The comments arose in Round Table discussions with 98 business leader participants throughout New Zealand in preparation for the 2015 KPMG Agribusiness Agenda – Growing Value.
Red meat sector conversations this year were far less focused on the future shape of the sheep and beef sector, despite the release of the Meat Industry Excellence (MIE) Pathways to Long-Term Sustainability report, which had been released a few weeks earlier, according to KPMG’s report writers.
“However, it was noted that the (MIE) report was focused on the issue of over-capacity, particularly between the two major cooperatives in the sector and failed to recognise the innovation being seen in processing and marketing activities across the wider industry.”
Instead, participants highlighted the investments being made in the sector to introduce innovation and the Agenda noted that, “It was highlighted how companies are investing in supply chain technologies to create value from operational excellence. Companies are using technology to introduce greater complexity and customer tailoring into their product offering and consequently differentiating themselves in the market and generating a premium.”
First Light Foods and Silver Fern Farms were highlighted regularly in conversations as examples in the sector of companies using innovation in genetics and packaging linked with authentic stories.
It was suggested by Round Table participants that the optimal position for the red meat sector should be as a boutique provider of high quality, hormone-free, free range, grass-fed beef and lamb.
“This is an authentic story that centres on attributes with appeal to premium consumers and leverages traits already inherent in most of New Zealand’s production,” the report notes.
The deer industry’s efforts, through the Passion2Profit Primary Growth Partnership, to make the venison industry more sustainable, were also noted.
Growing value – an uncertain future
The Agenda points to the key theme for many primary sector leaders this year –’the uncertain future of the dairy sector’.
A survey of 104 industry leaders ranked industry priorities. Top, again, was biosecurity, followed by food safety, which was second equal with rural broadband.
KPMG’s global head of agribusiness Ian Proudfoot noted, “It was apparent that leaders were focused on defending all aspects of our food value chain from inside the farm gate to the ultimate consumer’s plate.”
The challenge of attracting talented people to the sector also remained a key priority requiring collaborative pan-industry responses. “It must be clear to students that there are a huge variety of career options in the primary sector. It needs app developers and consumer experience designers as much as scientists and farm labourers.”
KPMG analysis shows the annualised growth in the value of New Zealand’s primary sector exports between 2002 and 2014 was 4.5 percent. The majority of this was driven by commodity price movements and value shifts – suggesting little progress has been made in realising added-value growth.
“Continuing to rely on commodity price and volume movements is simply not a sound growth strategy,” says Proudfoot. “Instead we need to focus on achieving premium prices for our products, and capturing downstream value, by taking greater control of our products throughout the supply chain. Our analysis highlights that there is exponentially greater value available to be captured the closer a company is to get to the consumer of their products.
“Many New Zealand companies focus their activities on production and processing activities, which sit at the lower value end of the supply chain,” explains Proudfoot.
According to KPMG, New Zealand’s the primary sector needs more organisations with the ‘seven DNA traits of high value enterprises’ to enable it to capture greater value from the food, fibre and timber produced. The seven enterprise traits are: pivotal leaders, ambition and attitude, strategic anchor, investment and resource allocation, customer intimacy, capable people and deployment discipline.
Ministers welcome the agenda
Primary Industries Minister Nathan Guy and Food Safety Minister Jo Goodhew have welcomed the annual KPMG report, which they say shows strong support for the Government priorities of strengthening biosecurity and adding value to exports.
“In order to maintain our market position as a global food supplier we need to continue to foster innovation and we are seeing fantastic results through initiatives like the Primary Growth Partnership programme where new, added-value ingredients and premium meat products are being developed,” says Goodhew.
She noted that food safety continues to be of high strategic importance to industry. “For New Zealand to be globally relevant, we need to maintain international confidence in our food safety system. That is why we are working to ensure our local producers and exporters meet the food safety standards of trading partners and the expectations of international markets into the future.”
Watch Ian Proudfoot talking about the first volume of the KPMG Agribusiness Agenda for 2015 (below). Your can download a (PDF) copy of the report here.