Investment in the shift from ‘volume’ to ‘value’ in New Zealand’s food and beverage sector is the key to continued export success.
New Zealand’s record on exporting food and beverages is exemplary. Over 90 per cent of our food and beverage (F&B) product goes to over 120 countries and accounts for 46 per cent of all our goods and services exports. We export more dairy, lamb and venison than any other country; we’re pretty good with beef, seafood, apples and kiwifruit too - this year Zespri is expecting its largest kiwifruit export crop ever including up to 100 million trays of the SunGold variety, launched only a decade ago.
In recent years, the global drop in commodity prices has led to tougher competition with other countries on volume. The challenge now is to raise our productivity to satisfy growing market demand, while also helping our businesses grow net profits and ensuring New Zealand sustains its reputation in environmental and animal welfare excellence, while meeting the growing challenges of climate change.
Investment is key as it goes hand in hand with trade – helping businesses address bottlenecks, improve performance and reach target markets. Along with investment, the solution is to shift from volume to value. Taking what we’re good at and making it even better, commanding a price premium.
Adding value
For a simple example of value-add, take again the humble kiwifruit. It has so many health benefits that one Nelson company is turning reject fruits – which otherwise would have gone to cattle fodder – into high-value snacks.
A broader example is organic food. Though it’s seen by some as overpriced, trade figures show that consumers here and overseas are happy to pay more for it – typically a 31 per cent dollar premium for red meat and 29 per cent for dairy, according to a 2020–2021 report from Organics Aotearoa New Zealand.
What’s more, customers are buying plenty of it. The overall value of our organic food exports grew from NZ$356 million in 2017 to NZ$420 million in 2020 – a rise of 18 per cent – despite the impact of COVID-19. Over the same period, organic exports to China increased 129 per cent, outpacing all other destination markets, due largely to dairy. This is more remarkable because just 1 per cent of our dairy farms are certified organic.
Sustainable and traceable
Alongside New Zealand’s unique premium soil conditions and organic certification, other attributes that lend credence to our reputation include sustainable and climate-friendly farming practices, strict biosecurity regulations, food standards, and animal welfare codes. Here are just a few examples.
- Under our Food Standards Code, any foodstuff must be traceable all the way through the supply chain – at any point, movements can be traced one step back, one forward.
- Seafood, which is monitored by OpenSeasNZ, must be fully traceable – from the water to either domestic retail or export.
- In May 2021, Auckland-based United Fresh, which represents New Zealand’s fresh fruit and produce growers, released its Produce Industry Traceability Guidelines, wrapping up a three-year Sustainable Farming Fund traceability project. According to project director Anne-Marie Arts, “Reliable traceability systems are no longer an optional extra in the produce industry, but a baseline requirement of increasing importance.”
- TANZ (Trust Alliance New Zealand) is a digital platform for producers, growers, exporters, retailers and consumers. It uses the latest technology, including blockchain, the Internet of Things and paddock location mapping to add layers of security to traceability.
- Under NZGAP, New Zealand adheres to GLOBALG.A.P. (Good Agricultural Practice) guidelines, which include food safety, environmental health and workers’ welfare.
Export consultants Katabolt recently said, “Our ordinary is extraordinary in many parts of the world. The purity of our food and environment remains unobtainable for many nations and we need to nurture it as a core strategic pillar of our food brand.”
Given these attributes, it ought to be the case that ‘Produced in New Zealand’ is a badge that sells itself. But Jade Grey, a restaurateur and plant protein innovator – with deep experience of the Chinese market – underscores the added importance of traceability. “Consumers continually ask, ‘Why is this food better?’ and we need to provide certification and trust factors,” notes Grey. “Evidence needs to be instantly available, as consumers in China want to scan a QR code for in-store, on-the-spot reassurance.”
Buying into Kiwi excellence
New Zealand’s F&B export sector is so successful that other countries are buying into it. Overall, around one-quarter of our F&B manufacturing sector is foreign-owned – mainly in the subsectors of beverages (67 per cent foreign-owned) and processed foods (39 per cent), followed by meat (25 per cent), produce (15 per cent), seafood (12 per cent) and dairy (10 per cent).
Dairy’s stock has risen hugely and following deregulation of the sector in 2001 we have welcomed foreign investment. China’s soaring appetite for high-value New Zealand dairy products, such as powders for infant formula, stems largely from the country’s rapid urbanisation and rise of a wealthy middle class, alongside growing concerns (and tightening regulation) around domestic food safety and quality.
For instance, Inner Mongolia’s Yili Industrial Group Company Limited (Yili) has the biggest dairy product range in China. Since its debt and asset acquisitions of New Zealand Oceania Dairy Limited (ODL) in 2013 and Westland Milk Products in 2019, a state-of-the-art processing plant has been built on the ODL site in Glenavy, South Canterbury, producing various formulated products including OEM infant formula base powder along with regular GDT products such as whole milk powder, UHT milk, UHT whipping cream, and anhydrous milk fat.
Westland is now producing UHT milk and cream, skim, whole and buttermilk powders, butter and butter products, as well as protein products and bioactives. The total investment is over one billion New Zealand dollars. From big data analysis of the markets and end consumer behaviour, Yili has invested considerably into targeted R&D, bringing about considerable productivity improvements on the legacy operations for market demand across the world, including the vast market back in China.
Similarly, in 2010 Bright Dairy took a majority stake in Synlait (now a producer of top-quality infant formula and lactoferrin), which acquired Talbot Forest Cheese in 2019 and Dairyworks in 2020.
Uptick for Auckland
Auckland is home to New Zealand’s largest F&B manufacturing cluster, with nearly 3000 F&B firms, including 50 per cent of the country’s 100 largest firms. In all, some 31,000 people in Auckland work across the sector, contributing more than $4 billion to the city’s GDP. Sea, road, rail and air freight terminals are all close at hand.
Auckland is strong on collaboration between industry and R&D, with three universities in the region (University of Auckland, Massey University and Auckland University of Technology), as well as Crown research institutes such as the NZ Institute for Plant & Food Research, which commits millions to research in new foods, and the Foodbowl, which nurtures local food innovators.
All these factors make Auckland ideal for investment in the future of New Zealand’s food and beverage industry as it shifts from volume to value to continue its upward growth.
Find out more
To find out more about investment opportunities in Auckland’s nutraceutical sector, contact Investment Specialist Yan Zhang.
DISCLAIMER: This article provides general information on potential investment opportunities in Auckland and is not intended to be used as a substitute for financial advice. The views and opinions expressed are those of the relevant author, and do not necessarily reflect the views of Tātaki Auckland Unlimited. Tātaki Auckland Unlimited disclaims all liability in connection with any action that may be taken in reliance of this article, and for any error, deficiency, flaw or omission contained in it.