- New Zealand must innovate to move all their business up the value chain
- The biggest consumer trend is moving away from eating meat
- Blockchain presents opportunities for the primary sector
As a professional director, CEO of technology companies, board member and recipient of New Zealand’s Order of Merit (ONZM), Melissa Clark-Reynolds is well placed to advise on what the formula for success looks like for New Zealand businesses.
Clark-Reynolds believes that to be competitive in a global market “New Zealand need to move all their business up the value chain,” using innovation, science and technology to their fullest potential.
Developing a high value mindset
Although New Zealand’s reputation as a premium food producer is globally acknowledged, Clark-Reynolds says it’s not enough for food to taste amazing. All the right attributes need to line up; there’s a demand for organic, antibiotic free, grass-fed produce, involving regenerative agriculture to benefit the environment.
But we’re not just talking about the environment, she says. Considering the community and ensuring people are paid a living wage is integral to creating a high value mindset.
“These things may not change the flavour of the food but they change the attitude. High value means producing ethically, and looking after the land and the people.”
High value doesn’t mean producing and selling an expensive product. In fact, Clark-Reynolds believes, “If you think more expensive you’re applying a commodity mindset, and that’s always a race to the bottom.”
The key to creating high value is using innovation to move all aspects of the primary sector up the value chain. Innovation can transform the future of agri-business, enabling New Zealand to be at the forefront of disruption, as the disruptors.
How to use innovation to drive value
Innovation is driving the future of agri-business, and many New Zealand businesses are leading exciting developments, says Clark-Reynolds. For example, most of the meat sector is moving up the value chain by “thinking strategically about making use of products usually just used for pet food, and not eaten.” New Zealand’s blood industry is booming, for example, generating $30 million dollars each year from using proteins from beef blood for value-add product development.
Lowe is a pioneering company that has positioned itself in the international market through implementing innovation. Based in Hawkes Bay, Lowe has a long history in the New Zealand meat and byproducts industry. With a focus on sustainability, the team sources hides and skins from both the farming and wider food industry, exporting 90% of their products.
Most farmers sell to an intermediary, which means a lot of people take a bite in between and farmers are getting the smallest piece of the revenue pie. Farms can develop a closer relationship with food producers by selling direct from the farm, organising delivery and cutting out middle-man distribution.
The Avo Tree is a company that has disrupted this business model, by producing avocados from the orchard and delivering to customers’ doorsteps. Picking to send and handling deliveries creates efficiencies like cutting out wastage, the need to cool-store fruit and the intermediary from the chain. The Avo Tree team believes Kiwis have been paying too much for avocados, and the benefit of their strategy enables them to deliver a reasonably priced, healthy product to consumers.
The role of science and research
The Primary Growth Partnership (PGP) is a program underway with a total of $724 million co-invested by government and industry, to kick start the primary sector through research and innovation. A 2014 report by NZIER estimated that PGP’s 18 programs will add at least $6.4 billion per annum to the New Zealand economy by 2025.
Clark-Reynolds says there are several companies leading the way in scientific development, and these indicate how New Zealand needs to act to improve yield. Spring Sheep dairy, for example, produce nutritious sheep’s milk from Central Plateau. The product itself is high value – batched fresh from healthy grass-fed sheep that live in lush pastures. Spring Sheep dairy also produce milk-related products with a medical application, such as vanilla probiotic sheep milk powder and sheep milk calcium tablets. They also implement international sales strategies, exporting to consumers all over the world.
Collagen grass-fed beef is another example of how a raw product is used innovatively. The same raw product is used by Nutraorganics to produce and sell a powdered bone broth, beneficial for gut health, and is also used to produce an anti-ageing skin and beauty product, sold by Sephora New Zealand.
Technology and the global move to vegan
Clark-Reynolds believes that generally, as people get wealthier they eat more protein. Yet, the biggest consumer trend affecting the primary sector is the global move away from meat eating, due to the increasing awareness and concern about the negative impact meat production has on the environment and to people’s health, she says.
As a result of this concern and the consumer mistrust in the food system, there’s been a rise in plant-based meat, where plants are taken and made bio-identical to meat in taste, appearance and nutritional value. Impossible Foods, for example, produce meat-free burgers, from a molecule called heme. The Impossible Burger uses 75% less water, generates 87% less greenhouse gases, requires 95% less land, and delivers the same protein and iron as a burger made from a cow. Interestingly, these products are not targeted at vegetarians, but at people who want to eat high quality meat as a treat.
China is the fastest growing market in the world for vegan foods and plant-based protein. UK supermarket Tesco saw a 50% increase in vegan food sold last year. And Australia is similar – the vegan category is growing, and meat eaters are becoming flexitarian, eating mainly vegetarian and animal protein two to three times a week.
Clark-Reynolds says that interestingly, in the US the biggest investors in plant-based farming are also the biggest investors in feed lot farming, so they’re diversifying away from plant-based farming practice.
Like plant-based meat, there’s also been a huge increase in organic and plant-based milk. The US has seen a steady decline since 1975 in milk consumption derived from animals. Clark-Reynolds believes it’s significant that the US imports so much food, both as an indicator of global trends and due to the fact it is a large export market to New Zealand.
Blockchain will create opportunities for the primary sector
Clark-Reynolds believes blockchain is going to transform the primary sector and that it will have a bigger impact than anyone imagines, on all industries, in the next 20 years.
Although it’s unclear exactly how this transformation will occur, Clark-Reynolds says the main opportunity for the primary sector is that blockchain will make authentication and transparency available for ethical production, from farm to fork.
“In a large part of the world consumers have lost trust in the food system – in terms of its safety, quality, labelling, processes and ethics - so there’s an opportunity for New Zealand to produce ethically.”
Advice for rural accountants
Accountants are still the people most go to for advice, and Clark-Reynolds believes that rural accountants can play a significant role in helping their clients succeed in driving their businesses forward. Everyone’s talking about the need to shift from commodity to high value, she says, and accountants can help clients understand how to do that.
- Decision making: Accountants can advise farmers and help them make decisions about where to invest. For example, how much of the farm to return to foresting, how to leverage the carbon market and how to identify other revenue streams. Farmers in Scandinavia put wind and solar farms in for a secondary revenue stream. And, while this is not currently viable in NZ due to government regulations, Clark-Reynolds foresees change is coming.
- Changes to business models: Farmers need accountants to help identify opportunities for business growth and implement changes to existing business models. Accountants can offer advice on opportunities to diversify and brand products differently, to join forces with other farms and producers, and to identify international export markets.
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