Hon Jim Anderton
Minister of Agriculture
Hon Trevor Mallard
Minister for Economic Development

30 January 2007 Media Statement

Apple industry needs to speed up transformation

The findings of an independent report on the New Zealand apple industry show that it must speed up changes for the industry to remain sustainable.

The Minister of Agriculture, Jim Anderton, welcomed the initiative of the pipfruit industry to commission the strategy report. Urging those involved to study the findings, he said "This evolution is similar to that occurring in other agribusiness industries, both in New Zealand and internationally. The report presents a major opportunity for the pipfruit industry to carefully consider options to be not only viable, but to have sustained profitability long into the future."

Economic Development Minister Trevor Mallard, whose Ministry of Economic Development funded the report, supports the recommendation of the report that the industry needs to rapidly transform in order to meet the challenges it is facing from other pipfruit producers such as Chile and China.

"The pipfruit industry, as a part of New Zealand's food and beverage sector, must work collaboratively to address the challenges set out in this report. Adopting new business models will be critical if it is to remain internationally competitive," said Trevor Mallard.

The report was produced by Dr David Cullwick of Innomarc Consulting. It shows that the New Zealand pipfruit industry has a number of advantages, including its high levels of production efficiency and history of innovation. However some industry commentators believe that the quality of export pipfruit from New Zealand is neither as consistent nor as good as it used to be, and that Chile may have surpassed us. "For those reasons," says Dr Cullwick, "faster change is critical."

The report concludes that the small, independent orchard will have a lesser role in production in the future and it recommends more consolidation of growers and/or exporters into groups, or ‘clubs’, to reduce current fragmentation in the industry.

Major retailers world-wide are now concentrating on doing business with only a few suppliers, so that the supplier can work closely with the retailer to increase sales via product differentiation and innovation. "New Zealand exporters must develop and commit to integrated marketing programmes for selected customers," says Dr Cullwick. "Organisation and service are increasingly becoming the major sources of competitive advantage in the fruit market."

He is urging the industry to double the current rate of transformation by planting new trees and new varieties, particularly new varieties with IP exclusivity, as well as setting up associated marketing programmes. "We must differentiate our products in order to find niche markets – organics are a good example, or a new class of pears bred here – and complying with safe foods (nil discernible residue) protocols will bring premium returns to New Zealand producers."

The report also highlights the importance of having systems that will provide the industry with improved market intelligence on changing consumer behaviour and what competitors are doing. "The New Zealand industry must constantly review that information and be able to adapt," says Dr Cullwick.

Despite the challenges, the review team believes there can be a successful future and economic sustainability for New Zealand pipfruit growers and businesses. Pipfruit New Zealand Chairman Ian Palmer welcomed the findings of the report, commenting that many of the recommendations have already been identified and are being implemented. “It is heartening to Pipfruit New Zealand that much of our current expenditure is in line with the recommendations.”

The Ministers emphasised that this Government is looking forward to engaging with the industry as it implements the report’s recommendations.

The report can be obtained by contacting Pipfruit New Zealand or downloading from its website.

ENDS