Enterprise Success: Climbing the Value Chain; the Food and Beverage Sector Has Long Been Exhorted to Capture More Value within NZ. Nick Grant Talks with a Bunch of Successful Business Leaders about Their Very Different Routes to Market

New Zealand Management, October 2012 | Go to article overview

Enterprise Success: Climbing the Value Chain; the Food and Beverage Sector Has Long Been Exhorted to Capture More Value within NZ. Nick Grant Talks with a Bunch of Successful Business Leaders about Their Very Different Routes to Market


Byline: Nick Grant

Stories of NZ enterprise success

This is the seventh article in a major eight-part NZ Management series: Stories of NZ enterprise success. Senior business journalists Nick Grant and Vicki Jayne draw on insights from the Deloitte/Management magazine Top 200 Awards and associated lists of the country's leading companies to conduct a sector-by-sector review of the underlying drivers of success in key parts of New Zealand's economy.

Next month: The tourism and entertainment sector.

In May this year, the then-Ministry of Economic Development released a report on the New Zealand food and beverage industry that, among other things, urged the industry to process more of its produce prior to export.

"The industry exports $25 billion in food and beverages each year," said Minister for Economic Development Steven Joyce at the time. "Much of this is ingredients which others use to make finished products. The report estimates that international consumers pay from $140-$200 billion at the checkout counter for food products that are primarily of New Zealand origin. It's not all about producing more. It's also about capturing more of that value for New Zealand."

Coriolis, the strategic management consulting and market research firm behind the report, is at pains to point out many of its figures are "directional" rather than right on the money. It attributes this to conflicting data from various agencies. Yet, even if one assumes the lower end of international consumers' estimated spend on food with NZ ingredients, there's clearly an enormous opportunity for NZ Inc waiting to be exploited in that yawning $115 billion gap.

This is no newsflash. The clarion call to stop shipping raw carcasses, logs and the like offshore has regularly rung out. Before he ascended to the role of earthquake czar, previous MED minister Gerry Brownlee made much the same comments when issuing an earlier Coriolis report on the food and beverage sector in 2010. "The maths is pretty simple," he said. "A kilo of infant formula is worth 10 times the value of a kilo of milk powder -- so we know which one New Zealand should be selling."

It's not as though these regular calls have gone unheeded, either -- as covered in NZ Management's June issue enterprise success story, our primary sector is slowly but relatively surely shifting from "from pure commodity to higher added-value diversity", a point echoed in the latest Coriolis report (see box story "A perishing nuisance").

While this transformation still has a long way to go (processed food still accounts for only around 16 percent of our total F&B exports, for example), it is underway and there are many excellent examples of local processed food and beverage enterprises that are already making progress in global markets.

Upwardly mobile

Wine is the leader in NZ's beverage exports in terms of both revenue and growth (see box story "Drink to success"), and it's the global thirst for Marlborough sauvignon blanc that's driving 90 percent of that performance

Winner of the World's Best Sauvignon Blanc for its Single Block S1 vintage at this year's International Wine Challenge, Yealands Wine Group is a prime example of why it's desirable to pull your business up the value chain from primary to value-added producer and just how successful such upward mobility can be.

The company, which launched in 2008, has its literal roots in serial entrepreneurial enthusiast Peter Yealands' decision to try his hand at viticulture 10 years earlier. In short order he'd established Yealands Estate in Marlborough's Awatere Valley, and was doing a roaring trade selling his grapes to the spot market.

However, a business based on trading commodities is only an attractive one to be in when there's a shortage in the market. By 2006 Yealands could see the signs of a coming surplus, thanks in part to others adopting methods he'd pioneered in converting Awatere Valley hill country into land fit for growing grapes. …

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