All Black: The Premiumisation of New Zealand – Let’s get the party started.
New Zealand is a country that challenges a writer’s ability to describe or depict. It’s equal measures of amazing, beautiful, gentle and awesome with breathtaking landscapes and sweeping vistas. It’s full of inventive, positive and super friendly people. As a place to live, it has no rivals. It’s an extraordinary country where amazing people are free and encouraged to create and innovate. The country’s farmers and manufacturers are responsible for some of the most exceptional produce and products on the planet. It’s not called Godzone for nothing.
Unfortunately, many Kiwi firms across all categories have been selling themselves short for years. There has been a lot of money left on the table. This seems crazy when you think about supply and demand. The immutable law that is Economics 101 informs us that reduced supply (scarcity) nearly always drives the price up. It’s rare you have to pay more…right. Prices become inelastic. The price of a Ferrari is the price. You don’t negotiate. You beg to get a place on the list for some of their limited models. Let’s change gears. If we context the demand for premium food and beverage with global demand the demand curve is similar to Ferrari and it’s only going one way…up.
“Global demand for food is projected to increase by 70% over the next 40 years.”
Irish Food Board (2014)
In a food production context, New Zealand punches way above its weight, but ultimately even New Zealand has a rev limiter. It can only produce so much and like the Ferrari factory, shouldn’t producers be, a) charging a premium, and b) conducting business on their own terms? Why are they giving away so much value, only to see others add it as the produce moves through the supply chain to the consumer? No wonder disruptive strategies are taking deliberate aim at the middle man. Why wouldn’t you? And why is so much of what New Zealand produces still stuck in the commodity trading mode? Which century are we in? A commodity trading strategy does not suit New Zealand. It shouldn’t be a country of factory farmers and its business leaders shouldn’t be striving for ever increased production on one hand, and ever decreasing costs on the other. That is not how you premiumize. New Zealand should be investing in converting as much production as possible into premium offerings.
It’s true – this thinking isn’t new. Premiumization has been around as a concept since the mid 1990’s. Many people in New Zealand acknowledge the high potential for premiumization. Most nod their heads in agreement about the strategic soundness of this approach, however action is in very short supply. It should be noted that adding value isn’t premiumization, but it’s a step in the right direction.
“If you’ve got the best product in the world, why would you give it away?”
Kiwi Entrepreneur (2016)
Conversations about building a more value added, resilient, and future-proofed economy for all Kiwis should include discussions about the foundation blocks required for premiumization. They should include innovative discourse about building desire, leveraging ‘occasionality’, building rapport with new aspirational audiences, delivering wow experiences, creating specialness, promoting world class provenance and developing surprise. All of these things kiwis do naturally, so transitioning shouldn’t even be hard. Maybe the toughest challenge will be getting those with the power and resources to make the changes required to accept the need for business model innovation. In some cases, extreme makeovers will be required and getting match fit won’t be easy for many, but it will be worth it. There is a growing cohort with an increasingly loud voice suggesting it’s time. They need to be listened to. It’s time for New Zealand producers, growers and manufacturers to step up. A much more profitable world is waiting. If New Zealand can’t feed the world, then surely it makes sense to divert production into feeding the wealthy and maximizing the price earned for every litre of milk, every litre of wine, every kilo of meat and every kilo of seafood. Premiumization is about maximizing returns and avoiding commoditized offerings. It’s about moving strategically into premium niche markets where value is at its highest for a producer, service provider, or manufacturer. And it doesn’t just happen by itself, in the same way building a premium brand requires market research, insights, patient capital and champions, so does premiumization.
At some point premiumization needs to team up with entrepreneurial action, risk taking and new thinking. Action isn’t about getting bogged down with mindless activity. It isn’t about doing more desk top research, and it isn’t about having a good cuppa and reading through a nice bit of grunty research. As Drucker famously stated:
“Because the purpose of business is to create a customer, the business has two – and only two – basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs.”
For New Zealand’s sake, let’s use innovation and marketing to create premium products for premium consumers and make sure we don’t leave anything on the table in the future.
By Jim Wilkes