Archive for 'Supply Chain'

New Zealand Banana Politics 2013 – First Installment

fyffe What might this be?  Well, it looks like a bunch of bananas.  It sure felt like a bunch of bananas and when I ate one, it certainly tasted like a banana.  Therefore it is a banana.  Case closed.

If only there wasn’t this little blue label on the fruit and that’s where matters  gets interesting.  You see, during the last ten years the New Zealand consumer has been used to seeing Bonita, Dole and Gracio branded bananas in supermarkets and greengrocers.  More recently, Fair Trade fruit has also made an appearance.

Bonita bananas, coming  from Ecuador, are imported by Turners & Growers, Dole bananas get here from the Philippines via a joint venture with MG Marketing and Countdown imports Gracio bananas, also from the Philippines.

Consumers care very little about banana politics.  As long as the fruit is the right colour, does not have bruises or stem rot and is priced reasonably, bananas will be purchased and consumed. Period. lrgscaleCoaster-Fyffes

Only – those of us who have a little inkling on how the produce industry works are left pondering how the Fyffe fruit got into the country in the first place; whether this was a once-off occasion or whether Fyffe will be a regular caller; how Luigi Noboa feels about this; what the impact on the wider banana pricing position will be as a result of someone deciding to mix matters up a little; whether overall volumes coming into the country were adjusted or whether the Fyffe fruit is ‘extra’….  You know, just a few minor considerations really….Yeah, right – to quote the Tui billboards.  Anyone interested in a historic perspective of the New Zealand banana business could do worse than following through here.

Ebony & Ivory Living In Perfect Harmony

allpakTwo empty wooden boxes, which have clearly seen better days, loitering in serene harmony on the pavement outside a street cafe on State Highway 1.  Thousands of cars pass by each day and pay no attention to these remnants from a by-gone era.  Pedestrians deposit rubbish into the black bags encapsulated by these very roughly  nailed together bits of timber.  Could we have seen these boxes on the same spot yesterday?  Probably.  Are they likely to be there again tomorrow?  More than likely.

Are they worth a second thought?  Why is one of them yellow and the other one green?  Why are there faded letters visible on the green one, spelling the word ‘ALPACK’? How old are they? What was there original use?

And by now readers will be asking why SAUERKRAUT is getting so excited about a couple of old wooden boxes he nearly tripped over, rounding the corner in Tirau on a sunny Sunday’s afternoon.  Those blog afficionados with a little history in the produce industry will, just like I did, spot the irony of those two unlikely mates leading a peaceful co-existence.  And if  you are interested in understanding what functions these boxes used to have and what this had to do with the produce industry, please start with having a look at this document.  Written only ten years ago but a life time away.



The Nonsense Continues

I had the weekend edition of the NZ Herald sitting around on the dining room table all weekend, pondering whether I should add my 5 pence worth to the article entitled Fruit, vege bargains at supermarket in theweekend edition. Then I sat down to watch the 6 o’clock news tonight.  First up –the milk price again. The Minister of Agriculture, David Carter,  now suggests that a Parliamentary Select Committee should investigate milk prices.  The CEO of the Consumers Institute made ridiculous comments on camera about a “secret manual” she alleged Fonterra uses to set milk prices and a TV One reporter found that supermarkets sell 2 litres of milk for $3.60 compared to $5.20 at a dairy and $5.60 at a service station. Doh.  Oh really?  Ah, there is a story that has gone off the rails.  That does not fit the intended direction –because we all know its supermarkets which engage in price gauging right?  Carter, luckily for him, was interviewed on Q & A this morning, rather than in the evening.  His “I never buy my milk at the supermarket and I would encourage consumers to shop around” wisdom therefore went unchallenged.  Let’s get some of the facts straight.  Supermarkets are in the volume business which works really well for them with processed food; milk for example.  Milk will always be cheaper in a supermarket  than in a dairy or service station, so please stop wasting time during the news bulletin and instead report the real issues we want to hear about.  When have you last seen a super market chain advertising  milk or bread at special prices or even as a loss leader?  The answer is “you have not” as it simply does not happen. The same goes for eggs by the way. They could, but they typically do not!  Accusing supermarkets on price gauging on those products is therefore an exercise akinto shooting oneself into one’s foot!  Back to the Herald’s fruit & veg story.  At a time of extreme shortages, you can rely on supermarkets to exert pressure to keep the prices down. Not because they want to be good citizens but out of self interest.  They have worked out a few years back that consumers have a pain threshold. When cauliflower prices go beyond $3.99 per head retail, consumers pull the hand break.  Tomatoes at $20 is pipe dream territory of unheard proportions.  Food & Grocery Council CEO Katherine Rich also has a thing or three to learn about the fresh produce value chain, judging by her comments in the NZ Herald story.  Of course, the produce will be fresher at a farmers market – if it has been locally grown and is being sold by the grower himself.  And of course, supermarkets are subject to greater controls and attempt to offer produce of greater uniformity.  And where do we think the produce supermarkets does not buy disappears to, hm? Whilst it is great that we as a society are focusing back on the basics, i.e., the quality and availability of our food and its price, there is a lot of nonsense being talked out there and the sooner that changes the better.

Greeks, Kiwifruit, & Supermarkets – They All Come Together In The NBR

I have just returned from the annual Horticulture New Zealand conference in Rotorua.  After a day and a half at an industry gathering one cannot help but come away with some thoughts about an industry’s future. And as I was pondering the future of the New Zealand horticultural industry, I opened last Friday’s NBR which I had not had a chance to read. Some weeks reading the NBR takes a matter of minutes.  This time though there were three stories that caught my eye.

The first one was the front page story dealing with the European Union debt crisis.  The fundamental  problem they have is that within the Eurozone all countries borrow at the same interest rate – but not all countries are able to repay their debts at the same pace, or at all as the case may be.  And that anyone can think Greeks and Germans have the same characteristics is downright mind boggling!

The second piece of interest was a lead article by Roger Kerr, Roundtable Supremo, on the kiwifruit single desk structure and what he thinks needs to happen.

Some years of my misspent youth had me occupying the Head of Produce Merchandise chair at New Zealand’s corporate superchain (as opposed to co-operative – and yes, we only have two of those).  In that role, to be honest, I did not give kiwifruit much thought.  I worried more about bananas, apples, potatoes and tomatoes – the real staples of the produce department.  Kiwifruit were those things people put on top of Pavlova, you know.  Similarly, Zespri and the kiwifruit industry at large understood very clearly that their real markets were not the 4 million ‘Kiwis’ occupying the motherland but the Japanese and and the Germans who were fascinated by kiwifruit, all things New Zealand and could be persuaded to pay decent money for the hairy little ‘buggers’, to borrow from Enza.

The global supermarket industry was an early adopter of networking before business sectors at large started to place any value on that concept and before social media platform began to connect us with God and the world.  I was in and out of European and US supermarkets on a constant basis and was forever hosting colleagues from those countries when they came visiting here.  There is little difference between the operational behaviour of fresh produce value chains in countries of a similar economic standard  that start with a grower, finish with consumers and involve supermarkets at the half way point.

I do understand where Kerr is coming from, in principle. But he has a few facts wrong – which is ok, given that he is a generalist rather than a specialist, but generalists who broadcast their views and want to be taken seriously ought to seek specialist advice before they start broadcasting!  So what are these facts I am talking about?

Firstly, Zespri has managed to build an enviable niche position based on innovation, brand, brand values and product quality in the face of increased global competition.  It therefore represents a degree of critical mass in key markets and key channels which allow it to exercise leverage and set the catgeory tone.

Secondly, kiwifruit growers have everything to fear from deregulation.  Supermarket buyers and category managers  typically allocate their time on the basis of the category’s importance to the business.  Bananas tend to account for circa 10% of the produce category, so bananas and their suppliers achieve plenty of attention.  Kiwifruit contributes at the low single digit percentage level, so the amount of time supermarket category managers allocate to kiwifruit suppliers is considerably less.  Unless of course, there is only one supplier from New Zealand to see and that supplier has innovative merchandise concepts and promotional support available as well as decent fruit.  We have seen what happened when the apple business deregulated.  We went from one apple marketer from New Zealand to ninety plus within one year.  International retailers were tearing their hair out. Supermarket operators like the “steady as she goes “approach.  “No surprises, thank you”, they say.  “What do mean, I have a queue of New Zealand kiwifruit growers who want to see me?” Not a pleasant prospect  for them.

Supermarket category managers  are not looking for more work.  They are not  really wanting us to drop our prices because they like things just the way they are. We will not get any thanks for upsetting their equilibrium and, if anything, they will actually get annoyed with scrapping novice kiwifruit sellers from New Zealand sitting outside their offices and demanding access. Guess who is going to loose out then?  New Zealand as a whole, because we will have just given the supermarkets the final justification they needed to switch their main focus to Chilean kiwifruit!

Thirdly, let’s just have a look at what we have got here.  We have an industry that opted for regulation after the free market model it started with had collapsed spectacularly.  Kiwifruit growers are part of the wider produce industry which has finally woken up to the fact that co-operative behaviour and co-opetition are the pathways to survival.  So what are we going to do?  Break something up that works really well because it no longer fits the principle – and then encourage it to band togther on a voluntary basis?  Get real, the country cannot afford experiments of this kind.

Lastly, anyone who has travelled through Northern Italy in the last twelve months would  have been shell shocked by the amount of devastation caused by PSA, the despair on the face of the growers – and the mess lying around in the abandoned orchards because  there is little or no co-ordination in terms of managing countermeasures and the new reality.  A stark contrast to New Zealand and its response.  A response mad possible through the robust structure of our kiwifruit industry!

No sooner had I calmed down and turned  a couple of pages in the NBR and I hit the next article of interest in this Unholy Trinity – Professor Jaqueline Rowarth’s column promoting the views of one of her Massey University colleagues on the role of supermarkets in the food chain.








All three articles and all three themes of great interest to me but the value they add individually to any reader is somewhat limited in my humble view.  I will therefore attempt to pull them together  and use the essence and learning from each situation to suggest a produce industry thought framework for future use.

The message in the Euro debt crisis article is pretty simple:  Know who you are, understand the value of your asset base and do not borrow money you know you cannot repay.  In other words, live within your means on the basis of having a jolly good handle on your economic reality.

Roger Kerr predictably blows the ‘monopoly is evil, free market is everything’ trumpet and, of course, he has a point – up to a point that is! Competition is good, competition keeps the mind sharp, competition drives innovation, innovation adds value – and isn’t that what we as a nation are desperately trying to achieve in our attempts to get ourselves out of the commodity trap and into the value add business.

Supermarkets cannot be ignored says Jaqueline Rowarth.  Farmers Markets are great little niche operators, but, hey , say Rowath and her colleague, supermarkets are THE channel to the consumer because that is what the consumer wants. Is it really that simple?

Short answer – no!  Supermarkets are in the volume business and a grower who operates at a certain scale needs supply chain partners who can cope with that scale. Assuming that the more the supermarket buys, the cheaper the produce has to become is a fallacy though.  There comes a point in the game – and that is exactly what it is, a game – where the supermarket has to pay more if it wants the produce or the produce will find a different way to reach the consumer.

And it is in that area of supply chain gamesmanship that I earn my living, so please do not expect me to drop my pants here and give you the recipe !  You know where to find me though.

If It Cost More, Would It Get More Respect?


Growing is a mug’s game – or so one of my team members often says.  Growers are at the mercy of so many things, 75% of which are completely beyond their control!  There’s the weather, the market, transport and fuel costs, compliance, staff, pests…and that’s not the complete list. So really, why would you be a grower?

Thing is, we – human beings – need food.  And food comes from the land, from growers.  So to eat, we have to have someone to grow it.

Sure, in an ideal world we can keep a chicken or two, a goat, an apple tree and a vege garden in our own back yard.  Problem is, very few countries, New Zealand included, have the luxury of sufficient arable land to give every family the quarter acre that such a utopia requires – never mind having the necessary favourable climate, let alone the skill set…
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