New Zealand Says NO to Commodity Trading and YES to Premiumization.
The Dream
New Zealand, famous for its amazing landscapes, pristine natural environment and friendly people, is finally securing the kudos its food and beverage products deserve. In doing so, they’ve started a new conversation and set a new agenda. Farmers, growers and F & B manufacturers have said enough is enough and they’re marching to the beat of their own drum, which means setting higher prices for their aspirational produce. Premium produce is not a commodity to be traded. The world’s best produce deserves the world’s best customers, paying the world’s best prices.
The county’s wine and cheese makers are making the French mutter sacre bleu, while the Italians blurt out mamma mia! New Zealand seafood is winning worldwide accolades and so is its beef, lamb, pork and venison. New Zealand ingredients have become the ‘go-to’ first choice for more Michelin Star chefs than I can name. The quality of New Zealand ingredients together with their provenance is everything to these masters. It doesn’t matter whether they’re prepping up-market pub grub or haute cuisine inspired dishes, because we all know at the heart of every great dish lies awesome ingredients. New Zealand stands and delivers the very, very best food and beverage on the planet. This is the dream and it’s partly true on some fronts. But are we there yet?
The Reality
Well, in a word, no, we’re not quite there. New Zealand is not yet fully leveraging its incredible, natural, competitive advantages. Why is it so late to the party, and why is it so focused on doing the industrial farming thing? Bigger this, more that. Why? I don’t get the strategy or the attraction. Scale isn’t what Kiwis do best. This industrialized approach combined with a historical willingness to hand over marketing responsibility to someone else disconnects producers from their customers and fragments innovation. Surely, a farmer wants top dollar for everything they produce?
Savvy insight is what’s required to identify premium niche markets and that doesn’t come from being as far away from customers as possible. And leaving it up to others is arguably not the best strategy either. So, whilst there are some early movers into the premium space out there, many are surprisingly happy to see increased foreign direct investment go into building commoditized industrial monuments all over New Zealand. They are being built with the express intention of pumping out more commoditized product. Yes, it’s value add…but it isn’t premiumization, and that means money is going to be left on the table again. A solid look at most price chains will quickly highlight who is making all the money. It usually isn’t the farmer, grower or producer.
And relying on convincing the world that New Zealand is 100% pure won’t save the day either. That’s a hard line to maintain when even Kiwis acknowledge it isn’t 100% true anymore. Producers need to build and position brands with more deliberation and care, or they will remain at the mercy of those who own the channels. There are plenty of countries out there with awesome landscapes. My country Australia is one of them. The USA is another. Ireland, France, and most of Europe isn’t too shabby either. No, the real potential for premium isn’t going to be derived from banging on about ‘pure’. It’s more likely to come from engaging consumers with emotional narrative. Telling an authentic story of innovative farming techniques and quirky Kiwi farmers is a better place to start. Articulating the farmer’s passion for growing and producing the world’s best food supported by an authentic provenance is more like it. This will underpin the claim to premium. The world is desperate for premium food and it could be New Zealand’s oyster. But it won’t happen unless enough brave, visionary, entrepreneurial leaders step up and actually lead. Those people are here. I’ve met them. It’s time to move beyond the definition of insanity and try something different.
New Zealand needs some boat-rocking Braveheart’s with Kia Kaha faith in themselves. They should be demanding the world’s food and beverage buyers pay a premium price for the world’s best produce. Getting trapped in commodity plays isn’t smart because New Zealand doesn’t have the scale to dominate. It can’t and won’t win this game, not even in dairy. We’ve all just seen the negative result of what happens when a commodity cycle turns. It’s not pretty for the balance sheet, and not pretty to watch.
There is a lot of confusion between added value and premiumization too. A block of cheese is added value, sure, but is it premiumized? Does that block of cheese represent the best way of achieving the highest possible return for a farmer? I’m not so sure. The French people say New Zealand cheese looks like a brick. In other words, not premium. The Parmigiano Reggiano company website points out, “Our cheese is not manufactured, it is made.” This famous Italian cheese is one of the most awarded cheeses in the world. It runs 3,272 farms with 245,000 cows dedicated to the production of milk for Parmigiana Reggiano. The company turns over 983 million euro per annum…premio.
“Montecavolo, Italy –The vaults of the regional bank Credito Emiliano hold a pungent gold prized by gourmands around the world – 17,000 tons of parmesan cheese. The bank accepts parmesan as collateral for loans.”
The Future
Surely, New Zealand farming deserves a renaissance. The country would be, could be and should be held up as a premium produce mecca. Its farmers have access to all the raw ingredients. They have some of the richest and most fertile land in the world in a country where pure water falls consistently from the sky onto a landscape custom designed for agriculture. The New Zealand provenance story is manna from heaven and so is the produce. Wrap some innovation, entrepreneurship and top table marketing around some smarter, better business models and stand back and watch the meaning of pure and premium come to life.By Jim Wilkes