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Mind the bollocks

Johnny Rotten once mocked the Queen; today he saves his sneer for New Zealand butter. Our key export markets are increasingly in the grip of environmental and social activism, led by a virtuous circle of consumers and supermarkets. Some Kiwi exporters are on to this rapidly growing and mutating phenomenon. Others, Mike Booker discovers, haven’t a clue.
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Photograph: Corbis/TRANZ

Johnny Rotten once mocked the Queen; today he saves his sneer for New Zealand butter. Our key export markets are increasingly in the grip of environmental and social activism, led by a virtuous circle of consumers and supermarkets. Some Kiwi exporters are on to this rapidly growing and mutating phenomenon. Others, Mike Booker discovers, haven’t a clue

Magazine layout

The news was treated as a bit of a laugh: those crazy uptight Poms worried that the lamb chop they were chewing on might have come from some poor animal stressed by sheep dogs barking at them. And so British grocer Tesco decreed that a Fielding abbatoir should no longer muster with sheepdogs, but with humans using modern methods like waving their arms, beating sticks and flag-waving. Political correctness gone mad, right?

Okay, that’s not the whole story, but the public reaction to it indicates that there’s limited understanding among many New Zealanders about how consumers in our key international markets—backed by the buying power of supermarkets—are reshaping food marketplaces.

New Zealanders are confident in the quality of our food, and with good reason. European consumers are lucky to have the chance to enjoy Kiwi lamb, butter, wine and the other bounties of our land. But we’re even more fortunate that they buy it—and their priorities are quickly changing.

These consumers not only want their food to be tasty, but also demand that it have a believable and compelling environmental and social back story.

The old saying ‘We are what we eat’ has taken hold big time in key export markets such as the United States, Australia and Europe. In Asia, food safety is the prime issue and the consumer activism seen in Western markets is becoming more common.

Many of the food movements that sprung up in the last decade are on the rise. Yesterday’s ‘fads’—such as carbon footprinting—are now mainstream. Brand New Zealand—100-percent pure, clean, green and safe—is in tune with these developments, offering our food exporters a unique—though fragile—selling point in world markets.

In most export markets the clean green image is a huge competitive advantage, and in the past we’ve been able to get away with often-unsubstantiated clean and green claims—but no longer. Today’s consumers want numbers, standards and measurements to assure them that what they are eating has not been greenwashed.

Yet in New Zealand, we think the issue is mainly about food miles. That’s not the half of it. The furore over pigs in crates demonstrates how easily pure New Zealand could lose its lustre. The stakes are huge: last year New Zealand’s food exports topped $20.7 billion. We’ve put endless effort into protecting our borders from foot-and-mouth disease, so why risk the lot when a PR disaster could be as just costly as an outbreak of foot-and-mouth, and probably even harder to recover from?

Betting the farm

Most of our major food exporters are on to this new dynamic, though it’s too often acknowledged in principle rather than practice. One real-deal company is Marlborough winemaker Grove Mill, which saw its sales in the United Kingdom more than double after it got a carbon-neutral classification.

And as in the case of Silver Fern Farms, the New Zealand company at the centre of the storm in a dog bowl, some are ahead of the curve.

Dogs were already on the way out in Silver Fern, not because some ‘woolly woofters’ identified with the sheep’s pain but because dogs increase stress levels in about-to-be-slaughtered animals, which results in poorer quality meat.

And in any case, if that’s what the customer wants, that’s what the customer gets. Companies that don’t supply what the customer demands will suffer.

According to analysis by environmental think tank the World Resources Institute and consulting firm AT Kearney, consumer companies that fail to introduce environmental measures could face a potential reduction in earnings of 13 to 31 percent by 2013 and 19 to 47 percent by 2018.

Agriculture Minister David Carter points out this type of warning is not being embraced by all farmers and horticulturalists . “Fonterra, Meat and Wool, Zespri—they are well and truly in tune with what’s happening in the world,” he says. “But we have got some education to do with some producers.”

In May there was the unusual spectacle of the National farmer minister ticking off the authors of the dairy strategy for their lack of acknowledgement of international consumer environmental demands. Carter didn’t like their view that environmental sustainability was “essentially an issue of compliance”. Don't see it as a matter of compliance, he advised, “but as an integral part of your future business success”.

In July, he was back on the case, telling pork producers at their conference that consumers “are completely rational people whose conscience affects their purchasing decisions. This is their right and as an industry you ignore them at your peril.”

The pig farmers had been too complacent, he said. “Your industry can treat these welfare issues as an opportunity or as a challenge. I suggest opportunity. Because one thing is for sure: this issue ain’t going away any time soon.” (The industry later voted for an animal welfare audit of every farm in the country.)

Another area of concern for Carter is traceability, the ability to track ingredients from farm to fork. He says New Zealand food producers are behind Australia, the US and Europe and “if the rest of the world does it, we’ll become an outlier and there’s risk attached to that”. Again, though, he sees opportunity where some see threats. He says the opportunities are more important, particularly at a time when many farmers are rapidly losing their low-cost advantage.

The dairy strategy and a recent Ministry of Agriculture meat industry survey show on-farm profitability is farmers’ number one concern. Both documents reveal a continued focus on reducing costs, or improving competitiveness, as the main way of dealing with poor profitability rather than getting more for their products.

Big picture

Four threads run through the smorgasbord of consumer issues emanating from our offshore markets: the environment, food safety, health and social activism.

The market segment that pulls these threads together has been dubbed LOHAS (Lifestyles Of Health And Sustainability). Practitioners represent the face of “responsible capitalism”, according to the dedicated website www.lohas.com. The LOHAS market in the US is worth an estimated US$229 billion.

The breadth of the phenomenon can be seen in British academic Tim Lang’s proposal for a new food labelling system based on ‘omni-standards’ covering quality (fresh, local or from a sustainable source), social justice (animal welfare, fair trade, ethical labour conditions), the environment (embedded carbon and water, eco-footprints, organic, biodiversity) and health (including food safety). Lang, who coined the phrase ‘food miles’, wants a shift from ‘value for money’ to ‘values for money’.

The global recession is impacting on Lang’s list in a number of ways. Tighter household budgets are reducing demand for the often higher-priced products that tick these boxes, while a desire to help local farmers and businesses through hard times is strengthening the buy-local movement.

Getting a handle on all these trends can be hard. UK communications company Fishburn Hedges, in a report for New Zealand Trade and Enterprise, says food miles is only part of the story. “The general trend to more traditional values (buy local, seasonal and fresh) embraces the distance issue without strictly being about food miles. It also operates at an emotive level.

“It is this general trend that is potentially more of a threat than food miles.”

On top of the distance issue, New Zealand food exporters have to contend with animal welfare, water use, fair trade and other consumer-driven concerns.

Centre stage of all these developments are the supermarkets who some believe have largely usurped governments as market gatekeepers and setters of standards.

Consumers used to be isolated and had no easy way of connecting. “Now their power is increased because communication is getting faster and more powerful. If you do something unsustainable, everyone is going to know in about five minutes”

Grove Mill is in the midst of working to comply with British Retail Consortium (BRC) food safety standards. It is also considering meeting the PAS 2050 greenhouse gas emission standard. Dave Pearce, Grove Mill’s chief wine maker, says there’s no law that you must have PAS 2050 or the BRC standards, but it’s a “market access imperative”—a virtual necessity if you want to sell in the British market.

“This imperative is incredibly important for New Zealand, but it is always going to be hard,” he says. “The field is moving faster than regulations can keep up with and it’s just going to get faster. It requires you not to take a fixed position on anything.”

Food miles debunker Caroline Saunders, Professor of Trade and Environmental Economics at Lincoln University, says the threats to New Zealand’s exports have changed from the regulatory (for example tariffs and quotas) to the demands of retailers. “Retailers, who have been made liable for food quality and safety, have taken the initiative and governments are toddling along behind.”

The supermarkets are also aggressively marketing their environmental and social activism in the battle for market share. From a food producer’s point of view these supermarket activities can look a lot like non-tariff barriers to market entry.

Saunders says that in general the New Zealand primary produce sector knows what is going on in these markets and, thanks to the good relationships it has in them, should be able to respond. The danger is that some producers may not be able to (or want to) act fast enough, and low-cost competitors such as Uruguay could catch and pass New Zealand on food quality and safety.

Pearce says a key to understanding the power and speed of these trends is the arrival of modern communications which has helped propel issues, that at one time would forever remain fringe, into the mainstream. “For example, if one in ten New Zealanders are concerned about pigs in pens, communications can quickly help turn that into a 400,000-strong movement.”

Pearce, who is also strategist with environmental consultancy Aura Sustainability, says consumers who felt strongly about these issues used to be isolated and had no easy way of connecting. “Now the power of people and their ability to make decisions is increased because communication is getting faster as well as more powerful. If you do something unsustainable, everyone is going to know in about five minutes.”

Opportunities

Grove Mill is an example of a company that has grasped this new challenging environment as an opportunity, though Pearce is at pains to ensure it’s understood that Grove Mill’s environmentalism is not just a marketing weapon but springs from a fundamental philosophy that the winery must meets its needs “without compromising the ability of those who follow us to meet their own needs".

Grove Mill Winery was the first winery to achieve CarboNZero Certification, the standard Grove Mill believes was behind its increased sales in the United Kingdom. CarboNZero, managed by Landcare Research, helps organisations measure, manage and mitigate their CO2 emissions.

Another business that is trying to stay ahead of the consumer sustainability curve is Zespri. The kiwifruit marketer’s consumer insights manager, Glen Arrowsmith, says issues like food miles and carbon footprints are constantly evolving and exporters need to be proactive so they can manage them.

He says it is better to talk to customers, and be ahead of the game, rather than waiting for customers to ask. “It shows that you really mean it.”

Zespri has completed a carbon footprint study showing emissions at each stage of the kiwifruit’s lifecycle, from orchard to consumer (including disposal). “This takes what we are doing in the sustainability area to another level. We are able to quantify where we are at.”

Arrowsmith says Zespri has also found that the drive to produce fruit in the most sustainable manner possible can have an immediate impact on the organisation’s bottom line. After looking at packaging, it introduced a new tray that was able to hold more fruit, improving transport efficiency and reducing wastage.

He says brand and a company’s sustainability credentials are now inextricably linked. “You can’t be number one in terms of brand without being number one in terms of sustainability.” And exporters need to back up their positioning with evidence, “otherwise it’s just words”.

But Arrowsmith says sustainability needs to be kept in perspective in terms of why consumers buy a particular product. A worldwide survey of Zespri customers found that the number-one driver of purchases was taste, followed by health-giving qualities, with brand coming in at three. “Sustainability was further down, but we still need to be focused on it as it is potentially a unique selling point.”

Virtuous circle

Fishburn Hedges, commenting on what is happening in the United Kingdom market though it could be applicable in most of New Zealand’s major food export markets, says consumers and retailers are joined in a “virtuous circle”.

“Retailers believe consumers are concerned about traceability or [buy] local, so they start to label their products with details of the specific farms (and farmers), which results in more consumers seeing such labels and believing that traceability and localness are important. The challenge, and opportunity, for New Zealand is to embrace the retailer agenda.”

This will be a leap for many in the New Zealand food sector which is world-class at producing more of what we grow best, but not always so good at producing more of what the world wants. It’s a leap the country needs to make.

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