In recent weeks, I have been writing about Synlait’s new infant formula Akarola [here and here]. The Akarola project is a joint venture between China’s New Hope agri-food conglomerate (75%) and Synlait (25%) which has set out to market New Zealand made infant formula online direct to consumers through JD.com.
The strategy is based on cutting out the multiple layers of middle men and pricing the product at just a fraction of what Chinese consumers are used to paying. But the strategy can only work if Chinese consumers can be convinced that low price does not mean low quality.
I am on record as saying that the Akarola product has potential to be transformational in relation to the Chinese infant formula market. But others are not so sure. Continue reading
(This post was first published at interest.co.nz on 28 April 2015)
In recent weeks I have been analysing [here and here] the GHD data that underpin the MIE recommendations for the meat industry. Those analyses confirm to me that MIE has missed the big picture.
The key MIE recommendation has been that companies must amalgamate, with the most important merger being between the two big co-operatives Silver Fern Farms and Alliance. However, Alliance has been consistent in their position, both before and since the MIE report, that the numbers needed to support an amalgamation do not stack up. Continue reading
( This post was first published online at interest.co.nz on 27 April 2015. The version here at https://keithwoodford.wordpress.com contains two additional comments in square brackets, added on 6 May 2015.)
Synlait’s Akarola is about to transform China’s infant formula market. Fonterra’s new partner Beingmate, and all the other marketers of infant formula, are in for a huge shakeup.
On 25 March of this year I foreshadowed that infant formula prices in China were about to become much more competitive [here]. I based my report on information from dairy industry sources within China that New Hope Nutritionals – owned 75% by China’s New Hope and 25% by New Zealand’s Synlait – was about to launch a new brand of New Zealand- made infant formula called Akarola. I reported that the new brand would be sold exclusively online, at prices much less than half of normal prices in China.
A few days later New Hope Nutritionals launched their online campaign on JD.com ,and the foreshadowed price of 99 RMB for a 900 g per can was confirmed. In New Zealand dollars, this is about $21, or $16 in American dollars.
In itself, there is nothing remarkable about selling infant formula at this price. It is a price that is broadly in line with international prices. But it is a price that is totally out of line with what has been happening in China. Continue reading
I have previously analysed GHD’s data on capacity utilisation and processing costs in the sheep industry [SFF’s sheep processing dilemma]. These GHD data underpinned the major MIE recommendations in their recent report. However, whereas MIE focused on the need for amalgamations, I showed that the crucial evidence was the exposed position of Silver Fern Farms relative to other processors. The overall cost leader was Ovation, which lies outside the ‘Big Four’.
Here I analyse the beef processing costs to see if a similar story emerges.
The simple answer is that for beef, as with sheep, there are big differences between the industry cost leaders and the rest. Once again, Silver Fern Farms appears to be one of the laggards, but it is not there by itself. Continue reading
Meat industry reform is back in the news in recent weeks with the long awaited release of the Meat Industry Excellence (MIE) report ( Pathways to long-term sustainability). The MIE perspectives have been well known for some years and so there were no real surprises in what they said. According to MIE, the most important issue is dealing with industry over-capacity through plant rationalisations and company amalgamations.
I will return to MIE’s solutions at another time, but here I want to look at the underpinning analyses provided by international consultancy company GHD, and some key insights therein that could easily be lost. When it comes to finding solutions, losing those insights would be a great pity. For Silver Fern Farms in particular, some of those insights make uncomfortable reading. Continue reading
A Chinese language report on WeChat –China’s popular social media platform – indicates that the Chinese infant formula market is about to become a lot more price competitive. According to a usually reliable Chinese industry website, the New Hope Nutritional Foods Company is about to introduce a new line of products called ‘Akarola’ which will come from New Zealand and sell for less than one third the price of similar products.
New Hope already has a New Zealand sourced brand called ‘Akara’ which is manufactured and canned by Canterbury-based Synlait. Linked to this, Synlait announced in late 2014 that it was taking a 25 percent share in New Hope Nutritional Foods and that this would create an integrated supply chain from farm to consumers, in line with Chinese Government regulations. Continue reading
[This post first appeared in the Fairfax NZ Sunday Star Times, and on Stuff, on 22 March 2015 under the title ‘Green-lipped bounty all ours’.]
If New Zealand is to double agri-food exports by 2025 in line with Government targets, then we are going to need some lateral thinking. We won’t get there just by doing more of what we have been doing.
Related to this, in recent weeks I have been giving thought as to whether the green-lipped mussel can be one of the heavy lifters that can get the job done for New Zealand.
The green-lipped mussel is indigenous to New Zealand. The species is found nowhere outside our coastal waters. It is easily identified in the shell by its distinctive emerald green colour. The flesh is also distinctive from other mussels. Continue reading