passion to
profit
The magazine of New Rural Industries Australia Issue 1 October 2010
NRIA Conference and Expo 2010
ISSN 1838-6016
Producing a product successfully Tax and Primary Production Collective Marketing – what are the choices?
elcome to our inaugural issue of Passion to Profit magazine, the magazine of New Rural Industries Australia! Firstly, let me introduce myself. My name is Lana Mitchell. I am a commercial wildflower grower located on the Southern Tablelands and I started my business just over 5 years ago. I am very passionate about the wildflower industry and also about the future of the cut-flower industry as a whole. My business is small compared with many, however I now have a proven market, a proven product and production system and I am now building up the economies of scale for a fulltime commercial activity. I have learnt a great deal in the journey to date. I have learnt that when taking on a new rural industry, you have to blaze a path through unknown territory and the risk factor is very high. The only way to reduce that risk, to enable you to solve your problems and sleep better at night, is to collaborate with others. Finding people who have done like things, or have experience or knowledge that can be related over to what you are doing is vital. It is THE way I have made it this far, and is definitely the key thing that I can say has made my business the success that it is.
Editorial
I became part of New Rural Industries Australia as I feel there is a huge potential for Australian agriculture in the new rural industries, and if we don’t have to all reinvent the wheel, over and over
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again, then the journey will become a shorter and far more enjoyable one for all of us. Our new rural industries not only provide sustainable agricultural opportunities for a climate that is unpredictable, and a country that is large and sparsely populated, but they also offer diversification choices for existing traditional farming enterprises. The purpose of this magazine is to provide a venue for people to meet and collaborate, to exchange information, to provide insight and to share knowledge and experiences. There are more than 30 recognised new rural industries in Australia at time of printing, and more are on the way. From alpacas, to sesame seed, from crocodiles to tea-tree oil, from yabbies to lemon myrtle, from truffles to farmed rabbits – we are a diverse lot! ‘If you have an apple and I have an apple and we exchange these apples then you and I will still each have one apple. But if you have an idea and I have an idea and we exchange these ideas, then each of us will have two ideas.’ George Bernard Shaw I trust you will enjoy this first issue of Passion to Profit. Feel free to write to me with feedback, suggestions, comments, opinions or good news. Look forward to hearing from you. Lana Mitchell www.nria.org.au
lana@nria.org.au
Contents 3
Introducing the NRIA
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Industry News
Passion to Profit – the magazine of New Rural Industries Australia, is published quarterly. All rights reserved. It is available to members of the New Rural Industries Australia. To subscribe go to www.nria.org.au.
10 Profile: John Robb – green tea
New Rural Industries Australia, PO Box 4776 Kingston ACT 2604, Australia.
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Profile: Glynda Bluhm – alpacas
Editor: Lana Mitchell. lana@nria.org.au
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Profile: Trish Esson – cashmere
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Profile: Wayne Haslam – truffles
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How to price your product for success
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Practices for water irrigation efficiency
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Producing a product successfully
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Tax and primary production
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Collective marketing – what are the choices – and how do they work anyway?
Designer: Cheryl Zwart of Orphix Printer: Envo-Print, 2 Isa Street Fyshwick, ACT 2609, Australia Advertising: advertising@nria.org.au The publishers reserve the right to refuse any application considered inappropriate. No part of this magazine may be reproduced in any form whatsoever without the written permission of New Rural Industries Australia. Whilst every care is taken to ensure the accuracy of the information contained within the magazine, the publisher, printer and their agents cannot accept responsibility for error or omission. Views held by contributors are their own and do not necessarily coincide with those of the publisher or editor.
Cover – Australian native wildflower ‘Macropidia fuliginosa’ Black Kangaroo Paw.
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
There’s an old saying that the whole is greater than the sum of its parts. It’s a good way to explain why we created New Rural Industries Australia (NRIA).
that will inevitably come before us. Quite simply, there is no better time to be part of the bigger picture and to work together to make our rural businesses more successful into the future.
The founders of NRIA come from diverse backgrounds and industries across Australia but we all believe that we can be more profitable and productive by working collaboratively with our fellow industry players. In these times of changing environmental and economic conditions, we need to be innovative to survive and flourish and to take advantage of the opportunities
I am inviting you to attend the inaugural exposition and conference of the NRIA being held at Jupiter’s Hotel on the Gold Coast, November 28 to 30, 2010, and to become part of an alliance of new rural industry innovators. Paul Miller - Chair, NRIA Board
Introducing the NRIA
In 2007, Darro was the Commissioner for the Environment for the Australian Capital Territory (ACT) and prior to that he was Head of the Environment Protection Authority for the ACT. In the Canadian Federal Government Darro held executive positions in the Department of Fisheries and Oceans Canada, Parks Canada, Environment Canada and Canadian Heritage. He has a farming background with tertiary qualifications in forestry. Since starting with New Rural Industries Australia, Darro has been a driving force behind the NRIA. He has been instrumental in securing funding for the NRIA’s first conference and exposition to be held in November of this year, launching the membership of the association and forging some immediate key alliances.
administration, having held long term positions with both the Rural Industries R&D Corporation and the Australian Centre for International Agricultural Research. When not working, her love of travel has taken her to over 100 countries and most corners of the globe. Together, Darro and Vicki have the initial phase of the New Rural Industries Australia (NRIA) website up and running! You can find the website at www.nria.org.au. This early edition of the site is intended to provide an introduction to NRIA, information on some of the many new rural industries and provide links to relevant and useful websites. It includes basic resources for information on pests and diseases, quality control, climate change and research and development. We also cover key information such as grants and funding, exporting and importing, legal, intellectual property, finance, bookkeeping and more. Please feel free to explore the content and links to external websites, and we also welcome your suggestions on what you would like to see included on the website.
Working with Darro is Vicki Byrne, the NRIA Coordinator and Administrator. Vicki has an extensive background in research Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
Vicki Byrne
welcome
Darro Stinson was appointed as the inaugural Manager of the New Rural Industries Australia (NRIA) Secretariat in December of 2009. Darro brings with him extensive experience in both the public and private sectors in Australia and Canada. Darro is the Managing Director of Stinson and Associates and has provided strategic advice in the area of natural resource management to numerous clients in Territory and Commonwealth government departments, authorities and the private sector.
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What’s in it for me? Get ready to cooperate better to compete better Although there are often some short-term advantages in working along and keeping information to yourself, the evidence suggests that there is far more to be gained by considering the entire supply chain as your “field”, and working collaboratively.
benefits
Each and every member understands that their fellow members have joined to help each other help themselves.
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The remarkable success of The Australian Persimmon Export Company is an excellent recent example. And there are currently a number of other new crop groups in such industries as bamboo, native flowers, and tropical fruits and vegetables, which are exploring ways of becoming more competitive through cooperation and adopting a ‘whole of supply chain’ strategy. Naturally, there are also clear opportunities for New Rural Industries Australia to develop a wide range of shared resources including industryinformation websites, researcher registers and practical best practice manuals, among other things.
Comprehensive, one-stop source for valuable information This can take the form of hard research evidence, specifically collected industry data and anecdotal feedback from various industry members. There are many processes, systems, techniques, innovations, research studies and technologies working well in other industries which may very well help make your efforts more productive and profitable. And there are also many regulations, Quality Assurance Standards, public education, marketing, production and health issues which are shared by others in your associated industries.
of your business. From basic information on industries or products making news, to broad national press releases relating to the hiring of staff, tax obligations and incentives, opportunities or threats. The range of areas covered can extend from keeping abreast of international matters to developments with minor-use permit applications.
Networking and developing business relationships that build your business Beyond the sharing of information and ideas electronically, New Rural Industries Australia is also keen to develop a powerful network. Through conferences, expos, workshops or any other networking event, the NRIA works to link up members so as to build on strengths and create unity in very diverse agricultural fields. The common range of issues and problems allows members to work together to address and solve them.
Improving the bottom line Each and every member understands that their fellow members have joined to help each other help themselves. The process of interacting with industry and associated industry colleagues brings its own personal rewards. Inevitably, collaborative effort leads to a better informed, better run and more successful business or organisation.
Tapping into this store of knowledge and experience can be very valuable.
From production efficiencies, to bookkeeping practices, to basic tax information, to risk strategies and tools for assessing viability and improving profit, New Rural Industries Australia wishes to provide members with more information and tools that will allow them to improve the bottom line and make their passion a profitable one.
Stay abreast of the news and issues
Solving problems
It is often hard to stay on top of news in a planet that runs 24/7. In the new rural industries it is also difficult to sift through the volumes of media to find items that are pertinent and applicable to your sphere of business. New Rural Industries Australia will work to provide topical, interesting and relevant news that you can use in the running
Confidence and morale aren’t the easiest qualities to engender and build in isolation. New Rural Industries Australia will work actively to provide opportunities to share challenges and solutions with those who are in very different pioneering fields but confronting identical issues and challenges.
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
New Rural Industries Australia
membership application
NRIA’s mission is, through cooperation, coordination and education, to create an environment for the development and capacitybuilding of new, innovative, Australian rural industries and to maximise the economic benefits our nation gains from such industries. Our organisation is as strong as its membership numbers and we are growing daily. To become a member you can go online to www.nria.org .au and apply directly online. Or, if you prefer, fill out the below and submit to NRIA PO Box 4776, Kingston ACT 2604. New Member
Renewal
Membership Category: (please tick appropriate box)
Individual
New member - $150/year Renewal - $100/year
Industry Bodies
$500/year
Corporate
$5,000/year
Name:______________________________________________________ Organisation:___________________________________ (please print) (if applicable) Address:____________________________________________________________________________________________________ Suburb/town: ____________________________________________ State: _________________ Post Code: ___________________ E-mail:____________________________ Phone: (
) _________________________________
What would you value most out of your membership with NRIA:
Collaboration and sharing information across industry Developing supply chain opportunities Information and solutions on key problem areas for new rural Inform policy makers on key issues industries Broad education at federal, state and consumer levels, of the Networking with other new rural industry participants new rural industries Conferences and expos Other (please state) _________________________________ Payment Method (please tick appropriate box)
OPTION A: BY BANK TRANSFER – to Commonwealth Bank BSB 062 910, account number 00801164.
Include your surname on the reference line and send the completed application form to NRIA, PO Box 4776 Kingston ACT 2604.
OPTION B: BY CREDIT CARD – please complete the section below Bankcard Master Card Visa Card number Expiry date ___ / ___ Signature _______________________________ Send your completed application form to NRIA, PO Box 4776 Kingston ACT 2604.
OPTION C: BY CHEQUE – please attach your cheque (made out to ‘RIRDC’) to the completed application form and post to NRIA, PO Box 4776 Kingston ACT 2604.
OPTION D: PAYPAL – please go to www.nria.org.au and follow the prompts. (Office Use Only) Date accepted______________________
Membership #____________________________________________
2010 Conference and Expo 28th – 30th November 2010, Jupiters, Gold Coast Purpose of Conference and Expo To bring about more collaboration between the new rural industries, take up common issues and allow the exchange of information to maximise the economic benefits Australia gains from such industries. To educate others on the diverse range and huge potential of our new rural industries. The conference will be structured around issues and situations that are common to most, if not all, rural industries. It will involve a mix of case studies from “hands-on” primary producers, as well as presentations from recognised industry experts in areas as diverse as innovation, quality and quantity, climate change, capacity building, legal and regulatory constraints to the new rural industries, profitability, market development, minor use of chemicals, exports, protecting your product through intellectual
property, value chain and making the most from research and development. There will also be a trade exhibition open to all allied industries and to any new rural industries to showcase their products. For full program, details of accommodation options, and for registration, go to www.nria2010.com.au
Supported by funding from the Department of Agriculture, Fisheries and Forestry under its Promoting Australian Produce (Major Events) Program
Herb R&D levy plan Consultation is under way for culinary herb and spice industry participants to consider a proposal to implement a statutory research and development levy for the Australian industry. The herb industry has experienced stable growth for 20 years and this growth has been underpinned
by research and development, which has been for the behalf of all industry participants. The levy is being proposed to ensure ongoing development and future viability within the industry. For more information: www.ahsia.org.au.
NRIA submission to Productivity Commission
news
On 15th Feb 2010, terms of reference were announced by the Assistant Treasurer and the Minister for Agriculture, Fisheries and Forestries for a Productivity Commission Inquiry into rural research and development.
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Amongst other things, this inquiry is to examine the: • rationale for Commonwealth Government investment in rural research and development. • appropriateness of current funding levels and arrangements–particularly levy arrangements, and matching Commonwealth contributions. • extent to which Rural Research and Development Corporation (RRDC) funded projects provide for an appropriate balance
between industry-specific and broader community benefit. • effectiveness of the RRDC model in enhancing the competitiveness and productivity of Australia’s rural industries. • scope for improvements to the RRDC model– and any alternative models that could deliver better outcomes. New Rural Industries Australia Chairman, Paul Miller, put in a submission to the commission, giving details on the importance of R&D for the new rural industries and laying a clear case for not just supporting our pioneer efforts, but increasing funding. This is one of 152 submissions the Productivity Commission has received. The draft report was completed and public hearings are now to be done in October/November and the final report due on 15 Feb 2011.
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
Hit cooking show, Masterchef, has whet the appetite of consumers for fresh produce, including products of new rural industries that once struggled for a spot on retailer shelves.
we are now making great inroads dealing with supermarkets, as they are seeing the impact of the show”, he said. “From a producer perspective, it has opened the doors to retailers”.
Game Farm has been able to start talks with major supermarket chains about getting its products on shelves after the show featured squab in one of its challenges. National sales manager, Michael Windebank, said the familyowned company, which has outside contract quail growers and processed pheasants and guinea fowl for independent growers, had enjoyed a significant increase in sales attributed to Masterchef.
Redgate Pheasant Farm director and chef, Carolyn Scott, said she hoped the Masterchef program would reverse the trend of “a McDonald’s generation” of children and encourage youth into the kitchen. Redgate, near Maitland, produces pheasant for restaurants, such as Sydney’s award-winning Aria. “Masterchef is creating awareness of fresh food”, she said.
“It has been very positive for us across multi-game species – it comes down to the fact the public have been made more aware of how easy it is to cook various game and duck”, he said. Mr Windebank said the company was amazed by the increased level of awareness of game that visitors to a recent food and wine show demonstrated compared to a year ago. “To date, quail, spatchcock, duck and squab have definitely been more of a food service line, but
The many and varied products of new rural industries: from crocodile and kangaroo meat, to Asian vegetables, game rabbit, tropical fruits, herbs, spices, Australian native foods and more, all have much to gain from the impact of Masterchef. A report by research company IBIS-World predicted the Masterchef phenomenon would spur dramatic growth in restaurants and cafes, food magazines, domestic catering and gourmet foods, which the report says will be worth $5.5 billion by 2014 – 2015 – a 60.8% increase.
Masterchef has wet the appetite for consumers of fresh produce
New Chair and Managing Director for RIRDC RIRDC is the statutory authority established by the Australian Government to work with industry to invest in research and development for a more profitable, sustainable and dynamic rural sector. Specifically, RIRDC’s mandate from government is to achieve results from research and development investments in three areas, one of which is new rural industries. RIRDC publishes (both in print and electronically) the majority of its research outcomes, which are available for free download from the website. Recently Professor Daniela Stehlik was appointed as the new Chair of RIRDC. Professor Stehlik is one of Australia’s leading social scientists in the areas of sustainability, human service practice and social cohesion with a focus on families and communities in regional/rural Australia. She has also recently been appointed as inaugural Director of the new Northern Institute at Charles Darwin University.
A new RIRDC Managing Director has also recently been appointed – Mr Craig Burns. Mr Burns comes to the position after a highly successful career in the Department of Agriculture, Fisheries and Forestry. He was most recently the Executive Manager, Trade and Market Access Division in DAFF and is responsible for coordinating the Department’s engagement on a range of multilateral, regional and bilateral activities. Mr Burns previously had the role of Executive Manager, Free Trade Agreements which included participation in Free Trade Agreement negotiations.
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
Daniela Stehlik
news
Source: The Land
Masterchef opens the marketing door for new industries
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New standard for the olive oil industry Standards Australia, in collaboration with the Australian Olive Association, is working with relevant stakeholders including retailers, consumer associations, government bodies and growers to develop an Australian Standard for the olive oil industry. Recent studies by the NSW Department of Industry and Investment found that three out of the six leading imported extra virgin oils carried inaccurate labelling. Further, a major study by the Canadian Food Inspection Agency found, on average, a quarter of inspected olive oils were adulterated. In addition, a recent CHOICE
survey of 28 brands of extra virgin olive oil sold in Australian supermarkets found that half did not meet widely accepted international standards. It is common practice, particularly overseas, for olive oils to be mislabelled, blended with other seed oils such as canola or rapeseed oils, or bottled using inferior oil. These products inevitably end up on Australian supermarket shelves. The Australian Olive Association believe that the new Australian Standard will be a huge benefit for consumers and growers alike.
New planned R&D Tax Credit Program Companies with turnover of less than $20 million can access a 45 percent tax credit
As part of the 2009 Federal Budget, the government outlined its Powering Ideas innovation agenda, which included plans to replace the earlier R&D Tax Concession Scheme with a new $1.4 billion R&D Tax Credit program from 2010/11. The main provisions of the new two-tier R&D Tax Credit program are: Companies or corporate groups with turnover of $20 million or above can claim a 40 percent tax credit, equal to 10 cents in the dollar of eligible R&D spend. Previously this was a 125% deduction which gave 7.5 cents benefit.
news
Companies with turnover of less than $20 million can access a 45 percent tax credit, equal to 15 cents in the dollar of eligible R&D spend. If these companies are in tax loss, they will be able to ‘cash out’ the R&D credit as a tax refund. Previously the rate of benefit for SMEs was the
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same as for larger corporations, but could be accessed as a refundable tax offset. The new R&D tax incentive is contained in the Tax Laws Amendment (Research and Development) Bill 2010 and the Income Tax Rates Amendment (Research and Development) Bill 2010, available on the Parliament of Australia web site. Parliament adjourned before the Tax Laws Amendment (Research and Development) Bill 2010 could be brought to a vote in the Senate. With the government election process now completed, the bill will be brought to the vote in the Senate. These new changes are likely to put downward pressure on R&D activities from larger companies, and the benefit to small and medium sized enterprises is likely to increase by a realignment of R&D eligibility. For further information go to www.ausindustry.gov.au
Guide to the Horticulture Award The Fair Work Ombudsman has been working with industry partners to educate employers and employees in the horticulture industry. The aim is to promote compliance with Commonwealth workplace laws, including the modern Horticulture Award 2010 and the National Employment Standards which came into effect on 1 January 2010.
A Guide to the Horticulture Award 2010, containing a self audit checklist, the modern Horticulture Award 2010, National Employment Standards and employers’ workplace rights and obligations. The Guide, checklist and other useful information are available at www.fairwork.gov. au. For a hardcopy of the Guide, which includes a CD-ROM, you can call the Fair Work Info line on 13 13 94.
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
“Families needing farmers” campaign The NSW Farmers Federation is implementing a campaign over the next three to five years that aims to educate metropolitan consumers about ‘farm life’ and where food comes from. The intention is to create a greater awareness of the role farmers play in feeding all our families, looking after the environment and caring for animals. Research by Meat and Livestock Australia found that more than half the 24 – 34 year olds living in Sydney have never set foot on a farm. Mr Charles Armstrong, the NSW Farmers Federation President, said the aim was to show how similar urban and rural families were, but also how connected urban families were to the land through their food and kitchens. He said the new “Families Needing Families” website would allow people to go online to find out just who was behind much of the fresh produce that appeared on their supermarket shelf (that ends up in their
pantry and fridge). “The website is all about education and putting a face to the farmer who produces the food. Mr Armstrong said people would be able to click on a common item of food and then be taken to photos and videos produced by association members. A map of NSW would also show people where in the state produce was grown to demonstrate the variety of agricultural products produced. The first of a series of television commercials will be launched on the Nine Network to coincide with the season premiere of the popular reality show Famer Wants a Wife, and then run across regional NSW. It is hoped that the campaign will give people a greater understanding and empathy with their farmers, and that with this, rural communities will benefit from improvements in policy development due to a greater understanding in farm operations within the metropolitan areas.
Incentives for ag students Figures from the Australian Council of Deans show universities are turning out just 800 graduates for every 2000 jobs in the agricultural market. And attracting students from regional and rural Australia into tertiary education has been a big part of the problem. Part of the strategy to entice students into agricultural studies and agribusiness and agribusiness courses has been to increase the range of scholarships and bursaries on offer. Most universities now offer scholarships of up to $5000 a year for agricultural students from rural towns, and bursaries are offered to attract students from more urban environments. The NSW Farmers Association also awards a number of scholarships each year under a tertiary scholarship program. The Australian Council of Agricultural Societies has a program that has been running for 5 years now, awarding agricultural scholarships of $2,000 to 35 students annually. Similiarly, RIRDC recently launched a new undergraduate studentship program to help
address the chronic shortage of agricultural graduates. The Investing in Youth Undergraduate Studentship Program will provide not only financial support for students, but a professional mentor to support students with career advice and direction, along with career relevant industry placement and employment opportunities and a support network to instil in students a sense of belonging in primary industries. There were 10 new studentships awarded in 2010 and the successful recipients were selected on the basis of their commitment to primary industries and to a career in primary industries. The studentships will provide support for the 4 year tenure of undergraduate studies. The program has the backing of a number of major national rural investment institutions. They are: the Australian Egg Corporation Ltd, Australian Pork Ltd, Cotton Research and Development Corporation, Grains Research and Development Corporation, Grape and Wine Research and Development Corporation, Horticulture Australia Ltd, Meat and Livestock Australia and the Rural Industries Research and Development Corporation.
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
news
The fight to attract students to agriculturalbased courses at universities and also at TAFEs is continuing in a bid to reverse the drop in numbers in recent years.
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John Robb Australian Green Tea Pty Limited
Q: What inspired you to get involved in a new rural industry?
Traditionally, we have been involved in growing Camellia plants (wholesale) for ornamental purposes. This sector of the Nursery Industry has been declining in recent years, due to a number of factors, so we took up and focused on growing green tea over the last number of years. Green tea is a good crop, particularly for NSW Central Coast. It is a natural means of diversification for our company and in my view it is an excellent opportunity for Australian farmers.
Q: What have been the pitfalls you have overcome? How?
Profile
“Our business seeks to be the gateway for new participants into this industry in NSW.”
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Varietal Selection: Because this is a start-up industry for Australia, most information on the best plant varieties comes from other countries with different climatic conditions. Taking this into account, and through a lot of trial and error, we have determined the varieties that best suit our conditions and we have started our own breeding program for green tea. Propagation challenges: All varieties have differing propagation requirements. Once again, we have had to collect all available information and follow this with trial and error. Planting challenges: Do you plant by hand or with machine? Each method presents its own problems. Machine planting needs plants which fit machine specifications, so it is also interlinked with propagation challenges. Weed control: Organic production is an important aspect for all edible crops and for obvious reasons it is desirable to have a sustainable, organic production model for the green tea industry. Weed control in the early phase of crop establishment is a major challenge and research is still underway to overcome this important issue. Processing: Currently in NSW, the driving force behind the establishment of this new industry has been a single Japanese company. The ‘industry’ in NSW cannot progress further until such time as farmers have a
guaranteed timeframe for the completion of the processing plant.
Q. What do you consider your successes? What do you attribute these to?
Good general knowledge of the potential new industry: We have achieved this through research and persistence. You have to get handson to understand the challenges facing new participants and you have to be prepared to go and seek the information, wherever it may be (ie travel!). Working knowledge of the industry from a farmer’s perspective: How can you set up a network of growers without knowing the challenges that you are likely to face? Once again, hands on and regular communication with all stakeholders is vital. Collaboration with other stakeholders: We have been working closely with the NSW DPI Gosford Primary Industries Institute to address the challenges facing the emerging Green Tea Industry. We have continued to engage with interstate growers on common issues towards the advancement of the Australian industry as a whole.
Q. What are 5 tips you could give others in new rural industries?
1. Know what the industry is about before you start 2. Look outside your local area for the answers you need. 3. Can you make money out of it – do the financials and a full business plan. 4. Simple SWOT analysis. 5. Move forward with people who share your vision – you can’t do it alone!
Q. What is your future vision for your business? Our business seeks to be the gateway for new participants into this industry in NSW. We believe that the green tea industry presents opportunities for potential large-scale investors, farmers looking to diversify their production and tree-changers alike. Our goal is to be able to supply the plants, the technical expertise and eventually the market access needed to spearhead this new and emerging industry to the forefront of Australian agriculture.
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
Glynda Bluhm Alpaca Magic
rural industry?
I had been involved in a beef cattle partnership and as that partnership closed I began to look at a stud breeding industry that I could run by myself. I knew that the conventional livestock industries would not fit the bill, so I researched new industries – lots of them. Gradually I eliminated all but a couple–alpacas and llamas.
Q: What have been the pitfalls you have overcome? How?
A lack of information because of alpacas and llamas being a new industry. I solved this by doing lots of research, via magazines, internet and mentors. No established markets I advertised, wrote articles, took alpacas and llamas to field days, nursing homes and other facilities (even shopping centres) in order to introduce these animals to the public. Mostly this was as a community service, but it also had the benefit of promoting alpacas and llamas and my stud. Limited end product (fleece) markets I have value added by having my own fleece commercially carded and spun. I then learned how to hand card and spin and felt to develop my own cottage industry. I brought in a teacher to run classes so clients and other interested people could learn how to use alpaca and llama fleece.
Q: What do you consider your successes? What do you attribute these to?
Breeding and selling stud quality alpacas is one of my successes. I attribute this to selecting quality registered female breeding stock; buying the best males I can afford; deciding what characteristics were important (ie. fleece quality, good bone structure, robust constitution, good temperament, etc.) and breeding for those traits. Being one of the top llama studs in Australia is also one of my successes. Similar to the path I followed with alpacas, key was deciding what characteristics were important and breeding for those traits. An intimate knowledge of each of my animals has also been key. I have spent a lot of time
really coming to know the dynamics of the herd, watching and learning. It allowed me to access each animals health (or otherwise), and keep my herd happy and healthy. It made my life happy and less stressful too.
Q: What are 5 tips you could give others in new rural industries?
1. Research several possible industries that interest you and choose which of these most interests you and that you have (or can get) the necessary skills and infrastructure. Get lots of “hands on” work experience before you decide. Offer yourself as a volunteer to an experienced person who is already making a success of that industry – they will probably be grateful for your help and you will learn lots of things you won’t learn from a book 2. Make a business plan and have back up finance – to set up well, will probably cost more than you expect. 3. Buy quality breeding stock. Breed quality stock. If there is an industry body, make sure you are a member, and that your stock is registered. Registered stock with identifiable genetics will give you a big breeding advantage. 4. Have a mentor. It is really useful to be able to discuss ideas and problems with someone with experience, and someone who wants you to succeed. 5. Provide fantastic (not just OK) after sales service to your customers
Q: What is your future vision for your business? My initial vision was to breed and sell quality stud alpacas and llamas, introduce new people to those industries. I am living my vision. I moved from just being a stud breeder to helping other people do the same by running workshops that introduce people to alpacas and llamas. From there I expanded my operation to selling my own commercially carded alpaca and llama fibre and learning to hand card, felt and spin alpaca and llama fibre. I then became a distributor of the Roberta Electronic Spinning Machine and I offer workshops to learn how to spin and felt with alpaca and llama fibre. My next goal is to breed llamas with certain special desirable traits.
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
My initial vision was to breed and sell quality stud alpacas and llamas, and introduce new people to those industries. I am living my vision.
Profile
Q: What inspired you to get involved in a new
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Trish Esson CASHMERE CONNECTIONS PTY LTD
Q: What inspired you to get involved in a new rural industry?
A love of animals and a very real interest in the breeding of animals, with a view to making genetic gain.
Q: What have been the pitfalls you have overcome? How?
Profile
We have made great genetic gain in the development of the Australian Cashmere Goat since we entered the Industry in 1988.
Meat market: Our cull animals all go into the goat meat industry. In the early days there were a lot of dodgy operators in this industry. With the introduction of the Boer goat the goat meat industry has become more competitive and a lot of the dodgy operators have disappeared. Returns for goat meat have improved several times over. Nowadays, with goat meat prices being on a par or often greater than lamb, it is worthwhile doing our homework and finding who will offer the best possible return for the cull animals that go to the meat market. Sourcing quality stock: When we entered the cashmere industry the goats were not far removed from their feral origins. As we didn’t know all that much about what a good cashmere bearing animal was (or was not), we took all the animals that we could get and consequently ended up with a lot animals that had to be culled before too long. Fortunately we were able to purchase some really good coloured animals as many of the better breeders were trying to go white and were happily casting quality animals with colour. Nowadays people considering entering the Cashmere Industry have the assistance of the Industry’s electronic herdbook (Merrrit) which contains the parentage and performance records of individual animals with links across herds within the Industry. Estimated breeding values are calculated for each animal for a number of different traits.This is a tool which is not only useful to those within the industry but also very useful for newcomers. They are able to have some assurance of the quality of the animals which they purchase to start their new enterprise. Sourcing information about Cashmeres & goats in general: Before we purchased our first goats I tried to research the subject as much as possible,
however this was before the advent of the internet, very little information could be found. The cashmere industry published “Goat Notes” and this became the virtual bible for cashmere producers in the late 1980’s-90’s. There have been several editions and updates to this popular publication and much of it is now available online at the Cashmere Growers Association website. Much research was done also by Dr Bruce McGregor, of the Victorian DPI. His large body of research into goats (both cashmeres & angoras) can be found online , along with articles and research by others. Fencing: We have had many issues with fencing. In the early days we put in all electric fencing, but new born kids kept wandering into it, getting shocked, panicking and then getting caught in the fence requiring fast rescue or they died. We turned it off and then a few does went through the fence, teaching the smaller kids to do the same. We have since replaced all of the electric fences with hinge joint and plain wire fencing, which solved our problems.
Q: What do you consider your successes? What do you attribute these to?
We have made great genetic gain in the development of the Australian Cashmere Goat since we entered the Industry in 1988. This has all been done through detailed record keeping together with a carefully planned and managed selective breeding program. Unlike other livestock breeds we have not had the luxury of being able to access of superior genetics from overseas to assist us in making gains in production, we have had to do it all ourselves. The early Australian Cashmere bearing goats produced 30 – 70 grams of cashmere, which was not commercially viable if reliant upon fibre production alone. As a result of breeding, the Australian Cashmeres are now producing 10 times the quantity of cashmere as those early cashmere bearing animals. There are still challenges ahead and hopefully more celebrations as we attain the milestones that we have set for ourselves in our quest to develop the Australian Cashmere as the ultimate fleece bearing animal. Continued on page 22
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Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
Wayne Haslam Australian Truffle Growers Association
rural industry?
Moving to retirement on a rural block I was seeking an outdoor activity that was both challenging and rewarding. I was seeking an interest that would occupy my newly found time.
Q: What have been the pitfalls you have overcome? How?
I guess determining the most suitable alternative farming option to suit my background (civil engineering) and the agricultural potential of the rural property I had. I considered grapes, but luckily all my contacts and advisers talked me out of that. I then considered olives, but at the time, found too much conflict over the most suitable varieties for the region. Then I heard about truffles and considered them an interesting option and less work that the two previous options. The second pitfall was then finding out information about the proposed new crop, which was a challenge, as the truffle industry was, at that stage, developing into ‘secret men’s business’. To further my understanding I joined the New Zealand Truffle Association in 2005 and then went on to establish the Australian Truffle Growers Association in late 2006. This is now a successful organisation assisting the majority of growers in understanding the business of growing, processing and getting truffle to market.
if you can’t control all the resources then you have to establish your base so that the negative effects of uncontrollable factors can be mitigated to reduce risks. I also consider the establishment of the Growers Association a success, as evidenced by its growth and maturity over the past 4 years into an informative and communicative vehicle for all truffle growers.
Q: What are 5 tips you could give others in new rural industries?
Follow the lessons from the RIRDC research! 1. Develop a personal business plan that integrates your aims with the overall industry strategic plans. 2. Widely seek the best advice possible and take a long-range program approach without being too optimistic regarding outcome; it is an agricultural pursuit. 3. Ensure the venture is commercially focused on the product outcome and with realistic marketing prospects. 4. Don’t rush into long term contracts for anything, until you really understand the industry and how it works. 5 Build long-term relationships with industry associations, competent and experienced growers and research providers.
Q: What do you consider your successes? What
Q: What is your future vision for your business?
Having established a producing truffiere and having learned from early mistakes, I have gone on to double the planted area. I base this on experience as a project manager and realising that
To have a successful producing truffiere that works collaboratively with the industry partners, as, in the long term, cooperation will always be more productive than competition and is the basis for mutual understanding.
do you attribute these to?
Having established a producing truffiere and having learned from early mistakes, I have gone on to double the planted area.
Profile
Q: What inspired you to get involved in a new
Who’s who on our Management Committee Ian Chivers
O
ver the course of the next several issues we will profile each of the members of the New Rural Industries Australia Management Committee, so that you can learn about the people steering the organisation, and get details on their backgrounds and the industries they are involved in. Full information can also be found at www.nria.org.au in the About Us section.
Profile
Martha Shepherd
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Martha Shepherd
Ian Chivers has been involved with native grass seeds for over 25 years. He has bred grasses, researched, sown, managed and harvested crops and established Native Seeds P/L the largest seller of Australian native grasses. He continues to undertake research, often in conjunction with Australian universities, and leads the technical development of the native grass seed industry in Australia. He is regularly asked to speak at conferences and has written extensively on this topic. Some of his work has contributed to his Masters and PhD awards from Melbourne University. He manages his own seed production enterprise based in South Gippsland, Victoria where he is converting a dairy farm into a seed production operation.
Martha Shepherd, with partner David Haviland, founded Galeru in 1997—a rural enterprise which produces a range of gourmet products from native rainforest fruits grown on their Queensland property. Martha has 35 years management experience in the food industry, in particular as Director of International Operations with Mrs. Fields Famous Brands, managing the company’s international franchise network in 37 countries, as well as its new product research and development. Martha was the Australian national winner of the RIRDC Rural Women’s Award 2006, Innovator in Residence for the Centre for Rural & Regional Innovation Queensland in 2007, and Honorary Senior Fellow of the University of the Sunshine Coast Queensland in 2008 for her contributions to agri-business. Martha is currently Chair of Australian Native Food Industry Ltd (ANFIL), the peak body for native foods in Australia, a Director of Galeru Pty Ltd, and holds a Diploma from the AICD Company Director’s Course.
John Lever
Andrew James
John Lever has been working on wildlife management programs since 1972 and established the first commercial crocodile farm in Queensland in 1981. John has been an honorary consultant to the Crocodile Specialist Group of the International Union for the Conservation of Nature since 1975 but has also served on the Queensland Tourism Board as a Director, was Chair of Central Queensland TAFE, Chair of the regional tourism and development corporation (CTDO), the Rockhampton Area Consultative Committee and the Rockhampton branch of the Queensland Cancer Fund. With a wealth of international experience, John is well positioned to help drive the development and growth of new rural industries in Australia. John’s crocodile farming business “Koorana” has won many awards for achievement, not the least of which
Andrew James has nearly 30 years experience in genetic improvement and management of Australian Cashmeres, he is the President of the Australian Cashmere Growers Association, editor of Cashmere Australia magazine and member of the Rare Natural Fibres advisory committee of the RIRDC. He also has experience in marketing and early stage processing of Australian Cashmere. He runs a mixed farming operation, principally beef cattle and cashmere goats at Lowood in Southern Queensland. Andrew is also a research scientist with CSIRO researching soybean improvement and improving adaptation of crops to challenging environments in Australia and tropical Asia. He has released eight soybean cultivars in Australia and contributed to the release of one in Thailand and three in Vietnam via collaborative work in those countries. Andrew
Ian Chivers
John Lever
was the National Telstra Small Business of the Year – 1992. John is currently Chair of the Queensland Crocodile Industry Group, a Director in his family business, Koorana, and a Fellow of the Australian Institute of Management.
Continued on page 23
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
Practices for Irrigation Water Efficiency Employ mulches wherever possible.
Develop an irrigation maintenance program. Routinely inspect all water lines, valves and pumps for leaks. Keep replacement and repair parts on hand. Inspect sprinkler nozzles to ensure they are operating properly and are distributing the water uniformly. Evaluate irrigation system pressures to better control application rates. Collect stormwater and irrigation runoff in a series of ditches or drains that return the excess water to a storage pond. Incorporate moisture retentive polymers in the soil. Though traditionally used in container plantings, these polymers are presently being tested by some growers and golf courses to cut down on irrigation demands. Water early in the morning to reduce evaporation losses. Practice conservation tillage. Conservation tillage encompasses minimal or no tilling and leaves at least 30 percent of the previous season’s crop residue in the field. Although conservation tillage was originally devised to prevent soil erosion, a side benefit is increased soil water storage capabilities. Till the land along the topographic contours to reduce runoff. Incorporate organic matter such as compost into
the soil. Organic matter retains moisture and is especially effective in sand and clayey soils. Incorporate cover crops for winter and fallow times to improve the soil and reduce water and soil losses caused by runoff. When tilled under, cover crops also add organic matter to the soil. In times of heavy drought, practice deficit irrigation where feasible. This method involves stressing plants by reducing water applications. Be aware that this practice typically reduces crop yields and may lower the quality of some products. However, the water savings may be more valuable than the crop losses. Utilise computer software to aid irrigation scheduling. Such programs determine crop water use, maintain root zone saturation records, predict soil moisture change and determine irrigation requirements. Use pressure regulators for uniform water distribution throughout irrigation systems. Use timers, automatic shut off valves, rain sensors and other such devices to help ensure overwatering does not occur. Investigate alternative irrigation water sources, such as bore water, use of dam water, on-site gray water systems, and holding tanks for rainwater or greenhouse irrigation water. There are also other options, depending on your location, such as treated municipal wastewater treatment plant effluent, and treated industrial effluent. State and federal regulations that restrict the reuse of water from certain sources should be investigated and permits obtained where applicable.
collaboration
T
he following water efficiency practices and techniques can help reduce water use.
15
Producing a Product Successfully
P
ioneers usually have no precedent to follow, having to develop production systems from nothing. They usually work alone. There are no industry exports with whom to share ideas, since the pioneer is usually the only expert. Hence, the cooperative ethics which is so important with successful supply chains may require a big change in approach for the industry. New industry pioneers who have had to work through the solutions to problems by themselves, can be expected to feel some special degree of ownership over their findings. Hence, there is often and understandable reluctance to freely share what they have learned.
“Since most rural industries involve growing a product under natural conditions, the conditions themselves will vary between locations and at different times. Transferring production systems from other places, especially from overseas, will usually require some degree of adaption in Australia.” Participants in new rural industries are faced with finding the most efficient production system for their product. This does not mean that the production process is fully understood. It means that the experience gained with production in the past has established steps that can be expected to generate the required product in the future. Since most rural industries involve growing a product under natural conditions, the conditions themselves will vary between locations and at different times. Transferring production systems from other places, especially from overseas, will usually require some degree
16 16
of adaption in Australia. The experience gained through this adaption is invaluable, but cannot be achieved quickly. The new industries that have been most successful in adapting their production systems are those whose systems are most similar to conventional production systems. Experience from a closely related domain enables pioneers to work through the issues much faster, since they can apply principles from the related knowledge. Nevertheless, there is still a large amount of trial and error with developing the production process for a new product, and this requires time. Some participants in this research observed that, once a suitable environmental niche has been established for a new industry, it is easier to develop a geographic cluster with a number of participants in close proximity to each other. This will happen if the local champion is able to facilitate the entry of his neighbours into the industry. This makes it easier to work together and share knowledge. Unfortunately, some new industry participants are quite protective of their expertise, seeing this as a point of competitive advantage and a potential loss for them if others were to acquire. The speed of a new industry’s progress has often appeared to be directly related to the amount of collaboration and information sharing that occurs. A common production challenge has been the accessing of suitable germplasm. Animals or plants that do well in one environmental regime do not necessarily respond in the same way in another place. They many not respond to the environmental cues in the same way, or they may encounter some pest or disease in the new place. Experience with germplasm can only can gained over time, and if the germplasm is unsuitable then either the germplasm or the environment needs to be changed and trials recommenced.
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
In summarising, the following is recommended: • Focusing on identifying the key components of the production system that will deliver a product the customer needs.
The new industry participants in this research identified specific examples of industries accessing germplasm without adequately considering the previous experience. However, there is no guarantee that such information exists for each new industry, or that it will be made available in usable form. Research for the new rural industries needs to be focused on finding simple solutions to the problems involved in getting the best possible product to market.
• Spend the time to access the germplasm and the prior experience gained with the germplasm, including the environments in which it was previously used. • Keep research focused on the product which the consumer needs. • Develop a means whereby participants in the new industry can share their experiences, learn about the most efficient production systems, and cooperate in improving the production system. • Encourage the proliferation of the appropriate production system within the chosen environmental niche so that critical mass can be achieved in a geographic area. This article is excerpted from “Critical Success Factors for New Rural Industries” a 2010 RIRDC publication.
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
collaboration
It is important to access the experience gained from other places before obtaining germplasm for trialling. This experience should include an analysis of both the relevant environments and the particular germplasm.
• Get good advice, particularly from experienced people who may have gained their knowledge from related industries.
17
Tax and primary production
S
ome practitioners in new rural industries will already have been primary producers for many years — either in one or more of the ‘new’ industries, or in ‘traditional’ industries but diversifying or changing their operations. On the other hand, some may be newcomers to primary production. This very brief introduction on tax and primary producers is aimed mainly at the latter group, but may still not be wasted on experienced producers. Much tax law applying to primary producers is the same as for all Australian businesses. For example, paying tax on profits and on capital gains, claiming eligible business expenditure and depreciation of capital assets, employing staff and engaging contractors, managing payas-you-go tax, paying GST and claiming GST credits, keeping accurate and adequate records, and so on. Many smaller primary producers (ie, with a business turnover of less than $2 million a year) can also take advantage of the special tax
In addition to the basics, it is important to know that some or all primary producers also have access to a number of tax provisions unique to primary production.
concessions for small business — these include simplified trading stock and depreciation rules, immediate deductions for some prepaid expenses, and concessions on Capital Gains Tax liabilities. If you are new to business, it is vital that you learn these basics about business taxation, whatever business structure you use (eg, sole
18 18
Alan Cummine
trader, partnership, company, trust, etc), and that you understand the ‘self-assessment and random audit’ model of tax administration used in Australia. You should also consider using the services (for a while, at least) of an experienced accountant who is used to dealing with primary production enterprises. In addition to these basics, it is important to know that some or all primary producers also have access to a number of tax provisions unique to primary production. Some of these are described below. All the basic information is available on the website of the Australian Taxation Office (ATO) — www.ato.gov.au. Two good places to start are a downloadable 10-page booklet, Information for primary producers 2010, and the main relevant webpage, Primary producer essentials.
Carrying on a business of primary production The most fundamental ‘condition’ of all is that you must actually be carrying on a business, not practising a hobby, regardless of whether your hobby makes money. If you have any doubts, you should study the ATO’s Taxation Ruling TR 97/11 – Income tax: am I carrying a business of primary production? This very readable general public tax ruling gives a comprehensive explanation, with examples, of the relevant indicators of being a primary producer. You can ‘self-assess’ that you are a primary producer (as long as you’re willing to be subject to a future audit), or you can ask the ATO for a private binding ruling.
Non-commercial business losses Non-commercial losses is one topic that has special relevance to certain producers in certain new industries, particularly part-time farmers. The essence of the non-commercial loss provisions are that, subject to certain conditions, if a sole trader’s or partnership’s
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
(not a company’s) business activity fails to pass one of four arbitrary tests of ‘commerciality’, any business losses are deferred (not denied) until a future income year when one of the tests is passed or the business activity makes a tax profit.
Examples of special primary producer provisions Here are some examples of special tax provisions available to primary producers. As usual, various conditions apply. All these and others are explained in the downloadable booklet and on the ATO website. Landcare operations: Primary producers can claim as a deduction 100% of their capital expenditure on landcare operations in the year incurred, instead of depreciating the works over time. Water facilities: Similarly, capital expenditure on facilities for conserving or conveying water can be written off over three years. Valuing livestock: In most cases, producers may choose one of three nominated methods for valuing livestock (cost, market selling value, or replacement value), and may vary their choice by year and by type of livestock. ATO specifies the method for valuing natural increase and livestock taken for rations. Abnormal receipts: Different tax-spreading provisions are available for (a) the proceeds of the sale of two wool clips in one income year because of drought, fire or flood; (b) profit from the forced disposal or death of livestock; and (c) insurance recoveries from the loss of livestock or the loss by fire of forestry trees. Income tax averaging: This enables primary producers, as sole traders or in partnerships, to even out their income and tax payable over a maximum of five years, although if they choose to withdraw from this tax arrangement, it is an irrevocable decision. Farm Management Deposits Scheme: Subject to a number of conditions, the FMD scheme
provides special tax treatment where noncompany primary producers deal with uneven income flows by making bank deposits during prosperous years and withdrawals during less prosperous years. Depreciation of living assets: New plant and equipment used in primary production is covered by the same ‘effective life’ tax ruling issued each July for all depreciating assets (although taxpayers can elect to self-assess, and must do so for used assets). Special provisions are made for capital expenditure on establishing living assets, such as grapevines and horticultural plants harvested for their products (eg, fruits and nuts, etc). When seeking more detailed information on all these topics, readers not familiar with the ATO website and ATO documents should not be daunted. Tax rulings in particular, are, for the most part, quite readable and explanatory, and are a valuable resource, along with ATO’s many fact sheets and guides. Alan Cummine has been representing private forestry at the national level for sixteen years, and has been a member since its inception in 1999 of the ATO’s Primary Production Industry Partnership consultative group. Editor’s note: For ease in accessing information about tax for primary producers, we are including this article on the NRIA website, along with the exact weblinks for: the Information for primary producers 2010 publication (10-page booklet plus two worksheets), Primary producers’ essentials (this is the main relevant up-to-date webpage, containing sixteen internal links and more sublinks on basic and advanced topics), the tax ruling for carrying on a business, and information on non-commercial losses.
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
collaboration
For some primary production that has an inherent ‘lead time’ before it generates income (eg, plantation forestry and much tree-based horticulture), you can apply for the ‘Commissioner’s discretion’ to allow you to claim your losses in the intervening years. There are two general tax rulings (TR 2001/14 and TR 2007/6) that have very useful explanations and rural industry examples to help you.
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collaboration
Collective Marketing – What are the choices – and how do they work anyway?
20 20
U
nlike large companies, smaller enterprises generally lack the critical mass and volume to support a marketing program from within their operating margins. Hence some form of collective approach is generally most cost-effective for new industry enterprises. Even with high margin/high value products, there is a certain threshold of volume required to sustain a marketing program. It takes a critical mass to have sufficient resources to retain a staff member fully committed to marketing either as an employee of the enterprise or of the new industry association.
Marketing company One approach is for a new industry to form a wholly owned marketing entity to conduct marketing activities on behalf of its shareholders. The marketing company may also trade the product centrally, on behalf of the cooperating industry members. Under this type of structure, the company could be self-funding, working from a commission on the trade. These structures work best when there are enough funds generated to finance a full-time manager to run the business. For example, Australia Alpaca Fleece Ltd’s Managing Director had prior experience in the clothing and
If new industry enterprises all try to implement their own separate marketing programs, not only will they lose out on economies of scale, but they may also be setting members of the new industry against each other as competitors. Collective action is also important in fulfilling orders and ensuring continuity of supply – failure to supply can be very damaging to the relationship between suppliers and customers. Volume of supply is particularly critical when dealing with larger supermarkets and export markets. There are several approaches to collective marketing, including use of a marketing company, a commissioned agent, or a licensed branding arrangement. In the early stages of a new industry, members located close together may choose to amalgamate their product through a cooperative structure for value-adding and/or marketing. Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
textiles sector, and has been heavily involved in developing and implementing strategies to take the alpaca industry into the global marketplace. Forming a company involves a considerable amount of effort and ability, and it also comes with the usual commercial risk. Hence it is important to first evaluate the viability of an industry marketing company. Projections need to be made with regard to revenues and costs, profits and likely risk. In simple terms, it needs to be demonstrated that the company can generate enough revenue to conduct its functions effectively and cover all operating costs. Again, the issue of critical mass is relevant, as there must be sufficient volume to support the overheads of the company.
Appointment of a commission agent An alternative to a marketing company structure is to appoint an exclusive commission agent who conducts the marketing and distribution of products on behalf of the industry. The choice of agent is of critical importance because the success of the industry is heavily dependent on the capabilities of that person or entity. Most new industries do not have sufficient volume to justify the appointment of a number of agents, meaning that there has to be some exclusivity in order for the agent to derive some profit for her/his efforts. If possible, it makes sense to appoint an agent who has extensive experience in the industry concerned. With new industries this is often difficult, so the alternative is to find a person or a business experienced in allied areas. For example, in the case of a meat product, there are companies or individuals with extensive experience in beef, lamb, goat and mutton, who could easily leverage their skills and networks into a new meat product. When appointing an exclusive agent, clear agreement needs to be reached and understood on the contractual arrangements, which specify: • • • •
The responsibilities, roles and obligations of each party. The financial relationships The process to be followed for dispute resolution. The collection and analysis of performance criteria.
Exit strategies for both parties For example, Australian citrus growers have developed a strong off-season market in the USA by using a commission agent to market and distribute their product. The agent is a Floridabased company called DNE that effectively
operates as a single desk importer for Australian oranges. In every other market in the world, Australian citrus growers compete head to head on price and deal ad hoc in a volatile trading environment. By using DNE as an agent, these growers are able to go to market offering greater volumes and a single strong negotiating voice. DNE is able to ensure the growers have some stability in pricing by locking in annual contracts with supermarket chains. Because DNE knows the local market so well, it does a much better job of managing the local promotion of the product, resulting in stronger customer loyalty.
Licensed branding arrangements An alternative marketing approach is to establish licensed or franchised branding arrangement. Under these arrangements, enterprises may conduct their own day-to-day sales and marketing but share a common brand, managed through a licensing arrangement. The industry established a company that owns a brand and the intellectual property needed to support a brand, such as the trademarks, quality standards, etc. Enterprises then sign a licensing agreement to use the brand, and market their product according
If new industry enterprises all try to implement their own separate marketing programs, not only will they lose out on economies of scale, but they may also be setting members of the new industry against each other as competitors. to the rules and codes of practice set out in their license agreement. This approach has been used very effectively in the Victorian dairy industry where historically there were many small dairies trying to promote and market their own brands of milk. The industry then established a company that developed and owned the brands. The brands they devised included Rev, Skinny, Farmhouse and Big M. The licensee dairies paid a fee per litre to the company to use these brands. The fees collected were used to manage the company and to conduct the marketing activity essential to build strong brands. This article is an excerpt from “Turning a good idea into a profitable venture” a 2010 RIRDC publication.
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
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Continued from page 12
Q: What are 5 tips you could give others in new rural industries?
If you are not enjoying what you do then you are in the wrong industry. If you don’t enjoy what you do, then it is doubtful that you will ever be truly successful.
1. Realise that success doesn’t happen overnight; to be attained success requires hard work and persistence. 2. Set a long term goal and short term goals that will lead you to your desired outcome in manageable steps and stages. 3. Stick to your chosen path and don’t hop all over the place following every latest trend & fad. Chopping & changing direction frequently will only result in you going nowhere. In saying this, you do also however have to keep an open mind and be you be alert to all opportunities, even those that come from the most unexpected places. Success can often spring from such unexpected opportunities. 4. Celebrate all small successes along the way to your final destination. There needs to be joy in what you do otherwise all the hard work will become drudgery. If you are not enjoying what you do then you are in the wrong industry. If you don’t enjoy what you do, then it is doubtful that you will ever be truly successful. 5. The trail blazers in all new rural industries are passionate about what they are doing and tend to
New Rural Industries for Future Climates Defining the Unique Flavours of
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want to share that passion with others, however we should all remember that not everyone can get as excited about our chosen field as we do. When your companion’s eyes glaze over, it is probably time to change the topic of conversation.
Q: What is your future vision for your business? I am aiming to breed a highly productive line of Cashmeres. Cashmeres which produce fine fleeces which do not require dehairing. Dehairing of the fleece is a costly process and causes fibre breakage. If the cashmere had no need of dehairing, processors would be able to produce a much longer and therefore more valuable cashmere top; and, the processing costs would be reduced and a more valuable product produced resulting in greater returns to the growers of this premium product. Australian Cashmere is a premium product in a niche market and we currently supply a few select high end European processors. I envisage that the longer top, which could only be produced by not having to dehair the cashmere, would have very great appeal to high quality European spinners and suit makers. Australian Cashmeres would consequently become the most profitable of all farmed livestock. This is my ultimate goal and one which now appears attainable.
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Continued from page 14
also has experience with improvement and cropping of the Asian vegetables edamame and yardlong beans. Andrew is a founding member of the Northern Australia Soybean Industry Association the forerunner of Soy Australia, the peak industry body.
Roslyn Prinsley Roslyn Prinsley is the General Manager, New Rural Industries, at the Rural Industries Research and Development Corporation (RIRDC) in Canberra. She also chairs Bioenergy Australia, the national steering committees for national R&D planning for New and Emerging industries and Bioenergy and Biofuels (under the auspices of the Primary Industries Ministerial Council),
and a number of R&D Advisory Committees. Previously Roslyn held a number of senior positions at RIRDC, was a Senior Research Scientist at the Bureau of Rural Sciences, and before this was the Program Manager for Agriculture and Forestry Sciences (representing Australia) at the Commonwealth Secretariat in London. During this time she worked in 24 different countries and had the role of providing scientific advice to the Commonwealth Secretary General. Roslyn holds a Bachelor of Science, a Diploma of Education, a PhD, and a Masters in Intellectual Property Law (with Merit), and is a Graduate of the Australian Institute of Company Directors. She has also published over 70 books and reports.
Andrew James
The Board of NRIA Paul Miller (Founding Chair) Olives
Pat Bolster Tea Tree
Ian Chivers Native grass seeds
Andrew James Cashmere, Asian Vegetables, Soy
John Lever Crocodiles Lana Mitchell Wildflowers Martha Shepherd Australian native foods
Alan Cooney Remote and indigenous farming Roslyn Prinsley RIRDC
For more information on the board members and activities of New Rural Industries Australia, go to www.nria.org.au.
Passion to Profit – the magazine of New Rural Industries Australia Issue I – 2010
Roslyn Prinsley
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New Rural Industries Australia
2010 Conference and Exposition 28th – 30th November 2010 Jupiters, Gold Coast www.nria2010.com.au