From Volume to Value

(Published on 2nd June 2016)

More of the same will not work, and change will primarily be driven by a major shift in consumer behaviour. That was the message from a number of speakers at the Primary Industry Summit held in Wellington recently - a message that will be of interest to those who support sustainable land and water management in New Zealand.

New Zealand's primary producers were encouraged to move away from traditional 'volume driven' business models and look to the future and pursue more 'value based' approaches. In other words, evolve from selling large quantities of relatively low value commodities and adopt a market orientated view that considers what consumers in developed economies actually want.

Dr James Lockhart from Massey University began by debunking the myth that New Zealand can feed the world. Our land area is simply too small and even if we continue to intensify production our outputs will always be miniscule when compared to the volumes produced internationally. Dr Lockhart went on to identify a recent report from Deloitte that details a shift in consumer attitudes over the last few years. The report entitled 'The Food Value Chain: A challenge for the next century' identifies how drivers such as food safety, health and wellness, and social impact, are no longer niche interests. In fact the report states that people who value these factors when making purchasing decisions now make up 50% of the market. Dr Lockhart emphasised just how important this development is, and suggested that New Zealand can ill afford to ignore this change if we want to remain globally competitive in the future.

Developing the theme, Jacqueline Farman NZ CEO of independent market research agency Colmar Brunton explained how these changing consumer trends are set to continue. Jacqueline presented the findings from Colmar Bruntons' 'Better Futures' report which has been tracking the rise of the conscious consumer in New Zealand since 2006. Key findings revolve around how the demands of the next generation will impact on organisations and their brands. 'Millennial' (also know as 'Gen Y') consumers bring a new set of personal values that challenge traditional business models.

What sets Millennials' apart is their attitudes and awareness. They feel a sense of responsibility for the planet and are sensitive to factors that they perceive as damaging. They are also suspicious of marketing hype and are well versed in decoding shallow sales messages. They are looking for the real story behind a product and 65% are already willing to pay more for items that align with their perspectives and beliefs. This newer generation of consumers will become increasingly influential and by 2025 will make up 75% of the market. This means New Zealand's primary producers need to start planning now to ensure they are ready to meet future challenges. Jacqueline advised that to be successful in the future businesses must consider how they fit into a market where social and environmental responsibility are mainstream concerns.

At a practical level Landcorp New Zealand Chair Traci Houpapa talked about the work they are undertaking on their 140 farms and associated businesses. They are on a journey to actively change the way they farm in recognition of environmental, community and social needs. Business decisions are closely tied to these core needs. Innovation and partnerships are important factors too, which led them to develop new products such as a recent initiative to design and manufacture premium quality leather goods - made from what was previously considered to be a low value by-product from deer farming. Leather handbags and other goods are now being marketed overseas for a premium price under Lancorps' Pāmu brand. Traci described how the Pāmu brand has been built to reflect the deep connection New Zealanders have with the land, born from respect and a genuine desire to protect and enhance the land. A proud provenance that stands behind every product.

Reinforcing the practical sustainability message, David Cole CEO with Mt Cook Alpine Salmon highlighted the challenges of building a luxury brand and taking a product to the world. David said luxury producers need to be prepared for close scrutiny. Senior executives and overseas buyers will want to take a close look at every facet of production and processing - they are taking a risk buying from a new supplier, so they will want to fully understand the benefits. They are looking for authentic, sustainable production practices that compliment an excellent quality product. In the case of Mt Cook Alpine Salmon, David and his team used the environment as an additional selling point, taking buyers on a helicopter tour over the pristine Southern Alps - the  source of water for their operation. Product differentiation is critical in an international market and Mt Cook Alpine Salmon attribute the quality of their product to nature and beautiful clean water.

Putting these points within an environmental perspective Corina Jordan from Fish & Game New Zealand drew attention to water quality trends linked to current land and water management practices. The evidence is clear, change is urgently needed if we are to turn around the current rate of decline. We simply can't continue with a high volume intensive approach to primary production that predominates in many areas, and still hope to benefit from potential premiums associated with sustainable farming practices. However Corina acknowledged that there are positive moves within the primary sectors such as dairy industry initiatives aimed at improving water quality and the community orientated approach to catchment management led by NZ Landcare Trust.

The volume versus value debate is not new, however the reasons for shifting towards value focussed production methods are become increasingly compelling (economic, environmental and social). Solutions are not simple and while we are increasingly encountering success stories the challenge facing many farmers is significant. This is where forums such as the Primary Industry Summit have an important role to play, offering the chance for industry leaders to seriously address this important issue and provide a pathway for change. One thing is clear, 'business as usual' is not an option.

 

Author James Barnett, NZ Landcare Trust 

 

 

Deliotte report -The Food Value Chain: A challenge for the next century:

http://www2.deloitte.com/content/dam/Deloitte/global/Documents/Consumer-Business/dttl_cb_Food%20Value%20Chain_Global%20POV.pdf

 

Colmar Brunton report - Better Futures:

http://www.colmarbrunton.co.nz/images/dims/Better_Futures/Better%20Business%20Report.pdf

 

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