Zespri has growers smiling

By LIAM DANN primary industries editor

When Zespri was unveiled to the public in 1996 people laughed.

How would this company with a funny name help the struggling kiwifruit industry find its feet again?

The furry fruit, considered a golden crop in the 1980s, had struggled through the 1990s as cheap competition from South America and Europe eroded markets and cut into profits.

Expectations had sunk so low that growers in 1996 were reported to be "jumping for joy" at news the Kiwifruit Marketing Board would pay them $4.29 a tray.

This year growers can expect to earn $8.20 a tray for ordinary green fruit. For Zespri Gold - a variety that didn't even exist in 1996 - they will be paid $10.37 a tray.

In 1996, the marketing board reported export earnings of just over $270 million. For the 2001/2 season Zespri's revenue totalled $800 million - almost all from exports.

The company with the funny name did something right.

For five consecutive seasons Zespri increased returns to its shareholders and growers.

The achievement was recognised this week when the company won the Trade New Zealand Supreme Exporter of the Year award.

Chief executive Tim Goodacre has been in the job just five months.

An Australian who made his mark at the Australian Wheat Board, he wasn't here for the dark days but is well aware that the company he has taken charge of has an established culture of success.

The key to that success was establishing Zespri kiwifruit as a premium product, Goodacre said.

"Zespri has positioned itself at the quality end of the market.

"I've seen premiums like 30 per cent for Zespri fruit in the marketplace. People are paying money over and above what they pay [without] the Zespri label."

The company had a marketing philosophy rather than a trading philosophy, Goodacre said.

Zespri was prepared to make longer-term investments in research and development, advertising and promotion.

"So spending money on developing a new variety like Zespri Gold is a priority. It's part of doing the business."

Through a combination of inspired research and development and aggressive marketing, the Gold variety has become New Zealand's fourth-biggest horticultural export.

That kind of forward-looking mindset was down to the commitment of growers, Goodacre said.

They understood that the focus was on the fruit returns.

"The share return is important, but very much as a secondary concern. Their investment is all about supporting the company sell fruit. It's not to get a dividend every year."

In contrast to exporters in some other sectors, Zespri seems to have maintained good relations with its producers.

"Growers are very happy with Zespri's performance," said New Zealand Kiwifruit Growers president Grant Eynon.

It was inevitable that good returns would have them smiling, but the company had done plenty of other things right, he said.

Zespri's focus as an international marketing company risked it losing touch with the very people it was set up to serve.

Eynon believes moving the head office from Auckland to Mt Maunganui, in the heart of the growing region, was an inspired move.

"That's helped connect them with growers," he said. This year Zespri surveyed growers for the first time.

"Interim feedback is that growers do feel well represented," Eynon said.

"The focus is on offshore markets and returns and that's what growers want."

The growth in the past five years hadn't all been on the back of booming demand, he said.

"They have defied trends. The overseas trend has been for fruit to get cheaper."

Zespri's premium product tag has buffered growers from primary sector ups and downs.

Goodacre said Europe had been in recession and fruit exporters around the world had had a couple of difficult years.

Eynon and Goodacre said Zespri's position as the sole supplier of New Zealand kiwifruit had given added strength when it came to dictating prices to the market.

"I am a very strong believer in single selling," Goodacre said. "It gives you some power in the marketplace. The consumer will pay more ... so it's not so good for consumers but it's very good for our growers."

In tough conditions, investing in the brand has also paid off.

"You might suffer some downside, but you are often the last to feel it," Goodacre said.

Investing long-term in marketing had other spinoffs too, he said.

Last month, kiwifruit sales in Asia soared with news that high doses of vitamin C could ward off the Sars virus.

Goodacre said Zespri spent no extra money promoting the vitamin C content of its product - the awareness was already there.

While it was great to see progress Zespri had made, there was still plenty to be done, he said.

Goodacre has just begun a review of costs within the company. He said that probably would not mean any great changes, but it was important to be sure the money was being spent in the right place.

The next big challenge was to consolidate Zespri Gold in Europe.

"It's very successful in Asia. We're still establishing it in Europe. There is plenty of potential."