Is China’s infant formula market about to see a price crash?

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

Posted in Agribusiness, China | 1 Comment

Can green-lipped mussels be the next heavy lifter?

[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

Posted in Agribusiness, The Fairfax SST Articles | 2 Comments

The Sauvignon revolution

[This post was first published in the Fairfax NZ Sunday Star Times on 15 March 2015, and online at  stuff.co.nz,  both with the (inaccurate) Fairfax-chosen title ‘Analysing wine’s cash harvest’.]

Last week I drew attention to the New Zealand Government goal of doubling agri-food exports between 2012 and 2025. I pointed out that our success over the last fifteen years has been fueled by product price increases, and that we cannot rely on the next decade being so fortunate. So how are we going to make the quantum leap that we need?

In recent days I have been in Marlborough, supporting my colleague Marvin Pangborn as he led a group of Lincoln University Diploma in Farm Management students studying land use and land use change. Inevitably our field tour included a focus on the Marlborough wine industry. Continue reading

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Doubling agri-food exports

[This post was first published in the Fairfax NZ Sunday Star Times on 8 March 2015]

The New Zealand Government has set itself a target of doubling agri-food exports between 2012 and 2025. The big question is where is this growth going to come from?

The target has been set in constant value dollars following adjustment for inflation. It requires an annual compound growth rate of about 5.5 percent. In nominal terms, before adjustment for inflation, the annual target will need to be even higher.

There are four main sources of potential growth. The first is increased physical production. The second is more value-adding of commodities into sophisticated ingredients and consumer products, and the marketing thereof. The third is through agri-food technology exports. The fourth is increased prices. Continue reading

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Fonterra and the two-company model

[This is the fifth and last post in the current series on Fonterra. It was first published in the Fairfax NZ Sunday Star Times on 1 March 2015 under the title ‘Don’t cry over spilt milk’ and then republished online in ‘Stuff’ under the title ‘Culture is king over strategy for Fonterra’. (Choosing the news title is the prerogative of the editors, not the author. Sometimes they use my supplied title and sometimes they don’t.)]

In recent weeks I have been writing about the key issues that Fonterra faces. This week I will look at one specific strategy to deal with those issues.

There are two key issues that stand out from the rest. The first is that Fonterra is trying to be good at too many things. It is trying to be a processor and marketer of commodities with a focus on cost and logistical efficiency. It is trying to be a supplier of specialist ingredients based on science and technological innovation. And it is trying to be a marketer of fast moving consumer goods based on entrepreneurial flair and panache. It is performing well with the first, but struggling with the other two. Continue reading

Posted in Agribusiness, The Fairfax SST Articles | 5 Comments

Fonterra’s three-way dilemma

[This post was first published in the Fairfax NZ Sunday Star Times on 22 February 2015. It is the fourth of a series of five on Fonterra.  The earlier posts were ‘The evolution of Fonterra’, ‘Fonterra’s jouney’, and ‘Fonterra’s global reach’.]

One of the big challenges for Fonterra has been to determine its overall market position. Is it a marketer of commodities? Or is it a marketer of fast moving consumer goods (fmcgs)? Or is it a marketer of specialist ingredients? Can it be all three?

The challenge of trying to be all three is that the appropriate business culture is different for each market positioning. Commodity marketing is all about logistics, efficiency, and financial discipline. Fmcgs are all about entrepreneurship, creation of brands, being fast on one’s feet, and willingness to take risks. Specialised ingredients require a focus on science and technology.

Very few companies succeed in being more than one of these. So where does Fonterra sit and where should it sit? Continue reading

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Fonterra’s global reach

[This is the third of five articles on Fonterra written in early 2015 and published in the Fairfax NZ Sunday Star Times. This one was published on 15 February 2015. Earlier articles in the series were titled ‘The evolution of Fonterra’ and ‘Fonterra’s Journey’ ]

Within Fonterra, there is inevitable tension as to its role on the global stage. From a farmer perspective, Fonterra is a business with assets of about $20 billion (about half equity and half debt) which processes the milk produced by five million New Zealand cows. It then markets the resultant dairy products across the world.

Most of the value of these dairy products lies in the farm gate price of the milksolids contained therein. Accordingly, ask any of Fonterra’s farmer owners as to what they most expect and demand of Fonterra, it is likely to be that this farm gate price is maximised. Continue reading

Posted in Agribusiness, The Fairfax SST Articles | 6 Comments