and customer bases to grow your brand without losing to much of your margin.

Traditional relationship-based sales channels have serve d New Zealand well in the past. However, as we move into the future both business customers and consumers will be made up of millennial and Gen Z individuals who have lived their whole lives immersed in mobile technology. They no longer value face to face relationships like previous generations and prefer convenience and speed of technology when doing business and consuming products.  We need to focus more on these consumers as they will be the dominant purchaser by 2030.

The humble mobile phone has not replaced retail or the face to face selling of food, it has just internationalised it and made it more accessible globally with simpler supply chains connecting producers direct to the customer. Businesses such as Alibaba, Tenpay and Amazon are disrupting how consumers interact with retailers and farmer producers and bypassing the traditional banking systems we are so used to.  If you want your business to remain relevant in a constantly changing global market place you need to read this report!

Developing an online sales strategy for New Zealand: How New Zealand agri-food producers can leverage mobile technology to add more value – Jason Rolfe 2017

The Innovative farmer: Generating innovation through a farmer and grower-led system of innovation.

Executive Summary

The genesis for my Nuffield Scholarship research was a sense that farmers and growers have a number of significant challenges or problems, both on-farm and off that have not been solved, or we are struggling to solve. As we milk, shear, tend and harvest, thousands of farmer and grower-minds around the country turn to these problems and to the dreams we have for the future.

We think about our immediate problems, like how much grass have I got to feed my animals, or do I have a water leak? We think about system problems, like how will I reduce my nutrient use, or what is my environmental footprint? We think about the tough problems like changing consumer preferences, or heightened society expectations and how can we reconcile these. Collectively we think and dream of a hundred thousand ideas. At the moment very little happens with many of these ideas. I want to change that.

In this Report I refer to the Wicked Problems of agriculture and food. These are the complex, incomplete, and changing problems we face, where there are no black and white answers but rather trade-offs. And often when a solution is found to one problem, then another problem emerges. Producing nutritious food for a growing population, with less agricultural land, a smaller environmental footprint, climate change and satisfying a multiplicity of consumer demands, while improving livelihoods for rural communities is a wicked problem.

In NZ we have many of the pre-conditions for innovation and fare comparatively well on international innovation indexes. So, what is missing? Why are we struggling to solve the wicked problems we face? The problem is two-fold: firstly the very-nature of the problems we face needs to be recognised; they are wicked problems and we cannot solve them alone. Working away in isolated groups won’t do it. Rolling up our sleeves and puffing out our chests to declare we will solve it won’t do it. And well-intended broad consensus collaboration won’t do it. Secondly, we need to take a closer look at our system of innovation. Where is the user (the farmer and grower) in our design of innovation, where is the user in the generation and development of innovation? How do we close that gap, refine our innovation and speed our cycles to market?

This Report aims to provide a model for generating and capturing ideas to solve the wicked problems of food and agriculture. The key element to solving this is bringing to bear the focus, passion, practical application and entrepreneurial drive of our farmers and growers. The innovation model needs to put them at the centre. It also needs to build an innovation consciousness amongst our farmers and growers.

This topic is important because the world today has become much more complex, uncertain and fast- moving. I borrow the term VUCA (volatile, uncertain, complex and ambiguous) from the military to throw light upon this. To succeed and innovate in this VUCA world we need to be actively engaged in innovation to perceive the opportunities and foresee the risks of disruption to our businesses and industries. As Rodd Carr, Vice Chancellor of University of Canterbury explained, “the lone-farmer standing in the field is a high- risk strategy.”

Generating ideas is the easy part. Ideas sitting in silos by themselves are useless. We need platforms to take one good idea and, as Stephen Johnson in his book Where Good Ideas Come From describes, collide it with another good idea to create innovation.2 We need places where good ideas can be shared, refined and given substance. In this Report I look at case study examples of platforms for innovation from Salinas Valley in California, from the Netherlands, from the EU and from Silicon Valley.

This Report recommends an innovation model for New Zealand where farmers and growers lead from the middle to solve the challenges they face. I describe eight principles of innovation to assist farmers and growers understand what good innovation looks like. I explain the myths, barriers and wrong-turns to innovation, to help navigate along the zig-zag path of innovation.

The Innovative farmer: Generating innovation through a farmer and grower-led system of innovation – Mathew Hocken

Effective industry collaboration of environmental gains.

EXECUTIVE SUMMARY

New Zealand farmers are facing significant pressure to manage the impact of their land use on water quality which has been affecting their social licence to farm. The environment we farm in underpins the sustainability of our farming businesses and our country. As stated in the KPMG Agribusiness Agenda 2017, an annual report detailing the insights and megatrends relevant to the agribusiness sector, a vision for the agri-food sector is actually a vision for New Zealand, given we are the only developed country that relies on selling biologically produced products to fund our schools, roads and hospitals.

Statutory regulation for fresh water management has caused competition between farmers within catchments as allocation of nutrients amongst land owners is discussed. A national strategy and anticipating the way forward is an easier way to collaborate than when legislation is in place. It takes more listening and more engagement. In my experience as a Certified Nutrient Management Advisor, farmers are willing to better understand what changes need to be made on farm, they don’t want to be doing the wrong thing. The competition really begins when industry bodies or processing companies get involved. Energy-wasted competition with fellow New Zealand farmers will get us nowhere. In situations where compromise is needed between farmers the time needs to be taken for the trust and understanding to be built between all parties involved. We need to better use our resources, both physical such as soil, water and biodiversity, and human resources to be the best New Zealand we can be. All too often I hear and read phrases such as “We need to collaboration more” or “we need to collaborated better”. What does that actually mean? What is effective primary industry collaboration for environmental gains? That is the questions I have been asking myself and others over the last 12 months.

This report includes four case studies that have been completed from 68 interviews completed during my Nuffield travels through America, Canada, Ireland, England, China and Australia. These case studies show how effective collaboration can be achieved. When effective collaboration is referred to, it is focusing on communities and catchments remaining strong and

vibrant. I’d love to see a New Zealand where instead of talking about Sarah the dairy farmer or Tom the sheep and beef producer, we talk about Sarah and Tom the food producers who farm in the same environment.

Environmental gains regarding soil, nutrients, irrigation, effluent and biodiversity can be made by each and every one of us. Each land based agricultural sector in New Zealand has a role to play and often, regardless of which sector you farm in, the same management practices will be applied to achieve these gains.

We need to acknowledge the current model of collaboration is not working. The main findings of this report identify key themes that came from interviews with overseas organisations that are having success with collaboration which enabled them to tackle environmental challenges.

How can pastoral Dairy Farming remain competitive.

EXECUTIVE SUMMARY

The NZ dairy industry has always historically enjoyed the advantage of being the world’s lowest cost producer of milk with our cheap pasture feed resource being the envy of the dairy industry globally.

Despite this, farmers in the Europe and the US, the worlds 2nd and third largest exporters are eyeing opportunities for growth to compete with NZ in the global milk market. They are using a containment (housed) dairy model to achieve this and becoming increasingly competitive on many production and cost metrics through the application of efficiency, scale and productivity gains. These same techniques are being applied to world grain production with resultant excess of supply over demand suppressing prices, a key driver for profitability in containment livestock industries.

The question for the NZ dairy industry in light of this is ‘How can pastoral dairy remain competitive?’

The aim and purpose of this paper is to explore and evaluate the comparisons between pastoral based and containment-based production systems and determine where the advantage for NZ will lie in the future i.e. how we can compete and stay relevant.

This is an important discussion, the NZ dairy industry is a key part of the NZ economy and its prosperity is important on many levels. Over the past decade, the NZ dairy industry has pursued a volume (growth) model but due to emerging environmental constraints, this has evidently run its course and a value model is the next opportunity.

Information gathered on the topic followed two main themes: production systems and consumer insights. Dairy farming businesses, particularly scale or expanding operations were consulted in the US and Europe with a view to establishing resilience of their business models, future prospects and intentions. Consumer market insights were observed, mainly in Asia and the US, to establish what trends are currently occurring in dairy consumption and consumer preferences.

The key findings suggest that cost competitive marginal milk will be delivered onto world markets from the US, Europe and others, but there are opportunities for NZ to differentiate and pursue a value proposition around ‘grass-fed’. Our free-range pastoral model is unique in a global volume context and difficult for most dairying nations to replicate. Many consumers are actively seeking out food produced from sustainable, high animal welfare production models and this is an important opportunity for NZ.

The recommendations from this research contain a key message around the NZ dairy industry continuing to do what it does best on-farm. Beyond the farm, we need to look at ways to tell our story and leverage the differentiation that already exists in our national milk supply.

There are of course a number of challenges along the way and some of these will be discussed. This report endeavours to provide only a perspective based on observations offshore. It is up to the industry to evaluate the merits of the discussion and find a way forward.