Using our natural capital

New Zealand exporters have long traded on our clean and green image, but are they making the most of it? Agribusiness editor Neal Wallace writes that some exporters argue we should take it further.

The proof, according to New Zealand Merino chief executive John Brakenridge, is visible in clothes being worn on the High Sts around the Western world.

It is not a woollen garment, it is not knitwear or jerseys, it is merino: the generic name given to fine, woollen fabric that just 13 years ago was sold as a commodity.

It is also the result of some slick marketing which links New Zealand's environmental and farm management attributes - our natural capital - to a quality end-product.

Exporters have often talked about New Zealand's clean and green reputation adding value and gaining market access, but Mr Brakenridge questions whether those well-publicised attributes have ever really been fully used.

"We have never sold the story to its capacity," he said in an interview.

The fact most of our primary exports endured boom-and-bust cycles typical of commodity markets was evidence of that.

United Kingdom branding scholar Prof David Hughes, of Imperial College in London, said the future for New Zealand was not "volume-fishing the bottom of the commodity markets".

That necessitated being the world's lowest-cost producer, something New Zealand was not.

While price was a factor for consumers, Prof Hughes, who is helping Silver Fern Farms launch its branded products under the same name, said increasingly affluent people bought on taste, healthiness, providence and safety - what French wine producers called terroir.

"It's your imagination, and I would think New Zealand's future is not volume-fishing at the bottom of the commodity markets, but your customers going forward are discerning, with greater disposable income."

New Zealand meat was in an excellent position to differentiate itself by selling the country's environmental attributes and the healthy, safe, sustainable, free-range food we produce.

But it meant moving away from a "one-size-fits-all" mentality, which assumed that, in general, all cuts of meat were suited to all markets.

"It requires a profound understanding of what consumers want in the various markets."

Mr Brakenridge said repositioning merino wool from just another commodity fibre to a desirable, targeted product was about selling "New Zealand's story", offering retailers and consumers a product with integrity, validating and attributing the thermal qualities of the fibre and authenticating its production in terms of the environment, animal welfare, social responsibility and the fact the sheep were free-range.

The goal was to gain greater value for producers, value he said was there to be captured.

Mr Brakenridge has been talking to the Government and to fellow exporters about how New Zealand can leverage its natural capital to capture a slice of an estimated $US200 billion ($NZ316 billion) market called "lifestyles of health and sustainability" (Lohas).

He said a social correction had created a niche which fitted perfectly with New Zealand's primary industry exports.

"If successful, we will drive significant financial gain and employment for this country."

This demographic based their purchases on environmental, sustainable, socially responsible and healthy values.

Mr Brakenridge said producers and exporters would have to "walk the talk" to verify there was substance behind their claims.

But the rewards were great.

A website devoted to the Lohas market estimated 35 million people were in this consumer segment in the United States alone - or 16% of the population.

For New Zealand to target this group, Mr Brakenridge said, business, the Government and industry needed to unite behind a shared vision and then position New Zealand "as synonymous with primary products of substance".

Businesses then need edto be transformed "to appeal to an experience economy" through creative branding, marketing, product innovation and validation, and intellectual property to capture added value.

This would differentiate New Zealand products from competitors.

Mr Brakenridge mentioned comments made by United Kingdom chef Jamie Oliver about the way pigs and chickens were reared, which had resulted in a consumer backlash against commodity products largely sold on price alone.

New Zealand Merino, a marketing company which handled 85% of merino and 60% of mid-micron wool exports by value, had used marketing to verify its claims about the quality of its products as it targeted the active-outdoors clothing market.

It linked growers with end-users and invested money in research to quantify the claims it made about the attributes of merino wool.

The company had negotiated long-term contracts with some of the world's largest and most prestigious textile manufacturers who were sold on the quality and attributes of New Zealand Merino wool.

Mr Brakenridge said when the the company was formed, merino wool was selling at a 20% discount compared with similar Australian wool with which it was blended.

In the past 10 years, between 70% and 90% of the time, contract prices for the finer edge of the clip were higher than in the spot market.

Mr Brakenridge said growers and users were aware prices had to be sustainable for both parties, so producers had confidence to continue to grow wool, and users knew they had long-term supplies.

It was a model the beleaguered strong wool industry was trying to replicate.

Prof Hughes said since he completed his doctorate on lamb marketing in 1973, "depressingly little progress" had been made in terms of product development.

Chicken and fish would always be the lowest-priced protein, but diets were changing in emerging nations and they wanted lamb, beef and venison.

He said New Zealand's meat industry, in evolutionary terms, was just stepping out of the swamp in how it understood what customers wanted.

"They're at the early stages of evolution in how they understand consumers."

The industry needed leadership to change, a point made in a Ministry of Agriculture and Forestry report on the meat industry released last month.

Prof Hughes said Silver Fern Farms' development of a plate-to-pasture integrated marketing system for meat was not new.

Kiwifruit, the New Zealand wine and apple industries, by retaining proprietary rights to brands, had built trust from New Zealand's natural capital.

"It's that sort of thing we are trying to do here."

But it meant promising to supply value and quality every day.

"If you don't deliver as promised, it's like not delivering on a promise at home. People are not going to be impressed."

Industry could not hide behind fears over cost, what Prof Hughes called "the strategy of despair".

"What we are saying is it is valuable to find out what people want and meet their requirements. That is how the world works. It is our turn to get out of the swamp."

 

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