Self-interest or frustration? A grower view on NZ's kiwifruit duopoly pitch
Proposals for a second kiwifruit-exporting entity out of New Zealand as an alternative to Zespri may have been dismissed by the industry's regulatory body, but are still a sign of dissent in the ranks, with some orchardists seeking alternative ways to get to market. New Zealand Kiwifruit Growers Inc (NZKGI) president Neil Trebilco believes any type of deregulation would be a "disaster", which he claims is evidenced by the state of the country's apple industry after it took that path more than a decade ago. At www.freshfruitportal.com, we speak with him and other growers about their thoughts on single desk marketer versus free market systems.
Te Puke-based grower Paul Jones describes those who advocate for change in New Zealand's kiwifruit export system as the 'one percenters'.
"That's because they are no more than that in the industry; something of a nuisance but in the big scheme of things, pretty irrelevant," Jones says.
"Growers are strongly backing the Zespri system and they're doing it for sound commercial reasons. They're seeing it in their bank accounts every month.
"I think the shortage of fruit has really highlighted the benefit that can be gained from that brand. Behind that there's the quality, the marketing effort, the uptake of the health messaging, and the reasonably efficient structure we have here."
But for grower Ted Meade, who started growing kiwifruit 14 years ago as a retirement nest egg, the system has proven problematic and frustrating with his business "just hanging on".
"I’m an angry grower with no control over my destination," he says.
"I detest going through Zespri with the fruit, even this year. But if there were a chance to get out of it, I’d be the first to put my hand up to go, and if John Thompson and Mark Bayly got an export license, I'd be the first one in the ring.
"They [Zespri] were given the job to transport and market fruit - a job they’ve dismally failed on - and basically they've got into everything they shouldn't be in."
With the last point, Meade is referring to new varieties - something he feels green growers have been indirectly subsidizing through the Zespri framework.
"Since the establishment of Hort16A [Zespri Gold] they've been taking money off the green grower and compensating the gold grower to make their varieties go further," he says.
"I believe they haven't got a PVR [Plant Variety Right] on green and therefore we should be able to do whatever we like with the green."
Avoiding the path of New Zealand apples
As far as grower welfare is concerned, Trebilco takes a very different view, using the apple industry as a case in point.
"I think that the apple model has not been successful. They had a similar model to us back in 2000, and the industry was of a similar size to ours - in fact, they had 50% more hectares," he says.
"Since deregulation the number of apple growers has dropped by 35%. Their export earnings, which is of interest to New Zealand because we have to pave our way in the world, have remained static. Meanwhile our earnings have increased 125%.
"Back in 2000 they had one exporter, now they've got almost 100 exporters. That's the only success from the deregulation of the apple industry – they've got a whole lot more exporters, but less growers and a lot less hectares planted in apples and producing apples."
Bay of Plenty grower Mark Mayston agrees, emphasizing the most important challenge right now is overcoming vine disease Psa. He himself has cut out his Hort16A plants and grafted to the disease-tolerant G3, which is 'chugging along quite well'.
"There’s lots of evidence around the world of different produce industries, even in our own country here, that have gone away from a single desk," Mayston says.
"There might be a few that have done well, but generally as an industry it’s retracted significantly, and if you look at the apple industry in New Zealand in comparison to the kiwifruit one, over a similar period of time, one has grown dramatically and the other has retracted."
Trebilco says the kiwifruit industry would "absolutely" face a similar fate if it were to deregulate away from the single desk marketer scheme.
"The industry would shrink substantially, a lot of hectares would go out of production, a lot of growers would have to leave the industry because they wouldn’t be able to make it work, orchard returns would go down, and returns per tray would go down. It would be a disaster."
Returns and self-interest
In terms of the proposal put forth by Thompson and Bayly, he claims the move is through self-interest.
"If they were successful they would make millions and millions of dollars, but it would be purely at growers expense. It's not something at all that we’d want to see happen, and I am totally opposed to it," he says.
"I think from a grower perspective this would be extremely damaging. I find it really difficult to understand why they think growers would find this of any interest at all.
"I think that the strength of our industry is based around being able to sell a very high quality in all aspect, and have control of the supply chain to market to ensure that we can supply the market with a regular amount of high quality fruit. Once you start to have more than one operator it’s very difficult to control that."
Last month, the pair told www.freshfruitportal.com the leaked proposal was out of date and unrepresentative of what they intended to establish. Trebilco does not buy this idea.
"You can put a dress on a pig but it's still a pig. You can put another dress on a pig but it still remains a pig. I can't put it any more bluntly than that I think," he says.
Jones and Mayston are also critical of the proposal.
"I wouldn’t support the idea in principle, and we have a pretty good marketing structure that's served us pretty well to date," Mayston says.
"We know very little about John Thompson, other than the fact that he is not a grower and my understanding is he is a fruit exporter, so he obviously has a strong commercial reason to have more than one exporter," adds Jones.
"It would be a good money-making proposition for him, but given that growers own entirely the current structure that we have, which is Zespri."
The fineprint of this last point has been previously called into question by the Independent Kiwifruit Growers Association (IKGA), for which Ted Meade is a grower liaison, claiming claims 75% of Zespri shares are only owned by 25% of the country’s kiwifruit growers.
Meade is also critical about Zespri's claims over record returns.
"You go back to 2001-02 we were getting six bucks to the gate, and that was over 10 years ago. The thing is we’re only getting about five dollars something in the gate now.
"If you go back to production versus higher prices, it’s only because the production has jumped up on these orchards through farming that we have more trays.
"They're saying that we’re getting a higher price per hectare. Well, yes they are, but the actual costs have doubled since Psa struck."
In terms of other Zespri-related issues that have caught headlines in recent years, starting with fines for anti-competitive behavior in South Korea, through to fraud charges in China and an investigation from New Zealand's Serious Fraud Office (SFO), both Trebilco and Jones do not believe there will be more trouble on these fronts.
"The fine in Korea was a technical thing that arises from time to time, and I think some of these things are relatively normal in the course of doing business in a large number of countries," says Jones.
"We'll have to let that [SFO] investigation run its course, and if any individual is found to have behaved wrongly, then I would expect them to be removed from the system and we will carry on without them, but we’re a long way from drawing that sort of conclusion. Personally I would be relatively surprised if any wrongdoing was found.
"I don't know what’s happening with the SFO. I could speculate here...I imagine the SFO has happened as a result of what we’d call some industry detractors approaching the SFO and asking them to do an investigation," adds Trebilco.