The FINANCIAL — The success of the agri-food sector is dependent on individuals across the industry placing consumers at the centre of everything they do, according to the 2017 KPMG Agribusiness Agenda: The Recipe for Action.
Based on contributions from more than 100 industry leaders, the Agenda explores what needs to be done to capture more of the quarter of a trillion dollars New Zealand products realise in-market and make a greater contribution to our nation’s prosperity. This relies on the industry collectively shifting its focus towards the consumers of the food and beverage, fibre and timber products it produces.
“There is a simple unavoidable truth: no customers means that there is no business,” says Ian Proudfoot, Global Head of Agribusiness at KPMG. “However, historically, we have placed the majority of our focus on maximising production.”
“When you are focused on the volume that you can produce, the government shapes your future as it sets the rules. However, as organisations pivot towards markets and consumers, the rules that shape the future are no longer determined by the domestic government but by much tougher masters, the consumers to whom they sell”.
The government is not responsible for securing the value lift. Although it can be an enabler, Proudfoot suggests that creating and capturing value falls on every person and organisation involved in the industry, including farmers, processors and exporters, industry good organisations, councils, Maori trusts, iwi and service providers. “Only by the whole industry seeking ways to work collaboratively will the pivot from a producer-focused, volume-based culture to a market-focused, value-based culture be achieved sufficiently quickly to capture the opportunities available to it.”
Proudfoot adds the biggest risk to success is complacency. “People don’t recognise the impact that structural changes in the Agri-Food sector globally, driven by innovation and consumer preferences, will have on our traditional markets. Some have the potential to literally vanish overnight, there is no place for any comfort or complacency.” Proudfoot notes that New Zealand is the only developed nation that relies on growing biological products and selling them to the world to pay for schools, roads and hospitals.
The Agenda highlights a significant difference in outlook in the lead up to this year’s election compared to three years ago. Concerns about the impact regulatory changes would have on the sector’s productive capacity dominated conversations in 2014. This year, the election hardly rated a mentioned with conversation centring on the expectations of consumers and the community.
What action do industry leaders want to take?
The Agenda features 110 action items that have been curated from more than 250 ideas provided by industry leaders. The ideas cover the need for a values-led framework for the industry, recruiting and training the best talent, rapidly deploying leading edge technology, exploring new business models, getting closer to customers, leveraging the best ideas in the world and telling authentic stories to all.
While maintaining world-class biosecurity remains the highest priority for industry leaders in the 2017 KPMG Agri Leaders Survey, there were a number of notable movements in the survey results and themes from conversations with industry leaders:
Managing consumer relationships – The increase in priority attached to provenance branding, co-innovation with customers, embedding resources (including people) into export markets and developing a New Zealand integrity mark highlight the focus being placed on managing consumer relationships.
New Zealand’s unique food culture – Nobody goes out for a ‘New Zealand meal’, in fact it is unclear to most New Zealanders and visitors to the country what a ‘New Zealand meal’ actually is. While we grow some of the best food in the world, it is used to make other nations’ cuisines, there is an urgent need to strengthen New Zealand’s unique food culture.
High quality trade agreements – Leaders placed greater priority on securing high quality trade agreements, reflecting the shift in the trade environment as a result of Brexit and the election of President Trump. Industry leaders suggest free trade as we know it will only survive if everybody benefits, we must seek to combat social inequality and better disperse the benefits of trade to retain market access into the future.
Swimmable water – Much discussion related to water and the impact this has on the wider community’s confidence in farmers to protect and restore the environment. The industry uses science to defend its position but this is an emotional issue that cuts to the heart of being a New Zealander; the message was clear: swimmable must mean swimmable and not ‘scientifically swimmable in 2040’. Bold action is needed on water and the environment to preserve the license to operate.
Alternative proteins – Recent transactions suggest that alternative proteins are set to become a material part of the global diet. Understanding these technologies, their strengths and weaknesses, is critical to protecting our natural protein markets. We ignore these technologies at our peril.
Biotechnologies – The conversation around biotechnologies has evolved, it is no longer about whether these technologies will be adopted given the benefits they can deliver, but about the regulatory framework that is needed to manage their application. It is time that New Zealand reviewed its rules so we remain competitive and address each product on its merits.
Leveraging data – Concerns were expressed around how the sector is leveraging data that is being collected, with some leaders suggesting we are moving backwards comparatively to other countries. Companies are keeping close control over their data and seeking opportunities to monetise it, however without collaboration it is unlikely any significant financial benefits will crystallise
Tasters from the 2017 KPMG Agribusiness Agenda: The Recipe for Action
Below is a sample of the 110 ideas for action featured in the Agenda:
Creating channels for the industry to be good for the world [Idea 9] “Given we will never be able to feed the world, we are not excused from an obligation to help the world feed itself. Delivering on this obligation will demonstrate our desire to build a more equitable world for all.”
Making our authentic ways of cooking accessible to New Zealanders [Idea 15] “While many of us like to think we have mastered the art of the barbecue, it is only when our amazing products are cooked carefully in our natural kitchens that the magic we grow is truly realised.”
Professionalising the industry inside the farm gate [Item 38] “Today, the sector can no longer rely on informal upskilling…the time has arrived to introduce a continuous professional development system, similar to that used by other professions.”
Accelerating actions to address climate change obligations [Item 48] “Given New Zealand’s greenhouse gas profile, meeting our commitments requires a significant contribution from the primary sector…the suggestion was made that the sector should welcome its early inclusion into the emissions trading scheme, with a framework of incentives and penalties to encourage the right behaviours.”
Embedding our leading science practitioners into corporate organisations [Item 58] “The government should move from core funding science delivery agencies towards seconding leading science practitioners into companies to increase their connection to critical commercial problems…we should have a science system that celebrates impact rather than when a grant is secured.”
Challenging competition regulation that misses the bigger picture [Item 67] “It was noted the role of the Commerce Commission is only to protect domestic consumers and its myopic focus on this goal means that, ultimately, it ends up preventing organisations exploring mergers that would benefit 95% or more of their businesses, their stakeholders and the wider community.”
Sharing capital assets to optimise utilisation and provide access to emerging businesses [Item 79] “A great deal of [capital] investment sits underemployed for much of the year. This imposes a significant overhead cost on many sectors. Around the world access models are evolving to optimise the use of assets and the suggestion was made there is significant opportunity to take cost out the sector by exploring these models.”
Offering a larder rather than selling a product [Item 90] “Consumers rarely buy a single product; they buy a meal, the ingredients to make a meal or a basket of products. Focusing on how products can be used together offers the potential to pool marketing budgets to amplify their impact, encourage collaborative innovation and collective investment in technology platforms.”
Creating the world’s largest collaborative Agri-Food solutions fund [Item 96] “Being on the leading edge of innovation will contribute to securing a more prosperous future for New Zealand…this can be achieved by creating a collaborative investment fund to secure access relevant emerging Agri-Food technology. A fund of $1 billion could be a game-changer for the industry, their suppliers and the wider New Zealand community.”
Accelerating the pivot towards food by renaming the Ministry [Item 108] “Few people connect primary industries with the sustainable production of food and nutrition but making this connection more apparent is critically important. Renaming the ‘Ministry for Primary Industries’ the ‘Ministry for Food’ was suggested as building more understanding of what the Agri-Food industry does.”
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