The kiwifruit story in general and specific information about kiwifruit marketer Zespri, can be found here and here. On this page I will discuss how the organisation came into existence, current issues and some thoughts about the future of the New Zealand industry.
Zespri is the New Zealand kiwifruit marketer. It holds that role courtesy of New Zealand Government regulations which were promulgated at a time when kiwifruit growers were faced with severe income losses, kiwifruit exporters were doing what exporters do best, which is competing with each other, and; the Government tended toward regulatory intervention in order to protect one of the country's 'signature' industries with substantial foreign exchange earning potential.
At the time the restructure of the kiwifruit industry through government intervention came as a rude shock to the fruit trade industry. The only part of the value chain that embraced the new concept wholeheartedly was the production sector. Growers saw the creation of a single desk kiwifruit marketer as their financial salvation. Kiwifruit exporters had to reinvent themselves in a hurry in order to survive or went out of business.
Today, Zespri is faced with several issues, some of them being more pressing than others.
The Kiwi Vine Disease has had a devastating effect on the kiwifruit industry globally. More details can be found here and here. Suffice it to say that PSA is a major disruptor of structured trade processes. Not so much because Zespri's supply chain is not capable of adjusting, but as a result of not knowing how it should adjust with any degree of certainty. The fact that there are fewer fruit to sell as a result of the disease because growers are culling orchards by the dozen is pretty obvious. What is not so obvious is when the disease will peak; whether green fruit will ultimately be as effected as gold fruit; whether replacement varieties are truly as PSA resistant as it is hoped;and whether the arrival on the scene as an issue will leave 'strategic scars' on the global retailers' mindsets, in terms of their relationship with Zespri.
China & Custom Duties
No producer or manufacturer of any product anywhere in the world can ignore the Chinese market. Kiwifruit producers are no exception. On the other hand, that is where kiwifruit originate from. China. The fruit used to be called Chinese gooseberries for a good reason. Shipping Kiwifruit to China is therefore akin to taking coals to Newcastle or bringing owls to Athens.
The China strategy succeeded nevertheless - or so it seemed until recently. Now there are some penetrating questions being asked about business ethics, tariffs and customs duties...and all in relation to the organisation's China trade.
Onshore Industry Consolidation
Zespri markets kiwifruit offshore. The onshore - the domestic- part of the kiwifruit value chain consists of growers, packers, cool stores and supply managers. The industry is experiencing consolidation at all levels at present. This is not surprising, given the impact of PSA and the general trends towards consolidation within the global fresh produce industry. Not a new topic by the way.
Growers are getting fewer and older, packhouses and coolstores are merging to create new economies of scale and supply managers are doing likewise. Where does this leave Zespri?
The future of the single desk marketing concept is being debated in New Zealand and elsewhere. The majority of growers continues to support the structure - but the dissenting voices have been around from day one. The fact that there is a Serious Fraud office investigation under way (October 2013) does nothing to give those who do not share the enthusiasm for the current sales model any more comfort. Every time a new WTO negotiating round is announced the single desk exemption for Kiwifruit ends up on some people's tables as well.
The Kiwifruit Regulations specifically allow for the existence of Collaborative Marketers, operating alongside Zespri, as long as they have gone through an approval process which determined that their planned activities are in the interest of kiwifruit growers. These approvals are as rare as hens' teeth, are with the odd exception only granted for a season at a time and typically are limited to specific markets, specific retailers and specific fruit sizes. It takes a lot of energy to lodge one of these applications and, even now, retail category managers struggle with the concept. It does not exist anywhere else in the world and it requires planning and commitment of a level not typically associated with a minor crop by corporate retailers. Even if this minor crop can be shipped by dedicated reefer vessels due to the market leverage generated through the single desk structure.
Then there is the question of NZ Kiwifruit Growers Inc and its role in the scheme of things. Zespri is owned by growers and growers are organised in and represented by NZ Kiwifruit Growers Inc. So when growers get brassed off with their own marketing company they give themselves a telling off, right? Well not quite, as Zespri employs professionals to market the crop, not growers. But what about those who are not enamoured with the single desk? Who represents them? How does NZ Kiwifruit Growers Inc running a China Inquiry work? Aren't they ultimately investigating themselves? And does the kiwifruit industry really need two strategic plans?
I do not pretend I have all the answer here, but I would suggest that the industry structure could benefit from a sort out, single desk or otherwise. Having said that - the single desk has created critical mass, does allow New Zealand kiwifruit a degree of leverage in the market beyond the degree of strategic importance the fruit has for retailers and has been financially rewarding for a whole generation of kiwifruit growers.