Tag: I’ve been thinking

An industry colleague with more gray hair than I have, turned up at a recent United Fresh meeting with a copy of the June/ July 1982 issue of what was the Grower magazine. He thought might interest me.  Yeah right!

Ten points for those who guessed correctly: yes, that is me on that cover.

While not wanting to dwell on the mistakes I have made over the years, it was a good trigger to take some time and think about what has changed in the industry since this issue was published in 1992.

Those price tickets you can see behind me on display were preprinted centrally but without the price. The produce department staff then put the prices on the tickets as per instruction, using stickers.

Inside the magazine, colour is the exception not the norm.  Casting my eye over the contact details for contributors and in advertisements and what jumps out at me?  There is not an email address or web URL in sight and mobiles were not common enough – nor were the call rates cheap enough – to warrant any mobile numbers being included.

Now? If you are not web enabled while mobile, you might as well be dead (or so anyone under 20 will have you believe).

So what does that mean for the fresh produce industry going forward in terms of technology?  Can we afford to invest in further technology, given that produce values in real terms are going in the wrong direction?  Can we afford not to invest?  How much technology do we need?  So much that horticulture becomes an open air food factory process with minimum labour inputs?  Or do we scale technology back to aid Government’s (regardless of who is in command of the Beehive) efforts to find jobs for the unemployable elements of society?

As I get older, and I do, judging by the picture, my ability to ask questions as opposed to finding answers appears to be increasing.  This is a good thing really, as questions drive action.

The Great Wall of China

And no – I did not like my picture being taken but at least it proves I have been there!

It is said that the Chinese Wall can be seen from the moon.  Unfortunately, the claim is actually a myth – but even so, the Wall is a very significant structure.

Three factors  amazed me about the Wall.  Firstly, the crowds.  We were there at 8am and so were thousands of Chinese – from all parts of the country according to my guide.  Secondly, the pride & respect.  The Cultural Revolution of the sixties clearly dealt to some parts of the country but even Mao appeared to have some respect for the handiwork of the old emperors who went before him.  And today’s Chinese citizens are very proud about the Wall and what it represents.  Thirdly, the scale.  Without cranes, without engines, without any aspect of the modern technology we take for granted, the Chinese created something they deemed was necessary and it became a legacy.

Walls do not have to be physical manifestations to be effective – the use of phytosanitary regulations as a barrier to control imports is one example that comes to mind.

But that’s a whole other blog post for another day.

I did not think I would end up writing that soon again about what is the Holy Grail  to some and an abomination for others – regulated marketing!  But as the New Zealand apple industry is trying to come to grips with the opportunities and threats represented by gaining access to the lucrative Australian market, the regulated marketing concept is getting another outing.  And rightly so, if for no other reason but to ensure that the industry has looked at all the options open to it.  As it stands, the debate on the matter is going on right now as I write this, today,  at the Pipfruit Meeting  in Hastings.

What is the core issue?

Well, when  apple marketing was deregulated in the late nineties the New Zealand pipfruit industry was shaken to its core, pardon the pun, and there exists a more or less general agreement that we stuffed up had not thought the issues entirely through and acted prematurely.  The since reconstituted, changed and slimmed down pipfruit industry which is earning no where near the margins it did under regulation is within reach of the biggest prize denied for close to a century – market access into Australia.  Naturally those of us who have learned from our actions and are also able to observe the fortunes of our friends, the kiwifruit growers, would like to see an orderly approach to entering the Australian market rather than a stampede akin to the “Running with the Bulls’ festival in Pamplona, which is a real possibility.  The smart money amongst the apple growing fraternity is trying to gain government support for creating order by way of manouvering Australian apple exports into HEA jurisdiction.  The excitable element of the industry, the element who are natural salesmen, be that of apples or second hand cars, do not want a bar of this. I do sincerely hope that common sense will prevail.  We need to go to Australia in a coordinated and strategic fashion.  Loose cannons need to get to the back of the queue and let wiser heads prevail.

A tricky one, though.  A free market government that nevertheless supports the kiwifruit regulations and faces an election in three months time.  An authority, HEA, who is all sorts of things but NOT a regulator in the way apple growers might think or like.  Australian growers who would love nothing better than see us shoot ourselves in the foot.  And Australian corporate retailers ready to pounce.

By the way, let us not for even one minute assume that Australian growers have rolled over and are playing dead.  On the contrary, here is a submission by one Australian orcharding family which considers itself under threat from our apples.

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.

APPLE BUYING IS SERIOUS BUSINESS

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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