1. Gavin Sheath – AgResearch, Ruakura, Hamilton Frank Scrimgeour – University of Waikato, Hamilton Alan McDermott – ANZCO Foods, Christchurch Members of Agribusiness Research & Education Network (www.aren.org.nz)www.aren.org.nz Supported by AgMardt

2. New Zealand Context 1980 → Starting point was a failed global and national economy and rampant inflation Rapid movement to de-regulation of industry and a free market economy Shift of debt from the public to private sector Diversification of alternative products and markets has been emphasised Increased expectation of NZ public and consumers towards more sustainable resource management Cases:DairyKiwifruit Sheep meatVenison

4. Dairy Industry Emerged from the 1980s, seeking control and stability Evolved from a NZDB strategy to a dominant co- operative (Fonterra) Development of new products, brands, markets and international partners Farming is more efficient, operates at a larger scale and has expanded Fonterra dominates through ownership of production-processing-marketing chains

6. Sheep meat Industry Industry without a strategy and highly competitive both internally and externally New markets in EU, USA and Asia; and products have changed from carcass to cuts and frozen to chilled Processing evolved through deregulation, market compliance, new entrants and reduced capacity Farming moved from survival to intensification; and an increasing dependence on sheep meat as wool value declined Alignment within chains is typically weak – competition dominates!

8. Kiwifruit Industry Young industry that has experienced boom-bust cycles, but now has a strategy providing transparency and control Two perishable, niche products that are readily substitutable. Branding, plant variety rights and innovation have been critical factors Post-harvest handling has become concentrated and efficiencies achieved through competition Orchard management revolves around demanding specifications and contracting Zespri’s strategy aligns industry players and a global supply base satisfies year round demand

10. Venison Industry Young industry that was encouraged in the drive for diversification Collective commitment to food safety, animal welfare, etc., but boom-bust cycles continue Limited success in market development – products are largely for the seasonal “German” game market Processing has become concentrated and farming systems have been built on significant innovations An industry that has been characterised by opportunistic behaviour along the value chain

12. Drivers of Industry Performance Demand - Supply Policy Environment Industry Structure Business Conduct

13. Demand & Supply There has been increasing expectations from retailers, consumers and public : food safety, consistently high quality, regular supply, etc Demand has been responsive to price spikes and niche products are readily substitutable Land use change has occurred in response to prices and profitability – this will continue Seasonality of supply has been reduced – further flattening is necessary

14. Policy Environment Government and industry co-operation has been effective in gaining international market access Government has responded to industry needs such as meat deregulation and dairy restructuring A free market economy has resulted in volatile exchange rate and appreciation in land values Environmental regulations are now starting to impact on “freedom to operate” on-farm

15. Industry Structure There have been cycles of consolidation and fragmentation seeking stability and then opportunity to innovate Restructuring has attempted to achieve an acceptable balance between market co-ordination, economies of scale and competitiveness Where chain ownership and structures are in alignment then there is better industry cohesion

16. Business Conduct To maintain a competitive position there has been an on-going need to create and protect a point of difference Innovation is key to creating these points of difference Risk aversion is commonplace as businesses and farmers deal with uncertainty and volatility The means of creating wealth has differed along the chain and therefore conflicting objectives exist, e.g.: capital gain versus operating profit

18. The Future Will significant changes in land use continue to occur? Yes. The balance between financial return on investment and sustainable resource use will drive land use changes Will Government regulations significantly impact on agricultural industries? Yes. An emphasis will be placed on sustainable resource management that meets public and market expectations

19. The Future Will cycles of industry consolidation and fragmentation continue? Yes. There will always be a desire to come together to gain stability/control and then splinter to innovate Will market and price volatility continue? Yes. This will need to be “collectively” managed by business to avoid price spikes and over-supply; but unfortunately our volatile exchange rate will remain

20. The Future Will value chains exhibit more horizontal co-operation in supply and vertical co-ordination into the market place? Yes. Business relationships must be stronger and responsiveness to market demands greater Will product and system specifications continue to be more demanding? Yes. New Zealand will need to supply high value products into affluent markets

21. The Future Will innovations be needed to create new points-of- difference in products and systems? Yes. New Zealand is now on a treadmill of higher value, differentiated products whether this is before or after the farm gate “So – Lets explore the future Know the potential impacts Set the future direction”