Cau­tion­ary tales of the years ahead

Amid the up­lift­ing mu­sic, videos and speeches cel­e­brat­ing Ze­spri’s 20year jour­ney from un­known brand to suc­cess­ful global ex­porter, the com­pany’s March 10 Mo­men­tum con­fer­ence in Mount Maun­ganui also heard cau­tion­ary tales about how tough the next two deca

The Orchardist - - Zespri Conference - By Ali­son McCul­loch

“The last 20 years have prob­a­bly been the easy 20 years,” Ian Proud­foot, the global head of agribusi­ness for KPMG told the au­di­ence of 500. “It’s not go­ing to be easy to pro­tect your position, there’s go­ing to be a lot more hard work ahead of you.”

The mes­sage from Ian Proud­foot and other speak­ers, in­clud­ing Ze­spri ex­ec­u­tives, was one of dis­rup­tion and un­cer­tainty on myr­iad fronts, from the po­lit­i­cal un­cer­tainty of a Don­ald Trump pres­i­dency in the United States, to cli­mate change, to dig­i­tal and tech­no­log­i­cal in­no­va­tion, to chang­ing con­sumer de­mands and stronger com­pe­ti­tion, es­pe­cially from China.


In his pre­sen­ta­tion, Ian tra­versed a daz­zling ar­ray of innovations, like un­der­ground gar­dens in Lon­don, and ver­ti­cal grow­ing in of­fice build­ings; like laser­ing brands onto fruit, de­liv­er­ing food via ro­bot and the pos­si­ble end of su­per­mar­kets. – “When you’ve got a some­thing like Ama­zon Prime de­liv­er­ing you fresh food to your front door within an hour why would you ever go to a su­per­mar­ket?”

Given the spread of cities, with longer and longer com­mutes, he said, food on-the-go would be in­creas­ingly im­por­tant. “The ki­wifruit is not the eas­i­est fruit to eat on-the-go, even with the new Spife.You need to be able to get a prod­uct that is easy to con­sume and there­fore a ki­wifruit with an ed­i­ble skin strikes me as be­ing a re­ally great op­por­tu­nity.”

All that change sug­gests “we’re play­ing a game with some dif­fer­ent rules.” The first of those new rules, Ian said, has to do with sus­tain­abil­ity, not just in terms of the en­vi­ron­ment, but in­cor­po­rat­ing good treat­ment of peo­ple and an­i­mals, and interaction with com­mu­ni­ties.


Food safety and sus­tain­abil­ity re­quire­ments came up fre­quently at the con­fer­ence, and was the fo­cus of a pre-con­fer­ence ‘Sus­tain­abil­ity Break­fast’, with a ca­pac­ity crowd of 200, where Ze­spri’s chief op­er­at­ing of­fi­cer Si­mon Lim­mer ad­mit­ted to “a sense of dis­com­fort” about the is­sue. “Be­cause whilst we think we have a rel­a­tively strong position and a good story, we’re only as good as our weak­est link, and that is where we’ll be vul­ner­a­ble.”

What’s more, be­ing sus­tain­able is only the start of the challenge. As Ian Proud­foot ex­plained, pro­duc­ers also need to be able to prove it to their cus­tomers, for ex­am­ple through dig­i­tal track­ing of pro­duce all the way from in­puts on the orchard to the cus­tomer. “If you want to be at the ul­tra-pre­mium end of the mar­ket, hav­ing that abil­ity to share data right the way through the value chain is go­ing to be crit­i­cally im­por­tant. It’s the area we’re see­ing peo­ple re­ally start­ing to fo­cus on now,” he said.

As if to un­der­score those com­ments, the risk to brands and the need for mean­ing­ful track-and-trace­abil­ity were high­lighted a few days af­ter the con­fer­ence with the ex­posé by the start-up news site­ of caged eggs be­ing passed off in some New Zealand su­per­mar­kets as free range.

Ze­spri’s gen­eral man­ager sup­ply chain, Blair Hamill, also spoke to the is­sue, telling the con­fer­ence that as well as need­ing to meet Glob­alG.A.P. and the GRASP add-on (Glob­alG.A.P. Risk As­sess­ment on So­cial Prac­tice) around things like labour is­sues, Ze­spri gets re­quests ev­ery day from cus­tomers want­ing an ex­tra layer on top of those stan­dards, as a way of per­son­al­is­ing or dif­fer­en­ti­at­ing what they’re of­fer­ing their cus­tomers. “This brings fur­ther com­plex­ity into the sup­ply chain where we need to seg­ment down the in­ven­tory fur­ther,” he said.

Ze­spri’s in­no­va­tion man­ager, Carol Ward, told the con­fer­ence that be­cause of some in­stances of bad be­hav­iour around in­ten­sive an­i­mal farm­ing, over-used an­tibi­otics in farm­ing, and wa­ter use, “hor­ti­cul­ture will not be able to avoid scru­tiny, and un­der­stand­ing the eco­log­i­cal and so­ci­etal position of ma­jor food brands will be the nor­mal be­hav­iour of our mil­len­nial con­sumers”. Carol said this wasn’t seen as a threat for Ze­spri but an op­por­tu­nity to pro­duce clean, eth­i­cal food. “We need to be re­lent­less in our drive for land use, wa­ter care, an­i­mal care and com­mu­nity care.”


While hor­ti­cul­ture has strengths in the sus­tain­abil­ity arena, it also has vul­ner­a­bil­i­ties, in­clud­ing wa­ter use, sprays and the poor treat­ment of work­ers, which has been back in the news in re­cent months. Ian Proud­foot said that if the in­dus­try is seen as treat­ing work­ers in an abu­sive man­ner, buy­ers will sim­ply stop tak­ing its pro­duce for fear of taint­ing their own brands. “It’s as sim­ple as ‘we just will not trade with you’”.

He iden­ti­fied food waste as an­other of the hor­ti­cul­ture in­dus­try’s vul­ner­a­bil­i­ties. “We’re all part of a food sys­tem that does not work, it leaves around about 795 mil­lion peo­ple mal­nour­ished or un­der­nour­ished ev­ery sin­gle day, and as a con­se­quence, there’s go­ing to come an in­creas­ing fo­cus on how we utilise what we


“If you’re wast­ing food, your li­cence to op­er­ate will come un­der threat. So think­ing about how you use ev­ery­thing that comes off your or­chards, en­sur­ing that ev­ery­thing gets used and is con­verted into use­ful nutri­tion, use­ful pro­tein, is go­ing to be­come a key part of the fo­cus for many, many food op­er­a­tors, and we be­lieve if you’re not do­ing that, your li­cence to op­er­ate will be chal­lenged.”

Asked in an in­ter­view about the crop man­age­ment of around five mil­lion trays of ki­wifruit last year, which in­cluded some dump­ing of fruit, Ian said that if the in­dus­try was “called for crop man­ag­ing trays, then I could see that as be­com­ing a prob­lem to your brand.”

Over­all, how­ever, Ian said he thought hor­ti­cul­ture was “in a good space”.

“I think we’ve reached peak milk, which means ac­tu­ally we’re go­ing to see over time a slow de­cline in the size of our dairy in­dus­try and amount of farms we have in dairy,” he said. “They’ll be­come more ef­fi­cient and more ef­fec­tive so that will free up land, and log­i­cally that land will be used for arable or hor­ti­cul­ture prod­ucts, and that’s bet­ter for the en­vi­ron­ment.”


At the Mo­men­tum con­fer­ence two speak­ers took the stage to ad­dress the global trad­ing out­look, Michael Ev­ery, Rabobank’s head of fi­nan­cial mar­kets re­search for the Asia Pa­cific re­gion, fol­lowed by Crawford Fal­coner, Pro­fes­sor of In­ter­na­tional Trade at Lincoln Univer­sity. And while there was much the two dis­agreed on, both saw changes on the hori­zon,

par­tic­u­larly in the wake of the elec­tion in the United State of Don­ald Trump.

Michael Ev­ery painted if not a bleak vi­sion then at least an un­cer­tain pic­ture of the fu­ture for global trade, ar­gu­ing that pro­tec­tion­ist moves by the United States were a mat­ter of ‘when’ not ‘if’. In look­ing at what might re­place the cur­rent trad­ing or­der in the wake of Pres­i­dent Trump’s re­jec­tion of the Trans Pa­cific Part­ner­ship (TPP) deal, he con­sid­ered and re­jected as un­work­able some al­ter­na­tives in­clud­ing the Re­gional Com­pre­hen­sive Eco­nomic Part­ner­ship (RCEP) – which in­volves the 10 ASEAN (As­so­ci­a­tion of South­east Asian Na­tions) coun­tries plus Aus­tralia, China, In­dia, Ja­pan, New Zealand and South Korea. He raised the prospect of a re­turn to a kind of 19th cen­tury era trad­ing game in which dom­i­nant play­ers ef­fec­tively carved the world into dis­tinct trad­ing blocs.

“China and the United States are play­ing a very very high stakes game of poker,” Michael said, “and at the mo­ment, we’ve got a joker in the pack and no one’s quite sure ex­actly what that joker is go­ing to do, so re­ally watch this space.”

He was also doubt­ful that gov­ern­ments could find a way to marry the suc­cesses of glob­al­i­sa­tion with the fair­ness and so­cial jus­tice nec­es­sary for sta­ble so­ci­eties. In re­sponse to a question from the au­di­ence at a Q&A ses­sion, he said that while glob­al­i­sa­tion gen­er­ates a lot of wealth in part be­cause of its ef­fi­cien­cies “it doesn’t re­dis­tribute that wealth par­tic­u­larly fairly, and that’s where we’re see­ing the blow­back, and ac­tu­ally try­ing to ad­just the model to re­tain glob­al­i­sa­tion and all its ef­fi­cien­cies with so­cial equal­ity is go­ing to be our big challenge and I’m ex­tremely skep­ti­cal that we can do it.”


Crawford Fal­coner, who took the stage next, de­scribed Michael Ev­ery’s talk as “su­per de­pres­sive”. “I wasn’t re­ally go­ing to come and say to you things aren’t quite so bad un­til I heard the pre­vi­ous speaker,” he said. “But I feel like we need to get a lit­tle bit of per­spec­tive on this, and that’s why I might sound a lit­tle bit more pos­i­tive about things.”

“If things ac­tu­ally go that ter­ri­bly wrong,” he said, “there’s not a lot you can do about it. You might as well turn your face to wall, eat your last ki­wifruit and kiss the world good­bye.”

While there was a real pro­tec­tion­ist shift in the Trump ad­min­is­tra­tion, Crawford said, “an ad­min­is­tra­tion does not act

in and of it­self, it re­quires the con­sent of the Congress and the sit­u­a­tion of the Congress is a lot less clear cut than that.”

Still, he too, saw cause for con­cern, and said that the con­test over trade pol­icy in the United States is still play­ing out. “That’s why I say, don’t get too de­pressed, be a lit­tle bit sig­nif­i­cantly wor­ried”.

As long as trade pol­icy in the United States re­mains con­tested, Crawford says New Zealand should work to shift at­ti­tudes by pur­su­ing what he called a “fear of miss­ing out strat­egy”. That would in­clude pur­su­ing agree­ments like “TPP-Mi­nus” (TPP with­out the United States), and the RCEP.

“You cre­ate the ‘fear of miss­ing’ out so the US busi­nesses and US politi­cians that don’t hap­pen to share that view – and there are plenty of them in both par­ties, par­tic­u­larly the Repub­li­can party – can ac­tu­ally point to the fact that they’re miss­ing out by this pol­icy,” he said.


While Ze­spri ex­ec­u­tives took time at the con­fer­ence to talk about how far the in­dus­try had come in the past two decades, they spent even more time look­ing at what the next 20 years might bring, of­fer­ing an out­look that was both op­ti­mistic and sober­ing.

Lain Jager, who will step down from his role as chief ex­ec­u­tive at the end of this sea­son, warned that while this is a very pos­i­tive time for the in­dus­try “now is not the time for us to be self-con­grat­u­la­tory or to spend too much time look­ing back­wards”.

“There’s a trap for any in­dus­try or busi­ness en­joy­ing times of strong growth and that trap is that dur­ing times of rapid growth, re­silience tends to di­min­ish, leav­ing the busi­ness or in­dus­try vul­ner­a­ble to ex­ter­nal shocks.”

Re­cently ap­pointed gen­eral man­ager global sup­ply, Sheila McCann-Mor­ri­son said the com­pany sees big dis­rup­tion com­ing from China in the next few decades. China’s pro­duc­tion has in­creased eight-fold over the last 20 years to 1.3 mil­lion tonnes, and could reach 3 mil­lion tonnes by 2037. “We be­lieve China is on the verge of dis­rupt­ing the ki­wifruit in­dus­try at a pace like we haven’t seen in the past 20 years,” she said. Look­ing at the ap­ple in­dus­try as a les­son, she said Ze­spri sales into China would be hit by that dis­rup­tion, par­tic­u­larly sales of fruit grown by nonNew Zealand sup­pli­ers. “In past 20 years the ki­wifruit grow­ing in­dus­try has been rel­a­tively calm, and Ze­spri has emerged from the pack as the undis­puted leader, but this calm­ness also makes the in­dus­try ripe for dis­rup­tion and we won’t be play­ing soli­taire go­ing for­ward,” she said. “It’s not go­ing to be easy.”


Sheila McCann-Mor­ri­son said the fu­ture is about lo­cal sup­ply, where Ze­spri grow­ers in Ja­pan would sup­ply Ja­pan, grow­ers in Korea would sup­ply Korea, and so on. “In or­der for Ze­spri to main­tain our lead­er­ship position in the ki­wifruit world we will have to be a leader in the lo­cal-for-lo­cal grow­ing world.”

One per­son who will be work­ing through that lo­cal-for-lo­cal sup­ply is Shane Max, Ze­spri’s orchard pro­duc­tiv­ity man­ager global sup­ply. He said that within the next 20 years, 30% of Ze­spri’s pro­duc­tion would come from non-New Zealand sup­ply, com­pared with around 11% to­day.

The first challenge Shane pointed to was cli­mate change. “In Tur­key this year in ki­wifruit or­chards they had mas­sive snow­fall. In China last year, not this win­ter but the win­ter be­fore, mi­nus 25 de­grees Cel­sius, and I don’t know if you know, De­cem­ber this year in the Bay of Plenty, we had the windi­est De­cem­ber ever recorded. So, cli­mate change is go­ing to be part of what we’re deal­ing with.”

Other chal­lenges Shane Max dis­cussed were com­pet­i­tive­ness – he noted that Italy is grow­ing good ri­val gold va­ri­eties, while China has gold and red va­ri­eties – as well as the in­creas­ingly com­pli­cated man­age­ment of big­ger or­chards that are grow­ing more va­ri­eties of fruit and deal­ing with in­creas­ing de­mands from cus­tomers for “in­stant in­for­ma­tion about our or­chards”.


Per­haps fit­tingly, the fi­nal words of the con­fer­ence came from Lain Jager in the clos­ing Q&A ses­sion, in which he re­stated his cau­tion about com­pla­cency.

“I think there’s go­ing to be more change in the next 10 or 20 years than there’s been in the last 10 or 20 years,” he said. “I don’t think this busi­ness gets eas­ier. I ac­tu­ally think it gets more chal­leng­ing, and in that re­gard, be­ing rel­a­tively suc­cess­ful is a real challenge, and that’s be­cause you start to be­lieve your own BS; you per­haps are less flexible, less open, less recog­nis­ing of what it is we need to do to change.”

Lain Jager said that what is com­ing is likely not in­cre­men­tal change but, “a dra­mat­i­cally dif­fer­ent busi­ness over the next 20 years. I think that’s hugely ex­cit­ing, I think it’s hugely chal­leng­ing to any ma­ture in­dus­try and com­pany.”

From left: Crawford Fal­coner, Blair Hamill and Si­mon Lim­mer.

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