$1b sales boost possible for Zespri

Zespri says it is hopeful a highly promising red-fleshed fruit will be on the market in five to six years.

New Zealand kiwifruit sales could be boosted by between $300 million and $1 billion a year within a decade thanks to a big investment venture announced by marketer Zespri and the Government.

Research Science and Technology Minister Wayne Mapp said $35.7 million would be invested over the next seven years in a joint research and development programme by Zespri, the world's leading kiwifruit marketer, and the Crown Research Institute Plant and Food Research.

The Foundation for Research Science and Technology would contribute $15.2 million and Zespri $20.5 million. The funds are to accelerate and upscale New Zealand's kiwifruit breeding programme. The boost will make it the world's biggest and most significant new kiwifruit varieties R&D project.

Zespri chief executive Lain Jager said a number of new cultivars would be brought to market and it was "realistic" to expect that one outstanding cultivar would be commercialised with forecast sales of $300 million a year.

Plant and Food Research chief operating officer Bruce Campbell told the Business Herald his institute was planning for at least four "outstanding" cultivars to be commercialised.

"I think the numbers will be something like $1 billion of sales by 2021."

Kiwifruit is New Zealand's biggest horticulture export, accounting for 45 per cent of all horticulture exports and 66 per cent of fresh fruit exports. The industry's economic value is estimated at $1.45 billion a year. Zespri expects the volume and value of the industry to at least double over the next 10 years.

But judging by commercialisation of New Zealand's "gold" kiwifruit, the process of getting exciting new cultivars to market can be long and financially painful.

Gold fruit sales of 20 million trays earned $450 million last financial year, with 30 million trays expected to be sold annually within three years and 50 million within seven. But Jager cautions that successful commercialisation of this breed took 10 years, and that the country's 2700 growers, who bear most of the risk and cost of new cultivar development, had to absorb marketing costs of up to $1.70 a tray in the early years.

Plant and Food's Campbell said conventional breeding programmes could take 25 years. The new consortium funds would shrink this to 10 years, perhaps less, and increase by eight-fold the amount of cultivar material in the research programme.

"We'll have a bigger team, a bigger area of land, more plants ... as well as creating some completely new ways of assessing quality. Because our target is the premium end of the market we want to build a whole set of high-quality attributes the consumer is looking for such as taste, appearance, storability, health benefits, as wellas producing high yields for growers and reducing inputs of chemicals."

Around 90,000 plants would be involved in the upscaled programme, Campbell said.

With Chile set to increase its production of the iconic green Hayward kiwifruit by 50 per cent in the next three years, and Italy, the biggest country exporter of kiwifruit, also poised for a production explosion, New Zealand needed to keep ahead of its game as the world's leading high-quality kiwifruit producer, Jager said.

"New Zealand is never going to be the lowest-cost kiwifruit producer - our land is too expensive, labour is too expensive and we're a long way from the markets. But we grow fantastic kiwifruit which tastes great and the yields are first class.

"So the first thing we have to do is continue to differentiate our offering in the market, and the second, innovate faster than our competitors, not just with cultivars - though that aspect is huge - but in productivity and supply chain efficiency."

Successful new cultivars would be grown abroad - but only in the Northern Hemisphere - as well as in New Zealand to achieve year-round sales, Jager said.

The Zespri business, currently recording compounding annual growth of 7.5 per cent, would be twice its current size in 10 years, he said. It spent $60 million to $70 million a year on promotion to achieve premiums of between 50 and 100 per cent. But because it was a marketing and innovation company, not a grower or distributor, its current 250 staff might only expand by 10 people with commercialisation of one new cultivar.

Listed produce company Turners & Growers, under chairman Tony Gibbs, is running a political and legal campaign to get Zespri's statutory near-monopoly marketing status abolished.

Asked if the Government's support for the new Zespri-led project suggested Gibbs had failed, Jager said the two issues were separate. But it was essential to continue the industry's grower-to-marketer integrated structure, he said.

On the timetable for expected returns on the investment, Jager said he hoped to see a highly promising red kiwifruit developed by year five or six.