Zespri’s near-monopoly on exporting New Zealand kiwifruit doesn’t sit well with everyone in the $4 billion-plus industry, but exiting chief executive Dan Mathieson reckons you’d be hard-pushed to find a more fiercely competitive business sector.
Mathieson and his family are heading for California where the global sales and marketing veteran will head up the Americas business division for global berry company Driscoll’s. He has been with Zespri for 21 years, seven as CEO.
The Kiwi quickly dispatches the suggestion the global marketer could perform even better if it wasn’t entitled by regulation to export all New Zealand kiwifruit, except to Australia, ie. if it had real competition at home.
“I think there is that real competition. If you look at the post-harvest sector, I think you’d struggle to find a more competitive industry. They’re fiercely competing for growers on the back of service and value. In that regard, it’s incredibly competitive,” Mathieson said.
“And in the way the industry sets standards in terms of incentives to produce better-tasting fruit, bigger-sized fruit, fruit that comes early or can be stored late in the season, these set parameters for very strong competition between growers to keep improving the quality of their fruit.
“Then if you look at the global fruit basket, we don’t say our competitor is only kiwifruit – we say it’s the global fruit bowl. We’re competing with all other fruits for that piece of shelf space which could go not just to other kiwifruit, but to apples, berries, citrus, bananas.”
Mathieson says the northern hemisphere provides yet another level of competition.
“You really do see a much sharper focus on kiwifruit competition coming into play. There are more and more brands of green and gold and red kiwifruit fiercely competitive for that shelf space.”
In Mathieson’s time as CEO, he says Zespri’s sales have grown 94%, from $2.3b in 2017-2018 to the forecast $4.6b for the current season. Exports have lifted from 140 million trays to 215 million.
Zespri, which achieved global sales revenue of close to $4b in FY23, operates under the eye of regulated body Kiwifruit New Zealand (KNZ), established in 2000 under the Kiwifruit Industry Restructuring Act 1999 and Kiwifruit Export Regulations 1999.
The regulations gave Zespri a unique position as the “single desk” exporter of New Zealand-grown kiwifruit to all countries other than Australia, with the opportunity for other exporters to export in collaboration with Zespri. KNZ says while the Zespri “single desk” supports the industry to meet the global market demands through certainty of quality and supply, it also creates risks, including captured supply and industry dominance. KNZ’s main functions are to issue export authorisation to Zespri; to monitor and enforce mitigation measures; and to regulate collaborative marketing ventures.
According to grower advocate New Zealand Kiwifruit Growers Incorporated (NZKGI), the regulations mean all New Zealand growers of kiwifruit wishing to export to countries other than Australia must enter into a supply contract with Zespri, either directly or through a supply entity.
This means, says NZKGI, Zespri is “effectively a monopsony buyer of New Zealand-grown kiwifruit for export”.
It also means grower-owned Zespri works atop an integrated industry pile of around 2800 orchardists and fruit suppliers and a slew of post-harvest operators, all with their own opinions and livelihoods on the line.
As one grower told the Herald, being viewed as the industry leader but serving such diverse constituencies sometimes makes it hard for Zespri to find its place.
And, as Mathieson is the first to say, it creates “tension” within a horticultural industry trying to forge a path through myriad environmental and other challenges it can’t control.
“You have to move in a very agile way to respond to challenges that come up daily, weekly, monthly and I think you’re always going to have tension within the industry as to what is the best way to respond. Sometimes you have to to move very fast and therefore you don’t always have the ability to have lengthy and robust discussions, so that creates tension as well.
“But generally speaking, when we’ve got big opportunities to go after, when we’ve got big challenges to face up to and find solutions for, the industry comes together – we get the right people in the room and we find a way forward.”
The industry’s ability to rally and recover was showcased in 2010 when the imported disease PSA devastated the country’s gold fruit orchards, and more recently when a cocktail of Covid labour shortages, extreme weather events and soaring inflation-driven costs caused fruit quality to plummet and crop yields to fall. The industry has bounced back to deliver a record crop this season and some record forecast variety earnings.
While a few sector players may gripe now and then about Zespri’s decisions, Mathieson senses no appetite for a review of the regulated, integrated industry structure.
“I think the structure is the right structure for us to be able to respond [to challenges] because it gives us real scale and critical mass to be able to find solutions.
“I think the ongoing challenge for our structure is to ensure we’ve got the right people round the table making the decisions all the time, ensuring our committees are strong with the right representation focused on the right areas, and being as clear and decisive as we can in the areas where we have to make decisions to move the industry forward.”
Mathieson says the kiwifruit industry is one of New Zealand’s fastest-growing, providing “enormous” opportunities to return value to communities, particularly in rural areas.
“And there’s a very clear pathway for a continuation of growth for future employment to get value back to communities, help build infrastructure and support them to improve their standard of living.”
But he acknowledges keeping the structure evolving and progressing “may require some big discussions around how do we evolve the regulations, how do we evolve the supply chain to ensure we’ve got a fit-for-purpose structure to allow us to generate that value”.
Mathieson is keen for more growers to be shareholders in Zespri – less than 50% own shares – but he can’t see the grower-owned company going down the Fonterra path.
The dairy export heavyweight is wholly farmer-owned, but offers stockmarket-listed, non-voting, dividend-carrying units to outside investors.
“I think you’d only do that if you were needing capital, which we don’t need. We’ve got a strong capital base to allow us to make investments in the industry for the future. The key focus now is to get more of our New Zealand growers into shares, particularly the new entrants of recent years, getting them to understand the value of the share.”
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the $26 billion dairy industry, agribusiness, exporting and the logistics sector and supply chains.
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