The Chief Executive: Creating value

Creating value

As New Zealand and the world recovers and moves on from Covid-19, anyone in the business of selling anything will need to re-evaluate their business model.

By Mike Chapman Chief Executive : HortNZ

They will also need to assess how they can create premium returns so that they can stay in business. What worked before Covid-19 struck will not necessarily work in the post-Covid world. It will be necessary to reassess what is being offered and how it is being offered to the purchasers of the product.

This reassessment applies equally to horticulture. Fruit and vegetables have four significant advantages over other products:

1 Healthy food

Covid-19 has taught the world the importance of healthy food. Consumers will need to be reminded of the importance of healthy food, but this is a head start over other products.

2 Tiny environmental footprint

In New Zealand we grow all our fruit and vegetables on less than 100,000 hectares. Fruit is climate and water quality positive, and where this is not the case this situation is being progressively reversed. Balancing the small footprint against the rapid environmental improvements and the need for healthy food, the outcome is on the plus side of the ledger.

3 Sustaining rural communities

The fruit and vegetable industry employs a large number of people and although there is increasing mechanisation, we will always employ many people. There are many skilled jobs in our sector and as mechanisation increases, the number of skilled jobs is increasing. Across the country around 60,000 people are employed in horticulture. This helps sustain our rural communities.

4 Provenance

Being grown in New Zealand with the combination of the first three factors above is an enormous marketing advantage. New Zealand has stood out in the world through our Covid-19 response and New Zealand has the reputation as one of the best places to grow high quality healthy food. These four factors, and they are not the only ones, drive a value equation for consumers. The challenge is how do we get consumers worldwide to recognise this value and in turn pay for it? This is the question that Horticulture New Zealand is grappling with at present. How to create that value proposition that empowers the status of our product in the eyes of consumers?

There is one other issue and that is how do we ensure that the grower of the produce gets a fair return? Everyone involved in the supply chain needs to be fairly remunerated and that includes the grower. This is in part because the issue of equity is equally important for consumers. As all of New Zealand makes changes to mitigate climate change and improve the quality of freshwater, the prices we pay for everything will increase. The Climate Change Commission’s recently released draft report notes that climate adaptation will result in a 1% reduction in GDP (Gross Domestic Product) over the next 15 years, costing New Zealand $4 billion a year. Added to that are the costs of changes to the minimum wage rate, increases to sick leave entitlement and a new public holiday, estimated to cost $2 billion a year. And then there are freshwater changes estimated conservatively at $6 billion. Consumers and ratepayers are going to have to pay all these costs. Some of the costs may be taken up by suppliers, but even if they are, the majority of the costs will fall to the public of New Zealand and the world.

Consumers are increasingly wanting food that meets the four significant advantages set out above. As the price rises, consumers will also want to know what they are paying for, and will want to know how much everyone in the supply chain is making. This is where transparency comes in. It is possible in this digital age to have complete transparency and fully inform the consumer about everything they are buying – how healthy it is, its environmental footprint, its support for rural communities, its provenance, and how much everyone in the supply chain is making off the product. The question HortNZ is working on is creating the value that both the consumer and the grower are looking for, and transparency is one of the key value creation drivers.