Questions over Enza's fruitfulness

By PHILIPPA STEVENSON agricultural editor

The heated debate over the future of apple marketing has gained a new focus with the release of a report questioning whether near-monopoly exporter Enza earns premiums in international markets.

The Ministry of Agriculture and Forestry discussion document, posted to apple growers today, will be the basis of a review of apple export regulations promised by Agriculture Minister Jim Sutton.

The regulations on apple exports independent of Enza came into effect only last year, but quickly came under scrutiny, particularly after corporate interests Guinness Peat Group and FR Partners gained industry dominance with an Enza shareholding of nearly 40 per cent.

Mr Sutton said the time needed for consultation meant any changes to the regime would not be made until the 2001-2002 season.

The ministry's 28-page report says that while Enza has gained premiums for New Zealand apples, "it is not clear whether this resulted from single-desk marketing, branding, new varieties, product quality, country of origin, service provision or other factors.

"Margins earned by Enza may reflect the critical mass it has achieved as a global marketer, or its management of intangible assets, rather than the benefits of single-seller marketing arrangements."

The report says some independent exporters are achieving higher returns than Enza for apples of the same variety and size.

"However, this may reflect independent exporters' achieving exceptional returns by targeting limited volumes of fruit into a selected number of high value markets. It is a much greater challenge to earn good returns from a much greater volume of fruit competing in a wider range of markets."

While it is argued that independent exporters can "cherry-pick" high-value markets without carrying the burden of taking on the whole New Zealand crop, the report says Enza's strategy is to contract for the part of the crop it believes it can profitably market and not to market the crop as a whole.

In that case, "It could well be argued that Enza now engages in cherry-picking, as do the independent exporters."

The report says some people now argue that more exporters, with wider market linkages and strategies, are needed if a much higher proportion of New Zealand's pipfruit is to be marketed overseas.

Four marketing options are suggested: returning to an exclusive single-desk model, retaining or amending existing export regulations, deregulation by removing all restrictions on exporting, or working under the auspices of the Horticulture Export Authority.

The authority, formed in 1987 by an act of Parliament, monitors and approves export marketing strategies, promotes quality management, acts as an information exchange forum and encourages market analysis, research and development.

The report says the New Zealand apple industry faces great challenges in a world awash with fruit, the popularity of which is being tested by a vast array of other foods.

New Zealand grows less than 1 per cent of the world's apples, and even among Southern Hemisphere producers lacks a dominant position.

"However, while it is a minor producer, New Zealand is the seventh largest apple exporter in the world, accounts for around 5 per cent of total apples traded internationally and is responsible for over 20 per cent of Southern Hemisphere apple exports," says the report.

Submissions on the discussion paper close on January 31.