Collaborative marketing is one of the key issues currently under scrutiny in a wide-ranging review of the kiwifruit industry by the Ministry for Primary Industries (MPI).
Collaborative marketing was the subject of a significant High Court judicial review last week.
The ongoing MPI review is the first major scrutiny of the industry since it was restructured into its current shape following regulatory changes in 1999, when Zespri was mandated as the dominant exporter for all fruit other than to Australia.
Kiwifruit New Zealand (KNZ) was separately established in early 2000 as the industry's regulator.
The MPI discussion paper - released in February - was the outcome of a review by the University of Waikato's Frank Scrimgeour and Stuart Locke, released in November 2015.
In addition to collaborative marketing, the Ministry is looking into a number of other issues including proposals contained in the Kiwifruit Industry Strategy Project (KISP) endorsed by the majority of the industry last year.
MPI says the KISP proposals have raised regulatory questions that needed to be considered.
The review discussion paper makes clear that MPI sees plenty of scope for improving the way KNZ operates.
"Central to MPI's assessment is that KNZ's relationship to the Government and its accountability structures should be updated with a view to enhancing its status as an independent regulator," the paper says.
"MPI supports collaborative marketing being more central in the industry's marketing plans."
MPI said its reviewers felt there were a number of regulatory and non-regulatory options for enhancing KNZ's performance. The Ministry requested submissions from industry stakeholders on the composition of KNZ's board, its accountability and reporting, its funding and the collaborative marketing process.
MPI has now finished receiving submissions, but has not announced when it expects to issue its recommendations.
MPI stated that despite KNZ having a significant regulatory role, it was perceived by some to lack independence.
"This is likely to be of significant concern to the Government and other key stakeholders, such as growers, suppliers, exporters and consumers."
When MPI released its discussion paper in February, the new independent KNZ chairwoman Kirsty McDonald, a Wellington-based QC, said the organisation agreed with much of what the review had to say.
"We have worked closely with the reviewers and MPI to ensure all aspects of the regulations have been covered, and we look forward to contributions and input from industry players so the regulations remain fit for purpose and reflect the needs of the industry today and into the future.
"Our role, as an independent entity, is to safeguard the interests of growers by ensuring Zespri works in their best interests and to ensure it meets its international trading obligations.
"That is what we will continue to do."
Regulator again turns down applications
The High Court judicial review was sought by Seeka Kiwifruit Industries and Splice Fruit in respect of three applications, two by Seeka for exports to China, and one by Splice for exports to Austria.
In a fast-track decision, the High Court in Tauranga ordered regulator KNZ, which had turned the applications down late last year, to rehear them. Last Friday, KNZ again turned down the applications.
Seeka chief executive Michael Franks and Splice Fruit owner Peter Luxton expressed disappointment that the collaborative marketing applications had been rejected and reiterated that their proposals met regulatory requirements to increase the overall wealth of New Zealand kiwifruit suppliers.
Both companies have made submissions to the MPI review and said they were hoping its recommendations would provide greater clarity and transparency around KNZ operations.
Zespri said in a statement following KNZ's latest decision that it continued to support the role collaborative marketing played in providing additional value for New Zealand growers.
"Zespri supports collaborative marketing applications which demonstrate clear wealth creation opportunities and can be operated collaboratively," a spokesperson said.
Seeka, which is both New Zealand and Australia's largest kiwifruit grower, and a leading post-harvest operator, had programmes in China and Malaysia approved.
In Seeka's submission to the MPI review, the company said that while it supported the single point of entry system, it was important to protect the interests of all stakeholders and to provide transparency.
"KNZ needs more power to monitor and enforce," Seeka told MPI. "It needs greater independence to remove the perception of conflict of interest that currently exists. KNZ needs to be subject to independent periodic review. Collaborative marketing must work better. Simply, all growers benefit when innovative collaborative marketing programmes are approved."
Splice Fruit, in its MPI submission, said that KNZ had, for all practical purposes, delegated its own role and responsibilities for collaborative marketing to Zespri by extending to it the role of de facto gatekeeper and decision-maker.
Kiwifruit NZ's regulatory functions include:
Mitigating the potential costs and risks arising from Zespri's dominant mandated role in global kiwifruit exports outside Australia, by:
- Encouraging innovation in the kiwifruit industry, while requiring that providers of capital agree to the ways in which their capital is used outside the core business;
- Promoting efficient pricing signals to shareholders and kiwifruit suppliers;
- Providing appropriate protections for Zespri's shareholders and kiwifruit suppliers; and
- Promoting sustained downward pressure on Zespri's costs.
KNZ is able to require Zespri to enter into collaborative marketing arrangements "for the purpose of increasing the overall wealth of New Zealand kiwifruit suppliers".