Winning the Green Premium
New research shows how sustainable products can win higher returns.
Researchers discovered a surprising thing in 2019. Consumers in California and China were prepared to pay a premium for grass-fed, sustainably-sourced New Zealand beef.
In some cases that green premium is perceived to be 20-100% greater than non-sustainably produced equivalents.
Research reveals that, regardless of the sector or ownership structure, greater value can be generated when producers are part of a highfunctioning value chain that’s committed to sustainable values. Professor Paul Dalziel - Lead researcher
Okay, so that is perhaps not so unexpected. We do grow happy beef here. What was surprising was the size of the prize. The researchers discovered potential to achieve a 20% price premium in the US market, equating to extra annual revenue of $238 million in export returns.
Emboldened by the numbers, Beef+Lamb NZ launched ‘Taste Pure Nature’, a vertically integrated value chain involving 8000 beef, sheep and deer farmers. Just three years in, the campaign shows promising results. Awareness and preference are up. In California, preference for New Zealand grass-fed beef is up 5%, while preference for grass-fed lamb is up 4% since March 2020. Awareness of New Zealand beef and lamb is up 19% since March 2020.
“We could get so much more if we could prepare and process a greater portion of the frozen product we sell internationally and label it as grass-fed. That’s about innovating here, developing brands here, and moving up the value chain in terms of how we do things,” says Hugh Good, B+LNZ’s Global Market Intelligence and Research Manager.
New research
This success is not a one-off. New research reveals the extent to which producers are already capturing the ‘green premium’ – and how they could get so much more.
The research, from the Agribusiness and Economics Research Unit (AERU), funded by Our Land Water, covered multiple sectors including honey, wine, dairy, beef, fruit, jewellery and an emerging cosmetics brand. It included Māori-owned, family-owned and corporate businesses in all parts of the country.
From stone to taonga
Another example from the research is South Island pounamu, once perceived by tourists as generic greenstone.
The owners of the pounamu rights, Ngaī Tahu, recreated the value chain in which the stone is registered, carved by approved artists, recorded by weight and origin, and traceable through unique codes and photographs.
“When you buy your Ngāi Tahu pounamu, you can put in the individual number on the website and you’ll know where it was harvested, the story, the mythology behind it, and who carved it. It’s a whole journey of experience,” says Ngai Tahu researcher Dr John Reid.
Dr Reid says the new value chain has created a premium ranging from 30%-100% over competitors.
The research shows a similar premium is being captured by producers of honey, wine, seafood and more - by being part of a high functioning value chain (see right for more examples).
Nine attributes of success
The research has identified nine attributes of these highly successful value chains.
“The most important is a commitment to shared values by every part of the chain, whether it’s the retailer, distributor, or suppliers. These values could be environmental factors such as carbon neutrality or social values such as origins or whakapapa - the point is that the values are understood and expressed all the way from the growers to the consumers,” says Professor Dalziel.
The nine attributes have been summarised in the Value Chain Compass – a free, downloadable tool for managers to help transform their value chains.