Agribusiness: Intimacy is the new reality

Volatility is the norm now, says Mike Petersen.

Speed of information flows allows customer relationships to grow at unprecedented pace, writes Mike Petersen.

It has been suggested that New Zealand's reliance on the primary sector might jeopardise our future economic prosperity.

The reality is somewhat different. There is no doubt that protein produced here will continue to dominate export earnings and create wealth for the foreseeable future.

The demands of rapidly growing middle classes for safe, quality food places New Zealand in the right place at the right time. While the medium and long term outlook is incredibly bright, there are some near term challenges that New Zealand will need to overcome.

The global economy has seen a slowdown in China and a Greek default in Europe. The Russian import ban seems like a distant memory but has also had a serious and distorting effect on world markets.

Growing pains in emerging markets are evident as Governments wrestle with the challenge of accepting that food security can only be achieved using a combination of imported and domestically produced food.

However, we need to remember that all of these headwinds have come hard on the heels of a sustained lift in demand and pricing for food that has set new benchmarks over the past 10 years.

The New Zealand primary sector should be in no doubt that the near term challenges are no different to those being felt in other food producing countries. Volatility is the new normal, and it is here to stay.

The real test will be how New Zealand companies adapt to this dynamic and rapidly changing world. The changes occurring in global markets are fast moving and breathtaking.

The new order seems to be 'adapt or fail' as we see a number of large multi-nationals struggling with the pace of change.

Other exporting countries are chasing the same opportunities we see, and we need to accelerate our efforts if we are to retain our place at the table in key markets. Of all the mega trends sweeping the world, the greatest opportunity for New Zealand may also be our greatest threat.

Technology and the internet provide us with an incredible chance to connect directly with consumers like never before. In the old world, our distance from markets was seen as a problem.

Today our distance from disease and global threats is an advantage for New Zealand. At a time when consumers are desperate to connect with the source of their food, the internet and social media places the farmer from New Zealand into the kitchen of consumers around the world.

The ability to converse through the internet in a personal way allows us to be very granular in our strategies to connect with consumers. Exporters can move beyond country strategies, and develop consumer followings by tapping market segments where their particular food preferences are satisfied.

Customer intimacy is the new reality, and the speed of information flows allows relationships to grow at a pace never seen before.

Being closer to the consumer is an extraordinary opportunity, but also poses some risks and challenges to overcome. Increased consumer connection also carries increased responsibilities for producers.

Greater transparency is leading to greater scrutiny about how food is produced in areas like sustainable farming -- a requirement for reduced environmental impacts and higher animal welfare standards. There is now nowhere to hide in the production of safe food, and the expectations from consumers are growing.

There is no doubt that added value products from the primary sector are delivering greater returns to New Zealand. Differentiated products from all sectors, including dairy, meat, horticulture and wine, are offering new products and new connections.

Niche market segments are looking for the finest products from New Zealand to fulfill their own particular preferences, and this trend is growing. While the long-term trends and opportunities are certainly in New Zealand's favour, none of these will be captured without access to the world's most discerning markets.

The brutal reality for New Zealand is that with a domestic market the size of Sydney, we rely on the rest of the world for a living. Access to markets remains a challenge for a number of our primary sector products, and in many cases, the cost of entry remains prohibitive. New Zealand has worked hard to secure high quality trade agreements, and in doing so we have gained access for our exporters and provided confidence for them to invest further in offshore markets.

There is much more work to be completed in this area, and the Trans Pacific Partnership is just one agreement that will open up new markets and new groups of consumers for the next generation of our primary sector producers and exporters. Social media and the ability to connect with consumers offer huge opportunities, but also brings added responsibilities.

The real measure of success will be how New Zealand primary sector companies adapt to the pace of change and level of volatility sweeping the world. Success in this area will ensure the future prosperity of New Zealand for all.

Mike Petersen is NZ Special Agricultural Trade Envoy, chairman of NZ Meat Board and director of Wool Research NZ.