If you were to ask me which productive industry New Zealand should invest in to ensure its future prosperity, I would have one word for you: food. Or, more specifically, agri-food – the farm-gate-to-plate integrated production and marketing of sophisticated, high added-value food products. In good times and in bad, everyone has to eat.
There is money to be made. In 2010, Nestlé, the world’s largest food company, earned revenues of US$105 billion – a 6.2 percent increase on 2009 – of which US$32 billion was profit. More than likely you contributed. Maybe it was the chocolate bar you bought when paying for petrol, the instant noodles you had for lunch, or the coffee you had with your workmates. Nestlé’s brands – think Maggi, Nescafé, Milo, Nestea, Mövenpick, or Minties, to name a few – are deeply embedded in people’s daily lives and they are enduringly profitable. Nestlé meets the Warren Buffett rule of investing: a stock you can reliably hold onto forever.
Yet in total New Zealand’s annual agri-food exports, at around NZ$20 billion, and the compounded annual growth rate of our agri-food industry, at around 4 percent, are a fraction of Nestlé’s. We need to do better. A lot better.
We are the 8th largest producer of milk in the world, with the capacity to provide dairy products for 165 million people according to the International Dairy Federation.
Yet in total New Zealand’s annual agri-food exports, at around NZ$20 billion, and the compounded annual growth rate of our agri-food industry, at around 4 percent, are a fraction of Nestlé’s. We need to do better. A lot better.
The Government’s Economic Growth Agenda calls for the real value of our agri-food exports to reach $58 billion by 2025. Will it happen? Not if we carry on as we are. As the Riddet Institute – which is based on Massey’s Manawatu campus – points out in a recently published report, to reach the target, the industry needs a compound annual growth rate of around 7 percent, 3 percent higher than the business-as-usual model would allow.
The report is called A Call to Arms: A Contribution to a New Zealand Agri-Food Strategy. I am sure the military allusion is intentional. This is something that we will only achieve if we work together deliberately and collectively, marshalling our national strengths.
I believe that in recent times we have fallen prey to unjustifiably diminished expectations. Yes, America may not be the economic powerhouse of old, and the European economic crisis shows no sign of ending any time soon, but I see no excuse for a lack of ambition.
In the first quarter of 2012, China’s annual GDP growth came in at 8.1 percent; in India the figure was 5.3 percent. Neither figure is high by recent measures – and China’s has since fallen by a percentage point – but by the standards of the Western world the wealth being created is extraordinary. China currently has around 172 million households in the category of “aspirant” middle class (with incomes between $5,000-$15,000); India has 107 million. In the next decade, vast numbers of them will join the middle class proper. It has been projected that Asia will account for two-thirds of the world’s middle class by 2030. Who will feed them?
Certainly I believe the world will consume all the food we can produce. The challenge is for us to become more than a provider of raw ingredients for other people’s products, to become a price setter, not a price taker. Take that $6 packet of cereal on the supermarket shelves; less than 60c will have been spent on the grain from which it has been made. The margins lie elsewhere in the chain: with the manufacturer, the marketer and the retailer. This is the value New Zealand needs to capture.
We can do it. If I look solely within Massey’s own ranks on its three campuses, we have world class experts in agriculture, horticulture and biosecurity; in packaging, refrigeration, nutrition and food safety; in food technology and engineering; in design, branding, marketing and business; and in ecological economics – for the one thing we cannot afford to do is to erode the value of the natural capital that has made our present-day success possible. Through the Food Innovation New Zealand alliance, we are working closely with AgResearch, Fonterra, Plant & Food Research, the Riddet Institute and the BioCommerce Centre. Through the Riddet Centre we are further formally allied to the universities of Auckland and Otago. On the Wellington campus, Professor Claire Massey has been appointed Director of Agri-Food Business, and in Auckland the first round of judging is currently taking place in the Massey University Food Awards.
So what comes next? The Riddet Institute has passed the torch to industry. This weekend about 20 senior executives from the dairy, meat, seafood, wine and horticulture sectors will begin a week-long boot camp. The institute would like to see the boot camp initiate an Agri-food Board to provide leadership within the sector.
I hope for this – and for much more. In a week where New Zealand has bested much larger and more prosperous nations at the Olympics, the time is right to take on a challenge.
