Bruce Cameron, chairman of Zespri International, at the Zespri AGM.
Zespri has just announced its operating revenue has surpassed $3 billion for the first time. With strong growth expected to continue, CEO Dan Mathieson outlines the strategy to increase sales, including developing newer markets like the US.
Zespri has a clear purpose and a clear strategy which drives our thinking and motivates us every day.
Our purpose is to help people, communities and the environment thrive through the goodness of kiwifruit, creating value and greater returns for growers.
Our strategy is to market the world's leading portfolio of kiwifruit 12 months of the year.
To deliver that we do a number of things.
We produce a product people want and we do it year-round; we're constantly innovating; we ensure we understand consumer trends and demand signals and feed those back to the industry and incentivise growers to meet them; we keep demand ahead of supply; we identify and manage risk; we bring our diverse team across the globe together through shared values; and we build and protect our brand.
Twelve-month supply is incredibly important. While 90 per cent of our supply comes from New Zealand, we can only fill supermarket shelves with home-grown fruit for around nine months of the year. The balance we fill with Zespri Kiwifruit grown in the Northern Hemisphere.
That means we retain shelf space with our key retailers, stay at the front of peoples' minds and ensure our spending on brand and marketing is more efficient.
That also means that we're the ones who are filling the demand we are so focused on creating.
We also invest heavily in innovation, at a total of around $40 million a year in association with Plant & Food Research, which is incredibly important to our success.
Around half of that investment goes into the new varieties breeding programme which is what delivered our proprietary SunGold kiwifruit which this year, for the first time ever, we expect to supply more of it than green kiwifruit.
It's a major part of our success today.
Our breeding programme is driven by what consumers have told us they want — fruit that's different, tasty, convenient and healthy and involves natural breeding techniques.
It's led to the development of our red kiwifruit which, following our limited release across New Zealand this year, we know there's a lot of consumer excitement about.
At the end of the year we'll be outlining our next steps in terms of potentially commercialising a red and a new green variety.
We'll be continuing to work hard to understand what our consumers want and to deliver it to them.
All of this helps us to decide what products we need and what characteristics within those products our consumers value — such as taste, size and colour — to ensure we send those messages back to growers and through our innovation programme so we can meet those demands.
That's also part of what's driving our renewed focus on sustainability.
Our industry is already doing some great things and making continuous improvements but we're always trying to do better.
We know that our consumers are increasingly aware of social and environmental issues and expect us to be doing more to address these so we're working very hard as an industry to do better right across the supply chain and you'll be hearing more from us about that.
Another important part of our strategy is managing risk which comes at points right across our supply chain.
We're a primary industry based in a small, isolated island nation at the bottom of the South Pacific with a relatively fragile ecosystem and an economy totally reliant on trade — mostly with the Northern Hemisphere — and strong border security.
We're at the mercy of the weather, of biosecurity breaches and regulatory changes here and in our key markets which drive up costs and make it harder to compete.
We're also a fast-growing industry facing a number of capacity constraints — in particular labour and post-harvest.
Offshore there's the threat of losing market access, of competition, global economic uncertainty and rising protectionism. So we invest a lot of time and resource thinking about these risks and putting in place strategies to try and mitigate them. That also includes working hard to diversify our markets.
Our success in China and Japan are well known. In Japan sales are up almost 25 per cent in the last year alone to hit more than $600 million.
Sales in China also exceed $600 million and we expect that to double in the next five years.
We are also looking at new markets. Sales across North America have grown from less than $25 million in 2014 to $96 million last season and are on track to double in the next four years and become our fourth-largest market.
Our Zespri team based in California has also grown considerably, from three staff a few years ago to 20 today.
American consumers love the sweetness and juiciness of the fruit and we're concentrating on getting them to try our fruit, discovering they like it, and then sharing how good it is for them and their families.
Fresh fruit consumption is growing in the US, and we want to move from the 20th most consumed fruit to crack the top 10. This allows us to manage quality in market and improve our service to distribution customers.
Lack of visibility in stores is the biggest barrier to growing sales and having direct relationships with retailers means we can invest heavily in our in-store promotions and sampling, introducing people to the great taste of our fruit. And to make sure that we're meeting that ambition of 12-month supply, we're running a multi-year trial on the West Coast to see if we can grow SunGold that's up to our quality and taste standards.
With kiwifruit making up just 1.5 per cent of globally traded fruit, we know there's a lot of potential to grow.
And to achieve that, Zespri will continue to build better connections amongst our diverse and growing team, and deliver a premium brand through our relentless focus on quality, consistency, food safety, taste and convenience.
• Strategy — having a good one and being able to adapt quickly. One of the big changes in my nine years on the Zespri board is we've become more confident in implementing our strategy, which has evolved over time. Now nearly one-fifth of our China business is direct-to-retail to our five key accounts. We can match the fruit in our inventory to what our customers want in real time, which means lower fruit loss and more value for our New Zealand grower-owners. It also allows us to get closer to consumers.
• People — having the right people and the right relationships and investing in them. We know that for Zespri to succeed in China we need the right people. We have more than 60 staff in market, plus strategic advisors to give us external sense check which has been invaluable over the years. Around half of Zespri's 600 staff are based offshore now and to have a global culture, you have to have shared values — as a company you have to invest in defining your own values and culture and bringing it to life in all your offices.
• Risk — being ready to deal with the inevitable issues, and only taking on as much risk as you're comfortable with. You can't always stop issues from arising, but what you can do is make sure your systems and processes are ahead of your supply and up to the task of anticipating issues, avoiding them where possible and dealing effectively with them where not. The other side of risk is understanding the balance between risk and opportunity and deciding where that balance lies for your business and what you're comfortable with. The opportunities in China are immense and tempting but putting all your eggs in that basket is a risk.