The strength of our primary sector has (so far) insulated us from the worst effects of Covid-19. For most of our food and beverage producers, except perhaps those supplying the international food service sector, business is going very well, thank you, even during a global pandemic.
People still have to eat, and that basic primal need underpins the success of our local food and beverage sector. New Zealand’s food and beverage export earnings, continue to climb. Trucks continue to thunder past the Hawke’s Bay Business Hub in Ahuriri, and the predominantly export driven Napier Port, is doing so well, it repaid the $2 million Covid-19 wage subsidy it received, with CEO Todd Dawson citing improved confidence in the Port’s future, and the company paying a five cents per share final dividend.
According to a late 2019 report by Coriolos*, the outlook for New Zealand’s food and beverage sector was pretty good. The sector accounts for almost half of total exports, and those exports achieve a large trade surplus. What’s more, food and beverage exports are growing strongly. New Zealand has the highest “revealed comparative advantage” in food and beverage of any major exporting country.
It all sounds rather good, until you dig a little deeper and discover that our food and beverage exports are currently over-weighted to low value-added, unprocessed ingredients.
Much of our produce is exported with little or no processing, or is sold as ingredients to become part of someone else’s brand. As a result we miss out on food manufacturing jobs, the ability to command a premium price, and the opportunity to tell a compelling brand story that consumers can connect with, resulting in brand loyalists.
Just over two years ago, Business Hawke’s Bay hosted the very well attended Future Foods conference, with the global future of food and innovation and opportunities for New Zealand and Hawke’s Bay food producers as the key topics.
What came through loud and clear was that we must drive greater value for Hawke’s Bay produce. That involves developing a deeper understanding of what global consumers want, connecting with them, and making products they are prepared to pay for.
We’re already ahead of the game in some of the recent and emerging consumer-driven trends – such as grass-fed, organic, ethical, traceable and sustainable – but we’re not fully realising its value.
One of our conference speakers, Natasha Telles D’Costa from business consultants Frost & Sullivan, describes our challenge really well. It’s all about taking a product from Hawke’s Bay and giving it a story that makes consumers half way around the world feel connected to it, and make it their own. That’s where we can generate real value.
The people that are consuming our produce are the ones we need to communicate with, whether it’s an end product or an ingredient that’s being sold. We must tell our New Zealand story more effectively and to the right customers.
Another speaker, futurist Melissa Clark- Reynolds, quoting Clayton Christensen, reminded the audience that there are no disruptive technologies, only disruptive business models, and cited examples such as Blockbuster Video and Netflix, and Borders and Amazon and Kindle.
Clark-Reynolds says our producers need to understand that the business models under which people buy and consume food today will not be the same business models that they’ll use in the future. Subscription models that connect suppliers directly to customers and those that use rich data (like Amazon) to predict customer demand, are the business models of the future.
Clark-Reynolds says that the commodity business model that New Zealand uses will soon be broken, and that New Zealand needs to move from volume to value. In the future, the non-physical attributes of food, the way that customers think about food and the story of that food, will be where the real value of the food industry will come from.
But what does innovation in food production look like?
Currently, in Hawke’s Bay it takes many forms. We have crop diversification; introducing hemp, hops and berries alongside traditional pipfruit and grapes. In pipfruit, growers are developing their own IP-protected varieties, and many hectares of traditional varieties have been replaced with upright, heavier croppers. Rockit miniature apples, many years in the making, are now sold in 28 countries and setting new records for growth, despite the pandemic.
Then there’s the new money for old rope approach, adopted by Apple Press, that repurposes fruit not fit for export, and therefore value-less, into a high-value varietal beverage. We’re seeing increasing use of robotics, sensors and artificial intelligence to pick and sort produce, as well as innovations in processing such as Freeze Dried Foods’ continuous freeze drying system. We’re also seeing product extension such as the Damson Collection’s move into alcoholic beverages, collecting international awards along the way.
And then there’s subscription models such as First Light’s Steak Club that connects directly with customers, bypassing the middle man, and Yvonne Lorkin’s WineFriend, a personalised wine delivery service.
On the packaging front, businesses can use packaging as a differentiator and source of competitive advantage, and there is a lot of interest locally in packaging innovation. However, there are many complexities including understanding consumer expectations and willingness to pay a premium for ethical packaging, to trade offs on freight costs, shelf life considerations and food safety perceptions, and the often prohibitive price of compostable alternatives. Still, we are seeing innovation in this sector, with a good example being Bostock Organics’ compostable packaging for its free range chicken.
But the biggest opportunity for innovation and increased earnings lies with how we tell our New Zealand story to the world.
The authors of the Future of Food and the Primary Sector: the journey to sustainability**, say that New Zealand’s Covid-free status has given our reputation a boost, with opportunity to leverage the mounting international interest in our unique national values and attributes and our status as a leading producer of elite primary products. Farmers and producers are already shifting to position themselves for a future based on the values of sustainability, resilience and kaitiakitanga.
In the context of uncertainty created by the pandemic, discussion around sustainable and safe food systems is taking greater prominence, and the Future of Food authors say New Zealand has “the opportunity to become a global thought leader in sustainability across the entire food system. Taking a proactive approach to emphasising the qualities of sustainable, low carbon dairy production, agriculture, horticulture, fisheries and aquaculture would be highly valuable to New Zealand.”
And that, perhaps, is Covid-19’s great contribution to New Zealand.
* Is this the beginning of the end or the end of the beginning? Finding the future of the New Zealand food and beverage industry, 2019.
** The future of food and the primary sector: the journey to sustainability by Anne Bardsley, Bridget Coates, Stephen Goldson, Peter Gluckman and Matthias Kaiser, 2020.