Profit magazine Winter 2014

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INSPIRING BUSINESS IN HAWKE'S BAY

Showing local loyalty Are our cafés steaming or flat?

Solar business charges ahead PRO PRIMARY Meet our finest progeny – animal breeders at the top of their game

AUGUST - NOVEMBER 2014

A Visible Difference Gemco’s Board of Directors have over 200 years of experience in the building industry, and together with their 110 staff they are making a visible difference in the Bay.

Gemco Board of Directors L to r: Karl Johnson, Alwyn Burr, Darren Diack, Edwin Brown & John Sarten.

CONTENTS PRO FEATURES 8-9 12-13 14-15 16-17 20-21 24-27

The Original Murse Co. Is there a flat white overload?

Bostocks Organic Chicken There’s gold in solar Election hopes by businesses Bay Espresso serves up 10 years

PRO PRIMARY 28-32 38 34-35 36-38 36-37

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Breeding good stock Pro Primary by Brent Paterson Gevir Deer Velvet profile Wine resurgence underway Fresh approach at Food HB

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PRO EXPERTS 39 42 43 44 45 46 48

Pro Property by Paul Harvey Pro Legal by Edward Bostock Pro IT by Wray Wilson Pro Education by EIT Pro HR by Kimberly McKay Pro Finance by Nick Stewart Pro Business by Cedric Knowles

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PRO REGULARS 4-5

Pro HB - what’s happening in the Bay

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Pro Q & A with Jonathan Bell

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Cellar Door: 1747 Korokipo Road, State Highway 50, Fernhill, Napier Tel: (06) 879 9737

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‘LOCALS FIRST’ IS BEST POLICY FOR ECONOMY BOOST Recently I had the pleasure of

working with a long standing Hastings business that I knew growing up.

As a teenager I worked at the family’s lifestyle property with a friend. We spent the holidays doing their gardens – it was a great job, they treated us well and paid us well. I think they got a lot of pleasure by giving two young Hastings lads some pocket money.

Fast forward 25 years – the business is on to its next generation of being run by family members.

The business was hoping to win back a Hastings District Council contract it had lost to its competition (an out of town firm) a few years back, as the service was out for tender.

So I thought it was pretty compelling and I had my fingers crossed for them. I followed up regularly to see if they had won and the last time I did, I was told the bad news.

I was gutted for him and his staff.

He’d put his best foot forward, provided a competitive price but on the scorecard they fell short.

I have heard this story many times... that a council officer has decided that the service is best provided by an outsider.

On the face of it – without comparing scorecards – I say “show your loyalty to HB businesses”.

They got to the interview stage and were told they needed a smart looking presentation.

Editor Damon Harvey damon@theprofit.co.nz

We also demonstrated that the business employed locals, paid rates and was a contributor to the community.

We took exception to all of this fluff and we hit the media saying the council should give creative talent in the Bay an opportunity. We suggested bringing many creative minds together for a brainstorm.

It was then decided that the logo (brand) was to be a competition between the agencies with the public getting to vote. The logo developed by us was the eventual winner.

Three council marketing managers have since come and gone and I’m yet to see any evidence of a successful marketing plan for the district or maximising the brand and its story.

My view is that if the service can be provided locally, and the price is right, then it should go to a local.

We got the call up and quickly set about collating all the information into a smart presentation. The “gold” of the presentation was some old archive footage, which showed the business in action over 40 years ago.

As with many tenders – price is a key determinant and the business owner was confident that he was in the ballpark. We then focused on the key points of differences such as leading edge technology and that the business was “local”. This would enable 24/7 callouts (if required) and additional support.

The tagline was thought up on a visit to Hastings when he observed tractors driving on Heretaunga Street.

On the local theme it’s great to hear about new businesses setting up and using local suppliers.

In this issue we profile The Original Murse Co, which uses a local leather craftsman to create ‘man bags’ and Bostock’s Organic Chicken, which has used solar power supplier GoldPower to install solar panels on its large chicken coops.

Our business has also faced the same issue with the council.

A few years back HDC engaged an Auckland brand strategist to develop the new branding for Hastings.

He wooed the council with past work and some councillors flew to the big smoke to sit in his “all white” offices – where he pitched “Hastings – Salt of the Earth”.

We also meet Chris and Jonelle Jarvis, who employ over 50 staff in there cafe empire. They too are proud locals, who know where they get their bread and butter from...

Locals!

Enjoy the read.

EDITOR/PUBLISHER: Damon Harvey 06 878 3196, 021 2886 772, damon@theprofit.co.nz, Twitter – @profithb

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CONTRIBUTORS: Sarah Thornton, Vivienne Haldane, Wray Wilson, Nick Stewart, Cedric Knowles, Paul Harvey, Brent Paterson, Kimberly McKay, Edward Bostock & Catherine Wedd

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AUGUST - NOVEMBER 2014

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SPICERS EXPANDS LOCAL PRESENCE

Tobias Taylor

Spicers Portfolio Management Ltd (Spicers) has strengthened its presence in Hawke’s Bay, centralising its advisory team in its new Havelock North office.

Spicers Hawke’s Bay and East Coast managing principal Tobias Taylor says the new structure is “fit for future growth” providing client focused financial planning services.

Tobias heads the franchise. After previously being employed by Spicers, he built a successful client portfolio with Barnes Mossman Financial Services over the last six years.

Spicers is based in the new building in Porter Drive in Havelock North, servicing clients spread throughout the region.

The opportunity to merge that practice with the two existing Spicers practices in Hawke’s Bay was the challenge has was looking for.

“It’s fair to say the brand and product has always been quality… but it was in need of a fresh perspective.

“I come from a banking background and a collaborative team approach. While advisers hold key relationships in their core competencies with clients, a team culture ensures consistency for service and advice,” Tobias says.

Tony Maidens, an experienced specialist insurance adviser, continues in his role and further advisers will be added to the full service team by the end of 2014.

Tobias welcomes industry regulation and says there has been a much stronger emphasis on quality, which has provided greater opportunities to those that have their “house in order”.

“The new financial management regulations have created significant opportunities for us. The importance of compliance has never been stronger and Spicers is at the forefront with first class regulation support and access to independently researched model and bespoke portfolios”.

The Air New Zealand Wine Awards is the premier wine competition in New Zealand, recognising excellence in winemaking. The competition is owned and organised by New Zealand Winegrowers, the national organisation for the country’s 1,700 grape growers and winemakers.

Spicers with 25 years’ experience in New Zealand, offers a full suite of tailored investment solutions and highly personalised services such as investment strategies, retirement planning, personal risk management and portfolio management.

For more information visit www.airnzwineawards.co.nz

“Our clients will benefit from the scale of the Spicers network, including its nationwide presence, rigorous standards of governance and accountability and the access our advisers have to support, training, development and business resources,” Tobias says.

As well as Spicers’ Qualifying Financial Entity (QFE) status, all Spicers’ advisers are Authorised Financial Advisers (AFAs).

Elephant Hill took out the Fruitfed Supplies Champion Syrah. Pictured right is marketing manager Vince Labet.

Region hosts Air NZ Wine NEW DIRECTOR Awards APPOINTED TO Hawke’s Bay will host the 28th Air New Zealand Wine Awards this November.

The annual awards dinner will be held on Saturday 22 November at the Pettigrew.Green Arena in Taradale, which will be attended by New Zealand’s top winemakers and industry figures to celebrate the country’s best wines.

The awards dinner will culminate in the announcement of the most coveted prize of the competition, the Air New Zealand Champion Wine of the Show Trophy. Last year, the trophy went to Marlborough winery Nautilus Estate for their Nautilus Cuvée Brut NV. The O-I New Zealand Reserve Wine of the Show was awarded to the Villa Maria Reserve Hawke’s Bay Chardonnay 2012.

Global Marketing Director for New Zealand Winegrowers, Chris Yorke, says the Air New Zealand Wine Awards dinner is a big night for New Zealand’s wine industry.

“Winning a trophy or medal is recognition of the hard work and skill that goes into making the wine, and lets consumers know they are drinking some of the finest wine in the world.”

AIRPORT BOARD Hastings District and Napier City Councils have announced the appointment of Sarah Park to the Board of Hawke’s Bay Airport. A vacancy on the board arose due to the retirement of long serving board member and current chairman John Palairet Napier based Sarah Park has had wide experience in the finance and investment industries. Most recently, she was a senior member of PricewaterhouseCoopers Advisory practice and established a Corporate Finance and Advisory service in the Napier branch.

“I am delighted to have been appointed to the airport board. It is an exciting time for the development of the airport and the business park and I am looking forward to being a part of the decision making team as we investigate future opportunities for growth,” says Sarah.

Tony Porter replaces John Palairet as chairman.

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AUGUST - NOVEMBER 2014

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PRO HB

TOP TOURISM PROVIDERS TO BE CELEBRATED AT AWARDS The best tourism operators will be announced at the third annual Hawke’s Bay Tourism Industry Awards on September 24 at Mission Estate.

The awards recognise local tourism providers delivering exceptional visitor experiences.

Annie Dundas, general manager, Hawke’s Bay Tourism says “The awards have been really well received since their inception in 2012 and the tourism industry is very supportive of continuing to celebrate local businesses who deliver an exceptional visitor experience. It’s important that we celebrate achievements within the tourism industry and to acknowledge those who are running successful businesses.”

The 2014 award categories include two main categories covering Accommodation and Activities, from which a Supreme Winner will be chosen, plus an award for People’s Choice, sponsored by The Hits radio station.

Liv Reynolds from Black Barn Retreats, 2013 Supreme Award winner encourages tourism businesses to get involved and enter. “Winning the ‘Hawke’s Bay Tourism Supreme Award’ title was not only an exciting achievement but it has also been of great benefit to our establishment.

Visitors are attracted to this sort of accomplishment when considering where to stay, eat or visit so in my opinion it was definitely worth entering these awards,” Liv says.

Annie Dundas

Bostocks springs into sponsor race carnival The biggest event on Hawke’s Bay Racing’s calendar is set to be more spectacular this year with the announcement of a new naming sponsor.

The JB Organics Spring Racing Carnival has the backing of JB Organics owner, John Bostock, who is getting in behind the event to ensure Hawke’s Bay Racing is charging ahead.

“We need to harness events in Hawke’s Bay which bring the community together and attract people to our region to enjoy a fun day out. We need to drive popular events like the JB Organics Spring Racing Carnival, so we can deliver greater economic impact for Hawke’s Bay,” says John.

JB Organics Spring Racing Carnival dates August 30 Makfi Challenge Stakes September 20 Windsor Park Plate Oct 4 The Spring Classic

Bigger crowds are expected this year with over 12,000 punters expected at the final of the three spring race meets, on Saturday October 4.

Hawke’s Bay Racing General Manager, Jason Fleming says he welcomes the new partnership with JB Organics because without the support of key sponsors the event couldn’t take place.

“JB Organics support of Hawke’s Bay Racing allows the wider brand of Hawke’s Bay to shine. It’s an obvious partnership because JB Organics and Hawke’s Bay Racing have a long history in the Bay,” says Jason.

Taking Care of Business Environmental management and economic development go hand in hand. In these areas, our role is: • Water management • Land and soil science • Online irrigation data • Pollution control • Transport planning • Resource consent advice and planning • Biodiversity Visit www.hbrc.govt.co.nz or call (06) 835 9200

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Strong Uplift in Market Carls Jnr Hastings sold at 6.71% yield

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The commercial property scene in Hawke’s Bay is riding its next growth wave following on from some recent high profile sales and leasing successes.

Colliers managing director Cam Ward says the mid-year mark has seen a move to a more positive commercial property market.

“The market seems to be operating at a more solid pace with sales happening at regular intervals and large leasing deals happening monthly rather than yearly.”

“Regular transactions lead to a sense of buoyancy in the marketplace. As investors become more aware of quality stock moving off the shelves faster and at sharper yields than historically, purchasers are seen reaching into their coffers quicker and a little deeper.”

“This also creates an upsurge, as we have seen quality stock selling at record cap rates and properties that have sat around starting to be picked up and sold.”

Cam points to the big news of Kiwibank relocating its service centre to Hastings CBD, the significant transaction will see the old Farmers building, located on the corner of Queen and Market Streets, successfully tenanted after sitting vacant for approximately two years.

Largest office deal brokered Colliers broker Danny Blair successfully brokered Kiwibank’s 2400m² regional office space after extensive negotiations, creating approximately 200 potential job opportunities.

As the largest office leasing deal ever to occur within Hawke’s Bay, it will greatly impact Hastings and the region, both in its economic development and overall reputation as a business destination.

“The relocation is a significant boost for the commercial real estate industry for Hastings in both sales and leasing. Not only will the transition have the potential to boost neighbouring vacancies, but investor confidence within the region should see a substantial rise,” Danny says.

Other sales transactions include the former Deka building, which was recently redeveloped to house Cotton On, Caroline Eve and Paper Plus. It has been sold at a circa 8% yield. With a large annual income stream and further development potential, this property was a prime retail investment.

The new Carls Jr. fast food restaurant on Nelson Street was successfully brokered at a sale yield of 6.71%, reflecting the strength of the established tenant, Restaurant Brands New Zealand Limited, and the favourable lease terms in place. The brand new purpose built building in a prime CBD location, with a blue chip tenant operating a market leading brand, provided an excellent investment opportunity.

The Hastings Countdown located on the corner of King and Queen Streets has also sold for redevelopment purposes in conjunction with the sale of the neighbouring RSA building.

In Napier CBD, commercial broker Dan Walker sold the property tenanted by Carlile Dowling on Raffles Street. The A+ seismic grade building sold with five years left on a six year lease, at a yield of 7.5%, and was under contract within a week of marketing.

Napier has also seen other notable transactions with the sale of the former Office Max building on the corner of Dalton and Dickens Streets, which is planned to be redeveloped, as well as an iconic Art Deco property on Tennyson Street sold to a local investor with a passion for Art Deco.

Food hub offers huge cost savings Colliers Hawke’s Bay has been appointed as master agents for the leasing of “food related” buildings at the new Tomoana Food Hub situated at Elwood Road, Richmond.

The concept of sharing resources offers huge cost savings for anyone looking to relocate their food affiliated business. The Hub contains 15 sites available for lease, ranging from 3,355m² to 23,525 m².

Other exciting leasing deals have come available, with the significant changes constantly occurring in Ahuriri Business Park as redevelopment continues. The success of Big Save Furniture’s increase in turnover of over 60% has resulted in the furniture retailer relocating to a larger site within close proximity on the high profile corner of Ford and Pandora Roads, where Bunnings’ Napier store was residing.

Danny Blair says that the site is in a prime location with over 10,000 cars passing per day and lends itself well to quality bulk retail or office opportunities.

Over the next eighteen months, Ahuriri Business Park will see the redevelopment of the historic tobacco factory building, along with redevelopments of the old Big Save Furniture site on the adjacent corner of Bridge and Ossian Streets. With this, there will be space available for office, retail and some industrial activity ranging in size from 100m² to 7,000m².

Danny says that opportunities like these, along with the cost effective services provided in Hawke’s Bay, offer out of town businesses the perfect reason to relocate and shouldn’t be overlooked.

“The Hawke’s Bay lifestyle is becoming more and more attractive to business oriented people and is being seen to offer a persuasive case for larger service centres and other businesses to relocate”.

It is also hoped that the new office addition will bring added diversity to the region and increases the incentive for other businesses to relocate to the Bay “The overall attraction of Hawke’s Bay as a region is on the rise, resulting in higher demand for business locations.

Why use Colliers?

Cam says a common question he is asked is “why use Colliers?”

“The answer I always come back to is results. By putting each company on the spot, and asking what comparable results have they achieved in the last quarter, is the one question that should be asked when determining who should be selling / leasing your property.

Cam says that the extensive list of successes achieved throughout the first quarter, along with our unique team environment in which we operate, is what should seal the deal when making such a decision.

The Colliers team hold a reputation and are known for their proactive and enthusiastic approach when dealing with clients and tackling a property, which Cam says, has led to their clear position as market leaders within Hawke’s Bay. “This proves that together as a team we are achieving more.”

By working together, the team effectively creates significant value for clients and constantly provides a huge selection of investment and development properties, proving that the collaborative approach is a concept that works in delivering the best results for clients.

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Feature

What started out as a “bit of fun” has turned into a growing manufacturing business for friends Adam Harris and Daniel Clausen.

The Murse, coined from the words Man Purse, was conceived in early 2012 after the pair spotted a gap in the market for an accessory that fitted the space between a man bag and a traditional wallet.

Two years later, hundreds of men, and a few women are sporting the stylish accessory from the Original Murse Co. “Dan had spent time in Argentina where leather goods are very popular. We realised there was an opportunity to create something similar here; practical, simple and sharp in design. A product that would hold your essential cards and smartphone

without being bulky in the way traditional back-pocket wallets are,” explains Adam.

“Also driving its development were our attitudes around simplifying your life by de-cluttering and only possessing essential items. The Murse will protect a beautifully designed product like the iPhone without the need for a clumsy cover. But it was most important to us that the Murse would be bespoke, high quality and New Zealand made.”

Designing the first Murse took a year of prototypes, discussions, designs and late nights and by December 2012, the concept had taken shape.

“Dan knew of a master leather craftsman who had relocated to Napier from Christchurch after the earthquakes. Finding him was the catalyst for our design to move from paper to leather – with him on board and using his incredible craftsmanship, everything fell into place,” says Adam.

Every element required for the production of a Murse is sourced within New Zealand; the domes come from Wellington, the leather from two Auckland suppliers. Bringing a new product to market involved a “huge” development phase.

The first prototypes were “road tested” on their friends, providing valuable feedback.

“It was a great way to get a handle on how the Murse was going to be used, what people thought of them and how they stood up technically,” Adam says.

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AUGUST - NOVEMBER 2014

4th October 2014 - 32km individual or teams run/walk event Check out our website www.capechallenge.co.nz

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A ‘stylin’ man business

by Sarah Thornton

Adam and Daniel have a collaborative approach to their business but each works in the areas that reflect their skills and expertise. Graphic designer Adam takes care of the design, branding and social media while Dan, a tax lawyer, deals with the distribution, stockists and sales.

Like most products, the Murse has evolved since the first one emerged from the hide. The quality of the leather and the shape has been refined and the range has been expanded to include iPad and laptop sleeves, card holders. A passport holder is currently in development.

Each Murse is named after an influential character – Brando, JFK, Eastwood, De Niro and McQueen.

Feature

There is also a ‘Walken’ due out soon, named after the off-centre actor Christopher Walken. Naming the Murses is an important part of the brand story that Adam and Dan have worked hard to create, and told primarily through social media. Murse has developed a strong following and attracted the attention of the mainstream media and celebrities.

“It’s our first foray into manufacturing and we love it. We have a huge sense of pride in what we’re creating.”

And advice for aspiring manufacturers? “Do your research, test your market and go for it.” www.murse.co.nz

Daniel Clausen and Adam Harris

In March 2013, the first Murse was sold and a year later, they were appearing in high fashion retail stores, alongside premium brands like Karen Walker, Zambesi and Ruby. Adam has created an online store also that “ticks over”, although not surprisingly with such a natural, tactile product, the majority are sold by their retail stockists throughout the North Island.

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www.williamsharvey.co.nz AUGUST - NOVEMBER 2014

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My idea of financial freedom

Getting up early to fish on the Tukituki River Whatever your idea of financial freedom, we can help keep your vision on track.

At Spicers we have been providing specialist investment solutions and financial advice to Kiwis for more than 25 years. We help our clients achieve their ideas of financial freedom and are trusted with over $1.3 billion of funds under advice.

Call Tobias Taylor or Tony Maidens to discuss your idea of financial freedom on 06 877 8021. spicers.co.nz

Your Spicers Adviser has a disclosure statement that is available on request and free of charge.

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Feature

Jonathan Bell

As the general manager of the Eastern & Central Community Trust (ECCT) Jonathan Bell gives us an insight into the role and the organisation that distributed over $5 million last year and over $100m in the last 25 years.

What’s your career background?

Varied, Initially with a fruit exporting company, then a stevedoring company in Gisborne (start up company so I was director and general manager) then rural banking with Trust Bank and Rabobank, self employed then head of credit at Farmlands before starting with Eastern and Central Trust (ECCT) in January.

Have you had any mentors?

My earliest memory of a mentor was my grandfather, more on life and sport. In business I have utilised mentors in a formal capacity as well as informally. I have sometimes used staff as mentors, they may not realise this, but I have tried to develop an open relationship to gain their confidence then utilise their thoughts and ideas. Someone once said to me that “every staff member comes with a free brain” I think it is important to capture their thoughts and ideas.

What’s the style/direction you will bring to the organisation?

My management style is very collaborative.

I also enjoy meeting with and developing relationships with people. I would like to think we can engage with our stakeholders more than we have done in the past, and look to build collaborative partnerships with other philanthropic organisations, local authorities, government departments, business and community organisations. By doing this we

will be able to understand the needs of the community and how best to fulfill these.

What is a normal day for you at ECCT

Normal is hard to describe. It is around assisting staff with queries around donation applications; ensuring that the fund managers are doing what is required and reporting as such; collating board reports, approving donations, meeting with community groups.

It is quite varied and will continue to become more varied as we look at new initiatives such as Responsible Investing, Social Investment, Results based donations etc.

ECCT is seen as a “giving” organisation but to give you also have to invest wisely – what’s the ethos of investing?

ECCT has a two pronged approach to investing, firstly we need to ensure that the original capital of the trust is “protected” and indeed increased on an annual basis to future proof it for inflation. We also try and maximise the income, being aware of inherent risks, to ensure that we can donate back to our community.

How did the money originally start ECCT?

It was the proceeds from the sale of shares when Westpac purchased the Trust Bank Group in 1996. The original starting capital was $90 million, it now stands at just over $150m.

What’s the geographical reach of ECCT?

It broadly covers East Coast, Gisborne, Hawke’s Bay, Tararua, Wairarapa, Manawatu and Horowhenua.

ECCT is a goodwill organisation - how do you all feel when you know the money is being used for good community outcomes?

Being community based and for the good of the community all concerned, staff and trustees, feel a sense of pride when a community organisation is able to provide a facility, service or programme that makes a difference in their community.

What does the 3-5 year future of ECCT look like?

Reasonably bright and challenging. The global financial crisis made the Trust refocus on its investment philosophy. It is now starting to focus on new initiatives and how we can do things differently, or better than we have in the past. This will provide some exciting new challenges.

What are the challenges that ECCT faces?

We are continuing to assess our processes to ensure best practice in management. Ensuring that our capital is invested wisely, ensuring that we can sustain future donations for the community, ensuring that what we are doing is making a positive change to our communities.

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Feature

LAND OF THE FLAT WHITE CROWD

By Sarah Thornton

We’re passionate about coffee round these parts. The places you can get a decent espresso number in the hundreds but our coffee drinking aged population is modest to say the least. It begs the question: are there simply too many cafés in Hawke’s Bay and how on earth do they survive?

As well as bespoke cafés that are “serious” about their coffee, there are those that are perfunctory, attracting a more mainstream lunch and coffee crowd including The Coffee Club, lunch bars like Heavens

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and BJs, Starbucks, McCafe and the myriad of other mobile coffee vans, restaurants and petrol stations.

So how do cafés compete with these more mainstream offerings? Quite well it appears, with a huge return on investment for the customer.

Cafés are the places we sit, read, conduct business deals, sign divorce documents. They’re an extension of our office, our lounge, our kitchen table.

For café owners, the lofty ideals of café culture are eclipsed by the fact that their café is a serious business, one that needs to turn a profit to remain sustainable.

Running a café is not as romantic as it might often look or sound.

According to the business owners I spoke to, far from hanging out, talking to your customers whilst listening to music sipping a long black, it is “bloody hard work”.

In 2011, Al Borrie transformed a shipping container and opened Box Espresso in Clive located literally on the side of the State Highway 2.

“We wanted our own business and Hawke’s Bay needed something different. We didn’t actually think Hawke’s Bay had too many cafés – although people said we were crazy to open in Clive because there was nothing there, which in fact was perfect for us and after three years, our customer base is still growing,” says Al. “What Hawke’s Bay suffers from though is too many average cafes – you need to differentiate yourselves from everyone else. Don’t try and please everyone – my motto is do one thing and do it well.”

Want to know more? Contact Callaghan Innovation’s Regional Business Partner who is based at Hawke’s Bay Regional Council.

Al has jus opened his second café, this time in Ahuriri. Crazy Good in Bridge Street has only been open for two months, but he reiterates that to have a business with its own identity is “vital to its longevity”.

Jenny Brown jennyb@hbrc.govt.nz 06 8338049

“Yes, there are a lot of cafés there, but we offer something unique. We focus on the roasting side of the business, selling coffee equipment and beans as well as running education for aspiring home baristas.”

www.callaghaninnovation.govt.nz

Inspired by the Wellington coffee scene, Chris bought his first café in Karamu Road ten years ago. “Cafes are an interesting business….,” he muses.

AUGUST - NOVEMBER 2014

Chris and Jonelle Jarvis are serial café moguls with their Bay Espresso empire spanning the entire region, with nine cafés, a food store and a roastery.

PRO

“We want to do a lotFeature of stuff; we’re not in great shape. We didn’t get a good night’s sleep. We’re a little depressed. Coffee solves all these problems in one delightful little cup”.

– Jerry Seinfeld

“Takeaway coffee as a concept back then was pretty random. When we took over Karamu Road, we were lucky to get a few customers in.

The Farmers Market kept us afloat in the early days and it took 18 months and a lot of hours to turn it around,” Chris says.

Far from seeing that there are too many cafés in Hawke’s Bay, he is open to new opportunities and is not ruling out adding to his Bay Espresso family.

“Location, location, location,” is paramount to setting up a café says Chris.

“The shift in attitudes over the last decade to coffee and cafes has also contributed to its success – people realised that it was ok to have a business meeting or hold an employment review over a coffee. A café was becoming an extension of the office,” he explains.

The Jarvis’ business remain sustainable by having multiple income streams, spreading the financial risk. His staffing bill every week is eye-wateringly high and with 10 months the average time to “bed in” a new location, it’s a business not for the faint hearted.

identifiable look and feel. You are creating an expectation and with a clear brand, people know what to expect when they walk through the door. With so much competition, it’s vital to keep your brand alive.”

There is a raft of cafés in Hawke’s Bay with an identifiable look and brand, positioned in strategic locations.

Box Espresso in Clive, Adoro in Napier, At E’s and Hawthorne in Havelock, Fuse in Hastings and Jennifer Le Comte’s trio of the Albion Canteen, Opera Kitchen and FG Smith (to name only a few) have all created their own position in the market, appealing to a particular slice of the coffee-drinking public and clearly defined by strong branding and personality.

One person who doesn’t subscribe to the “more is better” theory is Aaron Gladstone, owner of At E’s, a café in central Havelock North.

Aaron and wife Erin opened At E’s in 2009 and while they’ve enjoyed five years in business, he says with the number of cafés that have opened in the last five years, it has definitely diluted the market.

But it’s the loyal customers each of his ventures attracts and retains that keeps him motivated and passionate about his business.

“We counted 41 eateries or cafés that offer coffee from Tandem to Off the Track. And that’s not counting service stations.

Chris also says a key factor in keeping a café business viable is retaining your position in the market with a strong brand identity.

A few years ago, everyone was really busy but with so many cafés opening, it has affected business. It doesn’t feel like the population is growing along with it to sustain so many.

“It’s very important for your café to have an

Latest Website Work Guilty As Sin

We counted 41 eateries or cafés that offer coffee from Tandem to Off the Track. And that’s not counting service stations.

– Aaron Gladstone Even the opening of McDonald’s in Havelock North had an effect, taking people out of coming through the door and buying coffee at your place.

“I wonder whether councils should put a cap on the number of places offering coffee. With new developments, such as Mackersey’s boutique hotel that will surely have a café, on the horizon, is there capacity for more in Havelock North?

“We’ve worked hard in the last five years to develop a loyal customer base and we’ve done that by offering personal service. Building a good name is the formula for success in this business,” says Aaron.

With new cafés opening every month in Hawke’s Bay, our love affair with good coffee and places to drink it doesn’t appear to be diminishing.

www.guiltyassin.co.nz

www.guiltyassin.co.nz “Adam, Sam and the team at NZ Digital have been amazing! They built a full eCommerce store for us, and the sales to date have far exceeded expectations. The site is beautifully designed, and its simplicity and function makes it easy for customers to get around, from start through to completing the transaction.“ - Hannah Mclaughlin, Guilty As Sin Learn more about this project at www.nzdigital.co.nz

eCommerce Website, Digital Strategy

Wordpress Web Design | 21a Hastings St, Napier | p. 06 650 5754 | e. info@nzdigital.co.nz | www.nzdigital.co.nz

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Getting the Chicken Recipe Right

By Catherine Wedd When you drive up to Bostock’s Organic Free Range Chicken Farm it’s clear to see they’ve got the free range recipe right.

Plump, white chickens surrounded by vineyards and green pastures, free to range at their leisure. This is the type of farming that is true to the pure, green NZ image and certainly gives you confidence about poultry farming.

Hawke’s Bay is now home to one of the only organic free range chicken farms in the country with owner, Ben Bostock, keen to educate consumers about where their food comes from, producing a premium product that can be both financially and environmentally successful.

“We are the real deal here, totally transparent.

The difference between the organic standard and the free range standard is that we are about 30 times more free range than what you see under the normal free range birds in the supermarket.

“Our chickens are also antibiotic free, GMO free and chemical free. They live twice as long as any other meat eating chicken, which is a

major point of difference to normal free range, which are still pumped with antibiotics.”

Ben grew up on his family apple orchard near Hastings and is now adding a taste of protein to his family’s proud organic growing history by producing organic chicken.

His father John Bostock is the pioneer of commercial organic apple production in New Zealand, so Ben has grown up with a passion for healthy, safe growing processes where there is control – which means no chemicals, no antibiotics, no hormones and no genetic modification. Welfare and quality are Ben’s key focuses.

While working for a meat export company in Auckland, Ben saw how far removed the sheep and beef farmers were from their markets.

He saw an opportunity to produce a product where he controlled the whole process from the pasture to the plate – where he could grow the food, grow the chickens and distribute them to market.

“I’m really into the idea of being vertically integrated. We can grow our own grain, mill the grain, feed the chicken, pack the chickens and market them under our own brand and control the whole operation.”

Ben had the perfect environment to grow organic chickens. There was no better location than his organic family orchard in Hawke’s Bay to make his dream a reality and so the journey began! Ben established Bostock’s Organic Free Range Chicken in June but it had been a year in the making.

I’m really into the idea of being vertically integrated. We can grow our own grain, mill the grain, feed the chicken, pack the chickens and market them under our own brand and control the whole operation.

– Ben Bostock

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“My organic chicken farm has taken about a year to set up. From getting the sheds arranged, importing them from France, the crop grown and the processing plants set up.”

they live twice as long and we feed them twice as much. But we believe in quality and giving our chickens a good life, which translates onto the plate for the consumer.”

Ben researched international poultry practices, which included trips to France to see how he could produce some of the best free range organic chicken in the world. The French take their chicken and their freedom very seriously. Superior tasting, succulent chickens are part of French culture and identity.

The first few months have been busy up-skilling staff, which has included teaching them how to handle the chickens with ‘kindness’. Ben himself has been focused on marketing his products to retailers and is fielding strong inquiry from across the country.

Ben wanted to produce the same premium poultry in New Zealand and give the Kiwi consumer an unforgettable experience. The key to the French success is nurturing, feeding and raising chickens well.

Ben Bostock

Determined to give his organic chickens the best life, Ben purchased some ‘French Chalets’, which are state of the art, clean, spacious and solar powered.

They have a solar operated feeding system and windows, which enable the chickens to roam freely outside once they’re fully feathered. The chalets are also mobile and can be moved regularly to ensure the flocks have fresh grass all year around.

• NZ’s most popular meat is chicken • About 100 million chickens are consumed each year • New Zealanders eat about 31kg of chicken each per year

“These days more consumers want to know that they are buying healthy, pure meat, which has been raised well,” Ben says.

“We aren’t producing for the masses like the other companies. We are small scale and produce a niche product focusing on quality as opposed to quantity. The Tegel and Ingham plants can process up to 100,000 chickens a day. Whereas we are

www.bostocksorganic.co.nz

Interesting Chicken Facts

“We grow our own feed, including corn and barley, which ensures we are controlling the entire process.

However, the challenge for Ben is educating consumers and marketing his organic chicken products well from the outset.

It’s still early days for Ben, but he is on a mission to get his chicken business booming and believes the increase in demand for more sustainable farming practices will help drive success.

The French Chalets processing about 300 a day – 80,000 per year.”

Ben says all chicken meat producers in New Zealand buy their birds for the same price - one dollar each.

“We start off on the same playing field but the difference in the price we retail our chickens for is the cost in rearing them. Our chickens cost more to bring to the market because

•

Consumption of chicken meat has more than doubled since accurate records began in 1986.

(A recent Colmar Brunton survey)

Where to buy in the Bay • • • • • •

Bellatino’s, Havelock North Cornucopia Organics, Hastings New World Hastings New World Greenmeadows Hohepa, Clive Chantals, Napier

Think Solar.

High Performance Solar Solutions give you the power to control your own energy use.

GOLDPOWER, YOUR LOCAL INSTALLER OF:

• • • •

Residential single and 3 phase systems Commercial 3 phase systems Stand alone/off grid systems Solar pumping

100% finance options available Contact us today 022 156 2548 or (06) 281 2023 or visit

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CHARGING AHEAD WITH SOLAR

By Damon Harvey

The sun is shining for solar power generation and more Hawke’s Bay businesses and households are taking advantage of cheaper installation costs and improved solar technology.

Rupert Ryan has been on a crusade for the last five years to find alternative power sources. After trying windmills unsuccessfully, four years ago he installed a solar system to power a small tool shed.

He purchased the system from an Auckland based firm and when they came down to install he realised that “they had no idea of what they were doing”, so he decided to learn more himself, visiting manufacturers in China and Europe.

Rupert is well-known for his entrepreneurial spirit and he’s also involved with pastoral, horticulture and arable business interests in Hawke’s Bay. It was through using a lot of power in these enterprises that he decided to explore other power options.

And he’s not alone, according to a paper presented at an Electricity Engineers Association conference earlier this year, installed capacity per capita is growing year on year.

And as far as performance goes, solar is fantastic. There’s enough power for our needs – Ben Bostock At the end of 2013 it was 1.9 watts, 2012 it was 0.6 watts and in 2010 it was just 0.1 watts.

The upper South Island districts of Tasman and Marlborough, with long sunshine hours and the price effect of being at the end of a long transmission line, are leading the charge for solar with 9.2 watts and 7.1 watts per capita respectively. Amongst the lowest are Wellington with just 0.7 watts and Auckland at 1.5 watts.

According to Businessweek, China aims to triple solar generation by 2017 to 70 gigawatts - about eight times NZ’s total generating capacity.

Rupert and business partner Sam Barley have set up a solar business, Goldpower Solar, sourcing quality solar panels, inverters and components from China and Australia.

“We’ve researched and sourced some of the best products from throughout the world.

“Solar is now more affordable than a decade ago. A large part of the cost of a panel is the silicon content. The manufacturers have developed techniques to cut the silicon wafer thinner and have reduced its size by several hundred microns and this has led to gradually reducing costs,” says Sam. Rupert is using a 10-kilowatt 3 phase system on his farm, just south of Hastings. The system on the roof of his woolshed generates enough power for the busy shearing season and is then used in summer to operate pivot irrigators.

The system is “on grid” which allows him to import electricity from the grid at times when the solar system is not producing enough for his needs, and also allows exporting excess electricity to the grid, which power retailers then pay back to him.

World champion shearer Rowland Smith is a regular shearer for Rupert and he’s convinced solar power and renewable energy are the way of the future.

Rowland sets high performance standards shearing more than 400 sheep a day, and he’s excited about shearing and using only the sun to power his sponsor, Heiniger’s equipment.

“There’s no difference [in power output], but with solar there’s the added benefit that you know you’re using renewable energy, which is very satisfying,” says Rowland, who in the last year has won the Golden Shears, the New Zealand Open and the World Series, held in Ireland.

Sam and Rupert have recently installed solar units on the Bostock Organic Chicken chalets (see story on pages 14-15).

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Sam is quick to point out that it is important to base the economics of the cost of an install on ‘savings’, that is power you produce that you use yourself, as opposed to ‘earnings’, which is power you export, as there is no long term guarantee of what the power companies will pay for exported power.

A school in the Far North is among others in New Zealand to use solar power, which is saving them $6000 a year at current power costs – a saving of 60 to 70 percent. The Far North is amongst the highest power prices in the country.

World champion shearer Rowland Smith uses solar power to shear over 400 sheep a day.

have the added advantage of free power, so our ongoing overheads are less.

“And as far as performance goes, solar is fantastic. There’s enough power for our needs,” says Ben. As a back up Ben can connect the chalets to a generator but Sam doubts whether that will be needed very often.

Sam Barley and Rupert Ryan have seen a dramatic increase in interest for solar power.

The mobile chalets are moved around the paddocks regularly and rather than run overhead or underground power cables, Ben Bostock chose to go ‘wireless’ with solar energy to operate the motorized feed system and internal lighting.

It helped that solar also fits the green image of producing organic chickens but it also made sense from a financial perspective.

“There were the environmental considerations but there have been other benefits of using solar as well. The chalets are on leased land, so by using solar, we have not had to lay any cables, so if we move, we leave the land untouched.

“The upfront costs were similar but we now

“We’ve worked out the highest case in power consumption and have installed enough solar panels to accommodate this.

“The number one rule is to have enough panels and a big enough battery charger to be fully charged by 2pm – when the sun is at its maximum,” Sam says.

Although there are upfront installation costs the pay back for most commercial enterprises is between 4-8 years and for a residential home 5-10 years, depending entirely on the cost of each individual’s power and the amount of solar power that can be utilised.

For example a dairy shed using 205,000 Kw a year installing a 20Kw 3 phase system will give a pay back in just over five to six years. Over 10 years the saving would be in the region of $100,000 (based on current cost of power of 21.2c/kWh and an inflation rate of 4%pa).

A house example is that installing a 5Kw system shows that the pay back would be in 6 to 7 years area with savings over 10 years of approx $25,000.

Rupert says a further benefit for businesses is that they can claim GST and depreciate equipment.

Solar Power has created another on-farm power alternative for pumping water from dams and springs, where power is inaccessible, which is in hot demand through major distributor Isaac’s Electrical in Central Hawke’s Bay. Rupert and Sam designed a DC pump that can pump water at the rate of 1000 litres per hour up to a height of 80 metres to holding tanks, which then gravity feeds into stock troughs.

“The beauty of the system is that in summer when the stock water is at its highest demand, the sun is maximizing the pump’s capability,” Sam says. www.goldpower.co.nz

LEADING THE CHARGE

LEADING THE CHARGE When measuring installed solar power per person, New Zealand lags well behind the rest of the world, despite having pretty good sunshine hours.

Compared to the undisputed world heavyweights of solar, the Germans – at 440 watts per capita – we’re mere minnows, at just 1.9 watts installed per person.

However that’s about to change as the price of panels, rising power bills and rapidly improving technology come together to produce an industry that has grown 330 percent in the last two years, and is still increasing.

Isaac’s are your go-to provider for specialised, cost effective pumping and electrical systems specifically for the rural sector.

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WHAT’S UNISON DOING TO KEEP MY POWER ON?

POWERING YOUR BUSINESS: UNISON’S COMMITMENT TO A RESILIENT NETWORK With so much of our busy, modern lives powered by electricity, a power outage can bring us to a standstill.

Unison knows that for businesses, extended outages have significant implications that can cause severe disruption to services, ultimately resulting in economic losses.

Therefore, at Unison, we are committed to doing everything we can to keep the power on, or to restore power as quickly as possible during outages.

HOW RELIABLE IS THE NETWORK?

2014 Actual

without SAIDI (minutes power per customer)

SAIFI

(power cuts per customer)

112.82 1.77

At Unison, we have a team of specialist engineers who are focused on ensuring the network is operating at a world-class standard; researching, testing and deploying the latest cost-effective technology and knowledge that will provide increased reliability to customers.

Some examples of how Unison is improving network reliability: • Creating a Smart Network: Unison is leading the electricity distribution industry with the deployment of smart technology that will automate many aspects of the day-to-day management of our network. Using fibre optic networks and radio transmitters, ‘smart’ technology can give real-time data to our Control Room on the state of the network, as well as perform automated actions that can restore power within seconds.

• Reducing the risk of damage: With over 20% of network outages caused by trees coming into contact with power lines, Unison annually surveys the network to monitor the growth of trees near power lines, and has a team dedicated to working with landowners to keep vegetation well clear of the lines.

We Can’t

Help Here

• Proactive asset management: We are continually looking at new systems, technology and processes that can help us get the most out of our assets, by extending their life through careful management and maintenance, and by determining the remaining life of that asset, so it can be replaced before it fails.

• Maximising performance through design: Unison is also continually looking at how network design impacts our ability to restore supply to customers, should a fault occur on the network. For example, we aim to design ‘redundancy’ into the network wherever possible, meaning that although supply might be cut off from one area of the network, customers can be reconnected using an alternative supply, until repairs can be completed.

...but We can Help if you’ve

Got No Power

The Commerce Commission has two tools for ensuring that customers are receiving a reliable standard of service – SAIDI and SAIFI. System Average Interruption Duration Index (SAIDI) – this is calculated by adding all customer interruption durations and dividing it by the total number of customers served, to give, on average, the number of minutes a customer was without power over the course of the year.

System Average Interruption Frequency Index (SAIFI) – this is calculated by taking the total number of customer interruptions divided by the total number of customers served, to tell us, on average, how many times the power went out for each customer over the course of the year.

The Commerce Commission sets a target ‘threshold’ for these indexes that all electricity distributors are tasked with achieving.

McCain Food’s powered up by Unison

WHY DOES MY POWER GO OFF?

GOT MORE QUESTIONS?

There are a number of reasons why your power may go off during any given year ranging from planned outages, to line damage from wind, debris and third party damage such as motor vehicle crashes (as pictured below). Earthquakes, flooding, or corrosion can also damage Unison’s underground electrical equipment and lastly the power can go off because of a problem on the National Grid. It might be an issue with one of the main power stations, or it could be damage to the circuits supplying the region.

If you want to know more about what Unison is doing to enhance network reliability, check out our Asset Management Plan, published on our website at www.unison.co.nz, or contact us via our website, Facebook page, or on

For each issue the duration of outages can vary, but restoring power to customers in these situations is always top priority.

0800 2 UNISON.

TIPS TO HELP YOUR OFFICE OR BUSINESS DURING UNPLANNED POWER OUTAGE EVENTS; 1. Have an emergency plan in place so your staff are aware of, and understand, what to do during unplanned power outages.

2. Consider back-up generators that will operate during unplanned power outages to ensure vital lighting and equipment continues to operate.

3. Ensure you have UPS and surge protection for critical computer systems. They will add protection for sensitive equipment and help prevent a computer crash if the power goes out.

4. Have back-up alternative locations to work from and ensure you are able to divert landlines to mobiles.

Unison works as quickly as possible to restore supply during outages. Whilst its Smart Network will reduce the frequency and duration of these outages, events such as motor vehicle accidents will always remain a risk to supply.

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5. When the power comes back on, ensure you are aware of the equipment that needs re-setting.

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By Sarah Thornton Gemco Construction Manager Chris Olsen talks to Gordon and Jan Anderson

On 1 April 2015, new health and safety laws will be introduced in New Zealand.

Driven by the government’s goal to reduce workplace injuries and deaths by 25 percent in the next five years, the changes will be unprecedented in this country’s history.

For business owners, things have become very serious. The new laws will not only affect the way they conduct health and safety matters and compliance, but also where the buck stops in the case of a breach.

Gordon and Jan Anderson own Hasmate, a Health and Safety and Quality Assurance advisory management company. For the last 21 years, they have been working with businesses around the country helping them to navigate and comply with the Health and Safety in Employment Act. “New Zealand has an appalling health and safety record, with more than 800 Kiwis dying each year from workplace accidents and work related illnesses. That number is higher than Australia or Great Britain and doesn’t include the 300,000 plus people who have experienced a serious harm accident over the past two decades and may never work again. Something has to change,” says Gordon.

Following the Pike River Commission of Inquiry, the government identified that the New Zealand health and safety legislation was not fit for purpose and has introduced new laws based on an Australian model that will challenge business owners of every size, as Gordon explains.

“A key change will be the requirement for directors and business owners to be more pro-active and

accountable, and to prove due diligence in health and safety matters. The new legislation is firmly directed at the ‘top’, meaning not only business owners, but board directors, body corporates, silent partners, other officers and managers will all be accountable for health and safety breaches. It’s a major change and businesses need to get serious about complying with all aspects of the Act.” In the last ten years, the Andersons have met many business owners who are “doing good things” around health and safety but have also met many companies that have put health and safety in the ‘too hard basket’ or simply don’t know where to start.

“Generally the larger companies have health and safety policies in place and are really looking after their business and their staff. For the 40,000 or so Small and Medium Enterprises (SMEs) in New Zealand employing 17 people or less, some simply don’t have the resources or don’t understand what their responsibilities are.

Complacency equals consequences. The new laws will be the best thing to ever happen if we want to reduce workplace accidents and injuries.”

Gordon’s advice to businesses is to look at the simplest ways to comply. “It might be as simple as rolling up hoses or putting up signs. Complying with the Act doesn’t have to be onerous.”

The Andersons have developed an affordable compliance management programme that is built for NZ business. It is cloud-based with a wide range of businesses across the country now using it. It is a tool to manage health and safety, chemical management, human resources, training and many other business compliance issues and records.

It might be as simple as rolling up hoses or putting up signs. Complying with the Act doesn’t have to be onerous.

– Gordon Anderson

“The system takes the guesswork out of compliance; it will remind you when items are due for review and can be as specific and unique to a business. For example, one of our construction clients gets reminders to review the harnesses every 12 months. All checks are noted and logged; evidence of a health and safety management in action should there be any investigations for compliance.

“Hasmate provides a simple way to comply with the legislation and with insurance companies increasingly challenging health and safety claims, it also provides proof that business owners have complied with the Act,” says Gordon.

The company also runs health and safety training and provides advice for boards and business owners.

“We want people to go home safe. If we can save one person from a serious accident or worse, then we’ve achieved our business goal and done something positive for the NZ workplace.” www.hasmate.co.nz

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Tim Nowell-Usticke - WineWorks

Gordon Anderson - Hasmate

Greater regional support wanted from government The election is looming. The Profit asked five businesspeople what support they are looking for from the government and what policies will drive profitability.

Tim Nowell-Usticke is the owner of WineWorks based in Hastings, employing 225 staff.

Gordon Anderson is the owner of Hasmate, a small business based in Napier.

Gavin Streeter was the pro dam campaigner that organised a large rally in Central Hawke’s Bay recently. Gavin is a part-owner in Isaac’s Plumbing and Electrical.

John Roil is the managing director of Cottages New Zealand. He is also a Hastings District Councillor.

We talked to the President of the Hawke’s Bay Chamber of Commerce – Brent Linn to get the view of the Chamber, which is an apolitical organisation and “many people worship in our church”. His views are his read of members’ opinions drawn from the many Chamber activities he attends.

Brent also says the Chamber is not happy with the current status quo approach to assisting business in Hawke’s Bay. “We haven’t seen the benefits of the economic renaissance trickling down in Hawke’s Bay. Are we being too impatient? I don’t think so. I think we need direct investment from central government in regional economic development initiatives.

Some opportunities are; infrastructure (road/rail/ broadband), education/skills training, capability (natural resource management to support our primary sector production base).

As a business owner, what changes are you looking for from the government in terms of policies or support for businesses?

Tim: I’m looking for them to keep delivering on their promise to make dealing with the government electronic at all levels. There are still too many paper-based forms, and requirements to come in to offices to lodge papers. No-one’s got time for that.

Gordon: Financial assistance for SMEs to help them to achieve and to meet health and safety requirements.

Gavin: As a growth business we are interested in research and development options going forward, any assistance in this space will enable us to develop new products and market them both nationally and internationally.

John: As a business owner we are constantly struggling with an ever-increasing environment caused by risk averse councils providing extra layers of bureaucracy on all aspects of compliance.

The common theme amongst people doing business with council are certain themes such as increasing costs, higher levels of compliance.

More detail required in all aspects of council, lack of communication. All of this while at local council level is blamed on central government passing this down to councils to administer.

We are often told that the risk lies with council and it has to protect the ratepayers through their regulatory framework.

It is hard to decipher as to where the blame does lie because when asking both parties they blame each other and say it is down to interpretation.

Every sector in business is facing this bureaucracy, which, at the end of the day, the general public is

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Gavin Streeter - Isaac’s Electrical

paying for and with no added value to the projects been undertaken.

Government needs to stop this increased level of bureaucracy by encouraging business growth by way of making it easier to do business locally.

Brent (HB Chamber view): The cries of “less government in my business” seem to be less heard these days and replaced with “we need more government in our region”.

Regional economic development initiatives, skill training, infrastructure investment; these are the things that we keep hearing back from local business leaders as their expectation of government.

Are there particular policies or tax incentives you would like to see put in place?

Tim: The creeping indexing of excise is a burden that the wine industry should not have to bear.

Gordon: Make it mandatory as it is in Holland, that before any person can set up in business they are required to have a number of basic business skills like business planning, basic accountancy, taxation and ACC. Also understanding what laws are applicable to NZ business, what compliance and governance responsibility means and the consequences for not complying. That funding is made available for SMEs so they can be trained in the pending health and safety laws and any HR employment law changes or attend the IceHouse or other business programmes.

Gavin: Research and Development. We are currently working on several projects, and getting some support but any additional incentives would enable us to commit more time in this area.

John: Yes absolutely. Currently some councils around NZ are charging Development Contributions that are not transparent, do not take into account the value that businesses bring with jobs and economic benefits and also appear to be double dipping on services that have previously been paid for.

Brent (HB Chamber view): This is always a difficult area because business owners need confidence and certainty around the rules before

PRO

Feature

assistance to projects in each of these areas in order to keep people within the districts.

Brent (HB Chamber view): See before - but business owners need central government to concentrate on creating a general environment conducive to business success.

How effective do you think the local representatives can be for your business? Are you looking for support on a local level?

Tim: The dam should be built to ensure that we can continue to build on our strengths of food and beverage production, and to ensure there is some growth in Hawke’s Bay in the coming years.

Gordon: What representatives?

John Roil - Cottages New Zealand

Brent Linn – Hawke’s Bay Chamber of Commerce

investing further in their businesses. Remember the vast majority of our businesses in HB (and it is no different to the rest of the country) have less than five employees with the owners having put everything on the line (including mortgaging the house to the bank) to build them. They need to see some certainty and consistency in the policies that affect business so the last thing we need to see are policies or tax incentives that aren’t sustainable or consistent.

Zealand is losing this battle by refusing to do anything about it.

Are there any challenges you face in your business that you think could be helped by central government?

Tim: Whatever our government can do to keep the exchange rate down, should do.

Countries are using currency depreciation as a weapon to enhance their manufacturing. New

Gordon: To alter the threshold value for SMEs to attract NZTE funding.

Gavin: Assistance within the health and safety/ compliance area, next year there are some massive changes coming and SME need more support in this area, possibly the development of a cloud based management tool in this area, especially if it simply stepped through the process and made the business owners comfortable that they have met the requirements of the revised legislation.

John: Currently the greatest growth in NZ is in the main cities of Auckland and Christchurch.

The growth figures of NZ are distorting the lack of growth in provincial NZ. There needs to be greater

support

and

which

Gavin: Yes we are looking for support from our local representatives, we have some major infrastructure projects on the radar and we need our local leaders to get behind them and ensure they come to fruition. We can’t sit back and hope they happen we need to make them happen.

John: I am not sure what local representation can do for our business, apart from what I have mentioned before. It seems that provincial cities around NZ are all in the same boat with poor growth apart from those which have local resources like oil and gas supporting their economy, or proactive councils that are prepared to challenge traditional thinking and look at how risk averse they are.

Brent (HB Chamber view): Passionate and vocal local representation is essential for business.

Every other region is competing for the same fixed amount of resource in the government coffers so we need representatives who can carry our compelling arguments through to delivery.

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A PERFECT LANDING for YOUR NEXT MEETING Make the most of your next meeting by hosting it in our modern facilities.

We have a large boardroom suitable for up to 24 people and a smaller meeting room (up to 8 people) as well as fast wifi (free), electronic white board and a 55 inch TV for presentations.

The facilities are available 7 days a week until 10pm.

Catering is also available.

Contact us today Phone (06) 834 0742 wayne@hawkesbay-airport.co.nz 22

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Advice

IS YOUR BUSINESS READY FOR SALE? Over 300,000 small to medium sized businesses are expected to come on the market over the next five years, as baby boomers reach retirement.

Many of these business owners believe that selling their business will be just as easy as selling their home. In reality it is not that simple, and you can’t simply put up a ‘for sale’ sign and bank the cheque.

There are, however, some similarities to selling a home, in that a well presented business will fetch a higher price than one that is not.

Preparing a well-structured transition plan before your planned exit will reap benefits.

In fact, those who run their business as if it is always for sale will most likely achieve the best on sale value.

The secret to a good sale is simple. It all comes down to what drives value in your business.

Although this may seem quite straight forward, it’s surprising just how many businesses do not achieve their maximum sale price because the basics have not been adhered to.

All business owners should ask themselves these, sometimes difficult, questions: 1. How dependent is your business on key people?

Your business cannot be heavily dependent on the owner. So, look to build an effective management team around you to alleviate concerns for future buyers.

2. Do you have a business plan that demonstrates the upside to a purchaser?

Review your strategy (e.g. choice of clients, markets) so it’s focussed on creating a more attractive asset for sale. At the same time, realistically understand the strengths and weaknesses of your business. The more understanding you have, the better prepared you are to talk to a potential buyer.

It’ll also shore up relevant weaknesses and highlight key value drivers and investment considerations.

3. Do your management reports provide adequate information for a prospective purchaser?

Prepare regular management reports to help buyers understand the key metrics and performance indicators used to manage the business.

4. Are your financials prepared or audited by a reputable firm of chartered accountants?

Get your financials in order. A potential buyer will pay a great deal of attention to your financial results from the past few years.

They’ll scrutinise historical performance to get a better understanding of the risks and rewards associated with their potential investment. Historical performance is a good benchmark for future performance.

5. Are you extracting maximum returns from your existing operation?

The profitability of your business will impact the price you get. Continually review your operations, not only to reduce costs but to maximise returns from existing customers.

Consider strategic acquisitions to gain the benefits of scale.

6. Do you have strategies/procedures in place to mitigate all material risks?

Formulate and implement a comprehensive sell-side due diligence process that will make you better prepared for buyer scepticism, rigorous analysis and negotiations.

7. Do you have your prospective financial information well documented?

Develop key messaging around the quality of earnings and performance, and anticipate the questions and concerns of potential buyers.

8. Are key supplier/customer relationships adequately documented?

Demonstrate you have long-term relationships with customers and vendors.

Try and ensure all key contracts are in writing.

9. Have you considered who the ideal buyer may be?

Start considering who might be the ideal buyer and the concept of subjective value. By understanding a potential buyer’s view around what drives value, you can position your business to highlight those points.

10. Are your systems well documented and is your intellectual property protected?

Risk in your business will impact the buyer’s view of value. Risk can be minimised by well documented systems and processes. Where possible, protect your intellectual property including trademarks and patents.

It is never too early to plan for a business transition. You should always manage your business as if it is for sale, always looking to understand what will drive value for potential buyers.

PwC BUSINESS SALES

By Vicki Lawson Vicki Lawson is a Partner and a Business Sales Expert at PwC, based in the Hawke’s Bay. Email: vicki.j.lawson@nz.pwc.com AUGUST - NOVEMBER 2014

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TALISMAN OF SUCCESS

By Damon Harvey

It’s hard work, not luck that has led to 10 years of serving up thousands of flat whites and eggs benedict at Bay Espresso Karamu Road, but just don’t kill the Peace Lily!

Tucked away in the corner (and perhaps out of harm’s way) is a potted Peace Lily which has been the indicator that all’s going well for Jonelle and Chris Jarvis and their little empire of cafés spread throughout Hawke’s Bay. In the early days, the Peace Lily, which Chris calls “piece of luck”, was his closest companion as he worked all hours to scrape together enough money to keep the door open.

“That plant was given to me in about the second month of being here by an aunty.

“It’s become our talisman. I’ve said to staff that if that plant dies, so does our business and you’ll all be made redundant. One staff member wanted to re-pot it and I said mate I’m not even prepared to touch it, but if you want to re-pot it and it lives then that’s fine but I’m not.

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“He re-potted it and it’s lived on and that’s fine.

I’ve come in some days and it’s drooped and I’ve gone ahhh but it still lives,” says Chris.

Over the first 18 months Chris and Jonelle wondered many times whether it was a good idea to leave well paid jobs, sell their home in Wellington and buy a run down café on the outskirts of Hastings.

They had a love for the hospitality industry, having both worked in restaurants and bars in Wellington and the United Kingdom.

The couple probably expected too much from what was only a small café scene in Hawke’s Bay, but they believed that soon the region would catch up with the likes of Wellington and London.

On Saturday afternoons in Wellington the couple would sit in their favourite café, Caffe L’affare, enjoy a coffee and cake, read the weekend newspapers and observe the hustle and bustle of café life.

They wondered whether they could own their own café and it was on one of these Saturday sojourns that they came across a very small classified advertisement for a café and roastery in Hawke’s Bay. Chris, a Hawke’s Bay boy, had been looking for an opportunity to move the family back here and this looked like the golden opportunity.

Ignorance is bliss and I remember one of the lowest points was keeping from Jonelle that the day’s takings were just $343. There were days when I would have read the Dominion three times and my only companion was the plant.

– Chris Jarvis

“We loved the café scene in Wellington and we always knew we would be in hospitality.

“I would sit in the café and look at how the place was working. I would watch how the staff interacted with their customers and how they kept the buzz of the place going,” says Chris.

After seeing the advert in the newspaper, Chris and Jonelle visited the Karamu Road café and paid far too much for the business that operated from what they could only describe as a “dump of a building”.

“I said look at this [pointing to advert] – they’re roasting their own coffee now, let’s take a look,” says Jonelle.

They laugh now that the building hasn’t actually changed too much but that’s become the charm

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of the place, a rustic unassuming café where the walls ooze many stories of business deals and blooming and bursting of relationships.

The turning point to success came one day while standing behind the espresso machine Chris could feel the glare of his only customer.

“Ignorance is bliss and I remember one of the lowest points was keeping from Jonelle that the day’s takings were just $343. There were days when I would have read the Dominion three times and my only companion was the plant.”

A woman was sitting in the corner, slowly drinking a coffee and continually looking across to him. After a while, it got the better of Chris… was the coffee terrible, did she have something to say?

He adds if it hadn’t been for selling coffees and coffee beans at the Hawke’s Bay Farmers Market in those early days there wouldn’t have been enough money to feed the family and keep the “wolves from the door”.

“The only reason we are here today is because of the Farmers Market and that is an absolute fact.

Chris and Jonelle Jarvis

“That eighth day of cash was enough four times a month to keep every wolf from every door. And essentially that was the life for about 18 months.”

Chris wandered over and asked her if there was a problem with the coffee or was something else wrong?

“The woman asked if I sold Amway and then it all clicked. We later found out that the previous owners attempted to sell Amway to customers and this was having a detrimental impact on the business.”

From this day forward old customers returned and word started to spread about the quality organic coffee, served by someone genuinely interested in them, and a popular range of hearty breakfasts and lunches.

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“We were up one month, down the next, up again and so it went on and then one month it went from $28,000 to $35,000 and then to $38,000. This trend carried on for about a year.

It reduced the anxiety by about 27.5 percent and we knew that we must be doing something right.”

The Jarvis’ had a simple game plan that came from working in pubs in the UK. They wanted to create a place where the customer felt comfortable, where regulars were welcomed by their name and their regular coffee choice.

“We wanted to create a café experience similar to the television programme Cheers. We had worked in pubs and you got to know your locals really well. You knew what their favourite drink was and you had it ready for them, when they turned up at 5pm.

“We take the same approach with the cafés. I remember a customer sitting in his car one day talking on his phone. I made his coffee and took it out to him and he was scratching around for his money and I said just pay tomorrow. That’s the type of service we’ve focused on,” Chris says.

(opened in 2011), Long Black - Onekawa, Omahu Road (opened in 2006), Havelock North (2007), Taradale (2011) along with Adam & Eva in Havelock North (2010), Six Sisters (2013) on Marine Parade and Tandem on the outskirts of Havelock North (2013).

The business has over 50 full-time staff, nine part time staff and a hefty wage bill every week. Over 10,000 coffees are served each week, the most popular coffee of choice being a large flat white and the breakfast of choice is eggs benedict with bacon (which isn’t actually on the menu).

The decision to open cafés has been as organic a decision as the (440 kilogramsa week) of organic coffee that’s roasted at the Roastery in Omahu Road.

“The first café we opened after Karamu Road was Long Black in Onekawa and the idea came from a suggestion by a regular customer, who got her morning coffee here before driving to work in Onekawa.

“We would drive over to Onekawa on our day off and look at potential sites and wondered why no one else had set up a café. The kids hated the family drive.”

Step forward ten years and 2014, Bay Espresso is now a household name or at least a name known by coffee drinkers throughout the Bay.

Jonelle was keen on the challenge of starting their own café, rather than purchasing an existing one.

The first café has now been joined by other cafés under the same name in Market Street, Hastings

“When we actually started making money, that is when we decided to branch out. We were not going to borrow anymore to set up another café.

We waited til we hit the black and then we spent until we hit the red.

“We never wanted to get into a lot of debt. It annoys me when I see a flash new restaurant open, where they spend huge amounts of money making it look great and then it fails, leaving bad debts and suppliers owed thousands.

“Our approach was to set things up with the money we had,” Jonelle says.

Another wise decision was to protect the Bay Espresso name and set up this new enterprise under another name.

There were a couple of sound business reasons to their methods.

It protected the Bay Espresso name, if it failed; it provided an opportunity in the future to sell, which they did in 2012 and it created a perception that Bay Espresso’s organic coffee beans could be used by other cafés.

Although Jonelle was keen for the second café, she wasn’t as keen for the next venture in Omahu Road.

“I knew that three cafés would change everything. Long Black was pretty easy as it was only open five days a week. But Chris had a taste for expansion and I didn’t.

“Omahu Road was three years ahead of itself.

We would have a queue at 10am and again at 12.10 but we were nowhere near break even.

Everyone would come for a coffee but no one would use the space for meetings.

Unison, one of Hawke’s Bay’s largest employers was just across the road and staff not only started popping over for regular coffees but after a while started using the café for offsite business meetings.“We’re lucky to have Unison, if they had moved, it would have been

a set back, but with them and a

steady stream of contractors and

truck drivers, the place is now our busiest site.”

With nine cafés now spread

throughout Hawke’s Bay, there’s

little desire to expand further.

Each café has its own

regular customers

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and in some cases have developed their own customer type.

“We get that different flavour for each of the places. We never wanted these to be seen as a franchise – it’s always been my biggest fear,” Jonelle says.

It all goes back to the philosophy that Chris wanted to instil from day one - a place and a café scene that was a social outing, where staff knew your name and what you like to drink.

“It’s about the real simple things you do as a host. If someone knocks on your door and they’re your friend do you ignore them, do you let them walk in and help themselves to the fridge and tv?

“No you say ‘Hi how are you doing, are you being looked after, have we got everything you need, is the place looking neat and tidy, do we use polite language.”

It seems Chris and Jonelle have the recipe right.

Ruby Jarvis

CREATING CAREER OPPORTUNITIES Bay Espresso has become a significant employer in the region. 55 plus staff spread across nine cafes has had its challenges but both Chris and Jonelle had a desire to develop a career pathway for their staff.

“We realised that if we had more cafes we could offer the ability to learn more skills. They could learn to be manager or roast coffee. We could then attract people who are thinking more about a career,” Jonelle says.

They have also taken a very simple approach to management and operating the business. They don’t have heady job titles for themselves such as managing directors or chief executives.

They work on the floor, probably more than what they work on the business and it’s enabled them to keep their original values that the first café was set up on.

When it comes to selecting the right staff, the approach has also been simple.

“We don’t micro-manage.”

“We look for a skill set, how fast do they walk and do you have a face that looks friendly.

Generally if you walk quickly – you do quick.

“We get them in and see how they get on with the other staff. It’s like a group of flatmates.

“We have some staff that move between cafes and we have some that like to stay put at the same café.

“We have also been able to create a career in hospitality for many, rather than it being a short term job. We have managers, baristas, coffee roasters and the opportunity is there for everyone to progress.

“We now have people who have worked for us for a very long time,” says Jonelle.

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Catherine Wedd

PRO PRIMARY

Earlier this year I visited my sister and her husband who were sharemilking on a farm near New Plymouth, right beside the Maui gas field. From their kitchen window I could see two of New Zealand’s most successful industries, the richness of the flame from the gas plant - and the dairy cows producing white gold to fuel the Taranaki economy.

All over the region I could see it booming – wealth oozing everywhere I looked. They have made the most of their resources and pumped investment into their area and wow is it paying off! According to SEEK the average salary in Taranaki is $80,000 compared to $61,000 in Hawke’s Bay. Taranaki is at the top of the table. – Hawke’s Bay at the bottom.

It got me thinking – why can’t Hawke’s Bay boom too?

A water storage scheme and a prospering oil and gas industry is just the type of injection our economy needs to grow.

We should be enjoying similar growth and confidence like Taranaki.

We have one of the biggest opportunities looking us in the face, yet it still seems so far away.

The knock-on impact of the dairy and gas boom is felt massively in urban Taranki – jobs, training, industry, the expansion of trucking fleets down to the need for bigger and more efficient ships to dock at the port.

If the Ruataniwha Dam goes ahead we can experience similar flow on effects in the Bay. It’s not just the farmers who will directly benefit, it is the whole region.

The Board of Inquiry has given the dam the green light (under appeal as we went to print).

The Regional Council has voted to invest $80 million into the scheme. So come on Hawke’s Bay let’s look forward and change the game!

In this issue of Pro Primary we look at our successful breeding ground and how science and innovation is driving profiablity for farmers.

We find out some interesting facts about deer velvet and see how there has been a resurgence in the wine industry.

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BREEDING GOOD STOCK IN THE BAY Vivienne Haldane and Catherine Wedd

Dr Richard Lee performing an embryo transfer

Hawke’s Bay is a breeding ground for producing some of the best genetics in New Zealand and world. So what is the key to the breeding success? We spoke to some Bay breeders and found out that science, good management and vision are certainly part of the equation New Zealand’s largest red meat genetics company, Focus Genetics, is based in Hawke’s Bay and is at the cutting edge of international research and development - with its sheep, beef and deer genetics being used around the world.

“Out of 2000 hinds, 13 were selected. These superior hinds were then injected every 12 hours, over a critical three day period, immediately before artificial insemination, so they super ovulate.”

Focus Genetics was formed by the amalgamation of Rissington Breedline and Landcorp’s Genetics Division three years ago and the company is now seeing strong results after the expertise of the two largest breeding operations in the country teamed up.

The first embryo transfer programme exceeded expectation as 127 transferable embryos were produced.

Cattle programme manager, Daniel Absolom says the company aims to help farmers identify the best genetics so farmers can maximise profitably and production and produce the best quality meat for consumers.

“Quality genetics are continuing to improve results for farmers.

Genetics are one of the driving forces behind any production system” The company is at the forefront of science and has stepped up its Red Deer breeding programme this year by carrying out embryo transfers for the first time – a move Red Deer programme manager, Dr. Richard Lee says is essential to producing a rapid genetic boost.

“This boost is created by using known superior male and female genetics and the multiplication of greater numbers of offspring than natural mating.”

He said the programme involves a lot of work to select the best hinds and source the best stags available in New Zealand.

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“This was really exciting for us because it’s a first and to get outstanding results in the early stages is really rewarding. It is an opportunity for the industry and is going to help us drive production for farmers all around New Zealand.”

Internationally the Hawke’s Bay based company has been making its mark, especially in the UK. Research commissioned by UK supermarket giant Marks & Spencer, found that the use of Focus Genetics breeds, the Primera and Highlander could offer sustainability benefits for UK sheep farmers.

The trial concluded that increasing lamb output and production efficiency by switching to

Highlander ewes offered the opportunity to develop a more sustainable lamb supply chain through reducing on farm costs, green house gas emissions whilst maintaining product quality, processing efficiency and meat eating quality. Using Primera genetics resulted in faster growth rates and a higher proportion of high-value cuts.

Focus Genetics is also partnering with other progressive companies including Silver Fern Farms and agriculture research company, FarmIQ to carry out the world’s largest meat testing programme.

The annual meat testing involves Primera and Lamb Supreme lambs and measures qualities such as meat tenderness, colour, taste, fat depth and yield (which is the percentage of saleable meat on the carcass).

Focus Genetics chief executive, Gavin Foulsham, says the meat testing is one example of the processes the company is involved with which aims to link the plate back to pasture by identifying the key characteristics that influence on-farm performance.

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Alpacas pack a punch Sarah and husband Peter never meant to have so many alpacas, they have 120 of them on their 50-acre property at Poukawa and as Sarah explains, they have a way about them that is pretty irresistible.

“There are about 800 members in the Alpaca Association and you will find most of them have had to move house since owning them. You buy two but you quickly find out, two are not enough,” she says.

Sarah was formerly a research scientist from London and Peter farmed in Oxfordshire, so how did they get into the business of breeding alpacas on a commercial scale?

“We bought two alpacas locally and paid a lot of money for them but it turned out they weren’t very good in terms of fleece quality so we had to make a decision early on about whether we’d give up or do better. We thought, ‘let’s be really good at this.’ We have the land and we have the time to dedicate to it.”

‘We realised that people were advertising animals at a higher price because somewhere back in their parentage, they had forebears who were some of earliest imports from Peru to Australia. But by the time you’ve bought this animal and bred from it, the influence of those original genetics we were paying for in its progeny will become more and more diluted. What we really wanted was to go to the source; someone who still owned one of the original old males and get offspring that were his daughters and sons as opposed to great, great grandsons.”

The good news was that some of the original five males imported from Peru were still alive.

The bad news was that the lady who owned two of them wasn’t interested in selling any.

She owned 450 alpacas and said she, ‘loved every single one and didn’t need the money.’

Quick thinking Sarah struck up a conversation, found out a few things they had in common and finally the Australian alpaca breeder consented to sell some, on the proviso that they were taken out of the country, ‘because she didn’t want to ever be beaten in the show ring by her own stock.’

“We chose five females and one male and we still have that male. He has been the most important choice we’ve ever made and has produced some of our most successful offspring,” says Sarah.

That was 11 years ago and since then, they have been the foundation of Gilt Edge Alpaca’s genetic stock.

The Busbys have stuck to their rule to always be strict about which animals they breed from.

“We breed so we can predict that certain matings and crosses will result in a certain type of animal,” says Peter.

Sarah adds, “Even if we’d paid $30,000 for a male who had all attributes of fleece, confirmation, body and genetics but he has a nasty nature; he doesn’t like people nor do his babies, we wouldn’t want that. It’s a management thing; it’s same as in the beef industry. We have a male just like this that we now do not use.”

They are also involved with the AcrossHerd-Genetic breeding programme (AGE),

ATTN14PRO17

Sarah did extensive research to find out how to breed top quality animals. She found out that the first thing they needed was excellent genetic stock.

Sarah and Peter Busby

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which helps to maximise the improvement in their herd. Like other mainstream livestock industries, progeny testing and using a database to select pre-potent stock is essential for long-term success.

When raising alpacas, the couples’ different sets of skills combine well.

“I have a very analytical, logical and scientific approach to everything, whereas Peter has a lot of experience in animal management.

One of the attributes the Busbys are breeding for is fleece.

“We are looking for the highest yield of the best quality, fine fleece that we can possibly get off them.”

Last year she judged the World Fleece Competition, which was held here in New Zealand.

Alpaca fleece is unbelievably soft to touch.

The alpacas are shorn once a year and their fleece sent to a mill in Otago to be processed before being knitted or handwoven into fashion garments.

What about eating alpaca meat; does the thought of this alarm them? Not at all they say.

Is the business of breeding alpacas and selling fleece a profitable one?

“It is becoming so,” says Sarah, “But it would be a mistake to think you can buy two excellent alpacas and next year get your money back.

It’s a long-term goal.

Last year we had our best year: we exported 14 alpacas to different countries (mainly Europe) and now more people are enquiring because word has spread about the reputation of our animals.”

“You really have to work at it and produce good quality stock.

“Most importantly you have to treat your potential buyer with a tremendous amount of respect, honesty and after sales service. You have to go the extra mile because they often buy sight unseen.

“If you ever let someone down you lose a huge amount of potential,” says Sarah.

Sarah is involved with the Alpaca Association NZ (AANZ) and is a breed and fleece judge.

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“We’d like to see this side of it succeed because it is an essential part of turning the industry into a mainstream one.

“Alpaca meat is lean, has low cholesterol and takes on the flavours it is cooked in.”

Right now Sarah and Peter are excited about their first eight cria (babies) due to be born soon as the result of embryo transplants.

It’s a good example of overcoming the limitations of nature, mating the best with the best in order to achieve the optimum genetic outcome.

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GENETICS AND GOOD MANAGEMENT KEY TO SUCCESS The composite sheep breed, Kelso, is a good example of how the application of science to farming has helped achieve goals previously not thought possible.

That’s good news for farmers who want to increase their profit margins.

At the helm of the Kelso sheep-breeding programme is Matt Holden, a stud breeder who says he has taken on the challenge, “to carry on what Kelso founder, Roger Marshall started in 1970”.

Based in Havelock North, Matt is a 50% shareholder in Kelso.

Matt’s first taste of stud breeding was in 1990 when he worked on a high country station in the South Island that had a small merino stud. He then went to Australia and worked on two merino studs there. “I enjoy seeing what happens when you tag an animal and get individual information, rather than averages. In the early 1990s we did tagged animal recording with our deer herd and made significant gains as a consequence. I used to farm Romneys, but in 1996 I switched to Kelso and have never looked back.”

Kelso have both a maternal flock and terminal flock: Kelso Prime and Kelso Ranger coming from the terminal flock. “One of the strengths of the maternal flock is its dual purpose; they have high fertility, good survival, and good mothering ability, as well as high growth.

Matt Holden

They can produce a lamb crop in excess of 140% lambs weaned to ewes mated but with a high percentage of those lambs ready to kill at weaning.”

For Kelso clients, that’s a high priority because the amount of lambs they can target to ‘kill off mum’, drives efficiency.

Is this especially important in Hawke’s Bay? “I think it’s important in all environments, even for the guys that farm in the so called ‘summer safe’ area. A high percentage of lambs ‘killed off mum’ means good weaning weights in ewe lambs, which then paves the way for successful ewe hogget mating.”

“Fertility and growth are two key traits that drive profitability in a sheep breeding enterprise. It’s about having as many lambs to kill at weaning but also having a high percentage of ewe lambs to achieve minimum mating weight targets.”

Hamish Bibby who has been involved with

Kelso for a decade says, he is passionate about Kelso genetics because they tick all the boxes.

“This year we averaged 40kg at weaning (at 110 days) which is an 18 percent weight gain over the last year, and we’re looking to break this record again this year.”

Dunedin consultants, Abacus Bio drives Kelso’s genetic engine.

“We use one of their products, Animate to ensure the best is mated to the best for maximum genetic diversity and hybrid vigour.”

Another tool they use is SIL-ACE, NZ’s national sheep evaluation to identify the best rams for economic traits. This tells Kelso where they sit in the industry.

“It’s a great benchmarking tool and we aim to be at the top of SIL-ACE with a number of rams. It’s also the tool we use in the industry to source outside rams.”

The Central Progeny Test (CPT) plays a big part in generating good linkages with other flocks around NZ. Kelso sires have consistently performed at the top end in the CPT. While genetics are important, the other part of the equation is the right sort of feed. If feeding is increased, the lift in production is staggering. For example, this year Omakere farmer, James Aitken’s ewe hoggets were all over their 42kg minimum mating weight and that’s never happened before. James refers to genetics, irrigation and forage as his threelegged production stool. Getting these lined up is powerful for his business.

“Farming is not a hobby for me, it’s a business and I’m in business to make money,” he says.

Matt describes it well when he says “Kelso sheep are like a high performance racing car.

Until recently we hadn’t developed the high performance fuel to go with them. Now we’ve got plantain clover mixes of forage. We’ve achieved that so we are in for a really exciting time. The old adage 70% feeding and 30% breeding still applies.”

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THE SIRE OF ANIMAL BREEDING Animal genetics scientist, Dr Geoff Nicoll has devoted his career to breeding. He spent over 30 years at Landcorp (formerly Lands and Survey) where he was in charge of their livestock-breeding programmes. In 2011, Landcorp merged its breeding programmes with Rissington Breedline to form Focus Genetics and that’s where he remained until 2013. Now based in Havelock North, he has started his own company, Geoff Nicoll Genetics.

Asked why genetics helps farming profitability he says that “Genetics is the only form of improvement of animals that’s permanent.

Once you’ve selected the genes for high production, those genes don’t disappear into thin air, they stay there. Even if you did nothing beyond that, the potential for improvement you’ve got in those genes remains in subsequent generations.”

“Not only do you have those genes, you build on them. Imagine going up a staircase; the lift of the stair from one to the next is quite small but over time it accumulates. It’s the same with genetics. You gain performance by feeding animals better, but each year you have to put in the same amount of feed or more to achieve the same performance, so there’s always that cost input of labour or materials. With genetics, apart from adapting your management systems, it doesn’t actually cost a lot more.”

At Landcorp and Focus Genetics, Geoff was responsible for the genetic direction of large flocks of sheep, cattle and deer.

“We structured the breeding programmes around huge populations of commercial animals. Nobody in the world was running large breeding programmes on this scale. We are talking about breeding the sires needed for nearly half a million ewes, 60,000 deer hinds and over 40,000 beef cattle.”

Under his guidance – two new composite sheep breeds, the Lamb Supreme (terminal sire) and Landmark (maternal) breeds were created and in Beef: Angus and Simmental; in deer: Red and Wapiti.

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In the terminal sire line, selection is for genetic merit in growth and carcass traits. In the dam line, fertility, maternal ability and growth.

Selection is also made for wool production and for disease resistance such as facial eczema and parasites.

In 1995, the introduction of CT scanning to measure the distribution of meat and fat in a live animal was a groundbreaking innovation.

This joint venture between AgResearch and Landcorp, enabled selection for higher meat yield.

“I remember talking with breeders at different farmer groups and when I mentioned we were going into CT scanning to achieve higher yield of meat production, the audience pretty much, leaned back, folded their arms and went ‘Nah!’ Twenty years ago nothing was being paid for by meat yield; it was by weight of carcass. I said ‘It will happen and when it does, we’ll be there.”

Dr Geoff Nicoll

Genetics is the only form of improvement of animals that’s permanent. Once you’ve selected the genes for high production, those genes don’t disappear into thin air, they stay there.

Even if you did nothing beyond that, the potential for improvement you’ve got in those genes remains in subsequent generations.

G E T W H AT – Dr Geoff Nicoll

However, genetics is only 30% of the equation. the other 70% is down to feed quality, health, animal husbandry, climate and whether the animal is a twin or a single. These are factors that will enable a commercial farmer to make money from his ewe flock.

WHAT IMPROVEMENTS HAVE BEEN MADE ON FARMS IN NZ OVER THE LAST 10-20 YEARS?

“There’s a lot that the farmer has control over,” he says.

Dr Peter Fennessy of Abacus Bio Ltd spoke at the 2013 Ag Innovation Conference and used the following figures:

Modern technology such as DNA testing and Electronic tagging (EID) has shortened the amount of time spent recording data in the paddock yet it means there is now more information that requires further analysis.

“We have to be careful we don’t lose sight of the fact that an animal is fending for itself by grazing on grass so we need to keep in mind those practical applications.

As a scientist, I strongly believe in how that information is going to be used in the paddock. I call that the ultimate laboratory.”

Productivity (kg meat produced per adult ewe) has increased by 2.5%/per annun over the last 25 years. This represented an 86% total increase from 1985. This is both genetic AND farm management based.

Lambing percentage is up from 100% to 130% (total 25-year gain of +29%).

Lamb carcass weight has increased from 13 to 18.5 kg (total gain +37%).

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Primary

A LICENCE TO FARM...

What’s all this nonsense about, a License to farm? Who says we will need a License to farm?

By Brent Paterson | Rural Directions

Hang on we need a license to shoot, a licence to drive, a licence to fly, a licence to fish and a licence to dive, I’m really pleased that the doctor needs a licence to practice and the solicitor needs a licence to practice, but a licence to farm, who needs that?

I say that if we adopt the philosophy that when we are a patient we want the doctor to be licenced, then if you are a consumer of our product perhaps you have a good case to say you would like the producer to have a licence to farm.

What would a licence to farm consist of? Having a compliant dairy shed to harvest the milk, having a compliant shearing shed to harvest the wool and having a compliant stock handing area to handle the stock. I agree with this and many farms are already there anyway.

Having a Land Environmental Plan, what’s this all about? How will it assist me and add value?

Having an Overseer Nutrient Management Plan, what’s this, who does it, how much does it cost, what’s the outcome and how do you interpret it?

Having a Health and Safety Plan for your operation.

I agree with this and it also happens to be the law.

Perhaps we could have different levels of the licence; a pass, a merit and a distinction?

Compliance is seen as cost until there is a demonstrated benefit that produces a return, do we listen to the market and make a proactive movement towards meeting their expectations?

If the market tells us that it’s worth 5c/kg between each of the grades I know that my farming operation will be striving for the distinction pass.

Perhaps we could just call it a compliance certificate, then it may seem more digestible, especially to those farmers who measure digestibility.

Most farmers know they need this but still don’t have one. Those who have a plan in place feel better for it, can sleep better as a director of their business and have a genuine desire to provide a safe work place for their teams.

A wonderful quote that I heard last week at a conference “we must be customer-centric not product-centric” (Sir Ray Avery)

To me, a licence to farm is about communicating to the market that we are diligent in our occupation; it says that we care and are listening.

I understand that we all run different systems but I think we should all try to comply with the key fundamentals as most of us do anyway. I think most operators would get a pass mark if they were to be measured right now, I hope they would because we are all consumers.

Food for thought...

Is compliance a cost or is an investment?

Brent Paterson is the founder and managing director of Rural Directions- Primary Sector Recruitment & HR. His rural credentials are impressive from running a sheep stud and beef operation in Patoka, through to his involvement in Rural Directions subsidiary company, Primary Industry Management. To contact Brent, email – brent@ruraldirections.co.nz.

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Primary Feature

– Duncan MacLeod

A Smooth move By: Viviene Haldane

The first thing you notice about Clint and Shelley Thomsen (above) is how healthy they look. It’s not surprising to hear that they like to keep fit; they think nothing of biking 30 kilometres to Waipukurau for a cup of coffee or that they recently cycled from Mount Cook to the West Coast, a trail of 300kms. As well, they’ve trekked in Nepal and South America.

we needed. It was a big learning curve; I had no business experience whatsoever, apart from working in an office. We were required to do feasibility studies and to source machines that we didn’t even know existed,” says Shelley.

Ok, so what’s their secret? Are they shining examples of taking the deer velvet capsules that they sell?

Clint doesn’t miss farming at all and besides the deer velvet, they have other business interests.

Now Gevir is well established they can also take time off to pursue their love of travel, which they do several times a year.

Clint and Shelley have run their business, Gevir Premium Deer Velvet since 1990 and their story is interesting, because originally they were farmers but a series of events changed that.

The combination of a downturn in farming in the late 1980s and Shelley’s ill health, she was diagnosed with Multiple Sclerosis (MS) when she was 28, were catalysts for finding something that would help her and possibly provide an extra income.

“Clint had a brainwave about processing deer velvet and I was very interested in turning to the medicinal side of it for my MS – so we kind of got started and blundered our way along,” says Shelley.

They already farmed deer on their property near Takapau. “We were building up the stags anyway,” says Clint, “So we just took a greater interest in what deer velvet was used for. I started boiling it up in the kitchen. It was revolting - it stank the house out.”

A government grant, available at the time for small business enterprises, helped them get started.

“The grant enabled us to source the machines

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Gevir Deer Velvet began slowly but soon business began to snowball so in 1991 they decided to build a factory to process the velvet themselves.

Gradually the Thomsens have eased out of farming by leasing and selling off some of their property.

They’ve recently been to Papua New Guinea and in the past few years have visited Egypt, Africa and Mexico.

“In 15 years that little factory has been turning over a lot more than the whole farm did,” says Clint.

Gevir Deer Velvet hasn’t been an overnight sensation though. It’s taken a massive effort by both of them to develop and market their product.

In the beginning they had to overcome public perception that deer velvet was merely used as an aphrodisiac.

“There were other deer velvet products on the shelves but mostly they were sold without any additional information or support. We started doing product stands at shows because we realised no one had a clue what it was for or what it did. At first we used to get the odd ‘nudge nudge, wink wink – we know what that’s for,’ from the guys.”

“But eventually we got people who come to our displays saying things like, ‘Oh yeah, my grandmother takes this; it’s great for arthritis’.

It was neat to start getting a flow of customers who used it and felt its benefits. It gave both us and the product credibility,” says Shelley.

“

In 15 years that little factory has been turning over a lot more than the whole farm did.

– Clint Thomsen

”

Male deer grow a new set of antlers every year and are the only mammals to do so. The velvet is the epidermis that covers the inner structure of bone and cartilage. The Chinese have used deer velvet medicinally for thousands of years and say it promotes well-being and longevity.

Deer antler velvet is a very seasonal product, so hence its desirability.

The Thomsens now buy their deer antler velvet from PGG Wrightsons. “We contract for it by grade and price and they hold it until we need it. Then we bring it into the factory and I spend the next couple of months processing it.

“Basically you take off all the hair and the velvet.

People think we just use that part but we use the whole stick. It is dried and in the process loses about 70% of its weight. We then grind it up into a powder, it’s tested for bacteria and sent away to be capsulated in Nelson,” says Clint.

He thinks part of Gevir’s success is their ability to get behind their product and market it. They’ve attended countless trade shows and early on, Shelley promoted it on radio and television.

PRO

Primary Feature

Clint and Shelley in the early days and more recently.

Gevir Premium Deer Velvet may assist with: Arthritic pain, rheumatism, asthma, nervous disorders, muscle recovery, inflammation, digestion, osteoporosis, anemia and general well being.

What properties does Gevir Premium Deer Velvet have to aid health?

Prostaglandins, which tell our bodies how to react to pain, inflammation and infection.

Collagen, which is widely regarded as a healing agent and skin- care.

Amino acids – over 30, including the 9 essentials we must obtain from our food.

Mucopolysaccharides, which are important for elasticity of joints and a building block for joint cartilage.

Essential and trace minerals.

Other deer velvet producers have come and gone but Gevir Premium Velvet remains strong.

It is sold through health shops, pharmacies, Farmlands and PGG Wrightsons. They also employ an agent, Reagan Cotter, who works from his office in Napier. “That’s taken a lot of work out of it,” says Clint.

They say it’s exciting to hear what customers use deer velvet for and how it has helped them.

“The biggest one we hear about, for people of all ages is arthritis and rheumatics. The next one is frozen shoulders and fingers – such as dairy farmers who suffer from chilblains. It is also great for helping to build stamina for sports people and those with injuries.”

And has it helped Shelley? She says while MS can only be managed and not cured, she thinks deer

velvet has helped her, but she also takes a holistic approach though diet, exercise and meditation.

Clint, who takes a dose of deer velvet capsules everyday reckons it helps him too – “I don’t get colds and I do have arthritis from my days farming and shearing, but I don’t even notice it.” www.gevir.co.nz

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Feature

Local wine industry in strong resurgence After some belt tightening years, Hawke’s Bay’s wine industry looks set to see increased business, according to Hawke’s Bay Wine Growers Association (HBWGA) executive officer, James Medina.

Delegat’s has commenced construction of a new winery, just off the Hawke’s Bay Expressway and opposite the Hawke’s Bay Regional Sports Park.

The winery is expected to produce between 5000 and 10,000 tonnes of grapes.

The company has also increased its vineyard holdings from 61ha to 500ha including a property in the Gimblett Gravels area and sold its Matariki winery to BLK, a partnership of local businessmen, who also own the former Montana winery in Pandora leased out to winemaker Rod McDonald.

Constellation has added 40 to 50 hectares of vines on its Corner 50 vineyard at the far end of the Bridge Pa Triangle and Villa Maria is planning a new winery on its relatively recently acquired Te Awa property.

“Following two good vintages, people are more optimistic about investing for the future.

Cashflow is better and plans that were put on hold with the downturn in the economy can be actioned. Now people are ready to reinvest.”

“Delegat’s is putting in a new winery near Hastings and Villa Maria are working their way through the consent process for a new winery at Te Awa winery,” James says.

Rod McDonald

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There have also been expansions with the smaller wineries bringing in more equipment and adding capacity.

Grower surveys carried out by HBWGA had shown profitability over the last two years after several years of unprofitable business.

“There’s a lot of deferred maintenance that’s occurred in order to cut costs so we’ll probably see more money and more capital expenditure in terms of maintenance on the vineyards.

This has a flow on effect with suppliers and contractors,” James says.

Following two good vintages, people are more optimistic about investing for the future, cash flow is better and plans that were put on hold with the downturn in the economy can be actioned. Now people are ready to reinvest.

– James Medina

Another initiative is a marketing programme to expand the Hawke’s Bay wine brand in China.

“Hawke’s Bay wine growers have put together a marketing programme which is funded through participating wineries and AGMARDT.

Since joining Yealands Wine group in 2011 Crossroads looks set to reach even greater heights.

It’s part of a three year programme and at the end of that we will hopefully have achieved our objective of building the Hawke’s Bay wine brand, and increasing sales for the wineries.”

All Crossroads vineyards have been sourced and designed purposely for the quality and style of wines made at the winery. There are four Gimblett Gravels vineyards plus Kereru vineyard and Homeblock in Korokipo Road, Fernhill.

The Profit spoke to Crossroads winemaker Miles Dinneen, which has undergone some transformations and noted successes.

The story of Crossroads wines is one of commitment.

A commitment to finding the best ground on which to grow grapes, having a dedicated team and a top winemaker, all with the goal to make exceptional wine. The list of awards they have won illustrates the success of their ambition.

Crossroads began in 1987 and in 1990 the first Crossroads wine was released. In 2004 Miles Dineen came on board as winemaker.

Peter Yealands’ name is well known in the wine world for his innovative thinking and again, the ‘c’ word: commitment to sustainability.

His company’s mission statement is think boldly

James Medina

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HAWKES BAY WINE – FAST FACTS • Oldest wine region in New Zealand • 80% of NZ’s annual vintage of cabernet sauvignon, merlot and syrah comes from Hawkes Bay. • 92 independent wineries.

• In the last three years Hawke’s Bay wines have won 14 trophies and 70 gold medals in international wine competitions.

• More than 16 Hawke’s Bay wineries are now exporting to China.

Miles Dinneen

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tread lightly and never say it can’t be done’. In 2013 he won the prestigious Lincoln University, South Island Farmer of the Year award.

Being part of the Yealands Wine Group is an exciting development says Miles.

“This makes us the eighth biggest wine company in New Zealand. It puts us in an enviable position and gives us the muscle for a marketing budget and global distribution in 70 countries and counting.”

Buying Crossroads created environmental diversity for the Yealands Group. Marlborough is renowned for Sauvignon Blanc and Pinot Noir, in Hawke’s Bay its Chardonnay as well as Cabernet Sauvignon, Merlot and Syrah.

“Being in Hawke’s Bay has rounded out Peter’s portfolio and for us as a small company, it means we are now growing reasonably quickly.”

Miles recently returned from a marketing trip to Australia where he says Crossroads gained many new listings for its wine.

“We are starting to get Hawke’s Bay on the map in Australia. It probably helps that there are a lot of Kiwis over there.”

Miles has a hands-on role in selling Crossroads wine.

“I make the wine then get to travel the world selling it in fine dining restaurants. It’s a big part of what wine is about: making fine quality wine and putting it with good food.”

Getting the message across about our wines is all part of the drive for success.

“Hawke’s Bay is a relatively obscure region in global terms but I think we’ve cut through to the gatekeepers about the quality of our wine.

A lot of people in the world are rating Hawke’s Bay reds very highly, but to get to that point you need volume and producers from Hawke’s Bay with decent volumes of their wine on the shelves of supermarkets and other markets.

We hope that will be the next wave for the region.”

That’s positive news on the back of the recession when, for two or three years, few vines were planted anywhere in New Zealand.

“Yes there is definitely a resurgence; there is some planting going on here and wineries have confidence again. We are growing our programme here quite quickly, so it’s good.” says Miles.

Crossroads Winemaker’s Collection Syrah 2012 won the New Zealand Syrah and Red Wine trophies at the International Wine Challenge 2014 and a 2010 vintage of the same wine has just won the Decanter World Wine award, Best NZ Red Rhone Varietal.

“When you get the English wine trade tasting your wine and rating it really highly that filters down through the trade in that market and helps.”

Miles Dinneen Hawke’s Bay wines are beginning to grab people’s attention.

The 2012 Trinity Hill Gimblett Gravels Chardonnay recently won overall Best Wine of the Competition at the Sydney International Wine competition.

The 2010 Trinity Hill Gimblett Gravels Syrah won the Best Wine of the Competition award in 2012.

“Hawke’s Bay wines winning at this level will get us to a tipping point where global consumers are really starting to buy our wines,” says Miles.

Hawke’s Bay is a relatively obscure region in global terms but I think we’ve cut through to the gatekeepers about the quality of our wine. A lot of people in the world are rating Hawke’s Bay reds very highly, but to get to that point you need volume and producers from Hawke’s Bay with decent volumes of their wine on the shelves of supermarkets and other markets. We hope that will be the next wave for the region.

– Miles Dinneen

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Property

HOUSING MARKET ‘STEADY AS IT GOES’ How have the residential suburbs of Hawke’s Bay performed since the peaks of 2007?

By Paul Harvey | Williams’ Harvey Registered Valuers

Arguably the volume of sales transactions and house values in Hawke’s Bay started to climb in 2001 to unprecedented levels, with values peaking in 2007. Since then and for various well documented reasons sales activity and values have shown a downwards trend across the suburbs of Hawke’s Bay. At Williams’ Harvey we analyse and graph the REINZ (Real Estate Institute of New Zealand) statistics on a monthly basis. So how has your suburb performed in terms of value levels since the peak of 2007?

For the purposes of this article we have analysed and graphed the REINZ statistics Median Sale Price (MSP) since 2001 making direct comparisons between the suburbs of the twin cities and it is interesting to see how similar the cities are.

In general the statistics show a trend towards easing values with a slight lift in 2010 returning back to a very steady marketplace with modest growth since 2011.

Similarities •

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Both Napier and Hastings have two standout suburbs.

All mainstream suburbs track so closely together we have grouped those suburbs with the trends being almost identical.

Napier’s mainstream suburbs of Marewa, Napier South, Onekawa, Pirimai and Tamatea have a 2014 YTD MSP of $265,000.

Hastings mainstream suburbs of Akina, Hastings Central, Mahora, Mayfair,Parkvale, Raureka and St Leonard’s have a 2014 YTD Median Sale Price of $248,000 which is some 6.8% below Napier’s being a fair reflection of the value levels between the two cities.

Both cities also have their entry level suburbs in Maraenui and Flaxmere, with both suburbs showing similar trends.

Both suburbs were substantially impacted in a negative manner in 2011/12 due to the

depreciation tax changes introduced in April 2011with investors taking a step back from the market. However, Flaxmere which has historically been behind Mareanui in value terms appears to have recovered more quickly with strong growth in 2012/13 and now sitting 16% above Maraenui at MSP of $162,000.

The Standout Performers Havelock North Havelock North being Hawke’s Bay’s highest valued suburb is showing exceptional recovery with 3.4% growth in 2013 and 10.9% growth in 2014 Year To Date (YTD).

With a Median Sale Price (MSP) price of $454,650 Havelock North is the only suburb to have now surpassed the value highs of 2007, with value levels being 4.5% above those at the peak.

Frimley Frimley also shows growth with the 2012/13 years producing levels substantially higher than normal trend lines would have predicted.

A contributing factor to these increased value levels has been the high volume of new builds in this suburb transacting through that period.

Values have since settled back and the current MSP is currently recorded at $350,000 which is on a par with 2007 value levels.

Napier Hill (Bluff/Hospital) Napier Hill is also showing good recovery with increased value levels showing a 5.3% growth in 2013 and 1.8% in 2014 YTD. However, still below the highs of 2006 (this suburb peaked in 2006 as opposed to 2007).

Taradale/Greenmeadows Again another strong performer with a steady upward trend since 2011, with 7.1% growth since 2011 and a current 2014 YTD MSP of $351,250.

If you cannot find your suburb, for statistical accuracy reasons, suburbs with very low volumes of transactions have been excluded. Westshore, Bay View, Clive, Te Awanga, Haumoana have all been excluded due to low volumes of transactions and lack of reliability of the median sale price.

In general our residential market is stable and improving with modest growth in value levels across the board.

Havelock North really does stand out as providing the strongest growth rates at present.

Volumes of transactions still continue to be a bit fragile and vary monthly with approximately 200 properties selling in Hawke’s Bay every month during 2012 and 2013 with a slight softening to 186 per month 2014 YTD.

Paul Harvey is the Director of Williams’ Harvey Registered Valuers. He has a diverse and broad knowledge of the HB property market. To contact Paul, email paulharvey@williamsharvey.co.nz

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PRO Food

Fresh approach for Food Hawke’s Bay

Food Hawke’s Bay – Patricia Small.

Vivienne Haldane.

By Vivienne Haldane The new boss for Food Hawke’s Bay (FHB), Patricia Small, started in the position in May 2014 and brings a wealth of experience to the job.

She already has fresh and inspiring ideas about where she will lead the organisation.

Patricia’s career path to date has been one of taking on challenges and making the very best of them.

Before her appointment at FHB, Patricia worked in marketing and sales roles for Rush Munro’s Ice-cream and Country Culinaire, whose products started out at the Hawke’s Bay Farmers Markets and is now a well-known brands.

While living in the UK for 20 years, she ran a country inn with two restaurants in Hertfordshire.

“It was the focal point of the village and had fine dining as well as a bar menu. It was great fun and my first real introduction to the food business. As much as we could, we sourced local produce, particularly meat and vegetables. English people love their game, so this was a common feature on our menu, including pheasant, quail, rabbit and hare.”

Returning to Christchurch in 1995 she and her husband bought a food manufacturing company that specialised in Middle Eastern foods; humus, falafel, souvlaki and burghul wheat.

“I managed the whole operation; production, packaging, marketing and coordination of a nation-wide distribution team. It was an excellent experience at a time when the ‘Lisa’ brand was becoming well known.

“Despite the increasing public awareness of humus, it was important that we stayed ahead of the game to keep our customers interested. We were innovative with our ideas and introduced new flavours and frozen products,” says Patricia.

Her broad knowledge of the food industry will be helpful for newcomers seeking advice.

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“I understand consumer needs; products have to be at the right price, packaged attractively and offer perceptible benefits.

Getting products into the market is the biggest challenge, followed closely by distribution.

“The distribution of frozen products is particularly challenging in New Zealand. I have worked extensively with supermarkets, both at store and head office level and understand the challenges that face new entrants to the market.”

In October 2013, it was announced that FHB and Business Hawke’s Bay (BHB), along with stakeholders NZ Food Innovation Network (NZFIN), Massey University, EIT and the Hastings District Council, would benefit from a collaborative strategy.

FHB would retain its key role in managing the Farmers Markets as well as provide one-on-one assistance for new entrants into small food businesses. As those businesses develop they will pass to BHB for support, advice and further direction.

FHB and BHB will also undertake joint projects based around angel investment and other commercial opportunities.

“All these agencies are currently working together to create a document which will guide the prospective producers through each stage of their idea. At the moment there is some confusion as to where to go first.”

“I want to focus my energy on working with our members. Membership is open to anyone who is connected to food or wine. Some people are happy to take their product to the Farmers Market every week, while others have aspirations to sell into supermarkets and food outlets.

“Having a product, and passion is fantastic but the challenge is getting that product to market. I don’t have all those answers but I certainly have some,” says Patricia.

What would be her advice to someone developing a concept, whether they are a grower or a manufacturer?

“People are usually very passionate about their ideas. That’s brilliant, but sometimes such excitement can cloud judgment and prevent someone from looking ‘outside the square’.

“You have to do that. That’s the reality; turning your idea into something that people will buy. How you get to that point is often the difficult part, and that’s where FHB can help.

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“We can put people in touch with others who have expertise in specialised areas. Becoming a member of FHB enables this type of support.”

A cost saving exercise that she considers could be of huge benefit to local businesses is the sharing of resources.

“There’s a lot of equipment sitting around in Hawke’s Bay that’s only used a few hours a day or week. I believe if there is a willingness on the part of manufacturers to work more closely together, equipment could be used more efficiently and shared around, to the benefit of all.”

Patricia will also be having a critical look at the number of events that FHB runs.

“We’ll be looking at those that benefit the local community the most and also support the Farmers Market. I’ve organised many events in previous jobs, including charity events, and while they raise profile, they are incredibly time consuming.

“FHB is currently staffed by myself, an administrator, and a market facilitator who is solely involved with the Farmers Market.

“We have formed a working group to determine what events will benefit the organisation, and its members.

People are usually very passionate about their ideas. That’s brilliant, but sometimes such excitement can cloud judgment and prevent someone from looking ‘outside the square’.

– Patricia Small “I’d like to see more emphasis put on helping all our members, by doing what we can to support them to grow their business. It’s about helping the network to operate better than it has done in the past.”

The very popular Farmers Market at the A&P Showgrounds, and Napier Urban Market is an area she wants to help promote with the Farmers Market committee.

“It’s a great destination on a Sunday in Hastings, and Saturday in Napier. I am keen to work with the Farmers Market Committee to help them attract more local people to the markets.

“Bringing the market alive with entertainment, imaginative displays, and some activities that will educate children on fresh foods would be beneficial.”

“FHB is also trying to encourage local chefs to use stallholder’s produce in their menus as much as possible.

“Although this is a good idea, there can be an issue for some producers who can’t supply enough produce on a regular

basis, which means chefs are at times forced to purchase from outside the Bay.” Patricia enjoys living in Hawke’s Bay. “I like the weather, the easy access to food, and the wine is fantastic. In the UK, access to fresh produce is limited, and you have to drive miles, often in bumper to bumper traffic, to find it at the farm gate.

“I also like the changing of the seasons; the apple blossoms and the autumn colours are just beautiful.

“There are very few days when I don’t get a buzz from the everchanging scenery and most of that relates, in some way, to something we can eat or drink.

“It makes you feel good about living here. We’ve got some excellent chefs and great restaurants in Hawke’s Bay. I get a lot of overseas visitors who are amazed at the amount choice we have in such a small place. We are very lucky.”

About Food Hawke’s Bay FHB is a member based industry association that connects and informs both local companies interested in food production, processing and exporting and international buyers wanting to buy Hawke’s Bay.

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PRO Legal

A NEW ERA IN CONSUMER RIGHTS 17 June 2014 saw the majority of the changes, stemming from the Consumer Law Reform Bill, come into effect.

By Edward Bostock | Bramwell Grossman Lawyers The changes could have a significant impact on businesses and it will be important for all businesses (and traders) to review the way they contract and the types of representations that they make to ensure that they do not inadvertently contravene the new provisions.

There is not sufficient space in this article to detail all of the changes, as they cover numerous Acts – the Bill was split into six Acts - however we will cover some of the changes to the Fair Trading Act 1986 and Consumer Guarantees Act 1993.

Fair Trading Act 1986 (“FTA”)

Unsubstantiated representations •

It is now an offence to make an “unsubstantiated representation” in trade in connection with goods, services or interests in land;

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A representation will be “unsubstantiated” if the person, at the time of making a representation, did not have reasonable grounds for it;

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Whether a representation is actually false or misleading is not relevant and any business may breach the FTA even if the trader did not manufacture or supply the good or service, or develop the promotional material

Contracting out of the FTA •

Both parties (and the agreement) must be in trade, the agreement must be in writing and it must be “fair and reasonable” for the parties to contract out; and

The Door-to-Door Sales Act 1967 has been replaced by a sub-part of the FTA and the minimum disclosure requirements and a right to cancel have been extended to “uninvited direct sales” The Layby Sales Act 1971 has (generally) been replaced by a sub-part of the FTA. The definition of ‘layby’ agreements has been refined, there are new disclosure requirements on the supplier and buyers may cancel laybys at any time before taking possession of the goods.

Unfair Contract Terms (change takes effect from 17 March 2015) • This is potentially the most significant amendment to the FTA. •

It will be an offence to include, apply, enforce or rely on an “unfair contract term” in a standard form consumer contract that was entered into or varied after 17 March 2015;

• A contract is essentially a standard form consumer contract unless proved otherwise and the relevant factors include: – the relative bargaining power of the parties; – If there were effective negotiations or if one-party simply had to accept or reject the terms; and – the extent specific characteristics of any party are accounted for.

• Only a Court can declare a term “unfair” and Vehicle Graphics a prohibition of an “unfair” term will only The inclusion of “entire agreement” and “no Building / Shop Fronts apply following any such declaration reliance” clauses are examples of provisions Footpath Signs that may be effective to contract out of • Once declaration made, a person or business

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liability but the inclusion of such clauses will not be determinative.

will not be permitted to apply, enforce or rely on the unfair contract term.

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Call 0800 SPEEDY today!

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hastings@speedysigns.co.nz 903 Heretaunga Street West, Hastings 42

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Consumer Guarantees Act 1993 (“CGA”) The applicability of the CGA has been extended to goods supplied by auction or competitive tender.

The“reasonable consumer” test (used in assessing whether the acceptable quality guarantee is met) has been amended to refer to the nature of the supplier and the context of the supply.

Contracting out of the CGA • Provision amended to align with the FTA amendment (see above); New guarantee as to delivery • Is now a specific guarantee relating to the delivery of goods by the supplier; •

Provides that a guarantee of acceptable quality applies to goods delivered to the consumer on and from the time the consumer receives goods.

New (separate) guarantee and indemnity regime for the supply of gas and electricity. The onus is on businesses and traders to ensure that they comply with the consumer law changes.

We strongly recommend that businesses and traders do not delay in seeking legal advice on what changes (if any) are required to their current business practices or documents (e.g. terms of trade, delivery/returns policies) to comply with the changes.

Edward Bostock is a solicitor at Bramwell Grossman Lawyers in Hastings. He has Bachelor of Laws from he University of Sheffield in the UK. To contact Edward , email edward@bglegal.co.nz

PRO IT

3D PRINTING AT YOUR FINGERTIPS It seems like the stuff of science fiction - printing objects in 3 dimensions - but it is now accessible to us all for a fraction of what you would think it would cost.

By Wray Wilson | Need a Nerd

I was giving a talk recently and at the same event a vendor was demonstrating a 3D printer.

It was making a small vase (presumably for very small flowers) and laboured away for a couple of hours while I blabbered on. By the time I had finished, it still hadn’t and I would hazard a guess that the flowers would have been long dead by the time the vase was complete.

A few of us speculated on the application for such a device and curiously the first thing most people mentioned was printing out a gun (was my talk really that boring?). We were either all closet terrorists wanting to produce nonmetallic weapons to take on the next flight out of Hawke’s Bay or

lacked imagination of the practical application for such a device.

However, 3D printing is seen as one of the ‘next big things’ - one of the technologies that will change our lives over coming years. OK, I thought, let’s see what these things can really do.

You can pick up an entry level 3D printer for around $500.00. It should be able to accurately print out a small object in a single colour such as a small vase for dead flowers or a chess set for a last minute present.

The Makerbot Replicator 2 Printer – build your own White House

But step up to a more expensive machine and the doors open to a number of possibilities.

The most obvious example is rapid prototyping – the ability to design and quickly print an accurate scale or full sized model of what you

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A gear system printed on a Makerbot Replicator 2 3D Printer

are designing. No more clumsy cardboard models of your new home or renovation. No waiting days or weeks for dies or metal parts to be produced.

Lockheed Martin have used extensive 3D print prototyping in the production of the James Webb Space Telescope. Due for launch in 2018 the telescope is NASA’s largest science mission ever and the largest space telescope ever launched.

All designed using 3D printers that you can purchase for a couple of thousand dollars from a high street retail store right here in NZ. Another application is for remote workers – you can design items for people on the other side of the world, email through the design and they simply print out the object at their end exactly as you intended it to look. Because 3D printers allow relatively easy customisation you can take a template and change it for your own use. Nokia, for

instance has released the 3D designs for their cases so that you can print out a customised case for your mobile phone.

Most of us probably associate 3D printing with ‘plastic like’ finished products, fairly brittle and in a single, dull colour. Surprisingly you can print with a wide variety of materials – from human tissue to chocolate (don’t mix these though).

The rocket engine that powers the Dragon V2 space capsule is fully printed with parts made out of materials such as nickel/iron alloy.

With 3D printing small numbers of parts can be manufactured relatively inexpensively meaning economies of scale don’t necessarily hold true anymore in manufacturing.

So whether it’s a backscratcher, a rocket engine or a body-part, we should have a 3D printer with us all the time. Lost your car keys? Stop your fruitless search. Just print out another set and you’re on your way.

Wray Wilson is the chief nerd and franchise owner of Need a Nerd Hawke’s Bay. Need a Nerd is a nationwide technical sales and support business to the SME and residential market. Email - wwilson@needanerd.co.nz AUGUST - NOVEMBER 2014

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Ed

Education

Trucking on under the family name

To relaunch the family brand, Brendan Foley has been drawing on marketing skills honed while studying at EIT. On the road again – Brendan Foley, a partner in Foley’s Transport.

By Mary Shanahan

The grandson of the founder of Foley’s Transport, Brendan is getting the wheels of the trucking business turning again after almost 20 years.

The 29-year-old has teamed up with Tim Barley, 35 in establishing the Hastings-based enterprise, inspired by what Brendan’s grandfather achieved in 1949. Foley’s Transport dominated the Hawke’s Bay and Manawatu stock and rural cartage market for more than 40 years but when it sold in 1995, the name disappeared off the roads.

Pat Foley started Foley’s Transport with three trucks based in Waipukurau. When Pat died suddenly in 1976, aged 52, his sons Roger and Brendan’s father Derek managed the business. At its peak, the company ran 30 trucks and employed 45 staff.

Brendan gained his first heavy transport licence while working part-time and school holidays for a local transport operator, adding all the required trucking classes to his licence after

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leaving school. Encouraged by his father, he completed a Diploma in Applied Business at EIT, driving logging trucks in his spare time to support his studies.

“I didn’t like school and wasn’t keen on further study,” Brendan admits.

“But when you enjoy learning, it becomes easy.

“Studying the marketing stream helped me identify a gap in the transport market. Our livery is the original company colours of red and cream, and we developed the logo used on our shirts. We’ve painted the company name on the back rather than the sides of our trucks because that’s where it’s best seen by following traffic.”

Operating a four-axle truck and fouraxle trailer dedicated stock unit and other trucks for carting apples, hay or livestock, the resurrected business is backed by the two newcomers’ wealth of experience.

Brendan has driven freight, stock and logging vehicles throughout New

AUGUST - NOVEMBER 2014

Zealand and triple cattle road trains and stock and grain vehicles around Australia’s western and northern territories.

Tim also headed into the world of trucks after leaving school, gaining his trucking licences before joining the family firm, Barley Builders, and then establishing Kaweka Construction in 2005.

Covering his business options and using seasonal opportunities to supplement his building income, Tim purchased a truck to cart apples and hay. Securing fruit carting contracts, he then bought a hay loader and a second truck to meet demand.

The two Hawke’s Bay mates got talking and decided to join forces.

“There is a real cross-over with the clients we were separately working for but neither of us would have looked at those different markets,” Tim says.

Brendan has found timeliness and cost are major factors for the farming industry.

“I believe there’s a mood for change among some farmers, with many looking for a traditional rural livestock carrier with a driver who knows how to handle stock. As owner-drivers, we have our fingers on the pulse and can do what we say we are going to do.”

“The person you’re talking to on the phone is going to be the one who’s coming out to see you,” Tim points out. “That helps eliminate problems and we hope to build good relationships in a niche market.”

Bothmen admit it’s a challenge but say they’re at the right age to take a risk.

“We’d like to eventually have a small fleet of trucks but you’ve got to be able to provide a personal quality service and understand the needs of clients,” says Tim. The new Foley’s Transport dedicated stock unit can cart 600 fat lambs or 40 fat cattle, while the two trucks are able to move wool, hay and fruit and meet smaller cartage requirements.

PRO

HR

BEAT THE WINTER BLUES It’s that time of the year in many workplaces when staff are away because they are sick, or their kids are sick. Or perhaps they are at work but are miserable becuase they are coming down with something and are busily spreading it round their colleagues.

By Kimberly McKay | BDO Central

The healthy ones are struggling to cover the work of the sick ones. It can be dark when you get to work as well as when you leave and pretty cold if you work outside. We’re in that long spell between Queens Birthday and Labour Weekend when there are no stat holidays and it’s all a bit grim. So what can you do to chase the blues away at your workplace?

You might consider some wellness initiatives.

It’s not just a trendy HR notion – improving the physical and mental health of the workforce can positively impact on absenteeism, productivity and therefore the bottom line. There can often be indirect benefits in terms of employee engagement if people feel the organisation cares about them. Wellbeing activities targeting fitness are generally group based and can have fantastic team building spin-offs. Focus on the basics of nutrition, good sleep habits and getting some exercise to make people feel better.

There are plenty of ideas to choose from: • Free flu jabs for staff • Encourage healthy eating by providing fruit in the tea room as an alternative to biscuits • Provide nutrition information, share healthy recipes, ensure healthy options in workplace catering • Encourage and perhaps subsidise work sports teams or gym membership • Raise awareness about getting a good night’s sleep and taking proper rest and meal breaks.

A couple of suggestions I liked from career coach and author, Karen Elizaga (Find Your Sweet Spot:

A Guide to Personal and Professional Excellence), include: • Take an air bath (getting some fresh air is good for your waistline, mental health and energy level) • Listen to upbeat music on your way to work and at the office, as long as you don’t disturb your colleagues • Perk up your posture – carrying yourself upright sends a signal to your brain that you are feeling energised and engaged.

Positive thinking and a bit of humour is a great antidote to the winter blues. The idea of having fun at work gets some managers worried but there is plenty of research to show that it encourages team spirit, increases productivity, enhances satisfaction and engagement and stimulates creativity and innovation.

Keep it simple and inexpensive. At BDO, the winter months are also the busiest time of year so for a bit of fun we have Winter Warmer Lunches – two volunteers make big pots of homemade soup and staff get together for a shared lunch and pay a small amount to cover the costs. The comfort food is delicious but it’s getting people together that is most important. We also have a ‘Random Acts of Kindness Day’ which always makes people feel good - each person is allocated a colleague to perform small acts of kindness for that day, in secrecy. The giving really is as much fun as the receiving!

If you’re in an open plan office a work-station decorating competition can be superb fun and

people’s creativity will amaze you. It’s the right time of year to organise a mid-winter Christmas celebration or you might consider a ’Night at the Oscars’ with fun awards for individuals or teams.

Anything that involves humour, games, competitions, celebrations or recognition will promote a positive vibe that’s good for everyone and good for business. If you’re stuck for ideas then just Google ‘fun at work’. Here are a few internet gems that appealed to me: • Personalise your workspace with family and pet photos, fresh flowers or bright colours that you enjoy • Have a weekly riddle or joke in your staff newsletter • Provide toys for the office like koosh balls, puzzles, wooden blocks, or a hoola hoop • Create a Wall of Fame that is decorated with awards, positive feedback from clients, and news clippings of company successes.

If none of these ideas cheer you up then maybe you’re suffering from more than the winter blues; apparently there is a condition called ‘Seasonal Affective Disorder’ – hopefully it’s not catching.

Kimberly McKay is a Human Resource Consultant at BDO Central. She has extensive experience assisting both small and large employers with all aspects of their HR needs. BDO Central are Chartered Accountants and Business Advisors, with offices in Napier and Palmerston North. We are able to support clients with a comprehensive suite of accounting, information systems and HR services. Email Kimberly at kimberly.mckay@ bdo.co.nz

AUGUST - NOVEMBER 2014

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Finance

CRACKDOWN ON OVERSEAS ASSETS

Ever since the global financial crisis hit, governments around the world are focusing on the collection of revenue in a global sense – meaning closer scrutiny of offshore assets of their residents.

By Nick Stewart | Stewart Group

A good example of this are the Swiss Banks, which have been the backbone of the Swiss economy through their banking secrecy laws. Switzerland is the asset custodian of 25% of the world’s wealth and has agreed to turn over to the US Government all banking details of US citizens with Swiss accounts.

which was previously unknown to the IRD.

While New Zealand may be a long way away from Switzerland in a geographical and financial sense, our Government too is focussing on the offshore assets of its residents. In June this year the Foreign Account Tax Compliance Act was passed in Parliament, meaning open sharing of information on US citizens by our financial services industry from December 31 this year.

Some accountants have even gone so far as to send clients a survey requesting full disclosure of global assets, complete with a warning the IRD is on the warpath for overseas investments and income that should be taxable in NZ.

Migrants, in particular, have come under increased scrutiny from the Inland Revenue Department.

A significant number of migrants come from the United Kingdom, where an entrenched public sector saving environment and historically private sector means a number of these new residents arrive in NZ with UK-domiciled assets.

The earnings on these assets, which may or may not have been declared to the NZ IRD, are now cause for greater examination.

Aside from the global financial crisis and governments worldwide looking for revenue to reduce their deficits, the main trigger is the recent amendment to the pension transfer system between NZ and the UK. This amendment means UK residents looking at transferring their pensions to New Zealand are triggering the disclosure that the pension exists,

Some of the pensions where people have worked for large UK Government sectors can be in excess of £1,000,000 and the resulting tax ramifications in the form of back-taxes and penalties are significant.

Detailed questionnaires cover overseas life insurance, rental properties, loans, mortgages, superannuation, pensions, shares in private companies, bank accounts, inheritance or any income earned overseas.

The surveys also require a signed declaration from the client.

Chartered accountant Giles Pearson, a partner at PricewaterhouseCoopers, says the government has made several structural changes in recent times, affecting offshore assets.

The first was to overseas pensions. Previously there was significant non-compliance, but the change corrected a structural problem, making it easier for those with overseas pensions to comply, and easier for authorities to enforce.

The second change is New Zealand has strengthened its information sharing agreements with other countries. This allows revenue authorities to share information about people who have assets, especially in low tax in tax countries.

“We haven’t seen any evidence of how they’re using that information but, again, the structure is in place,” Pearson says.

PwC’s approach is to encourage clients to make a voluntary disclosure to the IRD if income on overseas assets hasn’t been declared.

Generally, the IRD is accommodating when it comes to voluntary disclosures and, although interest is always payable, there are usually no penalties with this approach.

Pearson encourages people who know they may be non-complying to be proactive about facing the issue and dealing with it.

“Being proactive and making sure you are complying is by far the less stressful option.”

If you know you have overseas assets and need help, seeking expert advice is essential in meeting your obligations as a New Zealand tax resident. It will give you peace of mind by removing a financial risk to your long term financial plan and success.

Disclaimer “The opinions expressed in this article are those of Stewart Group’s advisers and tax subject matter experts, and should not be considered as advice.

Investors should obtain professional advice regarding their own financial circumstances and objectives before making any investment decision.

Under the Financial Services Act 2008 a copy of our Disclosure Statement is available on request and free of charge.”

Nick Stewart is an Authorised Financial Adviser (FSP21383) and specialises in providing advice to wealth management clients.

To contact Nick email: Nick@stewartgroup.co.nz

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AUGUST MAY - AUGUST - NOVEMBER 2014 2014

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Feature

ELECTROTECH

is celebrating 30 years

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Richie Richards Managing Director

“It’s Been a Hellava Ride”

www.techgroup.co.nz AUGUST - NOVEMBER 2014

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Business

A TAXING ROLE ON BUSINESS DECISIONS

I’m old enough to remember the Hitchhikers Guide to the Galaxy and Hotblack Desiato deciding he was going to “spend a year dead, for tax reasons.”

By Cedric Knowles | KNOWLedge Accountants

While I wouldn’t generally advise any of my clients to pursue such an extreme course, it is interesting to consider how tax plays a part in the business and investment decisions people make.

I briefly covered the supposed “unfair” tax treatment of investment property in the last issue, but with tax looking like an interesting part of the election debate in September, it seems timely to expand on my thoughts around tax and the New Zealand investment environment.

In comparison with many of the world’s developed economies, New Zealand has a very flat and very simple tax structure (believe it or not!). The table below gives a comparison of personal income tax rates, GST or VAT rates, and Capital Gains Taxes:

Spot the Difference?

Existing House Value

$500,000

Existing Mortgage

$100,000

Available Borrowing at 80% LVR

$300,000 Rental Property

Share Portfolio

Purchase Price

$300,000

$300,000

Rent received per week

$320

Dividends received on shares after tax

5.55%

Capital Growth in Property Market (no basis in fact)

4.0%

Income

$16,640

$16,650

Holding Costs

France Sweden United Kingdom Australia China South Africa Japan United States New Zealand Switzerland

Top Personal Tax Rate

General Gst Rate

75.0% 57.0% 45.0% 45.0% 45.0% 40.0% 40.0% 39.6% 33.0% 13.2%

19.0% 25.0% 20.0% 10.0% 17.0% 14.0% 5.0% 0.0% 15.0% 8.0%

Capital Gains Tax Rate 75.0% 30.0% 28.0% 25.0% 25.0% 13.3% 20.0% 39.6% 0.0% 0.0%

Excludes local or state taxes and healthcare levies.

Most countries have varying rates of GST on basic goods.

There are many exemptions to captial gains taxes.

Rates above based on a quick trawl of Google, which apparently knows everything.

Over the last 30 years, most of the loopholes in our system have been removed, along with numerous allowances, deductions, exemptions, incentives, subsidies and other government fiddling designed to channel taxpayer behaviour in a certain direction. In theory, this has left us in a state where decisions are made based on what produces the best profit result aligned with overall business goals.

Now that house prices have gone crazy in Auckland and Christchurch again, the same old line is being trotted out that we need to adjust the tax system to “discourage” investment in housing. In my view, this is arrant nonsense – the tax treatment of housing is absolutely identical to any other form of investment. Any proposed capital gains tax will also affect all forms of investment equally, that is, by simply bring priced into the cost of the investment over the long run. According to The Economist magazine’s global house price report to the end of 2013, both Australia and France have higher house prices compared to average incomes than New Zealand, and both have capital gains taxes. My consistent view is that migration (and therefore demand) is the consistent major driver of house prices, not tax or interest rates.

So why do we constantly hear politicians and media commentators going on about the tax environment that encourages property investment? Above right is an example of the tax treatment of two identical forms of investment – both using equity in an owner-occupied home to leverage into another investment – one in rental property, one in shares:

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Rates

$1,600

Insurance

$1,000

Maintenance

$500

Property Manager 8%

$1,331

Investment Manger 1.5%

$4,500

Manager

$4,431

$4,500

Interest on borrowing at 6.75%

$20,250

$20,250

Total Costs

$24,681

$24,750

Taxable Loss – Actual Cash Spent

($8,041)

($8,100)

Tax Free Gain in Value

$12,000

$12,000

Net Gain

$3,959

$3,900

*Assumes not a trader or bought with intention of resale at profit

We can see from this example that the investor will make a cash loss, and will usually be able to offset this against other personal income and receive a tax refund. I have heard people saying that property investors are being subsidised by other taxpayers, but if they are receiving a tax refund, it is never more than 33% of their actual cash loss – you could say they are losing 67% of their money to provide an essential service to those who do not have the means to purchase their own homes!

To me, the bigger issue is why would somebody who has good equity in their home, or savings to invest, choose property over other forms of investment that generally provide an equal or better income return and capital gain over time? I believe the answer is fear – property can be seen and touched, and even with quite bad management, will usually still exist.

The sharemarket and finance company investments have been littered with disasters since at least 1987, and the legacy of those unregulated cowboy days has probably still got a long time to run. And this is a massive constraint on the potential of NZ and HB – those with capital are simply too scared to invest in companies that are innovative and growing. And why wouldn’t they be, when NZ’s biggest investors won’t – the NZ Super Fund stands at approximately $26billion and 62% (at the end of May 2014) was invested overseas, and ACC has over 30% of its similar portfolio overseas.

I see numerous businesses that are struggling to find seed capital or growth funding, yet the government has around $24billion invested elsewhere. I’m also old enough to remember the Development Finance Corporation which was a government-funded investment organisation that went spectacularly broke due to its exposure to commercial property and the agricultural sector when all the rules changed in the 1980’s.

Maybe it is an idea worth looking at again, with a small part of the funds invested offshore – it would send a clear message from government that “we’re prepared to invest here, so why don’t you?”

Cedric Knowles is a director of KNOWLedge Accountants, Hawke’s Bay. He has worked as an accountant in the Bay since 1987. Contact Cedric by email: cedric.knowles@knowles.net.nz

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