Agribusiness Agenda 2017

The recipe for action

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Foreword 3

The pivot towards the consumer 4

The year in review 8

Accelerating change 10

The 2017 KPMG Agribusiness 14 Agenda Survey

Establishing a values led 18 framework for New Zealand’s Agri-food sector

Theme 1: Strengthening 22 New Zealand's food culture

Theme 2: Capitalising on the 28 benefits of diversity

Theme 3: Delivering an integrated 34 lifelong learning framework

Theme 4: Pursuing sustainability 40 first – no debate!

Theme 5: Adopting and utilising 46 technology quickly

Theme 6: Reinventing operating 52 models to build a prosperous future

Theme 7: Collaboration to create 58 scale and impact

Theme 8: Connecting deeply 64 with customers

Theme 9: Learning from the world 70

Theme 10: Storytelling in a 76 multi-channel world

KPMG Field Notes 82

KPMG Primary Sector Leaders 84 Foreword

New Zealand’s primary industries have The KPMG Agribusiness Agenda come through a challenging 12 months discusses the importance of attracting with significant weather events and talent and leadership to the sector. This the Kaikoura Earthquake testing the is why MPI is a Programme Partner for resilience of our sector. Despite these the Kellogg and Nuffield Rural Leadership setbacks, our producers continue to programmes, and co-funds the Emerging innovate, develop and export high value Primary Industries Leaders Scholarships to products to our overseas markets. attend the Te Hono Stanford Bootcamp. Primary sector exports are expected to Associate Minister of Primary Industries grow to $38 billion this year, showing Louise Upston is overseeing a programme we have a strong and diversified sector. of work aimed at attracting young people into the primary sector, including This is the fifth foreword I have written ‘Champions’ and ‘Ambassadors’ who are as Minister for Primary Industries and working directly with students in schools. it is no surprise to see that maintaining a world class biosecurity system is The importance of science and innovation again ranked highest in the KPMG is also highlighted in this report. At this Agribusiness Agenda survey results. year’s Fieldays, I was proud to launch the Primary Sector Science Roadmap with Biosecurity is my number one priority Science and Innovation Minister Paul as Minister and I was proud to Goldsmith. This provides a long-term announce a funding boost of $18.4 view on the most pressing science needs million over four years to strengthen and opportunities to grow, protect and our biosecurity system and protect our enhance the primary sector. borders as part of Budget 2017. I welcome this year’s KPMG Agribusiness In November last year I also launched Agenda, which is always a fascinating The Biosecurity 2025 Direction read for anyone interested in the primary Statement. This strategy was sector. I look forward to discussing the developed collaboratively with the input issues it raises at this year’s Fieldays. of a wide range of New Zealanders, and provides a shared sense of direction to future proof the system. This year’s KPMG Agribusiness Agenda also highlights a range of other government priorities, such as international trade and connecting to consumers. Earlier this year, Prime Minister Bill English launched ‘Trade Agenda 2030’, an updated trade strategy aimed at expanding our access into new markets and improving our existing trade relationships. It sets an ambitious goal of having free trade agreements cover 90 per cent of our goods exports by 2030, up from 53 per cent today. New funding of $91.3 million over four years will help achieve this, including extra funding for MPI to support primary sector exporters. In particular, it will accelerate work on non-tariff barriers which can be a major barrier. MPI’s newly established Economic Intelligence Unit will help provide Hon. Nathan Guy market insights and economic Minister for Primary Industries information to support exporters and New Zealand government agencies. The pivot towards the consumer, rather than the election, sets the 2017 Agenda.

Having completed our discussions for this year’s Agenda, it is hard to believe that there is a general election less than three months away. At a similar point in time three years ago, the concern about a potential change in government was palpable.

The election was the top-of-mind issue during our conversations. Leaders were approaching the election with trepidation, concerned about what a shift to a Labour/ Greens coalition would mean in terms of restrictions being placed on the farmer’s licence to operate, our long-standing bipartisan commitment to free trade, incremental operating costs from the introduction of environmental taxes and levies, limitations constraining investment in water storage and aquaculture, and tighter rules being introduced for foreign investment in New Zealand. We noted in the 2014 Agenda that the outcome of that election would influence the future potential of the primary sector for years to come, making it the most important for the industry in many years.

4 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 So, what about the 2017 election? Many organisations are working to We grow enough food to feed around develop and implement strategies 40 million people; once we have fed Fast-forward three years and the based on doing what is right for their ourselves and our visitors, we can election hardly had a mention in our businesses, the environment and export enough food to feed about 35 conversations this time around. The the wider community. Rather than million people. The goal with this is not difference in our discussions could not merely trying to comply with rules to feed the full diet for 35 million people have been starker. The obvious question and regulations, they have developed but to provide a small part of the diet to we asked ourselves was: “Why the standards that they apply to their a much larger group of people for which difference in focus on the election this businesses and their suppliers to they will pay a premium price. Achieving year?” After all, with the shocks of support their product positioning in this aspirational goal relies not only on Brexit and Trump in the background and, the market. They have moved further evolving the way in which we handle domestically, the retirement of John Key and faster themselves than the current current production but also on late last year, it would be surprising if all or any future government is likely to responding to the rapid evolution of industry leaders had concluded that the shift the regulatory framework. While market conditions as new products and chance of political change was remote an aligned government is seen as an solutions become available. and had moved on. enabler of success, the reality is that — The only certainty about the future is the demands of the community and the To me, the reason that the result of that people will require sustenance. market, rather than any election result, the election is no longer consuming The form this will take will undoubtedly are now defining the rules of the the head space and energy of industry evolve over the coming years. It may agri-food game. leaders lies in the issues that are facing not be food as we know it today. The their organisations on a day-to-day basis. demand for traditionally produced, They are the issues that were discussed Our understanding of the new rules natural protein will decline; however, it during this year’s conversations and of the agri-food game will be possible to maintain a market of the topics explored in this Agribusiness sufficient scale to consume everything We believe the new rules of the game for Agenda. Issues such as the need: we can produce in New Zealand, if New Zealand companies competing in the attributes and provenance of our — to define and articulate clearly a the global agri-food sector are becoming products appeal to premium consumers. broadly accepted vision and values progressively clearer. Understanding for the sector these is critical to understanding why — T o earn the right to be considered for — to develop a clearly recognisable industry leaders are focused on the supplying premium markets, everything New Zealand food culture issues covered in this report, and the about the product being offered must actions that will progress them, rather be sustainable. That is ensuring not only — to recruit, educate and retain the than on the result that the general that the impact of growing the product best talent available, regardless of election will produce on 23 September. on the environment, biodiversity, soils their background and water is appropriately controlled The rules are built on a perspective of and minimised but also that people are — to lift performance on the sustainable the future for the New Zealand agri-food respected and developed appropriately use of land, water and labour and sector that we have developed over the and the business is conducted in to communicate progress to the last few years. This is our aspirational accordance with the expectations of wider community vision for the agri-food sector. the community. Sustainability is the — to keep up with and adopt relevant ticket to play in premium markets. technologies as they become We believe the future for the New Expectations will increase continuously. available around the world, and, Zealand agri-food sector is as an potentially most significantly, artisan, niche producer of premium- — The integration of digital technology into all aspects of a farming system will be quality, safe and sustainable food — to accelerate the process of pivoting necessary for it to operate sustainably. individual organisations and the and beverage, fibre and timber The collection of data and the use of industry from a volume-driven products. The sector provides algorithms will assist in enhancing the production culture towards exceptional products that are eaten intuition that a farmer has for their a consumer-led, value-driven agri- at landmark events and family land, enabling better decisions to be food industry. celebrations and used when people made to improve yield while reducing the quantity of inputs applied to the The reality is that the global environment wish to treat themselves. The sector farm. The data that is collected will in which organisations are operating has does not aspire to feed the world but form a step in the blockchain of data changed dramatically in the last three recognises the importance of making that will ultimately assure the consumer years. Many of the perceived threats a substantive contribution to helping about the provenance of the products that leaders believed could have been the world to feed itself. they purchase. manifested by a change in government have already had to be addressed: driven by shifts in community perceptions, customer expectations and emerging technologies.

KPMG • 5 — The role of food and nutrition will evolve friendly and safe solution to traditional in our society as the cost of traditional low-cost animal protein product appeals curative healthcare models increases to more consumers. to the point where they are no longer affordable. Governments will refocus — The increase in the range of products healthcare progressively towards available to consumers will be matched preventative care models, making food by innovation in the ways that food is central to how people manage their processed and presented to the market. health. Taxes and other restrictions will be We already observe the emergence of applied to products that are perceived as food printing technologies, which will being adverse for good health; products transform business models across the with proven health benefits will enjoy global food-service sector. Processing increasing demand. innovation that creates unique food solutions or enables consumers to — T he evolution of the healthcare system extract more of the beneficial nutrition will see the gap between nutrition and from food without unnecessary pharmaceutical providers becoming calories or carbohydrates will ultimately increasingly grey. Pharmaceutical accelerate the shift to sustenance for companies will seek to take positions the majority of the population. in functional and high-health foods as the costs associated with developing —  A key determinant of the formats in and obtaining approval for ethical drugs which food will be presented will be continue to spiral. Food companies will the way that people’s lifestyles evolve transform into nutrition businesses, and change. As society becomes more seeking to divest low-health products in urbanised and commutes become favour of more scientifically advanced, longer, people will increasingly be functional foods. eating on the go and seeking food solutions that make this easy and — With shifts in healthcare and the nutritious. Fitting food into people’s emergence of more wealthy consumers lives requires intimate understanding around the world, there was an of the lifestyles people lead and expectation that diets in emerging significant personalisation of the markets would evolve to be more aligned solutions that are provided. to the generic Western diet. Our observations suggest that this belief — Matching the delivery mechanism was flawed; while these consumers are of a product to the way in which it is adding premium products to their diets expected to be used will contribute to reflect growing wealth and success, to addressing the significant global the core of their diets remains traditional challenge of food waste. With ethnic foods. The reality is that the diet hundreds of millions of people still in the Western world is evolving more undernourished, organisations that quickly, driven by globalisation. This continue to operate systems that create challenges producers to review the and tolerate significant food waste risk products they grow constantly to ensure their credibility and their licences to that markets remain available for them. operate. Regulation will accelerate the development of innovative solutions to — Consumers will consistently look for new, waste as well as drive a strong focus on innovative products. Being able to bring utilising all co-products and by-products diversity into the diets of consumers will from a production system. assist in securing a price premium. As a consequence, there will be increasing — We expect there will still be demand incentives for producers to shift away for sustainably produced, storied from monoculture-based production natural products. They will be supplied systems and explore heritage, as well as by producers that are able to build genetically bred, varieties of plants and strong personal connections with the animals to deliver new products consumers of their produce. Connecting and solutions to premium markets. the passion of the producer, and their Innovative growing technology will be desire to create amazing products in the applied to maximise the productivity of way that is best for their land, animals, these varieties. team, family, community and country, to the consumer will differentiate a product — We are already observing a step-change and secure a premium. Technology occurring in the alternative proteins sector assists in making this connection (any and expect this to accelerate as the consumer can be put on a supplier ability to replicate the eating experience farm with virtual reality) but, ultimately, of traditionally grown food increases. The ensuring everything done makes the market positioning of alternative protein experience deeper and more fulfilling products at the current time, towards to the consumer will determine the premium consumers, will evolve as the value that is able to be returned to potential to offer a clean, lower-cost, the farm gate. environmentally sustainable, animal-

6 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 The pivot to the consumer must Key to responsible entities be unstoppable This year’s Agribusiness Agenda In the end, it is the authenticity of the features 110 action items we collected story around which an organisation from industry leaders across the is able to build its products and the country. Together, these ideas constitute way that this appeals to a consumer ‘The Recipe for Action’ to enable the that will shape the value able to be agri-food sector to accelerate its pivot secured from what we grow. This towards consumers and markets during Agenda explores many actions that a period of unprecedented disruption could be taken to ensure that New across the industry globally. Not every Zealand-grown products have the best organisation can take action on every chance of being successful in global item we have included in the Agenda markets. At the core of this report is a so we have attached to each point our single, simple belief: that to succeed view of which types of entity are best in a world that is changing, and will positioned to move forward with that continue to change, rapidly, the action. The key for the responsible ultimate consumer of the product must entities is as follows: be central to everything that we do. Historically, this has not been the case in New Zealand and this is why Individuals industry leaders were so concerned (every person connected about the results of the 2014 election. with the industry) When you are focused on what volume you can produce, the government Producers shapes your future as it sets the rules (farmers, growers, that determine how much you will fishermen) be able to grow. As an organisation pivots towards a consumer-focused value story, the rules that shape the future are no longer determined by Processors, exporters the domestic government but by the and marketers markets and consumers to whom we sell. They are tougher masters than is any regulatory authority. Industry good This Agenda indicates that there are organisations still many actions we can take to capture more of the value that we grow. It is apparent that the pivot towards the consumer has gained Education providers momentum over the last three years but it is the actions that each and every one of us takes that will enable the pivot to gain the velocity needed to make it unstoppable. The agri-food Research institutes sector has the potential to help create a better New Zealand for all New Zealanders. If everybody connected with the sector is prepared to step up and think about the actions they Local can take individually, within their Government organisations and as an industry to enhance the pivot towards a consumer-led business, we collectively have the potential to deliver a more Central Government prosperous future for all. (including agencies)

The wider industry Ian Proudfoot (through organisations Global Head of Agribusiness such as Te Hono) New Zealand Agri-Food Industry Leader KPMG New Zealand

Iwi and Māori organisations

KPMG • 7 The year in review

JUN. 2016 JUL. 2016 AUG. 2016 The result of the Brexit referendum Hawkes Bay Regional Council Countdown launches egg producer leaves New Zealand producers approves $80 million investment into programme designed to support free assessing their future. Ruatanuwha water storage scheme. range and barn eggs. The Government approved NZ Agritech startup CropLogic Unique Manuka Factor Honey AgResearch’s $133 million Future crowdfunds $500,000 for ASX listing, Association defines and classifies what Footprint plan, in which majority of Government announces $35 million genuine Manuka honey is to help protect its four campuses will be consolidated fund to attract world-class researchers integrity of the industry. at Massey University and Lincoln and their teams to New Zealand. New primary growth partnership University. between MPI and Spring Milk Dairy The New Zealand Merino Company has been approved, boosting the signed a $45 million deal enabling their sheep milk industry. farmers to sell wool to Reda, an Italian wool mill.

DEC. 2016 JAN. 2017 FEB. 2017 Eight additional storage and processing Sale of a 66.5 hectare kiwifruit orchard The Queen's official grocer, Fortnum & facilities reported to be approved to in Hawkes Bay sets record price for sale Mason, pulls NZ Manuka honey from export meat into China. of any kiwifruit land in New Zealand. shelves when tests show lower than NZ apple growers launch Dazzle on Report released showing kiwis more expected levels of active ingredient, world market, which has seen the willing to pay for ethical shopping – leptosperin. biggest development since royal gala. increasing by 17% in the last year and 71% Minister Guy declares drought in Sanford and Moana announce a plan more willing to pay for ethical products. Northland weeks before a run of storms to protect the Maui dolphin from fishing President Trump signs executive deliver wettest period in Australian record. nets on the west coast of North Island. order withdrawing USA from TTP, UK retailer, Waitrose, rebrands ‘British’ instructing officials to explore bilateral lamb meals after it is revealed they agreements with trading partners. contain NZ lamb.

8 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 SEPT. 2016 OCT. 2016 NOV. 2016 Howard Schultz, the founder of Prime Minister opens state of the art Westland Milk Products report Starbucks, invests USD 7.25 million fish oil processing plant in Nelson $14.5m loss resulting in Board and into AllBirds, a New Zealand Merino with capacity to refine up to 5,000 Management change. shoe brand. tonnes of Omega 3 fish oil every year. US magazine names Marlborough’s New agricultural innovation network Foodstuffs and Progressive join Kim Crawford as New World winery of revealed at Lincoln University to forces to prevent obesity, proposing the year for best winery outside build gateway for ag solutions and changes to supermarkets including of Europe. collaboration. removing checkout confectionery, Ag Leaders Health and Safety action Silver Fern Farms receives approval fruit give-aways and health star group launches in an effort to support to complete its $261 million partnership rating system. farming safety. with Shanghai Maling. Aotea Maersk arrives in Port of Tauranga, being the largest container to ever berth in Australasia as the result of a partnership between Maersk, the Port and Kotahi.

MAR. 2017 APR. 2017 MAY. 2017 Government sets 2040 ‘swimmable’ Fonterra release NZs first tractability Avocado sales reach a record $198 rivers target to make 90% of NZ program for infant formula using coded million for the 2016-2017 season, country river and streams swimmable cans of Anmum. increasing by $64 million over the and safe by 2040. Genetics discovery project has a previous season. Rural debt tops $60 billion. focus on cutting nitrogen across national Myrtle Rust is discovered in Northland Palace Poultry eggs revealed to not be dairy herds which is expected to and Taranaki triggering a national free range and Countdown pulls eggs decrease farm nitrogen by leaching biosecurity response. from shelves. 20% over 20 years. Fisheries management receive a Fonterra Ventures is launched as Eric and Maxine Watson, NZ Farmers, $30.5 million boost over for years, along an opportunity for game changers to break world record for wheat growing with an extra $18.4 million over four innovate collaborative with Fonterra. producing 16.791 tonnes per hectare. years to strengthen biosecurity systems in Budget 2017.

KPMG • 9 Accelerating change – explosion of flavour since November

With eleven percent of the Changes in how we farm population undernourished, the In the years 2005 to 2015, the amount invested into agri world endlessly struggles to feed tech has grown from US$100 million, to $4.2 billion. itself. Paralleled to an increasingly Markets have recognised the opportunities, and are hungry population, sustainable investing to disrupt with a clear purpose addressing the and ethical expectations are issues facing the global food system. encouraging inventive thinking to close the gap between what As a way to tackle food safety, and track the entire food we produce and what reaches chain, we have seen the emergence of Blockchain. In our mouths. November, Walmart commenced a project to combat the challenge of identifying and removing recalled food from their supply chain, utilising blockchain, the distributed ledger technology built to underlie crypto currencies like Bitcoin, to connect grower data to the store and ultimately the customer. Increasing KPMGs investment in Agricultural technology, a The changing minority stake was taken in the Yield, a leading Australian AgTech start-up. The Yield has been recognised as one nature of a farm of the five most innovative Pre Series start-ups globally, and works with leading food growers to create Internet of Innovation has become an integral aspect of a complex Things and data-based solutions to improve farm decision- agricultural system as we compete with many challenges; making and customer yields. food and nutrition security, health, environmental changes and sustainably managing the planet’s resources. The demand for organic product is driving a lot of discussion around what is truly organic, one example of To reinvent the food system, new farming models are this is consideration of whether produce from plants that challenging tradition norms as we seek opportunities to are grown in hydroponic systems can be called organic, better embed food production systems to our day to day given no soil is involved. If you apply a consumer lens, lives to nourish the world. the lack of spray determines whether a product is organic, A 5,000 square-foot public floating farm, Swale, made although the industry may hold a different view. its way around three locations in New York in April, showcasing its solar powered growing space, perennial garden and aquaponics verifying the environmental push towards new farming systems. In April we saw Dutch plant breeder Rijk Zwaan create the opportunity to bring back cultivars with highly attractive traits that have previously failed to flourish in Technology has transformed the world we traditional farming by utilizing indoor growing techniques live in. While the true essence of farming with LEDS. has not changed, the way in which we operate is in full disruption mode. The Crafting more with less, is changing how we look at shear surge of financial investment production processes. Fermentation has exploded as a into tools to enhance how we farm way to create natural substances through a metabolic highlights that we are fully emerged in a process. Perfect Day uses fermentation processes as a technological revolution in the agriculture way to create cleaner, greener, and more ethical milk than sector and consequently, at the start of traditional forms of farming and the start-up company is the first global agrarian revolution. tracking to release its first products later this year.

10 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 As the world's population grows in size and wealth, producers are relentlessly having to assess the products that they grow, catch or harvest. Consumers are increasingly looking for new and alternative products, and producers are having to re-align to this and actually grow what consumers want.

Changes in what we grow In March, Unilever, Ingredion and Givaudan invested in Plant Meat Matters, a company that produces vegetarian steak as meat substitutes are set to outpace meat sales. Danone acquired and completed and purchase of Whitewave for EUR12.3 billion to increase their exposure to plant based alternatives and the organic food market (at the same time announcing the divestment of their natural, organic yogurt business, Stonyfield) and General Mills patented a process to create a range of dairy alternatives from legumes. Investment across non-traditional food markets by traditional players is setting a clear market direction unifying the future of food. We have seen pressure coming from investors on companies to explore emerging protein markets, they are keen to see companies diversify from being 100% animal protein based. Understanding how products fit into the future is a key constituent to remain relevant and prosperous.

KPMG • 11 Changes in how food is distributed The way we package and label consumer goods is being re-engineered. Apeel, in December, created an edible solution to keep fruit and vegetables fresher for longer, extending shelf life. Swedish supermarkets, ICA, trialled natural branding, in the form of lasers, in December as a new, and natural, way to label organic produce. New models are reinventing the western shopping experience; reflecting time conscious consumers, products that have important attributes (price, nutrition, provenance, origin, health attributes) and a wish to make life just that bit easier. The rise of educated consumers drives In March, Amazon opened a click and collect service for innovation. The way in groceries. This allows shoppers to pick up online orders which food, fibre and from between 15 mins to 2 hours, or order their groceries timber products are in-store using electronic tablets. processed need to meet Semi-autonomous robots are being pushed into the sector consumer’s expectations to eventually take over roles that humans historically have and fit within evolving had. Food delivery service by Starship technologies, lifestyles. saw the delivery of food services trialled in January. Pizzas can now be made and delivered by Zume, reinventing the pizza business.

Processing innovation In February a phone app was created, Hawkspex, with the ability to scan food for harmful chemicals as consumers are increasingly demanding clean food. In a world of limitless choices Seaweed is now at the heart of packaging innovation, via digital channels and evolving with an edible water bottle being created in April by technologies, producers need Skipping Rocks Lab, with the potential to end plastic to curate experiences and tell packaging. a story to keep consumers engaged and enthusiastic about Even business models around health and nutrition are their products. There is so being reinvented, with tailored nutrition emerging. much choice in the market HABIT, has created a model in which people pay for now, having a point-of-difference their meals and nutritional education to be tailored to is imperative. their biology, goals and preferences, and get delivered straight to their doorstep. On the flip side of health, adding innovation to the wine sector, GIK wines, in December, combined red and white wine organic pigments to create a blue wine to fit in with life style trends.

12 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 Changes in what we eat In December, Nestle scientists found a way to re- structure sugar as a way to cut sugar content by 40% but not lose the taste, to help address the obesity crisis and to target the health-conscious consumer. While in response to the challenges of selling sugar based products, Mars acquired Veterinary Clinics America, meaning more of its revenues now come from animal health and nutrition than confectionery. In terms of education, meat substitutes were added to the curriculum at UC Berkley in January, as a way to re-think plant based proteins as they permeate the mainstream food culture. Tyson invested in plant protein in the form of a 5% stake in Beyond Meat On a daily basis, 800 million in December, further cementing the direction of the people go without food or are alternative protein market. undernourished. The current food With health an increasing focus for many consumers, system is simply not delivering, yet large manufacturers formed the FReSH initiative. Twenty we are exponentially putting more five global food and beverage manufacturers (including pressure on it to provide. We need Pepsico and Nestle) in January, formed a food reform to produce more in a sustainable, and sustainability health program with the aim to define long-term way. Consumers want guidelines on sustainable diets, redefine food production, to be a part of the story when it reshape food consumption and evaluate a sustainable comes to social responsibility. footprint for food transport.

Social issues

As lifestyles accelerate, consumers reshape the industry actively seek out ways to find products that tick all the boxes In February, a supermarket opened in Germany when it comes to fitting into called The Good Food supermarket which only their lifestyles. Food, isolated, sells wasted goods, as a positive way to combat is no longer enough. Functional, food waste. We saw Tyson Foods launch a venture nutritious, convenient food is not capital fund with a focus to invest in companies with just sought after but it is expected breakthrough technologies, business models and as we become educated and aware products to sustainably contribute to feeding a growing of the growing consequences of world’s population. Other companies have invested health, or lack thereof. in making more from co-products and by-products, a good example being Smithfields in the US, who have created Smithfield Bioscience, to explore pharmaceutical uses of co-products from their meat business. As the public begin to accept genetic modification as a potential channel to address the food crisis, there has been a turning point in the highly polarizing debate to acceptance. Artic apples went on sale in March, the first GMO non-browning apples.

KPMG • 13 The 2017 KPMG Agribusiness Agenda survey

The results of this year’s KPMG The mechanics of the survey The action list for executives is growing longer Agribusiness Agenda leaders’ Once again, we used an online survey provide a fascinating survey, which asked industry leaders The average priority score showed an to rank a range of priority items on almost 4 percent increase on last year’s insight to where the minds of the a scale of 1 to 10, with 1 being an results, suggesting that many executives industry’s leaders are currently item of no priority for the industry now have more issues on their radar to focus on while 10 represents a than they have had previously. Of the 44 focused. The research for the high priority requiring immediate questions in the survey, 31 questions Agenda was conducted against attention and action from industry recorded increased priority scores, while leaders. The questions used were 15 priorities achieved a higher rank than a background of a recovery in largely consistent with those used in they did last year. dairy prices, the launch of a new previous years; one question relating to the use of antibiotics in maintaining The survey suggests that leaders trade strategy, and heavy rain animal health was replaced and executives are recognising the and flooding across much of with a new question around the opportunities available in the globally consequences of failing to maintain disrupting agri-food system but that the country (as one contributor high standards of animal welfare and capturing the benefits provides a noted, we have moved from some changes were made to the wider range of variables to manage. The increase in the priority attached good rain to bad rain). Then the question on whether or not there is a need for a more clearly codified set to provenance branding, co-innovation Sunday programme, The Price of of expectations around environmental with customers, embedding resources management. in export markets and developing a Milk, aired and fired up a social New Zealand integrity mark highlight media storm across the opinion We received responses from around the central issue that came up in the 80 industry leaders and they tell a majority of our conversations with spectrum as it, again, presented fascinating story about how thinking industry leaders: the critical need for anything but a balanced view in the industry is currently evolving. the industry to pivot towards having As in previous years, the full survey the customer at the centre of of the way in which most New results are available on our website. everything it does. Zealand dairy farmers operate. From the survey and our conversations, we collected a plethora of ideas about the actions that are being and can be taken to lift the level of customer- centricity across the industry; those ideas form the majority of this Agenda. Firstly, there are some highlights from the survey worth noting.

14 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 Here are the Top 10 2017 priorities...

RANK ACTION 2017 PRIORITY RANK NUMBER: 2017 PRIORITY RANK NUMBER:

World-class st th 1 biosecurity 1 6 Create NZ provenance 2 brands Maintain world Sign high quality class biosecurity trade agreements

Food safety 2016 PRIORITY RANK NUMBER: 1 2016 PRIORITY RANK NUMBER: 7 strategic 3 importance Biosecurity – still reigns Is ‘whiter than white’ better when supreme it comes to trade? Once again, the maintenance of a world- The dramatic shifts in the trade Deliver high class biosecurity system collected the environment over the last year were speed rural highest-priority ranking, recognising the raised in many conversations. Discussions 4 broadband catastrophic impact a major incursion moved beyond the double shock of Brexit would have on the agri-food sector and and Trump to: the connection of free trade the wider economy. Biosecurity has to social inequality around the world; the ranked first in every survey we have launch by China of its One Belt, One Road completed although the priority score was policy; and the rise and rise of non-tariff Innovate with at its lowest level since 2012; this probably barriers (NTBs). All these factors shape 5 customers reflects the relatively stable incursion the need for a much more nuanced environment we have experienced in the approach to trade. last year. The priority attached to securing high- That said, in the week after the survey quality trade agreements increased less Sign high closed, Myrtle Rust was discovered in significantly than we had expected it quality trade Northland and an incursion response would in this year’s survey, given the was triggered. Minister Guy continues 6 agreements shifts in trade policy. The government’s to highlight that maintaining a world- trade strategy to 2030 was noted as a class biosecurity system remains his top welcome contribution to the discussion. priority. During the year, the government It includes new money for in-market has reinforced this focus with investment personnel, enhanced market insights Delivering behind the Biosecurity 2025 strategy, and rapid response to NTBs. The which included $18.4 million of new R&D incentives potential weakness highlighted was that, 7 spending in the Budget 2017 to increase fundamentally, it continues to focus on offshore biosecurity management securing more of the same sort of market activities and lifting public awareness and access for our goods and services as has participation in biosecurity management. been available in the past. Increasing It is fair to say that biosecurity was The message from our conversations rural / urban not a hot conversation topic this year, was clear: that free trade will survive 8 understanding suggesting most leaders are comfortable as we know it today only if the whole with the system and how it is operating, community benefits. It was also clear that with a number of people noting the our historical approach of playing strictly Government Industry Agreement by the rules puts us at a disadvantage framework is working better than was in a world where most countries are Developing expected, particularly considering the skewing the playing field in their favour. 9 future leaders Ministry for Primary Industries (MPI) Our contributors are seeking a more willingness to involve industry groups sophisticated approach to trade: one that in the management regime. When looks beyond commodity and focuses on biosecurity was raised, it was to stress higher-value access; one that thinks about the importance of ensuring the system is the impact of trade beyond the transaction Deliver market as proactive as it possibly can be, and that itself; and one that sees us standing up to signals to it must be focused on preventing threats defend our national interest. 10 producers from ever reaching our borders rather than be geared towards attempting to eradicate an incursion once it arrives at the border.

KPMG • 15 2017 PRIORITY RANK NUMBER: 2017 PRIORITY RANK NUMBER: 2017 PRIORITY RANK NUMBER: 14th 8th 19th

Investing in irrigation Closely following Increase rural / urban infrastructure and global developments in understanding water storage alternative proteins

2016 PRIORITY RANK NUMBER: 10 2016 PRIORITY RANK NUMBER: 23 2016 PRIORITY RANK NUMBER: 34

Water quality – the bottom line is The rural/urban chasm grows Alternative proteins are no longer crystal clear deeper and wider a ‘what if’ It was not surprising that water The water issue has contributed to Recent transactions suggest that was a central theme in many of our concerns that the gap between the agri- alternative proteins will become a conversations. While some discussed food sector and the urban community, material part of the global diet in the the opportunities inherent in water particularly in Auckland, has become medium term. To date, the threat of storage, most of the discussion centred so deep and wide that bridging it will substitution has been remote but on the issue of water quality. It is present the industry with a significant, investments like Danone’s purchase of apparent that this issue will feature if not insurmountable, challenge. Those WhiteWave Foods for EUR12.3 billion strongly in the coming election. It is concerns underlie the significant lift have shifted the alternative protein also clear that the industry is losing the in the priority that industry leaders trend into the mainstream and it is not battle for the hearts and minds of the have attached to building the mutual surprising that the priority attached wider community over water quality. As understanding between rural and urban to tracking these developments has a consequence, it is putting its licence communities. The priority ranking rose increased by 15 places in this year’s to operate at risk. 15 places to make its first appearance in leaders’ survey. the Top Ten at number eight. Numerous contributors highlighted that While New Zealand has the potential to the industry has failed to recognise that The concerns are not limited to water; position itself as the leading producer the idea of swimming in a river is not a a range of other matters contributing of traditional natural protein, if the scientific one for most of the population to the misunderstanding between the industry is able to collaborate along but one that cuts to the heart of being communities has been raised. These its value chain, the message from our a New Zealander. The emotional issues include: animal welfare failings conversations was, largely, that we connection to water is strong and, as (particularly in relation to bobby calves ignore the alternative protein trend at a consequence, arguments about the and reflected in the ranking of 11 our peril. Wool farmers ignored their kilometres of streams fenced or riparian attached to the new priority relating to ‘synthetic’ substitution moment and strips planted, no matter how genuine or penalties for those that don’t protect have been fighting a declining market well-meaning they are, do not resonate animals); the growing number of New for more than 40 years. Understanding with the majority. They sound like Zealanders not born in this country the technologies, and their strengths excuses for water quality falling short of (who lack traditional family links to the and weaknesses, is critical to protecting expectations. farm); and the greater effectiveness of our natural protein markets. This environmental pressure groups, which will also help to ensure that we take The industry has appealed to the head have successfully utilised social media advantage of strategic opportunities but it is the heart that is shaping policy. tools to bring emotive issues to the that new food trends will present in Swimmable means swimmable and not attention of mainstream media and the coming years. for 10 minutes, keeping your head above urban community. water. The message came through clearly from many of our conversations. Many of the recommendations in It also came through that achieving this Agenda relate to ways in which ‘scientific swimmable’ in 2040 is just far progress can be made in building too late. Bold action on water is required bridges between rural and urban to preserve the licence to operate. It is communities. Drawing stronger critical that the industry listens to the connections to the food that people eat, wider community to understand what demonstrating substantive progress on right looks like for New Zealand. environmental issues and highlighting career opportunities in the sector are all significant to this goal. In the end, the sector contributes significantly to the economic vitality of New Zealand and having the country agreed on some common values will increase the authenticity of our provenance story for customers around the world.

16 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 2017 PRIORITY RANK NUMBER: th Biggest increases in priority scores: Engaging more widely +22% with community Up 10 34 places

Tracking synthetic and Initiating GM field trials +21% Up 15 alternative forms of protein places

2016 PRIORITY RANK NUMBER: 37 Increasing rural/ urban +16% Up 15 understanding places Addressing the opportunities inherent in bioscience Umbrella body to Although moving up only three places +16% Up 2 in the ranking, the priority score unify industry voice places attached to initiating GM field trials rose 12 percent in this year’s leaders’ survey: one of the largest increases. The evolution of genetic technologies Initiating GM field trials +12% Up 3 to include gene-editing tools, such as places CRISPR, has seen many leaders note that they are observing a shift in the global GM debate. Biggest decreases in priority scores: The conversation is no longer about whether or not these technologies will be adopted, given the benefits they Mandating minimum health can deliver, but about the regulatory -5% Down 9 and safety standards places framework that needs to be built around their use. The key change is to shift to a basis of regulating products rather than Tailored food solutions for processes that have been developed -4% since the time the legislation was dominant demographics Down 9 introduced in the 1990s. places We talked to a few leaders who hold entrenched views that strongly espouse Incentivising students the benefits of wide adoption or total -4% Down 9 prohibition of genetic technologies. into Agri-Food places Most contributors support a more measured, cautionary approach, maintaining the understanding and Evolving alternative science capability of working with -4% Down 9 these technologies while regulating capital structures places commercialisation based on science input together with community and consumer acceptance. Deliver market signals to -3% Down 7 producers places

KPMG • 17 Establishing a values- led framework for New Zealand’s agri-food sector

We first sought the views of Since then, the issue has been raised Our conversations suggest that industry in our conversations every year with leaders recognise they have a once- industry leaders on the need broad support being expressed for in-a-generation window in which to for a pan-industry vision and development of a vision but very develop a values framework for the limited progress being made. A industry, which will contribute to a strategy for the 2012 Agenda. constraint on progress has been the more prosperous New Zealand by We found 81 percent of government’s view that there would enabling the sale of unique food and industry leaders supported be limited benefit from the industry beverage, fibre and timber solutions articulating an umbrella strategy. to the most affluent consumers in the development of a strategy However, things have evolved rapidly world. It is also recognised that it is although few were clear about in the last six months as understanding unlikely (or impossible) that the whole of initiatives being adopted by other industry will ever be on the same page who should take responsibility countries has increased (in particular, on every single issue; thus, finding for its development or about Origin Green in Ireland). This led to the and building on the areas of common launch by the MPI of Project Origin ground are critical to creating trust and, the best approach to use to in late 2016 to explore pan-industry consequently, delivering success. create it. Some hoped that the options that would assist the agri-food first Primary Sector Bootcamp sector in unlocking greater value from its produce. We received many ideas for at Stanford, which was to be The government has indicated that any action around the development held later in 2012, would take initiative will need to be industry led of a framework; however, the key on the challenge of vision and government enabled to succeed. takeaway from our conversations Replicating Origin Green is not an is that the level of volatility and development. This did not option, given the commercial initiatives change the industry is facing happen, although the session individual companies have adopted to respond to specific customer needs means that now is the time to stand ultimately contributed to the for integrity standards. A solution up and be counted in moving this creation of the government’s that seeks to replace what has been forward. We cannot afford developed is likely to fail. Any solution to miss the opportunity in front New Zealand Story framework, needs to build on the work that has Open Spaces, Open Hearts, already been done. We also need a of us for future generations of framework that leapfrogs existing New Zealanders. Open Minds, which is now solutions to provide New Zealand’s used by many agri-food sector agri-food sector with a best-in-class organisations. platform for sustained success in global markets.

18 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 2017 PRIORITY RANK NUMBER: 14th

Codify environmental expectations

2016 PRIORITY RANK NUMBER: 18 01 02 2017 PRIORITY RANK NUMBER: Being clear on our place Involving the spectrum of in the future. interested parties in the rd We constantly make a huge vision conversation. assumption that our key products, our A vision for the agri-food sector is dairy, lamb and beef, for example, will actually a vision for New Zealand, given be in demand in premium markets we are the only developed country that 23 as future generations of alternative relies on selling biologically produced proteins become available. Future products to fund our schools, roads foresight often takes emerging and hospitals. As a consequence, technologies and thinks about the Articulating a collective developing any articulation of the impact they will have within the day-to- sector’s vision and values cannot industry vision day lifestyles that we recognise today; be done in isolation from the rest of however, deeper analysis is critical if the New Zealand community. More we are to be clear on our place in the progress will be made when the whole 2016 PRIORITY RANK NUMBER: 21 future. We need to think beyond the community is aligned towards common current iterations of technology and goals. Ensuring that representatives think about how they will evolve; then, of all interested groups, including we must challenge ourselves about national, regional or local government, how these more mature solutions iwi and tangata whenua, academics, 2017 PRIORITY RANK NUMBER: will reshape lifestyles in the future. community groups and environmental Thinking about the impact plant- protection groups, must be invited to based protein version 8.0 will have in sit at the table beside industry leaders reshaping our lives is more challenging as they seek to create a vision for the th but may provide more clues to what future. our sustainable place in the future is 27 likely to be.

Sourcing and utilising global innovation

2016 PRIORITY RANK NUMBER: 22

KPMG • 19 05 06 Building on common ground Having the confidence to rather than waiting for do things differently. uniformity. New Zealand has a track record It was highlighted regularly that, while of taking positions on issues that it would be nice if every organisation have enabled a small country at the were to agree completely on bottom of the South Pacific to stand everything, it is never likely to happen. out in the world: some in a positive Every organisation has different way and others less so. A number products, markets and customers of our contributors suggested that it with which it is working and needs to is becoming increasingly difficult for tailor strategies and tactics to its own New Zealand agri-food organisations realities. That said, there will be shared to stand out from the crowd values and points of common interest because the gravitational pull of the on which even the most aggressive establishment: the government, competitors can agree. In developing research institutes, universities or a pan-industry initiative, it is critical the people they employ. We need that these points of commonality to enshrine the confidence to think are understood and used as the differently, challenge the status quo foundations for collaboration. and stand out in the vision for the industry and our organisations. This means that some current and well- established business relationships will not be part of the future as organisations gain the confidence to do things differently. 03 04 Drawing on Māori culture Leveraging our position to create develop uniquely as an indigenous Aotearoa values. Pacific nation. When people have sought to articulate Most people in the world will never New Zealand stories, they generally venture to New Zealand but our feature mountains, rivers, beaches and remote location is an integral part cities. While our natural wonders are of our identity. Our products have impressive, they are no more impressive a degree of mystery, intrigue and than those of other naturally blessed exoticness as a consequence of our regions around the world. What does location but this, even with every differentiate our story is the social integrity mark, stamp and approval, is and cultural history of the country: the not enough to command a premium. world’s youngest nation. In the Māori The point was made that securing a world view, Papatūānuku, or the land, premium relies on creating products is a powerful mother earth figure that that are different from those being gives birth to all things and provides the produced elsewhere in the world. physical and spiritual basis for life while We can be inspired by other cultures mauri is the energy which binds and but we should not try to mimic them. animates all things in the physical world. The New Zealand agri-food sector Decisions made by Māori organisations should use as its foundation those recognise the importance of sustaining things that we do at the world-class Papatūānuku indefinitely, while ensuring level. One contributor suggested we that mauri is transferred effectively and are world leaders in orchestrating the not wasted by the actions taken by the impromptu barbecue; the challenge organisations. As one contributor noted, for the industry is bringing this casual incorporating this world view into their efficiency and inherent ability to decision-making process simplifies create an experience and include reaching the right conclusion, although it in the solutions we deliver to our the implications can be significant. consumers. Integrating a Māori world view into a suite of pan-industry values will require organisations to be prepared to change: for instance, to stop doing things that don’t align with those values.

20 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 07 08 Doing the analytics to Ensuring any vision is understand the impact of widely understood. audacious strategies. It was highlighted during one Too often, people float schemes based conversation that, for many in New on their beliefs and impressions of the Zealand, the concept of export double impact that a plan will have on their is interpreted as the need to double the organisation or industry rather than number of animals and the levels of on detailed analytics. A pivot from a pollution. Consequently, they fear what volume-driven, production alignment the strategy means for the country. A towards markets and consumers has compelling, values-led vision needs significant consequences for many to be communicated clearly to the organisations, given the revenue, wider community so that people do cost and investment implications. It not fear the future but engage in the was highlighted that there is a need opportunities that it presents. The to address the shortage of high-level reality is that the agri-food sector analytical capability available in New cannot rely on mainstream media to Zealand to analyse strategy options communicate its stories; therefore, it quickly and provide relevant insight. is critical that the industry is active in Without access to analytical capability, utilising all the digital tools available to decisions will continue to be made on it to engage with the wider community. a hunch or in response to regulation, We will have a true New Zealand story much of which is developed by under- only when the whole community has resourced councils. bought into it fully.

09 10 Creating channels for Recalibrating the aspirations the industry to be good of those in the sector. for the world. The point was made that we need to Positioning New Zealand as a country make producing the finest agri-food that contributes positively to the world products in the world a team sport in will enhance our global reputation and which New Zealand dominates. We are support the growth of strong, long- a small, artisan producer on a global term partnerships. Given we will never scale and, rather than aiming to win be able to feed the world, we are not on our own, we should be proud to excused from an obligation to help the work with partners to gain sufficient world feed itself. Delivering on this scale to take on the most valuable obligation will demonstrate our desire opportunities in global markets. Models to build a more equitable world for all. such as the Family of Twelve wine One option suggested was to charge a companies, which we featured in the small levy on every product exported in 2016 Agribusiness Agenda, show that order to fund an initiative to enlist our much can be gained from making it brightest young leaders for placements ‘you plus me’ out in the world together. in emerging nations to utilise their skills Leaders need to be prepared to explore in solving complex agri-food challenges co-opetition rather than to focus that enable communities to feed monotonously on beating their local themselves and earn a living. Another competitor. suggestion was making our core agri- food intellectual property available to emerging nations on an open-source basis so that our good ideas benefit the wider global community.

KPMG • 21 THEME 1

Strengthening New Zealand's food culture

22 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 RELEVANT SURVEY RANKINGS TO THIS THEME: New Zealand farmers grow Most New Zealand restaurants cook food that is associated strongly with 2017 PRIORITY RANK NUMBER: some amazing food. While other parts of the world. While some we believe our pastorally chefs have created fusion cuisines that produced milk, beef and lamb combine cooking styles and ingredients nd in innovative and distinctive ways, are amongst the best in the there are very few chefs working in world and many of our fruit New Zealand to create unique food varieties are unique to New which uses indigenous cooking styles 2 and native ingredients. Some say New Zealand growers, a number of Zealand is too remote or small to develop Create product brands contributors highlighted that its own cuisine but the explosion of the we are not world famous for Nordic Food Movement highlights that to tell the New Zealand unique food can come from anywhere provenance stories the food we produce. While there are passionate, innovative people the French, Italians, Swiss and and unique ingredients. Within Aotearoa, 2016 PRIORITY RANK NUMBER: 5 Germans are world renown for we have unique flora and fauna, great chefs and indigenous ways of cooking their wines, cheese, chocolate food; all the elements for creating a food and sausages, respectively, movement are present. 2017 PRIORITY RANK NUMBER: New Zealand really lacks The conclusion from many contributors authentic, unique foods that was that New Zealand today lacks people from around the world an authentic food culture. There is no nd unique style of cuisine that consumers seek out. around the world will associate with the Too often we are producing food New Zealand. People don’t go out for 22 products enjoyed by consumers across an evening at a New Zealand restaurant the globe but that are ‘world famous in in the same way that they will head out New Zealand’. It is difficult to identify for an Italian, a Chinese, a Mexican or a Creating an integrity foods that are truly unique to this Vietnamese meal. As a consequence, system to ensure authentic country; the Australians even dispute the our visitors are left to eat food that they New Zealand products provenance of the classic Kiwi Pavlova. are familiar with from their homes, as As one contributor noted, they would there is nothing available to take them to not take a visitor to visit a New Zealand a different place or to profile the amazing 2016 PRIORITY RANK NUMBER: 26 supermarket as there is just nothing food we grow to its maximum potential. unique about the experience, even Capturing the value inherent in the agri- though they are taken to supermarkets food sector requires greater effort to be all around the world, when they visit made in creating and promoting a unique other countries, to see local produce and New Zealand food culture. retail innovation.

KPMG • 23 13 Creating artisan, local food stories. On a global scale, New Zealand’s agri-food sector is made up of a plethora of niche, boutique and artisan businesses. Greater value will be created by joining the dots between the producers and the communities from which our products originate and those that ultimately experience the product. The point was made on numerous occasions that we need a mind shift on our scale to ensure we secure the value inherent in the food we produce. Capturing value relies on telling the stories that underlie the products we grow. There is much we can learn from the way that European communities have evolved famous products that are associated globally with towns or regions. We need to identify our regional superfoods, encourage chefs to use them to create signature dishes and then promote these experiences globally.

11 12 Connecting farmers with Placing more value on the their reason for being. food we grow. Too often, the role of the farmer, Western societies have become grower or fisherman is denigrated in complacent with regard to their food our community to money-obsessed supplies. Consumers expect food moaners. Most do not think about to be readily available, plentiful and farmers as the providers of our cheap, regardless of the season. This food and our health and, ultimately, expectation ignores the environmental as those who support society to costs of food production and creates a function effectively. The point was perception that jobs in the sector are, made on a number of occasions inherently, of low value. A sustainable that it is necessary to help farmers food industry needs higher prices to understand their deep and to provide the resources to manage fundamental role at the core of modern environmental assets better, reward society and connect them to the food employees adequately and provide that they produce. Programmes that for investment in innovation and new enable farmers to see and experience technologies. Pricing food appropriately consumers using their products around will reduce waste, encourage the world must be scaled up to help innovation in its use and, ultimately, them understand how their products contribute to the development of a are utilised and what they could do to more diverse cuisine. The journey enhance the experience. They help to fairly priced food will take time, farmers to understand that producing particularly as supermarkets chase safe, sustainable, healthy food unsustainable price points as they race absolutely puts them on the to the lowest prices, but it is important winning team. that consumers are educated about the costs of producing the food they expect to be available.

24 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 14 Utilising food to engage with New Zealand’s global whānau. Kiwis who live around the globe represent a most important but under-utilised national asset. The Irish are masters of leveraging the members of their diaspora, keeping them connected to their country and encouraging them to be strong promoters of its culture and products. The annual St Patrick’s Day celebrations see coordinated efforts to have government ministers around the world connecting with the global Irish family. New Zealand’s diaspora is largely made up of passionate Kiwis, as we observe when the All Blacks come to town, who want opportunities to celebrate and showcase their country. Our food, beverage and fibre products deliver unique ways in which we can connect with New Zealanders around the world. Building on initiatives like Kea World Class New Zealand, we need to create distinctive opportunities for our global whānau to celebrate their country, in their Image courtesy of Primary Collaboration New Zealand current homes or back in New Zealand (as Ireland did with The Gathering). 15 16 Making our authentic Offering unique food ways of cooking accessible experiences to our visitors. to New Zealanders. If you have visited a tourist attraction Cooking the New Zealand way is not in New Zealand in recent times, you done in a faceless kitchen that could have probably been offered a choice of be anywhere around the world; it is soups, salads, pies, burgers and fries done in nature over the fire or in the in the café for lunch. In fact, the choice hāngi pit. While many of us like to would be much the same if you were think we have mastered the art of the in Sydney, Los Angeles or London. It barbecue, it is only when our amazing is not good enough that most of our products are cooked carefully in our visitors leave without having eaten natural kitchens that the magic we any truly New Zealand food. The same grow is truly realised (as the food that cannot be said of the wine sector Monique Fiso is creating at her Hiakai where many wineries do a fantastic job pop-up events demonstrates). To create of creating tourist experiences at their a unique New Zealand food culture, we cellar doors, with data indicating more need to make our authentically cooked than 400,000 tourists enjoyed a wine food more readily available to the whole tourism experience last year. The goal community both through restaurants is simple: every person who visits this and through community facilities that country should go home having had enable people to cook their own kai. the opportunity to experience authentic As we design public space in our cities, New Zealand food and wine. This incorporating a communal cooking pit will require our agri-food and tourism should not be too difficult. We should sectors to partner closely together to be training chefs to cook authentic create the immersive experiences and New Zealand food at high school menu selections that would enhance level and running competitions our guests’ holidays and deliver long- and promotions to encourage our term benefits to both sectors. restaurants to incorporate indigenous kai into their menus.

KPMG • 25 17 18 Providing enhanced hosting Ensuring indigenous to create millions of New ingredients are available Zealand food ambassadors. on a commercial scale. Our unique food story should be Core to the explosion of the Nordic Food prevalent from the moment that a visitor Movement has been the availability of first comes into contact with New native ingredients in commercial quantities Zealand, whether that is when they step to enable the chefs to commit the time onto an Air New Zealand aircraft or when and effort necessary to incorporate them they sit down for a snack on arrival at into their menus, whether they are plants, the airport. When visitors are here, we animals or insects. It was noted that our need to ensure that they experience agri-food sector is geared up to produce food of a consistently high quality but, to the same goods as those supplied by make them our advocates, we need to the rest of the world with little attention think beyond the food towards ensuring or effort paid to cultivating some of our all aspects of the hosting experience more unique native flora (and, potentially, are world class. This is not just in the fauna) commercially. If we are to develop presentation of food but in the education a unique food culture, then it is important provided to staff about the origins of that the agri-food sector puts more focus the products on the menu, the ways in on delivering native options to chefs which they are cooked, the reasons that across the country. This will require they are sustainable and the ways that producers to make a commitment to the option can be tailored to meet the supply, but also to working with, chefs specific needs of the guest. We need to to assist them to use the products; it move beyond a transactional mentality in also presents the opportunity to build our service sector and invest in turning intellectual property and protected, our visitors into long-term ambassadors high-value niche markets with export for and customers of New Zealand’s potential as the New Zealand food Image: Hiakai agri-food sector. culture trends globally. 19 Connecting border protection to our food culture. The first human many New Zealanders and visitors to this country experience on arriving at the border is the MPI Biosecurity Officer. As the survey highlights, these officials play a critical role in protecting our national economy but many people to whom they talk have no understanding of their role or of the contribution that the industry they are protecting makes to our economy. The idea was floated that, once people have passed through biosecurity, they could be given a sample bag featuring some of our agri-food products together with a brochure introducing the sector. It could include information about the role the sector plays in New Zealand society and details of places across the country where people can engage with it, such as restaurants, tourist attractions, pick-your-own farms, farm stays and tours, wineries and retail outlets. The biosecurity experience provides a unique opportunity for the agri-food sector to engage with visitors and New Zealanders alike.

26 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 BUSINESS SNAPSHOT

www.hiakai.co.nz

Creating a foodie culture

Fusing fine dining with Using a pop-up bell tent, fitted out traditional indigenous as a fine dining space, she creates ingredients Chef Monique an opportunity to utilise native flora Fiso, of Hiakai, is working to and fauna and traditional hangi bring New Zealand food back cooking methods, to create uniquely to its roots. New Zealand experiences. With the ability to rotate the pop-ups After working in some of the best through different regions, Hiakai restaurants in New York, Monique is able to “highlight the regional has recognised an opportunity to differences in our food. An open capitalise on our native advantages kitchen experience offers foodies and create a food experience like no a front seat experience to creating other. “In New Zealand we have a true New Zealand cuisine”. mind-set of copying what is already in the global market, we have With a lack of commercially struggled to articulate what a true available native ingredients, cooking food experience exclusive to New with them can be challenging. Zealand is. We are not clear what “Encouraging growers to it actually is that we are famous for commercially produce products when it comes to food”. will address the challenge for our chefs”. Once ingredients are Despite having all the tools, sourced it comes back to the chefs 20 ingredients and land, we lack an themselves; they need to acquire Extending our food integrated food identity home- the skills to best showcase our grown to our culture. Monique beautiful cuisine. experience through adds we need to articulate what co-product innovation. we want our food culture to be, “Given the lack of focus on suggesting “food off the land and New Zealand as a unique food A strong food culture has to be built inherent to the people, of this time, destination, we will struggle to on a sustainable platform which sees and the past”. attract and retain chefs if we keep all aspects of a plant or animal grown replicating what everybody else for food being utilised in a meaningful Kiwis follow the model that does rather than creating our way. Food cultures around the world everyone else does around own food style”. Monique looks recognise this, with many incorporating the world; “we flock to the to the Nordic Food Movement into their cuisines elements of products heart of the city, to restaurants as an exemplar; they challenged we would consider to be waste or by- serving westernised food calling themselves, used native products, products; they create unique sensory it contemporary NZ cuisine”. and have created a true food experiences with these. We need to Monique’s international experience movement. “Top chefs leave their recognise this trend and, while our highlighted that there is no jobs to go and learn from them”. palates may struggle to eat all of the knowledge globally about what an Monique suggests we urgently elements of some of the products exquisite kiwi meal should consist need to create a culture in which we grow, thinking widely about how of; our traditional foods are not top chefs are eager to come and co-products can be utilised is critical, utilised or storied to capture value share our passion for our traditional, particularly as the focus on functional and craft our individuality. indigenous food rather than them foods and nutraceuticals around the Re-shaping what it means to heading off to Copenhagen or Oslo. world grows. Given that New Zealand cook kiwi cuisine, Monique fuses is late to the table in the food culture unique NZ historic techniques stakes, we have opportunity to and ingredients, by creating not develop a culture that fully integrates only a meal, but a true immersive emerging food trends to maximise experience. the likelihood that it will attract an influential global following.

KPMG • 27 THEME 2

Capitalising on the benefits of diversity

28 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 RELEVANT SURVEY RANKINGS TO THIS THEME: The leadership of the primary In a world where the ultimate consumers of our products are 2017 PRIORITY RANK NUMBER: sector in New Zealand has male, female, pākehā, Māori, Asian, been dominated largely by European, able-bodied, disabled, gay and straight, our organisations must ageing Caucasian males from increasingly reflect the customers th the day commercial agriculture to whom we seek to sell if we are to started in this country. They understand what drives and inspires them on a day-to-day basis and have done a good job, building connect with them emotionally. 11 New Zealand, as the youngest and sustaining New Zealand’s developed country in the world, has largest export sector. As the a distinct benefit in that many of the Infrastructure for agri-food sector pivots towards people in our community have made strong rural communities conscious decisions to travel here its consumers, the need to or are descended from those who utilise the diverse talent that have migrated to this remote region of the world. 2016 PRIORITY RANK NUMBER: 15 is available in Aotearoa New New Zealand benefits from having Zealand and beyond increases. significant diversity inherent across our community and unlocking this 2017 PRIORITY RANK NUMBER: Recent moves by the NZX to upgrade under-utilised capability must be a its Corporate Governance code to high priority if we are ever to create require listed companies to adopt a a truly prosperous nation for all New formal policy around diversity has Zealanders. This is not a numbers nd been interpreted by some as imposing game, nor is it tokenism; bringing a requirement on companies to set diversity into our boardrooms, quotas for the number of women they executive suites, offices, orchards recruit into leadership positions. Our and milking sheds is critical to 42 conversations with industry leaders ensuring that, on each and every day, indicated that there is little desire to see we present the best of ourselves to quotas imposed on any organisation but our partners and customers across Exploring scale a clear understanding of the opportunity the world. inherent in looking widely for the most organics talented person for a role, be they male or female, pākehā or Māori, Asian or European, able-bodied or 2016 PRIORITY RANK NUMBER: 42 disabled, or gay or straight.

KPMG • 29 23 Leveraging the contribution made by half the industry. The ownership structures of most farming businesses mean that women are significant partners in New Zealand’s agri-food sector although the point was made during our conversations that their contribution is often overlooked and undervalued. While organisations like Rural Women New Zealand, Dairy Women’s Network and Agri-Women’s Development Trust exist to support women in the sector, ensure that their voices are heard and equip them with skills to make a greater contribution to their businesses, industries and communities, there is still more that needs to be done to leverage fully the contribution women can make to the agri-food sector. It is often overlooked that it is women who ultimately purchase the majority of the products we grow for the world. Women provide diversity of perspective and empathy with our consumers, which we have noted in past Agendas has been, and is still, lacking in many organisations, while also increasing the ability of an organisation to engage with all stakeholders. 21 22 Promoting leaders that back Listening to the voices their best talent. of youth. As change becomes the new normal, The Future Leaders Agribusiness more leaders who are prepared to Agenda, which KPMG co-created take bold steps are required. The in 2015, highlighted clearly the role of a leader is not to shield those significant benefits of listening they lead from every threat but to to the voices of young people forge pathways that make it easier in an organisation. They have for others to be successful. We need strong ambitions for what is leaders prepared to step outside possible. Initiatives such as their comfort zones and break their associate director appointments unconscious biases to recruit the best to the main board, parallel aspiring person into a role, regardless of their leaders’ boards, and ideation background. Tone from the top will events like hackathons and online shape the behaviours of leaders and communities all help to connect employers throughout the sector. young people to an organisation and provide input into its strategy and tactics.

30 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 24 Building Māori capability for the agri-food sector. The pivotal role Māori organisations will play in New Zealand’s agri-food future was highlighted by a number of contributors. The inter-generational time horizons that Māori take to business and alignment of commercial activities with the social goals and objectives of the organisation create the potential to provide emerging Māori business leaders with fulfilling and challenging career opportunities. There have been a number of initiatives entered into between iwi, trusts and education providers to create pathways that will enable young people to be developed into operational, and ultimately leadership, roles within their whanau or iwi organisation. The ability to connect a deep understanding of purpose with the cultural values and beliefs of Māori, will ultimately create future leaders for the wider agri-food sector that deeply understand the how to connect doing what is right by the land to create value which benefits the whole community.

25 Launching a pan-industry future leaders’ programme. Historically, sector leaders developed capability through roles with smaller entities before stepping into senior positions. With consolidation, many of the roles on which today’s leaders cut their teeth have gone, reducing the options available for gaining the necessary experience required before seeking senior positions. Building a diverse leadership pool requires investment, although many organisations lack the scale to do this independently. The need was highlighted for a collaborative future leaders’ development framework that immerses people into all aspects of leadership and which could build on existing programmes run by companies as well as initiatives like the Kellogg Rural Leadership Programme.

KPMG • 31 26 27 28 Crafting relevant entry Enabling regional Maintaining the licence pathways for varying regions. employers to attract the to operate through purpose- Too often a solution to a problem is talent they need. led people. identified and then used to solve a The lack of social infrastructure and It was suggested that, too often, we multiplicity of problems that, on the patchy connectivity in rural areas make focus on the really important things surface, appear to be similar. Many it difficult for ambitious people to see only when we are about to lose them. existing talent-attraction programmes through the living challenges and look Some of the challenges the industry adopt a one-size-fits-all approach at the potential inherent in a regional faces have arisen because people have nationally. The reality is that the employment opportunity. The idea allowed their business activities and messaging used to attract people from was raised for a strategic regional personal values to fall out of alignment. South Auckland into agri-food will employment fund for key roles in It was suggested that the industry need to be different from that used in organisations that are regionally based. should be focused on recruiting the Waikato despite the regions being It was suggested that a tax incentive purpose-led people: those who will geographically adjacent. Highly tailored could be available to an organisation call out and stop doing something that pathways are required to engage with so a package could be offered for a is unaligned to their personal values target audiences, particularly in urban key role in a regional area to attract and are prepared to apply a higher areas, if the industry is going to attract a person with critical global skills to standard to themselves than the rules the most talented people to consider its consider the role at least. Placing the would require. Success will come more career opportunities. right people in significant roles will easily for an industry that is made up amplify the impact that the organisation of passionate people doing the right is able to make to New Zealand. things for the right reasons.

32 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 29 30 Paying a fair wage for a Increasing maturity around fair day’s work. success and failure. This is not the most radical idea in this Bringing the most talented people into Agenda but it was highlighted that the industry is critical to long-term employers prepared to pay a fair wage prosperity. However, successful people do not tend to face the same struggles will bring their creativity and talents recruiting and retaining good staff as do to the sector only if they perceive it to others. Valuing the contribution people be a good place to work. Our ongoing make to a business appropriately and fixation with the tall poppy syndrome, going beyond financial rewards to the a desire to chastise those that achieve quality of the working environment, success, together with our need to training and opportunities for crucify those that fail, do not provide advancement are critical to retaining compelling work environments for talent. To those that argue they can’t high-performing people. Maturing as afford to pay more or provide benefits, a community to be able to celebrate it was suggested that the problem may success while focusing on the learnings be their business models; they should from failure will create workplaces that ensure that they are producing products are more welcoming of the diverse for people at price points that deliver talent we need. economic returns.

KPMG • 33 THEME 3

Delivering an integrated lifelong, learning framework

34 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 RELEVANT SURVEY RANKINGS TO THIS THEME: The discussion about attracting It would not be fair to suggest that there the best talent to the agri-food has been no innovation in the sector. 2017 PRIORITY RANK NUMBER: The development of the NCEA-level sector goes hand in hand with Agribusiness curriculum, led by St Paul’s a conversation about equipping Collegiate in Hamilton, demonstrates th what is possible when passionate them with the necessary skills educators seek to develop a programme to deliver high-performance for high-performing young people with outcomes consistently. The a desire to build a career in the agri-food 9 sector. The opportunities for people effectiveness of the education across the industry to seek ongoing infrastructure in serving the professional development continuously sector has been addressed in expand. The increase in the number of Developing future leaders people accessing programmes run by previous Agendas. the Agri-Women’s Development Trust demonstrates the demand for relevant Similar concerns about the system 2016 PRIORITY RANK NUMBER: 9 programmes that are designed to arose during this year’s conversations: meet specific needs. concerns about whether or not institutions are sufficiently integrated Digitalisation is redefining how many products and services are delivered in 2017 PRIORITY RANK NUMBER: across the sector to provide cohesive lifelong learning pathways for people our day-to-day lives and education will seeking to progress from school, through not be exempt from this change. The tertiary education and, ultimately, into ability for people in New Zealand to go th continuing professional development. online to source the best programmes Other recurring concerns voiced include: available globally introduces new the lack of focus placed on the agri-food competition to domestic institutions. 26 sector in the school curriculum; funding However, the ability to deliver education models for institutions that are geared online also provides domestic institutions towards volume in favour quality; and with the opportunity to leverage New Incentivisng students into the understanding that teachers hold of Zealand’s reputation for innovation and the skill requirements of today’s agribusiness careers quality in the agri-food sector to become agri-food sector. global leaders in sector-specific training. Questions over whether or not the Seeking to be the best in this area 2016 PRIORITY RANK NUMBER: 19 education sector is meeting the needs will benefit the institutions as well as of the sector was a top of mind for a enable them to lift investment in their number of our contributors. The current programmes and deliver better learning work being undertaken into the future outcomes to the whole sector. A critical 2017 PRIORITY RANK NUMBER: direction of Lincoln University was component of an organisation securing identified as an opportunity to take a a premium market position is having the fresh look at how the education sector is right people executing exceptionally. th configured to deliver the new skill sets Action is required to ensure New Zealand that the sector is seeking. There was has a fit-for-purpose labour force. recognition that the current framework of institutions and assets that deliver 33 agri-food education and training services is too fragmented and the quality of the education often inconsistent. Mandating minimum Health and Safety practices

2016 PRIORITY RANK NUMBER: 24

KPMG • 35 33 Supporting schools to foster thinking skills and entrepreneurial capability. There was much talk about attracting the most talented people into the industry but little talk about what needs to be done to grow the talent pool available to the economy as a whole. One contributor questioned whether or not there are enough entrepreneurially minded, inquisitive young people leaving our schools and whether or not the sector has a role to play in growing this pipeline. The suggestion was made that, for its own benefit, but also for the wider benefit of New Zealand, the agri-food sector should support the development and delivery of programmes that equip young people with critical thinking skills and entrepreneurial talent. Young Enterprise does this already but we really need to lift capability in commercialising ideas through providing live experiences in today’s disrupting market places through case-study competitions, hackathons, funding start-ups and other similar initiatives. 31 32 Engaging with school kids Getting kids out of the from the day they start classroom and onto preschool. the farm. Most children crave knowledge and We have talked with hundreds of are highly motivated to learn about industry leaders over the eight years the world around them. The agri-food we have produced the Agribusiness sector provides a plethora of themes Agenda. Many of them were urban that can be incorporated into lessons kids but they have pointed to events for subjects as traditional as Maths, in their childhoods which sparked their English and Science, and as diverse as initial interest in the primary sector: Art, Music or Physical Education (rural these were events that ultimately led sports anybody?). Teachers will teach them to leadership roles. It is critical with the best materials available to that the industry supports programmes them. The onus is on the industry to that seek to deliver every single school develop compelling learning modules student in New Zealand an immersive that fit into the mainstream curriculum experience of the agri-food sector to for students from preschool to Year 13. try and ignite that spark of interest amongst today’s kids and tomorrow’s leaders. Whether it be supporting the proposed Experience Centre at the ASB Farm at Mount Albert Grammar School in central Auckland, collaborating to create farm-stay programmes for schools or taking school groups to Field Days and A&P Shows across the country, there is a need to work collaboratively to ensure that every kid has the opportunity to move out of the classroom and onto the farm.

36 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 34 Offering financial incentives to attract the best talent. In previous Agendas, we have argued that student funding and loan schemes should be directed to incentivise young people to take courses that offer the best career opportunities for them in New Zealand. Given this would mean students studying different programmes being treated differently, it is politically challenging for the government; thus, the industry needs to explore options where it could provide stronger financial incentives to attract talented young people to the industry. Rather than the current patchy approach to scholarships, there is the opportunity for organisations to collaborate to offer meaningful financial incentives to all students who pursue sector-aligned programmes and commit to work in the industry after graduation. Ideas for programmes suggested include cash grants, additional loans that are written off as the graduate works in the industry, internships during study breaks and funded travel experiences to complement the institutional learning that the student completes.

35 36 Rethinking agri-food-based Leveraging global university tertiary education provisions. partners to create a unique The issues facing Lincoln University centre of excellence. and the review under way to consider Through the Te Hono Movement, its future were raised in many New Zealand’s agri-food sector has conversations. It was noted that the created a globally unique relationship review provides a unique opportunity to with Stanford University in California. reassess how we structure the delivery Other organisations have collaborative of agri-food-based tertiary education partnerships with institutions like across New Zealand. Questions were Wageningen UR in the Netherlands, raised about the number of providers University of California, Davis and in the sector, whether or not we Harper Adams University in the United need a world-class university-level Kingdom. New Zealand offers leading institution focused on the sector, and academics and researchers from the interaction of universities with institutes like these and others a unique research institutes and other science- opportunity to research, test and learn based organisations. While much of the about premium agri-food product value talk was about land-based education, chains. We should establish an agri- the reality is that our solution needs food centre of excellence in partnership to position us best to provide learning with globally recognised institutions. By and research capability across the value supporting the institutions to second chain. The prevailing view, on balance, leading academics to the centre to was that some rationalisation is needed pursue research interests relevant to to ensure resources are focused on our market, we will create opportunities delivering high-quality education for them to work with New Zealand rather than on funding multiple sets academics and organisations to of overhead costs and to enable build the knowledge capability programmes to be made as accessible across the industry. as possible through regionalising delivery and utilising digital technology.

KPMG • 37 37 38 Identifying and empowering Professionalising the change leaders. industry inside the farm gate. Another element of the capability The sector has prospered for decades discussion revolves around equipping without formal learning requirements future directors and governors to for farmers and growers. Learning and bring relevant perspectives to their development has been informal: over leadership roles from the day they are the fence, through field days, at the seated at the board table. While there pub or through reading some of the are many governance programmes in material farmers receive by mail. That place, the point was made that these system worked before the onset of the do not lift people out of their day-to- 24-hour news cycle and the increasing day activities for too long and are often focus of the wider community on the delivered once the person has reached a sector’s environmental and ethical leadership position. In the past, entities performance. Today, the sector can no like the Dairy Board provided offshore longer rely on informal upskilling. It was placements to young New Zealanders. suggested that the time has arrived Those opportunities have largely to introduce a continuous professional vanished yet the knowledge they enabled development system, similar to that people to build is more necessary today used by other professions, covering than it ever was. The suggestion was themes like ecology and soil science, made that it would be worth investing business, people management and in our brightest emerging leaders early animal welfare. It would indicate and giving them immersive offshore clearly that working the land is a true experiences for extended periods so profession: one committed to ensuring they can build a detailed understanding its practitioners consistently seek to of markets and networks, which will utilise the latest available thinking in assist them later in life. It was suggested operating their businesses. that this could be run as a structured OE programme, allowing time for young people to live life while also taking part in planned educational activities. 39 Equipping producers to maximise their roles in the value chain. For decades, farmers have been encouraged to focus on enhancing productivity and growing volume and leave what happens beyond the farm gate to the cooperative, processor or exporter. This has left many producers not knowing who their consumers are and unable to understand the volatility inherent in the returns they receive. Whether it is via value-chain partners, industry-good organisations or academic institutions, programmes are needed to enable producers to understand more about the value chains in which they participate, how these are evolving and the options available to them for maximising value. Farmers and growers need to have the knowledge that enables them to think more widely about the options for their businesses.

38 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 BUSINESS SNAPSHOT

Fatima Imran from Mt Albert Grammar School

Inquisitive and open-minded, Sparking a fire for the subject has Fatima Imran of Mt Albert increased awareness among her Grammar School in Central peers and she has found herself Auckland, has a foresight on the speaking at events with senior future of agriculture far beyond leaders in the sector, including her years. Appreciating the the recent New Zealand Agri- innate potential inherent in the Investment Week Future Leaders New Zealand agri-food sector for event in Palmerston North diverse and challenging careers Highlighting the breadth of the she initiated her first step on a industry; Fatima notes that path to a career in Agriculture in business, science, technology year 10. and marketing are all attractive Aspiring to show her peers, the opportunities in agriculture that future leaders of New Zealand, most don’t associated with that agriculture has the potential the industry. to offer more than physical Against the grain of what her work on a farm, she permeates friends considered a “cool” course, enthusiasm and excitement for the Fatima has embraced the subject sector. “Agriculture has such wide as the unexploited opportunity for applications, I have been studying students in Auckland. With the 40 alternative proteins with crickets support of her parents to “never and the sciences in agriculture, it drop the subject as New Zealand Educating the industry isn’t all about traditional farming” needs Agriculture” she has about core Māori values. encouraging those around her to committed to continue her studies follow her footsteps and study and wishes for a future in agri-food. Most of the ideas about enhancing our careers in Agriculture. She also learning systems are things that any highlights the opportunity to “Everything starts with agriculture country could choose to do. While they integrate her interest in business – the land, the people, our food. help in identifying and nurturing talented and accounting into her study People become so obsessed people, they may not differentiate programme. with careers like becoming a New Zealand in the market. During our doctor or a lawyer, but agriculture conversations, it became apparent that With no agricultural connections in encompasses so many professions the way we differentiate ourselves is her family, Fatima stepped out of her and brings them all together”. by building capability around core Māori comfort zone to study the subject values like kaitiakitanga, manaakitanga, but saw the infinite opportunities. mauri and whakapapa, together with “My Grandfather studied English the protocols that surround the culture. and languages, my mother was a These concepts are unique to New primary teacher, and my dad was an Zealand and provide a valuable lens for accountant. When we came to New shaping our thinking about how we use Zealand I had never been exposed our land and water, build relationships to anything to do with farming. I with people and present them with think my parents expected me to solutions to their problems. The reality look at normal career options like is that too many New Zealanders are becoming a doctor or accountant. In uncomfortable with our indigenous year 10 I decided to take agriculture culture and fail to recognise the point as a subject. We had a farm on the of difference it can deliver to all. Every school grounds, which is so exciting, organisation needs to work to lift their no other school has this. No one people’s competency and confidence else took agriculture and I thought it in these core values, whether they are would be fun and it turned out to be based in New Zealand or not. very challenging too!”.

KPMG • 39 THEME 4

Pursuing sustainability first — no debate!

40 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 RELEVANT SURVEY RANKINGS TO THIS THEME: The impact that the agri- The takeaway from our research for this year’s Agenda is really simple; it 2017 PRIORITY RANK NUMBER: food sector has on our must be sustainability first in everything natural environment was a that every organisation in the agri- dominant theme in many food sector does every day and we th cannot continue to debate this. When of our conversations this an organisation tries to defend what year. We came away from the wider community perceives to be indefensible with science and logic, it 11 the discussions with little weakens trust and leaves many feeling doubt that the majority of that the farmers and growers around the country are just ignoring the places Penalties for those that our contributors recognise that are important to them. don’t protect animals that the future prospects for Attachment to place is not something the industry are inextricably that can be measured easily. It is the emotional connections we each hold 2016 PRIORITY RANK NUMBER: N/A linked to its stewardship of to the places, people and events that the environment and water. make us who we are today. Māori It was also apparent that, for articulate this beautifully through the 2017 PRIORITY RANK NUMBER: description of their whakapapa but, most leaders, sustainability whether a person identifies as Māori is a bigger conversation than or was born in Asia or Europe, we each have our own personal whakapapa th just that about the land and that we want to see preserved water; it is also about the role and respected. When we perceive somebody to be failing to respect or, 17 they take in ensuring their even worse, damaging the places that animals live good lives, and are central to our own stories, statistics their employees are treated will never make this right; they just Schemes to regenerate reinforce perceptions of arrogance and respectfully and kept safe, widen the divide in our community. native ecosystems and in contributing to making This divide, which is often referred New Zealand a better place to as the rural/urban divide but is, in 2016 PRIORITY RANK NUMBER: 17 reality, much greater than this as it is a for all New Zealanders. primary industries/New Zealand divide, is inexorably growing larger and proving Recognition that the industry’s licence to be more difficult to bridge. It can to operate is no longer guaranteed is 2017 PRIORITY RANK NUMBER: no longer be ignored. It has become a shaping the thinking of many of our major roadblock to industry, capturing contributors on how their organisations value as it leaves many attempts to tell and industries need to act to become a sustainability story looking shallow th truly sustainable. They acknowledge and insincere. The challenge for the that, as the contribution that the tourism sector is to commit to engaging with sector makes to the economy increases, the wider community on sustainability 37 perception grows that the dependency at an emotional level: a level that on the wealth generated from agri-food is respects and enhances the whakapapa waning. The implication of this is simple; of every New Zealander. the wider community is increasingly Implement water comfortable with tougher regulations if costing mechanism they preserve our natural environment. They recognise this will protect the ability of the tourism sector to continue to grow 2016 PRIORITY RANK NUMBER: 35 its contribution to the economy.

KPMG • 41 43 Curtailing the development of sensitive land. One contributor, reflecting on a recent trip to Europe, highlighted that it is apparent that, increasingly, sector leaders in Europe are regretting their failure to take action to curtail development of sensitive land before it was too late. Some farmers around New Zealand are constructing barn- based farms or feed pads in response to environmental compliance issues; however, these solutions cause irreversible damage to the environment and can eliminate the ability to regenerate an ecosystem. It is time to be serious about protecting our sensitive land and ecosystems; a number of contributors suggested that this means there is a need for a national land-use plan and the associated planning constraints that would come with this. This will mean that some landowners will face restrictions on how they use their land but failing to take action will increasingly challenge our ability to secure premium prices for the products we supply to the world.

41 42 Making bold commitments Appointing sustainability on how we operate. ambassadors for New It was suggested, politely, that too Zealand’s agri-food sector. many in the primary sector have rocks Steve Irwin changed the world’s in their heads if they believe that the perception of salt-water crocodiles by solution to securing their licence to helping people to understand them in a operate will be achieved by pushing way to which they could relate. Jamie back against and trying to discredit Oliver has created a debate around every negative media story. The reality healthy eating in schools. Both have is that the environmental conversation made the topic that is important to is currently owned by environmental them fun, informative and accessible pressure groups. Rather than being to the wider population. The agri-food stuck in a blame game, it would be sector needs to identify its own Steves better to focus on how the sector can and Jamies, and enable their passion re-engage with the wider community. for the industry and its stories to shine This needs bold thinking and actions through to the New Zealand community that are sufficiently distinctive that they and beyond. Identifying a select group reposition the whole argument; these of industry ambassadors and providing may be pledges on becoming carbon them with the platforms on which to neutral, pest eradication, regenerating share their stories and engage with native land or paying a living wage. It is New Zealanders are important steps in time to kill the victim mentality, recover closing the gap between them and us. pride and shift community perception of the sector from villain to hero.

42 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 44 Moving with velocity to deliver on the community’s desire for swimmable water. As we noted in the summary of the survey results, it was very clear during this year’s conversations that many industry leaders believe swimmable must mean swimmable as it would be understood by anybody in the community. Taking until 2040 to deliver scientifically swimmable water will not be acceptable for most members of the community and will allow an open sore between the sector and the rest to fester for another 23 years. The call was made that the agri-food sector needs to develop its own action plan for water quickly with more ambitious targets and a shorter implementation time frame.

45 46 Avoiding policy frameworks Exercising the obligation to that grandfather adverse shape what happens on farm. environmental outcomes. The processor/exporter that sits As each region develops between the producer and the market environmental management policies, benefits directly from being part of a one common issue arises every premium, high-value industry. They are time: How will nutrient loading in a unique position, being required on be allocated between farms in a a daily basis to understand emerging water catchment? It is clear from market trends and the value consumers our discussions that this is a highly attach to specific product attributes. divisive issue given the impact The view was expressed that exporters the allocations can have on land have an obligation to translate market values. It was highlighted that policy signals into pricing programmes that frameworks should not reward support farmers seeking to make their those who, historically, have failed businesses better for themselves, the to meet environmental obligations community and the environment. The by grandfathering current nutrient counter-argument to this is that they loadings. Rules need to respect must be equally resolute in refusing to the investment people have made tolerate suppliers that fail to aspire to into their land but should not do the right things; there should be no penalise those who have achieved shelter for those that choose to hide better environmental outcomes from consumer expectations. over time by devaluing their land. Trading mechanisms within catchments must be incorporated into frameworks to provide farmers with time to transition their farming systems to operate within the confines of their loading limits.

KPMG • 43 47 48 Requiring an integrated Accelerating actions to report on performance. address climate change With a few stand-out exceptions, the obligations. majority of New Zealand organisations While the Trump administration has are not keeping pace with the taken a sceptical position to man-made rest of the world in terms of the climate change, the rest of the world sophistication applied to reporting is operationalising the commitments their performances. The annual report they made in the Paris Accord in 2015 remains focused on financial metrics. and accelerating their transitions to Best practice internationally sees low-carbon economies. Given New companies using a wider spectrum of Zealand’s greenhouse gas profile, measures of analysis and reporting of meeting our commitments requires their results. To increase accountability a significant contribution from the to the community and better inform primary sector. New Zealand should potential consumers about the aspire to lead the world in mitigating steps taken to deliver them safe, the impacts that agriculture has on sustainable food, more organisations human-induced climate change but to need to publish comprehensive achieve this requires financial signals. reports that provide quantitative and The suggestion was made by a number qualitative analysis of all aspects of of contributors that the agri-food sector their operations. If organisations are should welcome its early inclusion into unwilling to take this step voluntarily, it the emissions trading scheme, with a was suggested the government could framework of incentives and penalties mandate reports from organisations to encourage the right behaviours. actively engaged in the utilisation of New Zealand’s natural capital.

49 Creating a land bank that funds environmental enhancement. Many of the banks offer products that support their customers to complete investments which enhance the sustainability of their businesses but, with the dairy downturn, innovation in this area has slowed. The environmental expectations of the wider community together with the need to address climate change means the rate of investment in such programmes will need to increase and some of this investment will need to be carried out because it is the right thing to do rather than because it delivers a return to the bottom line. There is the opportunity for banks, processors, iwi and sovereign investors (like the Super Fund and ACC) to come together and create a land bank that provides long-term finance to support landowners to make the investments necessary to preserve their licences to operate at a pace that would not happen if strictly commercial considerations were applied.

44 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 BUSINESS SNAPSHOT

Sustainable farming

Adapting to changing consumer the environment is a crucial element expectations and doing what is right to creating a sustainable future for the by their land has seen the Gordon sector”. Stephenson Trophy and supreme Richard explains his belief that creating winners of the Auckland Balance premium food products requires Farm Environment award for 2016, systems to be operated below the Dianne and Richard Kidd continually maximum capacity of the land. The seek to redefine what it means to be Kidds have worked with likeminded sustainable farmers. farmers in their region to create Kaipara Farming at Whenuanui Farm at Lamb, a high quality grass fed lamb Helensville, North of Auckland since supplied to Countdown stores in the 1978, they have consistently focused upper North Island. Dianne adds that on grasping opportunities to shift from so much of what is the story we wrap volume to value. around our natural proteins. They believe premiums and incentivisation Dianne explains that “transparency, for producers are effective and efficient traceability and telling our food story is a ways to create change quickly. Being large part of the sustainability approach out in the lush green grass is a great we take at Whenuanui. This is not only story but that’s only 80% of the story. a crucial element for food producers, Farmers also need to diversify, brand but anyone in the sector”. The Kidds themselves and story their products are very clear that the sector needs to 50 locally and regionally. reconnect with the wider community Introducing incentives to and consumers to know about their food As part of their prize for winning the optimise the use of water. products and how they are produced. Ballance award, the Kidds have recently visited Europe. During their visit they The Kidds have been driven by a desire Like the carbon footprint, animal explored the Origin Green approach in to farm to the highest standards of welfare certifications and proof of not Ireland. Dianne notes it is successful, sustainability for nearly four decades. using child or slave labour, the water “although we have better farms in New More recently they have focused on footprint is becoming a ticket you need Zealand, they have an enviable national how sustainable farming can assist in to have to sell to premium markets. collaborative food strategy across the capturing more value from the food This presents an issue as New supply chain with government, industry Zealand farmers have never focused they produce. and farmers”. on how to optimise water use in their Richard notes that “by creating a systems, since we are a country that They also observed that we are situation in which there is less pressure currently placing a significant focus generally has more water than we on stock and on the environment we need, in most regions, most of the on water quality in New Zealand, but have developed a model to grow quality overseas there does not appear to be time. However, wasting water, even food products without compromising if we have an unconstrained supply, this same emphasis. The impression the environment”. He points to their the Kidds left Europe with was that will not be acceptable to customers early action to fence off marginal in water-constrained countries. The the primary focus there is saving wetlands and native bush to ensure they biodiversity and also carbon footprint. need to incentivise producers to adopt are working with good quality pasture world-class management practices, has assisted productivity, improved The passion the Kidds have for their for instance, in grey water recycling, sustainability and made the farm safer farm is clear from talking with them as precision irrigation and water-storage for their team to work on. is their message. With a historic focus technologies, was highlighted. It was on volume in New Zealand, we need suggested that the most effective The Kidds also recognise it is important a cultural and strategic switch to focus way to encourage a shift in water for farmers to share their stories with on value. We have the technology to optimisation would be to announce the community and have become interested drive innovation and productivity – we introduction of a water charging regime in consumer education. “Most children just need to ensure change is effective with a phased implementation plan. grow up thinking their milk comes from and timely. the fridge, education around farming and

KPMG • 45 THEME 5

Adopting and utilising technology quickly

46 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 RELEVANT SURVEY RANKINGS TO THIS THEME: Previous Agendas have The implication of this is simple. The evolutionary innovation approach, which 2017 PRIORITY RANK NUMBER: highlighted New Zealand’s has delivered so much benefit to New position as the only Zealand’s agri-food sector since the developed country in the removal of subsidies and price support th in the mid-1980s, will not be sufficient to world that relies on the deliver future competitiveness. Emerging biological products it grows biotechnologies are shortening the breeding cycle for a new cultivar with 4 and sells to create the wealth desired traits from decades (with a bit that pays for key social of luck) to a few years and uncertainty is largely removed. Evolving digital Deliver high speed assets like schools, roads technologies make it simpler to integrate rural broadband and hospitals. This position numerous data streams to augment the intuition of farmers, regulators and has been achieved through customers. These and other innovations 2016 PRIORITY RANK NUMBER: 4 progressive adoption of make it critical that the sector challenges innovation, which has driven itself over the ways in which it identifies, assesses and utilises all emerging, productivity and enabled disruptive technologies. 2017 PRIORITY RANK NUMBER: us to capture more value There were two clear themes that stood from the country’s natural out during our conversations in relation to innovation: one relating to the way that th environment and favourable New Zealand as a nation understands climate. The current and assesses the opportunities inherent challenge facing the industry in bioscience (a theme discussed earlier 34 in this Agenda in the survey results is that these successes have section) and the other to the approach been achieved against a organisations are taking to sharing data. Initiating Genetically There are significant concerns around background of low innovation how we are leveraging data as a country, Modified field trials across the global agri-food with the view being expressed that we are moving backwards in comparison to sector; this is something that other nations as organisations are not 2016 PRIORITY RANK NUMBER: 37 is changing very rapidly. prepared to share data. It was suggested that companies are choosing to keep The emergence of technologies that tight control over their data until they can fuse physical, biological and digital 2017 PRIORITY RANK NUMBER: understand what financial benefits they elements to create solutions that, may be able to extract from it; thus, previously, were confined to the realms they are not recognising that, without of science fiction means the innovation collaboration, the benefits may be th game has irreversibly changed for negligible. the agri-food sector. Combine these solutions with a huge injection of financial In a future where change will be the only resources coming from new investors constant, the ability to identify and adopt 40 into the sector (including angel investors, emerging technologies quickly and early venture capitalists, private equity funds, will be critical to maintaining an edge in Reforming levies to and chemical and pharmaceutical premium markets. While our history of innovation demonstrates a comfort with enable multi generational companies) and the speed at which change is able to occur causes us to change, the speed and nature of change projects believe that the world is entering the in front of us requires organisations to first global agrarian revolution: the most rethink all aspects of their innovation 2016 PRIORITY RANK NUMBER: 40 significant period of change in the global processes to create a culture that thrives food system in centuries. on the challenge of uncertainty.

KPMG • 47 51 Making sure we have rapid access to the best technology in the world. With so much innovation occurring in the agri-food sector, one of the biggest challenges for many organisations, particularly smaller businesses, is keeping up with the innovations being brought to the market and identifying what is relevant to them. In previous Agendas, we have noted our belief that universities and crown research institutes should be focused increasingly on seeking out relevant technologies for the country rather than seeking to deliver all the answers 52 53 from their own research. However, the more organisations that are focused Delivering express, reliable Collaborating to capitalise on on scanning, analysing and identifying connectivity to all regions the inherent potential of data. relevant technology for their industry and stakeholders, the more likely we across the country. Numerous leaders commented on the are to find and secure access to the While the issue of connectivity did exciting opportunities in emerging data best solutions available globally. It not feature as prominently in this and Internet of Things technologies; was suggested that industry-good year’s conversations as it has done in however, they noted that turning the organisations, processors, exporters the past, the priority for fast national collected data into something useful is and business partners should all be connectivity retained its number- a significant challenge. Two key themes active contributors to the ongoing four ranking in the Agenda leaders’ around data collaboration emerged: the search for game-changing technology. survey. There has been progress need to create a platform that allows made in delivering fast connection effective sharing of data; and the speeds to more people in recent need to involve the right capabilities in years but contributors commented building algorithms, if we want them that there is still much more that can to be transformational. The suggestion be done. We must continue to work was made that a single, industry-owned to make sure that connection speeds data depository be developed with are never a barrier to the adoption the partners that contribute their data and use of the latest technologies. having rights to access and utilise all the Given the geographical challenges data in the depository. It was suggested of coverage and the associated that, if a commercial solution cannot economics of building the assets, be reached, the benefits inherent in it is likely that ongoing government data may ultimately require a regulatory investment will be required to response that results in the government support the roll-out of faster rural collecting and providing critical data infrastructure. We should not be sets. The need to incorporate detailed afraid of exploring public–private knowledge of biological systems into partnerships, if such arrangements the solutions being developed was accelerate the speed of connectivity also highlighted. This would enable in remote areas. algorithms to move beyond providing answers to single questions that are sought by individual organisations and, instead, provide more comprehensive solutions relevant to numerous organisations and all aspects of a farming system.

48 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 56 Mandating adoption of technologies with significant environmental benefits. One contributor suggested that the agri-food sector is currently some distance from being able to claim to be truly sustainable yet there are technologies that already exist that, if they were widely used, would provide a platform to enable the industry to claim to be sustainable. One example given was the use of variable-rate irrigation technologies on pivots in Canterbury. Only around 20 percent 54 55 of installations use the technology Accelerating the Incentivising rapid adoption despite full installation being estimated of new technologies through to have the potential to save 250 billion incorporation of blockchain litres of water per annum and avoid the solutions into consumer the tax system. associated nutrient leaching. Economic integrity plans. While the benefits of new innovation payback on this technology makes are often apparent, the challenges sense for most farmers before any The potential application of blockchain and uncertainty of change mean that allowance is made for the social and technologies to the agri-food sector many choose to adopt technology environmental benefits. The suggestion has come into sharp focus during slowly or not at all. As a consequence, was made that it may be necessary, the first months of 2017. Blockchain, the potential economic, social and on occasion, to mandate, through a technology developed to support environmental benefits of an innovation regulation, the use of technologies digital currencies like Bitcoin, was are never realised. Current government that have strong environmental and initially viewed predominately as a innovation incentive schemes offer economic benefits. The industry financial services tool. However, its support to businesses developing needs to support innovation that ability to track an item through a value technology solutions but provide little equips it to compete and must act chain, attaching information to it that or no support to organisations that against intransigence to ensure it supports its provenance, has meant are prepared to take on the risk of can differentiate itself in the market that many agri-food organisations being early adopters of technology. and protect credibility with the are looking at the applicability of the The suggestion was made that the domestic population. technology to their businesses. The government could provide accelerated technology would require a significant tax depreciation on innovations that uplift in data-management capability have both economic and environmental across the value chain but rapid benefits, so that companies that adopt adoption could differentiate a product an innovation within a defined period in the eyes of a consumer. The from its commercial launch (say, 18 technology would impose cost onto months) could claim a full write-off of input providers, farmers, processors the cost within the year of expenditure and exporters, but the greater for tax rather than over three, five integration between these businesses or 10 years. Such a scheme would would reshape the way that agri-food help incentivise the rapid adoption value chains work. of beneficial innovation by providing a tax subsidy to offset the financial impacts that come with changing well- established and effective processes.

KPMG • 49 57 58 Recognising the increasingly Embedding our leading nuanced conversations science practitioners into surrounding biotechnologies. corporate organisations. The rapid evolution of bioscience and Science activity in the agri-food genetic technologies was raised in many sector is still dominated by the discussions this year. It was highlighted government, which funds close that emerging technologies present to half the bill and ‘owns’ the significant opportunities to businesses majority of the delivery agencies. around the world but there remained The government has indicated that significant perception issues, particularly it would like to see companies with premium customers. Some of take on a large share of funding the diverse science caught under New for a more commercially focused Zealand’s GE categorisation is becoming sector; however, the low returns increasingly acceptable to consumers generated by many businesses make (particularly Millennials who recognise investment in innovation a variable the technology can help address both cost that can be turned on and off environmental and malnutrition issues) with performance. One suggestion and we cannot afford to ignore it. It was made was that the government suggested that the technology is also should move away from core a prerequisite to securing (or retaining) funding science delivery agencies some of the best scientific brains in and towards seconding leading the world. Concerns were expressed science practitioners into companies about the regionalisation of policy in this to increase their connection to the area, particularly as the diversity and commercial problems that need complexity of the science increases. The solutions. One contributor suggested prevailing view expressed on this theme the focus should be on transitioning was a desire to ensure each genetic to a science system that celebrates advancement is considered on its merits work that has a significant impact for rather than being subject to a blanket New Zealand rather than retaining restriction that regulates the process and one that celebrates when a funding does not make a specific assessment grant is secured for a project. of whether or not the technology would ultimately benefit New Zealand. 59 Exploring the opportunities inherent in emerging proteins We have been tracking the emergence of alternative proteins with great interest over the last year. The positioning of these products as ‘clean food’ rather than ‘synthetic food’ is a master stroke as it highlights their core attributes, which are often more sustainable than are those of traditionally grown food. While the alternative protein sector remains niche, the signs are that its growth is accelerating and it is attracting significant investment from established protein companies. Substitution will start to occur as people swap increasingly expensive animal proteins for cheaper alternative products. Any disruption creates opportunities and it is critical to New Zealand’s future that our eyes are open to what these may be for our agri-food sector. It is equally critical that we are not complacent; as noted earlier, the current state of the wool industry is a cautionary tale of what happens if you choose to put your head in the sand and try to ignore disruption.

50 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 BUSINESS SNAPSHOT

www.figured.com

Smart, simple, farm financial management software

Partnerships and collaboration Figured has therefore built strong are at the core of Figured’s value relationships with key partners, proposition. The farm financial including banks and accountants, management solution was that deliver further market created based on the idea that insights, and ultimately provide an farmers don’t just need another opportunity to scale rapidly through accounting tool, but need a becoming a trusted part of the better way to connect and work farmer’s team. “Because farmers with their key financial advisers. have immediate online access to the support and advisory services This idea inspired the “Farming of professionals, we’re seeing that Team” concept - using online farmers are engaging with their functionality to unite the whole finances, establishing budgets, team - farmers, accountants, rural and monitoring their financial bankers and farm consultants performance regularly, rather than - enabling collaboration from waiting until the end of the year, wherever they are working. when it’s too late to make any Historically, farming software has changes,” Sophie Stanley explains. been desktop based, meaning that data is siloed, and farmers, their Pushing their products to 60 accountant and their banker are market fast in response to all looking at different information. customer feedback is a focus Maintaining a sufficiently “By combining Figured and Xero, area for Figured. “With an agile agile regulatory framework to the whole farming team now has development team we get a access to the same farm financial minimum viable product to market respond to innovation. data in one system, which then with speed; we then rapidly build The speed at which technologies, becomes a single source of truth”, on products and prototyping, processes and products are being explains Figured General Manager initiating an instant feedback flow”. New Zealand, Sarah Foote. released to the world is challenging An online forum offers certified the capability of many regulators to Recently relocated from New users the opportunity to provide assess an innovation and respond Zealand to pursue significant feedback or feature requests; no with well-considered regulation on growth opportunities for the matter how big or small. Pushing a timely basis. As time frames for company in the United States, out any changes as soon as they review and appraisal extend, the ability Figured Vice President North are ready provides continuous for a company to gain a strategic America, Sophie Stanley, improvements to Figured’s users. advantage erodes, opportunities articulates that partnerships with Stanley notes that providing quick to be an early adopter are lost and a farmer’s key advisers are critical wins to users, creates confidence consumers have the choices available to the adoption of the technology. that Figured listens carefully and to them restricted. Many of our “The market is crowded, and implements what the farmers contributors highlighted the inflexible many farmers are wary of trusting prioritise and value most. approach we adopt to regulating new an IT solution. They don’t know biotechnologies as a good example of who to rely on, making the a poor regulatory framework that starts recommendation from a trusted with a presumption of unacceptability. partner crucial”. Ensuring that we have sufficiently agile agencies and rules to enable regulatory decisions to be made quickly is critical to maintaining a vibrant innovation sector. The harder it is to seek regulatory approval, the more challenging it will be to attract and retain world-class innovators.

KPMG • 51 THEME 65

Reinventing operating models to build a prosperous future

52 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 RELEVANT SURVEY RANKINGS TO THIS THEME: A number of our contributors Challenging the status quo does not mean that what came before was 2017 PRIORITY RANK NUMBER: reflected on whether or flawed or is even broken today, it just not the sector has the means that times have moved on and capability and capacity to the customers, markets and products th that we are supplying have evolved. As a be able to realise fully the consequence, there are alternative ways opportunities available to it to do things today that offer the potential to realise more value than we have been 25 in global agri-food markets. able to realise traditionally. Challenges with governance, It was apparent from some of our Evolving capital the constraints of historical conversations that some leaders see cooperative ownership as the root structures investments in stainless cause of a lack of ambition and agility steel, the availability of in the sector while others consider collective ownership by farmers of 2016 PRIORITY RANK NUMBER: 16 capital, ownership structures critical processing assets to be the and regulatory limitations greatest gift that past generations have were all identified as issues bequeathed to today’s industry. A more 2017 PRIORITY RANK NUMBER: pragmatic outlook recognises that, in a that could derail the ability to world of virtual businesses and tailored capture value. It was noted partnerships, there remains a role for producers being connected to their nd that, too often, our thinking is customers but the vehicles through anchored by the institutions which this could be achieved may be very different from the institutions of 32 and practices that we see the past. While industry leaders may be in front of us rather than emotionally attached to one side of the being more aspirational in discussion or the other, it is important Reducing debt and that they are open to exploring ideas and challenging ourselves about learning from the way that the world is enhancing cash-flow what is possible. evolving around them. Recognising what we have achieved The reality is the established institutions, 2016 PRIORITY RANK NUMBER: 25 in the past but avoiding past success regulations and protocols by which the becoming an anchor on change is critical industry operates today were never if we are to build a country with the designed for a world where meat can ability to create the prosperity necessary 2017 PRIORITY RANK NUMBER: be grown in a laboratory and where to deliver wealth, jobs and opportunities milk comes from plants rather than for all. This needs leadership from four-legged animals. If our ambition is government, companies and individuals constrained by the gravitational pull of that looks beyond self-interest to th an establishment that sees the future explore solutions that are optimal for our only through a lens that applies the circumstances today and align with our rules of today, our ability to capitalise on aspirations for the future. 44 the opportunities in front of us will be constrained. Capturing the future that industry leaders articulate to us relies on Restricting foreign our being able, respectfully, to challenge some of the industry’s ‘sacred cows’ and land investment on our confidence to experiment with new, and at times very different, ways of doing things. 2016 PRIORITY RANK NUMBER: 44

KPMG • 53 63 Breaking the ownership link with assets that do not differentiate our products. Our work in understanding what supports a premium price position in a market consistently indicates that the experience built around a product helps secure the premium. While safe, consistent processing is undoubtedly important to providing a great experience, it is the brand and story attached to a product, the packaging, the in-store presentation, and the innovation in terms of taste, texture and ease of use that are more important to the consumer than are the speed or scale at which something is produced. It is becoming apparent that the tendency of the primary sector to invest in processing assets over brands is imposing a high overhead cost on the sector, reducing agility and constraining funds available to invest in product differentiation. Alternative ownership models for production assets should be explored to support a pivot towards the consumer. This could see assets being sold and leased back from real asset investors, pooled into a pre-competitive tolling operation or spun out into stand-alone entities to 61 62 release capital on balance sheets. Exposing producers to a Adding expert advisory broad picture of the future. panels to support directors It was noticeable from our conversations to make better decisions. that the pressure for significant change The traditional governance model in the dairy industry is less intense this used in New Zealand is to have a year than it was last year. The cyclical board of directors with responsibility recovery in prices has been interpreted for the performance of a company. as a signal that everything is fixed. The Many boards seek expert advice to picture from processors is one of a large complement management insights bubble of demand growth and a smaller but this, generally, is on an ad hoc bubble of supply growth supporting basis in response to specific concerns current volume-led strategies. However, held by boards. However, this is this does not highlight the threat of changing; Landcorp has established cultured milk, the EUR12.3 billion Danone an ongoing Environmental Reference has spent acquiring the largest US plant- Group and Zespri has an Advisory based milk producer, the uncertainty Board specific to the Chinese market. created by the Trump administration’s These groups, which bring together policies or the shift into the dairy sector recognised experts in the focus areas, we observe from Coca-Cola, Pepsi and enable directors and management to pharmaceutical companies. If producers gain wide perspectives on the issues are not exposed to the global context facing the businesses. The addition for their businesses, we run the risk of such a panel to the governance of ‘group think’, where threats are structure highlights a recognition that ignored and opportunities to capture boards do not hold the answers to value missed. The agri-food sector has every issue they need to consider and, a tendency to focus on the season at in a rapidly changing world, gaining hand but there is a need to encourage insights from those much closer to credible people to be engaged to explain an issue can provide a competitive the wider, longer-term context for the advantage. The point was made that industry, through study tours, field days, many organisations could benefit from symposiums, Facebook and any other targeted advisory panels to ensure relevant channel. We need to ensure appropriate decisions are made to that we retain a balanced outlook on the benefit from strategic opportunities. future rather than seeing only what we want to see.

54 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 64 Identifying new models to support young people to go farming. The goal of farm ownership is harder to achieve today for young people with a desire to go farming as land prices have risen. In the absence of benevolent parents with the capacity to pass down the family farm, it is difficult for a young person to amass the equity needed to purchase a farm. Farm ownership has been a key factor in attracting and retaining people to the industry. The connection of an owner to their land has been a driver of productivity growth. The point was made that now is the time to think creatively about mechanisms that can be used to give more young New Zealanders the opportunity to own their own farms. Ideas suggested include tax incentives for retiring farmers to leave equity in their farms to support young farmers to buy in, government- subsidised debt linked to on-farm environmental actions and partnerships with equity investors that support young farmers to build stakes in their businesses using sweat equity, amongst other things. Mechanisms that will retain ambitious young farmers in the sector are critical to achieving a step- change in culture, so thinking needs to be directed rapidly towards an industry response to this issue. 65 Being prepared to back entrepreneurs with a global vision. New Zealand is a nation of small businesses driven by boutique entrepreneurs. Some are comfortable with the scale available to them in the domestic market while many want growth but are challenged by having to look offshore earlier in their life cycles than do companies that emerge in larger markets. While most contributors were clear that they do not like subsidies, there was much they believed the government and established international companies could do to support these entrepreneurs, including: providing landing bases for them in market, implementing tax breaks for market development expenditure and low-interest debt schemes; supporting collaborative market insight work or engagement with global experts; and, even, taking short-term equity positions in the businesses while they take their first steps offshore. The purity of our trade policies means we tend to shy away from some of the initiatives that governments around the world take to support their businesses meaningfully; the suggestion was made that we need to unleash ourselves to keep successful businesses in New Zealand.

KPMG • 55 66 67 Reaching the answer on Challenging competition foreign investment quickly. regulation that misses the It was noted that the Overseas bigger picture. Investment Office (OIO) application A number of our conversations focused process and the expectations placed on what is constraining industry on purchasers are increasingly well ambition, particularly when it comes to understood, but either the resource creating organisations with the scale to level is wrong or politics have a dominate their markets globally. One tendency to interfere as the time reason for constraint that was raised frames for decisions are just too on a number of occasions is the fear slow. Certainty is critical to attracting that the Commerce Commission might foreign capital but, in a rapidly evolving determine that a business is working market, with many opportunities too closely with a competitor. It was available to investors around the world, noted that the role of the Commission so is speed. We are kidding ourselves is only to protect domestic consumers if we believe we can take months and its myopic focus on this goal means longer than do other countries to that, ultimately, it ends up preventing reach conclusions on an investment, organisations exploring mergers that particularly when the assets being would benefit 95 percent or more of traded are often between two foreign their businesses, their stakeholders investors. Investors faced with delays and the wider community because have a world of opportunity in front of the limited risk that consolidation of them and will choose to deploy could impact pricing in domestic their capital elsewhere. We need to markets. This constrains the ability ensure that regulatory agencies, like of New Zealand-based exporters to OIO, are fully resourced to complete control their destinies more effectively their analyses quickly to ensure that in global markets: something that opportunities can be capitalised on for seems counter-intuitive when size is a the benefit of all New Zealanders. constraint on many organisations. The suggestion was made that a regulatory change is required to prevent the Commission from making domestic decisions that compromise our global competitiveness. More transactions would be explored if credit were given 68 to proposals that increase the ability to influence market prices globally. Establishing a Chief Agri- Food Advisor role within government. The government has appointed specialist commissioners and advisors on a range of policy areas, for instance, the Parliamentary Commissioner on the Environment and the Prime Minister’s Chief Science Advisor, who are able to bring specialist insight and knowledge in their specialist areas to the table to support decision-making processes. These roles are in addition to the resources and officials embedded in the relevant Ministries. It was highlighted that there is not a similar role for the agri-food sector. The suggestion was made that it is the right time to appoint a specialist agri-food advisor to the government: somebody who can provide foresighted perceptions on the evolution of markets and innovation across the sector and also help to connect the right parts of government and industry together. A nominee with mana will ensure that the opportunities and challenges facing the agri-food sector are highlighted at the highest levels of government and addressed appropriately at national, regional and local levels.

56 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 70 Evolving traditional co-operative models for the fourth industrial revolution. The future role of the cooperative in the agri- food sector has been raised during a number of our conversations, as it has been in previous years. During the last year, we have seen Silver Fern Farms evolve its cooperative structure by entering into a partnership with Shanghai Maling Aquarius, providing both capital and market access to enable the business to pursue new growth opportunities. The historical challenge with cooperatives has been in securing the capital necessary to fund significant growth opportunities and this is even more challenging when profitability is variable; this means that shareholders are focused on bringing every dollar back into their businesses. Given the current level of change, the demands for funds to invest in solutions right along the value chain is only going to grow. Cooperative leaders will need to review funding models continually to ensure cash is available to enable them to stay relevant; this could include reviewing the ownership of processing equipment, splitting processing and marketing activities, entering into partnerships or bringing in cornerstone investors. Farmer connection to the market is critical in the future and the way in which this is achieved will be an area of innovation over the coming decade. 69 Reinstating the rural affairs portfolio for better rural outcomes. The current government chose to discontinue the rural affairs portfolio when it came into office in 2008. While the rural population is diverse, people living in rural areas represent the second-largest demographic group in New Zealand. The distribution of people in rural areas makes service delivery a challenge and, as a consequence, the connection between government and citizens is weaker in rural areas than it is in urban areas. The concern was also expressed that, without a rural affairs portfolio, there is no formal lens being applied to policies being created across government to consider how they will work in rural areas and interact with regional council policy positions. The existence of a rural affairs portfolio would help to ensure that social investment policy is applied in some of the most deprived areas of the country, innovative service delivery models are developed for rural areas and government efforts to drive social and economic prosperity in rural areas are maximised.

KPMG • 57 THEME 7

Collaborating to create impact and scale

58 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 RELEVANT SURVEY RANKINGS TO THIS THEME: The most significant finding While any prediction about the future is only ever a guesstimate, it is becoming 2017 PRIORITY RANK NUMBER: from the workshop session apparent that organisations around we ran with a group of the world are evolving their business emerging primary sector models from those where they own th every stage of the value chain towards leaders in September more flexible models that see them 2015 was the importance partnering with different organisations at various steps along their value 13 that they placed on trust chains. Organisations are looking for between people and collaborators that can bring performance efficiency, greater functionality or Lift commerical organisations. They saw more scale to the table in order to collaboration trust as being necessary build stronger businesses mutually. for effective collaboration to We also observe that collaborative arrangements are progressively less 2016 PRIORITY RANK NUMBER: 12 occur and their vision of the lineal; many organisations appear sector’s future without this comfortable taking positions in networks where they have broad collaboration was fairly bleak. webs of relationships within commercial 2017 PRIORITY RANK NUMBER: Their perspectives around what ecosystems, thus creating more constituted effective collaboration were complex but infinitely more flexible th very clear; collaboration was about businesses. entering into business arrangements During our conversations, there were that expose critical parts of a business examples of organisations that have to a collaborative venture when there is come together and are collaborating 28 the potential for one plus one to equal effectively; examples included a number significantly more than two but with of the Primary Growth Partnerships no certainty of success. Their model and Primary Collaboration New Zealand, Licensing to accelerate of collaboration was very much about which is based in Shanghai. However, sharing risk with trusted partners. market access the prevailing view was that, historically, This is in stark contrast to the traditional we have not collaborated effectively view of collaboration in the agri-food and many organisations are still focused 2016 PRIORITY RANK NUMBER: 28 sector, where a company enters into a on patch protection and trying to block joint venture or partnership in relation their competitors rather than on looking to a non-core part of their operations for ways to unlock greater returns by but continues to keep the key drivers of focusing on a bigger picture. Successful 2017 PRIORITY RANK NUMBER: value under tight control. Collaborative collaboration needs leadership from initiatives rarely relate to a high-risk the top of an organisation to ensure part of a business, with the responsible alignment to its wider vision and th executive often sitting well down the purpose. organisation hierarchy. They would rarely It was also suggested that much of our attract the attention of the board and, as focus, when thinking about potential a consequence, you can often question collaborative partners, tends to be on 39 why an organisation would bother to what partners do today, rather than continue to pursue the business. on why they are doing it and how it could be done better in the future. Creating single open Collaboration will reshape global access data platform businesses; we need to recognise this and ensure that we have the skills and competency to avoid being left behind. 2016 PRIORITY RANK NUMBER: 32

KPMG • 59 73 Seeking opportunities to minimise the cost of serving consumers globally. While we believe New Zealand’s geographical location is increasingly a competitive advantage for the provenance of our products, when it comes to logistics and the cost of serving customers, there is little doubt that being a small island at the bottom of a big ocean adds to the bill. While the personal aspects of servicing customers can be a point of differentiation, much of what happens to move a product from here to China, Singapore or Los Angeles is fixed cost that is impacted by the scale of activity. The point was made that it makes sense to look collaboratively for ways to minimise the cost to serve, building on the Kotahi model that Fonterra and Silver Fern Farms set up some years ago. Removing cost from areas that do not differentiate a product in the eyes of the ultimate consumer provides more resources to be directed towards activities that are value accretive. Organisations should regularly challenge their supply chains and seek collaborative opportunities to reduce costs for activities that do not directly contribute to the consumer experience or the value generated.

71 72 Building hubs that showcase Creating a big impression New Zealand to the world. at large international The Te Hono Movement started in 2012 trade shows. with the first Stanford Bootcamp as a way It was raised during a number of of building connections and trust between conversations that New Zealand the leaders of the largest companies companies are attending and exhibiting at in the primary sector. The Movement major trade shows, particularly those held has grown significantly with the sixth in Asia, but, often, companies are taking Bootcamp group due to head to Stanford stands of their own and are struggling in July and there is no doubt that people to be noticed. The point was made that who did not know each other six years companies from other countries appear ago now do and are engaged in active to pool their investments better: building projects to lift the value the industry national pavilions and, as a consequence, contributes to the economy. A good multiplying their impact. The work done example of a project initiated through by New Zealand Winegrowers in enabling Te Hono is the Primary Collaboration smaller wineries to be part of a substantive New Zealand (PCNZ) hub in Shanghai, footprint at a show was highlighted as a which features in the case study. The successful model, although it was noted suggestion was made that the PCNZ that even these efforts are struggling to model of an industry-owned-and-led hub, secure New Zealand Trade and Enterprise which companies can use as a platform (NZTE) investment as the focus switches to build their businesses in a market to supporting companies directly. both individually and in collaboration with Attending a show involves significant cost; other New Zealand companies, should be thus, taking any advantage to maximise explored in other key growth markets like its impact makes sense. It was suggested the US, India, the Middle East and Brazil. that NZTE should focus on working with The hubs could not only provide combined organisations and industry bodies to create office space but could be developed as New Zealand zones at major shows; these showcases of New Zealand products could feature cultural displays and New and as homes for Kiwi-focused retail and Zealand cuisine to amplify the benefits the dining experiences. industry extracts from an event.

60 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 74 Co-investing to find the X-factor that makes our products unique. One of the stories that stood out during the last few months was the launch of a range of free-range milk products by Asda in the United Kingdom. On its own, this was not very notable until we read the free-range claims being made for the premium-priced milk: that the cows had access to grass 50 percent of the time. It again highlighted how we often underplay, or even ignore, the unique attributes of our products in the race to find any buyer (our lamb and green-lipped mussel sectors are noted as the classic examples). The suggestion was made that companies need to collaborate to articulate clearly the X-factor attributes of the goods they produce, whether that is in how they are produced (as with our free- range, pasture-raised milk), their nutritional attributes (as is the case with mussels or honey) or their provenance. The suggestion was made that Primary Growth Partnership investment should be prioritised towards projects where companies collaborate to identify and monetise the value inherent in their X-factors. Only when we have confidence that an X-factor will sustain a premium will organisations commit to the pivot from volume to value. 75 76 Partnering in market to Assessing the future for provide the necessary industry-good activities. scale to work with large In the 2012 Agenda, we discussed customers. industry-good activities and concluded there was a future for industry good, Big in New Zealand does not mean big particularly in intergenerational in the world or even big in the market investment and addressing market niche in which a company chooses to failures, in areas like environmental compete. While there are potentially mitigation. If the industry commits to lucrative opportunities for being niche in pivoting towards the consumer, much a niche market, the reality is that most of the research work done historically value will be created by working with by industry-good organisations with a the organisations that connect you to focus on increasing volume will be less more of the highest-value consumers. important. Research undertaken because For many of our agri-food companies, of market failure, will be performed by their minimum supply quantities of commercial organisations, if it supports customers are well above anything the their value propositions (which would company could supply alone. The meat include a strong sustainability platform), companies have supplied lamb to the and, if it doesn’t, there is a question North American market collaboratively about whether or not the research needs for years, giving them the scale to talk to be done. It was suggested that the to Walmart or Kroger, although the focus of industry good needs to shift products supplied are frozen cuts rather towards intergenerational activities than high-value fresh, chilled products. in collaboration with commercial The opportunity exists for companies organisations, to build a platform for with similar ambitions in an identified future growth. The wine sector is market to design a collaborative model demonstrating this through the Lighter that pools volumes and promotional Wines Primary Growth Partnership, resources to deliver the necessary which is developing wines collaboratively scale and product support to engage in response to lifestyle changes, and the with the large players, but still enables proposal to build an industry research each entity to realise its individual value centre in the Marlborough region. aspirations.

KPMG • 61 77 78 Seeking partners beyond the Recognising that knowledge agri-food sector to realise the is most valuable when it is inherent value in co-products. used by everybody. A clear global trend in the last The progress made by the avocado six months is the emergence of industry during the period since comprehensive co-product strategies it entered into its Primary Growth as companies become focused on Partnership (PGP) with the government ensuring that everything produced has been significant. The value of both is used effectively to support their the domestic and international markets sustainability positioning. Finding the has grown significantly, companies right corporate partners in biochemistry, are working more closely together on nanotechnology or pharmaceuticals creating value and science is being and human health is significantly applied to the industry’s biggest easier when major players sit on your challenge: the biennial bearing of fruit. doorstep as they do in the US, Europe While much has been learnt from the or Asia. While New Zealand has world- programme to date, the point was recognised science capability in these made that it has not been the learnings areas, we do not have many companies that have delivered the value but it has with sufficient scale to partner with our been the application of those learnings major agri-food sectors. Increasingly, by growers, pack houses, exporters the value of production will reside in and marketers throughout their effective utilisation of co-products so businesses that has been significant. finding partners with the right skills The avocado story is a great example and strategic alignment becomes of what happens when information is 79 really important. The suggestion was shared in an open-access manner. Too Sharing capital assets to made that companies would benefit many projects do not deliver in the way by collaboratively seeking out potential achieved by the avocado PGP as there optimise utilisation and partners; pooling volume to present is a tendency to protect intellectual provide access to emerging a larger potential opportunity to the property to such an extent that it is businesses. market may help to attract interest never actually used. Developing a from larger organisations with greater wide-access mentality around insights The agri-food sector has made a capacity to invest in innovation. and intellectual property that grows significant investment into fixed Ultimately, co-product activities may be a sector would be a step towards assets, from on-farm equipment used controlled through joint venture entities; fully realising the value inherent in annually, through processing and however, the value will be realised by much innovation (we suggest ‘wide’ storage assets constructed to meet having the right partners involved. rather than ‘open’ as, at times, it is seasonal peaks, to sporadically used appropriate for an originator to be paid labs and test kitchens. Seasonal assets for their knowledge). are subject to peaks and troughs and, as a consequence, a great deal of investment sits underemployed for much of the year. This imposes a significant overhead cost on many sectors and this ultimately impacts the returns to producers. In some cases, collaborative assets have been built; the FoodBowl is a good example of an open-access asset for food companies. Around the world, access models are evolving to optimise the use of assets as diverse as cars and hotel rooms, and clothes and tractors, and the suggestion was made that there could be significant opportunity to take cost out the sector by exploring access models. These could be as simple as leasing out a test kitchen for use by a start-up food entrepreneur on days or evenings when it is vacant, sharing tractors and farm machinery through a web platform or transforming the red meat value chain by introducing collaboratively owned toll processing.

62 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 BUSINESS SNAPSHOT

Collaboration to scale businesses in the Chinese Market.

Focusing on seeking to create their own Chinese entities. PCNZ value by collaboratively embedding enables clients to be supported in capability deeply into the Chinese building relationships with importers, market and to build understanding wholesalers and customers. It also and relationships with major offers the opportunity to not only customers is a key driver for grow relationships with Chinese Primary Collaboration New authorities and New Zealand Zealand (PCNZ). PCNZ is operating government agencies in China, but as a shared point of capability understand the market in a much to better enable the partners to deeper way that would be possible capitalise on the opportunities making a lone entry. 80 inherent in a complex One of the first employees to be market – China. recruited, Kevin, met with the Providing public support only The idea for PCNZ was hatched in shareholders and set up the operating for collaborative projects. 2012, at the first Te Hono Bootcamp model in Shanghai, which was at Stanford University. The triggering structured to ensure full compliance in It was noted that it is too common in moment was when the cohort of China and New Zealand and manage New Zealand to see the government leaders realised that they recognised the risks of doing business in China. as the solution to every problem the vast opportunity in China and the Kevin explains he leads a team of 12 and a source of financial support to level of that knowledge required to be people on the ground in Shanghai, underwrite organisations undertaking successful in China. A group of leaders supporting their client’s brands. day-to-day business activities. challenged themselves to address the Each client has a Market Manager Organisations need to take ownership issue. The PCNZ model was created that provides marketing and sales of their challenges and focus on to provide in market services, based activities, relationship management, turning them into opportunities; the on getting maximum knowledge and events and brand support. The model government should be seen as an insights through collaborating. provides the opportunity for the team enabler rather than a fixer. Given the “We needed to close the gap between to have regular catch-ups to discuss size of many of the opportunities ahead, the limited knowledge companies their collective opportunities across all it was suggested that government had about doing business in China their clients in market and identifying enablement and co-investment and assumptions being made in New where we can add value by cross (regardless of the agency that manages Zealand and what actually happens pollinating ideas. By working together the programme) should be restricted to behind the great wall”, comments on opportunities and introductions, organisations working collaboratively Kevin Parish, the General Manager clients effectively get much wider to create success. Support should be of PCNZ. The original partners to the brand reach than they would having a targeted only towards organisations initiative, Sealord, Silver Fern Farms, single person in the market. working collectively to enhance our Mr Apple and Synlait, (who were “We have created a model which we natural environment, invest in on-the- joined by Kono and Villa Maria and two can lift and move to other markets but ground capability in market, innovate further apple exporters, Bostock New for now the focus is China. We are with new and novel products and Zealand and Kiwi Crunch/Freshmax), open to taking on new clients outside experiences, and engage substantively initially created PCNZ as a holding of the food and beverage sector and with the community. The government company in New Zealand. “We knew are actively looking for New Zealand should focus on enabling those driving that to really make things happen we clients that need ‘boots on the ground’ towards a more prosperous future for couldn’t do it individually. If we wanted in China to be successful. The most the country rather than those looking to succeed it had to be supported by recent company to start working with for handouts from the public purse. collaboration and be industry led”. PCNZ is King Salmon. The structure of the entity was Collaboration creating individual designed to allow clients to enter the success is crucial to the model. PCNZ collaboration and then have an option highlights the capability to achieve to exit when they reached scale more through collaboration. and potentially wanted to establish

KPMG • 63 THEME 8

Connecting deeply with customers

64 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 RELEVANT SURVEY RANKINGS TO THIS THEME: There is a simple While a pivot towards the consumer will be uncomfortable for some producers, 2017 PRIORITY RANK NUMBER: unavoidable truth: no as they realise that they are no longer customers means that there the reason the business exists, the is no business. However, fundamentals are quite simple; without rd focusing on the consumer there will historically, we have placed not be sufficient profit to sustain the majority of our focus on businesses indefinitely. To meet the environmental and water standards the 3 maximising production. community is seeking to impose, there has to be profit to fund the necessary Our customer relationships have investment in innovation, technology Food safety been transactional, price driven and and good farming practice. Without strategic importance often conducted with an intermediary profit, the licence to operate will not be rather than the retailer or the ultimate maintained, the operation of businesses consumer. As a consequence, returns will be constrained and the future will have varied depending on who else 2016 PRIORITY RANK NUMBER: 2 be bleak. has similar product in the market at the same time. Sometimes weather, The good news is that it was clear from demand, disease and luck have our discussions that many organisations 2017 PRIORITY RANK NUMBER: combined in our favour to deliver have started their journeys towards premium returns but, most of the time, becoming customer-centric food or fibre they have delivered marginal returns. companies. While the level of maturity th Every now and then they have made and sophistication varies significantly, life uncomfortable and left businesses the important thing is that they have reliant on the banks to ensure their recognised that their understanding survival. of and relationships with the ultimate consumers of their products are central 10 For many organisations, this picture to their futures. It was not surprising remains all too familiar. They continue that much conversation centred on to focus on maximising production and Deliver market signals actions organisations can take to build then on starting to look for customers to stronger relationships with customers to producers buy what they have produced. However, and value chain partners. this is changing as organisations start to pivot from commodity to premium, 2016 PRIORITY RANK NUMBER: 3 from volume to value and from price to attributes. The key to this pivot is changing organisational culture to put the consumer of the food, fibre, 2017 PRIORITY RANK NUMBER: timber or beverage product that an organisation produces at the centre of everything they do. It also means that th there is a need to articulate clearly the role of the farmer, grower or fisherman, who, to date, has been at the core of the business model and had the world 20 revolving around them.

Food solutions for the dominant demographs

2016 PRIORITY RANK NUMBER: 11

KPMG • 65 83 Shifting relationships with customers and consumers into partnerships In preparing past Agendas, there has been discussion around the key role that good relationships play in cultivating profitable businesses; this is something that many have suggested New Zealanders are comfortable doing. The conversation this year evolved from the importance of relationship to the importance of partnership. A partnership is built on trust, weathers the tough times and is strengthened by open, frank communication. It is not possible to develop partnerships with every customer so organisations need to focus on those entities which have the greatest potential to deliver two-way value. The key to selecting potential partners is taking time, doing due diligence and not accepting the first offer that comes through the door. We need programmes that give leaders the confidence to pause, analyse and respond in ways that enhance their business strategies. 81 82 Understanding consumers Creating products that will once for the benefit of all. be tomorrow’s fashions. As Millennial consumers increasingly Food, natural fibre clothing, beverages eat their values, driven by a growing and, to a lesser extent, timber consciousness of inequality, the construction systems all come in or need to understand the product traits out of fashion over time. It is easy for that inspire or prevent a purchase an organisation or a region, when it is more important than ever. With has enjoyed sustained success with a a few exceptions, companies work blockbuster (Marlborough Sauvignon independently to collect similar Blanc is a good example), to become insights on identical customers complacent and fail to recognise in the same markets, resulting in that fashion is shifting in a different duplicated spend and shallow insights. direction. The best time to innovate is Organisations should collaborate to on the back of success but it is also create a Consumer Insights Centre the most difficult time to self-disrupt of Excellence, pooling spending to with a new product. The wine industry secure deeper pre-competitive insights. benefits from naturally innovative The centre would be open access so winemakers who love to experiment organisations that do not invest can join with different grapes and wine styles projects of interest on a commercial in a search for the next blockbuster. basis. MPI’s Economic Intelligence Unit All sectors need to be alert to is doing similar work, although it was changing fashions and to seek insights suggested that the natural home for that will enable them to deliver this is outside of government as part of products to the market that will be the Centre of Excellence: in particular, tomorrow’s fashions. to enable recruiting of experienced commercial people, who are unlikely to want to work for the New Zealand government.

66 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 84 Resetting how we do free trade. Trade policy was a key topic of conversation this year. Concerns were expressed that our traditional approach to free trade will not work in a world that doesn’t consider unfettered access to be desirable. The discussions were focused on what we need to do alongside the free trade agreement to ensure that its benefits filter down to provide wider community benefits. We need to continue to seek free trade agreements, with a focus on securing access for higher-value products and developing protocols that enable more rapid resolution of non-tariff barrier issues. However, initiatives to support inclusive growth benefiting the wider community, particularly in regional agricultural areas, need to be part of our trade strategy. These could include such things as technology transfer, training and educational activities, people exchanges, infrastructure development and promotion of fair trade.

85 86 Ensuring we consistently Recruiting fit-for-purpose present a professional edge sales representation. to the market. We have often been told that the best There are elements of the ‘she’ll be sales ambassadors for New Zealand right, No. 8 wire’ culture that are products are the farmers and growers very appealing to many consumers that produce them. While every effort (it helps make our products cool) but should be made to take producers into we need to be careful that our laid- market regularly to meet consumers back culture does not leave people and see their products being used, the questioning the professionalism or reality is that they also have businesses quality of what we do. We need to to run at home. It is critical that ensure that presentation to the market careful thought is given to the sales is professional and tailored to the representatives that an organisation traits that are most important to target deploys in a market as these can consumers in a market. The days of impact brand perception and pricing. ‘doing it the same way everywhere’ The case study illustrates the approach are long gone as are those of relying Fonterra Foodservice is using in China, on consumers being prepared to look which employs chefs to sell to chefs; through a lack of polish because of they speak the same language and the quality of the product. Premium can demonstrate practically how to consumers want products that optimise the products. Organisations enhance their lifestyle and the way need to challenge themselves to ensure in which they are perceived by other they are having conversations in the people. Product solutions and their right way with the right people to lock presentation to the market need to be themselves into a customer’s business designed to exceed the expectations or a consumer’s diet. of consumers rather than celebrate their New Zealand origins.

KPMG • 67 87 88 Optimising involvement Delivering quality 365 days along the value chain. a year. In the last Agenda, we highlighted the Building a brand that makes a product gap between the agri-food sector’s become a recurring purchase can take export receipts (around $38 billion) years to achieve and cost significant and the estimated retail value of these dollars for a single market. Every day products when they are billed to a product is not on sale, the ability to consumers (more than $250 billion). generate a return on that investment Strategies to capture more of the value is lost, brand recognition falls and, grown were discussed by a number of most galling, competitor products contributors. The knee-jerk response may benefit from the investment in is to insource logistics, representation category development. The effective and distribution to internalise third-party way to address this is by making sure margins. It was noted that such actions the product is available 365 days a year. often represent a false economy unless This presents challenges to seasonal an organisation has the connections and producers who cannot harvest all year in-market assets to be able to operate round. There are solutions available more effectively than a third party can. such as global supply, where tightly Focus should be directed towards being controlled quality standards are applied involved in value chain interactions that to international growers, enabling a create value, rather than towards trying product grown within a system rather to own the whole supply chain. There than a country to be sold all year round is no one-size-fits-all solution to value (Zespri uses this model, selling Zespri chain configuration; solutions vary by Kiwifruit rather than New Zealand market. As a consequence, there are no Kiwifruit). The key to an effective global shortcuts to undertaking the detailed supply model is the ability to ensure analysis to identify the right solution for consistent quality and experience a specific opportunity. regardless of the source of the product; this is easier said than done.

89 Listening and responding to insights from social media. Any organisation selling a product to consumers anywhere in the world can benefit from listening to the feedback available from social media to enhance and target their marketing strategy. Technology is available which can scan tens of millions of social media posts and identify what is being said about your product, your competitors, fashion shifts and emerging products, and it is increasingly easy and cheap to access. Social media provides raw and direct feedback and failing to listen to it will put any organisation at a significant competitive disadvantage. Even not hearing anything about your product is a signal that consumers are ambivalent towards it or the approach used to take it to market has missed the mark. With the availability of instantaneous feedback, the organisations that will prosper are those that are able to reshape their processes to act on the information available to them.

68 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 BUSINESS SNAPSHOT

www.fonterra.com

Fonterra’s foodservice market

As consumer demand for high In central Shanghai, a gastronomic quality, nutritious, great tasting evolution is taking place. Chefs food surges, foodservice are experimenting with exotic providers are having to become ingredients supplied from New increasingly creative to meet Zealand, changing the way dairy these expectations. It is no is incorporated into popular and longer enough to sell a product, traditional dishes. By recruiting customers are looking to be and working with Chinese chefs, educated on how to use it. Fonterra is able to give chefs the They want to understand the confidence to experiment with provenance; where it comes dairy. The Fonterra team provide from, who grew it and if it is mentoring and support where the socially and ethically sourced. chef needs it and are there to guide when a trial does not go Working face-to-face in the kitchen completely to plan. directly with the customers who purchase their products, the Mr Watson notes the “increasingly Anchor Food Professionals teams urbanised middle class in China around the world are ensuring is adding selected high quality New Zealand dairy products are Western foods to their diet”, but being used optimally in restaurants. they are seeking out high quality, 90 Grant Watson, Director Global naturally sourced, trusted products. Foodservice explains how With an emphasis on safety and Offering a larder rather than “throughout our end-to-end dairy quality through to the point of selling a product. value chain, our Fonterra Quality service, Fonterra’s end-to-end System makes sure that wherever value chain delivers on these Consumers rarely buy a single product; we are operating in the world, expectations. they buy a meal, the ingredients to we have a clear, consistent He attributes Fonterra’s success make a meal or a basket of products framework to deliver quality as fundamentally being based on for making a week’s worth of meals. A products and services” lack of connectedness across the agri- having the right people in market. food sector means the opportunity is The learnings Fonterra’s team “We have invested in local teams being missed to present the consumer collect from being immersed in their that unite chefs, channel experts with a larder of New Zealand food customers’ businesses are driving and sales professionals. With and beverage products rather than innovation across the co-operative dedicated centres developing a series of unconnected products. to tailor solutions with the end industry leading technologies and Focusing on how products can be used consumer in mind. “Using industry products we are delivering solutions together offers the potential to pool insights paired with world leading designed for our customers.” marketing budgets to amplify their research, the Foodservice team impact, and encourages collaborative endlessly create high functioning, innovation programmes and investment fit-for-purpose dairy ingredients” in technology platforms. Creating an and through collaboration are online market place in which to sell a educating those at the heart of wide range of New Zealand products the kitchen. presents significant opportunities Operating in 50 countries, while as more consumers shift to online focussing on 20 markets, China is purchasing. The market place, call it the leading the growth in Fonterra’s Farmer’s Larder, would better enable foodservice business. By executing the story and provenance of products smarter, more strategic moves, their to be articulated and for combinations goal of $5 billion in sales by 2023 of products to be presented in curated looks likely to be achieved ahead forms to consumers. of schedule.

KPMG • 69 THEME 9

Learning from the world

70 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 RELEVANT SURVEY RANKINGS TO THIS THEME: We need to be realistic. the world. To achieve this, we have no choice but to be connected and open to 2017 PRIORITY RANK NUMBER: New Zealand is a very small learning from anywhere at any time. country a long way from the We still hear people talking about the world's major population tyranny of distance and the physical th challenges associated with doing centres. Most people in the business from New Zealand, as if they world know little or nothing have never heard of the internet or jet 5 about New Zealand. Even planes. They highlight the challenges of working with people from countries if the number of visitors with different languages, cultures and Innovate with continues to grow at the business practices. They appear to be seeking reasons to dedicate themselves customers current annual growth rate to being world famous in New Zealand of just under 9 percent per rather than to building businesses founded on an aspiration to be truly 2016 PRIORITY RANK NUMBER: 6 annum, it will take until 2032 world famous. for just 1 percent of the Thankfully, the majority of contributors current global population to to the Agenda recognise the importance 2017 PRIORITY RANK NUMBER: visit New Zealand (assuming of being globally connected and the opportunities that this delivers to create every visitor makes only one value. They acknowledge the ease th trip here). It is reasonable with which this can be achieved today, thanks to digital connectivity and the to assume that, for at least proliferation of travel options available to 27 the next decade, 99 percent cities around the world. of the global population will It was highlighted that there are never make the journey organisations in the agri-food sector Sourcing and utilising that are just a little bit arrogant. They are here. As a consequence, confident they have little to learn from global innovation their contact with New the world to assist them in creating more value from the products they grow or Zealanders and the products sell. Often their confidence is linked to 2016 PRIORITY RANK NUMBER: 22 we grow will come from the efficiency of their processing assets: perhaps the largest milk powder drier, us as we reach out to them the biggest fishing vessel or the fastest killing chains. 2017 PRIORITY RANK NUMBER: physically or digitally. Such confidence is often a false We have talked about the 1 percent:99 confidence as efficient processing percent conundrum a great deal over assets do not differentiate our products th the last year. This is the idea that, given in the minds of consumers. The reality is the financial resources and intellectual we create value by delivering standout capacity available to New Zealand-based solutions to consumers; it is not the organisations, we can never expect to processing asset that makes a product 28 come up with more than 1 percent of stand out but the brand, innovation, all the good ideas generated globally people and tailoring put into the product. (and even achieving this would see us These solutions can be developed only if Licensing to accelerate batting well above the global average for we take the time to listen and learn from market access innovation per capita). To succeed and, the market. more importantly, stand out in the world, we need access to the other 99 percent 2016 PRIORITY RANK NUMBER: 28 of good ideas that are generated across

KPMG • 71 91 92 93 Using the world to help Attracting the world’s most Moving in the right solve our most important innovative companies to circles globally. problems. New Zealand. While we don’t accept that the tyranny It was Albert Einstein who suggested There is no shortage of good ideas of distance is a valid argument for it is very hard to solve a problem using generated in New Zealand; the challenge inactivity, we do recognise that our the same kind of thinking that created we face is in providing pathways for distance from the rest of the world does it. The implication is that exposing those ideas to be developed into not mean that, as a community, we may an issue to a broader range of commercialisable products and investable not sense disruption emerging in the left perspectives is more likely to generate businesses. It was highlighted by a or right field as quickly as would people a wider variety of possible solutions. number of contributors that a key pathway who live in regions like North America, Historically, we have had a tendency for ideas to find a commercial pathway Europe or Asia. At best, this means that to keep our problems to ourselves; around the world is the availability we can, at times, be too complacent however, globally, more organisations of corporate R&D functions, which about the security of our current markets are seeking to leverage the power are constantly looking for early-stage and customers while, at worst, we of the crowd in seeking potential opportunities that could enhance their miss a shift in our markets that leaves solutions to the biggest challenges that market offerings. The suggestion was us irrelevant. As a consequence, it is they face. It was suggested that the made that the government, universities critical that we work extremely hard industry should consider developing and crown research institutes should to keep our eyes open and ears to the a collaborative laboratory initiative initiate an active programme to attract ground to ensure we sense the seeds involving people from New Zealand global agri-food companies to locate of disruption as early as possible. This and every country with which we trade some or all of their R&D capability in New means we need to invest heavily in to facilitate crowd-sourcing solutions Zealand. This may include offering the moving people offshore and attending to our most significant challenges. companies and their staff some financial major industry events, building networks Recognising that literally working with assistance for relocation, tax incentives and sharing intelligence. We also need the world is likely to generate better for the costs they incur (similar to the to ensure that we bring thought leaders solutions could be a game changer for arrangements currently offered to movie to New Zealand and that their messages New Zealand business. producers) and access to the capability are heard widely. While the obligation inherent in our existing institutions. Such a to make these investments falls on policy would lift the size of the innovation individual organisations to protect their sector, grow opportunities for ideas to be businesses, initiatives like Te Hono offer commercialised and position New Zealand the opportunity for costs to be shared as a globally recognised centre of research and the impact scaled. excellence in agri-food.

72 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 94 Embracing vulnerability. Most people who consume the products that we supply to the world are from different cultures and backgrounds from those of our industry leaders. The point was made that the only way leaders can learn deeply about their consumers is by truly exposing themselves to vulnerability and going to live in somebody’s house for a period of time to listen, watch and learn from them. Only by walking away from their day-to-day support networks, the direct reports and communications people can senior leaders expose themselves to unencumbered feedback from their consumers. This can be confronting but, ultimately, should assist in shaping key strategic business initiatives. Executives should seek out opportunities to disconnect from their routines, immerse themselves into their markets on a regular basis and embrace the resulting vulnerability.

95 Providing stepping stones into international markets. While there are relatively few companies in the agri-food sector that have set up networks of global offices, there are many companies which have offshore shareholders and the New Zealand government has on-the-ground representation in around 50 countries. The suggestion was made that there is an opportunity for government and industry to work together to provide landing pads for New Zealand companies looking to enter into new markets, thus expanding on the services already offered by NZTE and its Beachheads programme. Having a desk, practical local knowledge and some warm introductions would enable companies to assess opportunities in markets more quickly and determine whether or not they are worthy of further investment. It would also provide the opportunity to explore whether or not there is the potential to collaborate with other New Zealand companies to present a wider product offering in a particular market.

KPMG • 73 96 97 Creating the world’s largest Mentoring for collaborative agri-food commercial success. solutions fund. It is noticeable that a number of Being on the leading edge of innovation contributors recall the days of the New will contribute to securing a more Zealand Dairy Board with significant prosperous future for New Zealand. fondness: before it was integrated into As we will never have all the game- Fonterra. They recall the opportunities changing ideas, there is a need for a they had to work in international markets, mechanism to secure access to the often leading sizeable businesses when world’s most innovative solutions and they were relatively young; they recall organisations at an early stage in each the networks they built and remember solution’s life cycle. Globally, many what they learned from the previous large companies are creating corporate generation of industry leaders. The venturing entities to enable them to take mentoring they received helped shape equity positions in early-stage solution their careers and the leadership styles companies; however, many New they practise today. Although we no Zealand companies are too small to have longer have the Dairy Board, we still have their own fund and, as a consequence, the need for mentoring and supporting are not exposing themselves to a broad emerging leaders to build the skills and spectrum of early-stage innovation. We understanding of international business believe that New Zealand organisations, that are necessary if they are to be together with the government and some successful into the future. The industry of its sovereign investment vehicles, needs current leaders to be prepared to should explore setting up a collaborative give up small amounts of their time to act investment fund to secure access to as mentors and pass on their experience. relevant emerging agri-food technology. The suggestion was made that A fund of $1 billion targeted at some of organisations could collaborate to create the most innovative agri-food start-ups an industry-wide international business globally could provide our organisations mentoring programme, where leaders with access to solutions that change the share insights and act as sounding boards game for them, their suppliers and the for emerging leaders in their organisations wider New Zealand community. and others. 98 Leading the shift towards a low-carbon economy. Regardless of the posturing from various politicians around the world, our observations suggest that most organisations recognise that doing what they can to mitigate their impact on the environment is just good business. The reality is that many New Zealand organisations have been reticent about taking tangible actions to pivot their businesses towards low-carbon opportunities. Increasingly, customers are looking at the actions that companies are taking to transform their businesses when they are determining whom they choose to deal with. The agri- food sector needs to step up and take more of a lead in New Zealand’s transition to a low-carbon economy. This is not about arguing that food miles claims are empirically wrong; it is about identifying and deploying low-carbon solutions to all aspects of the business. Ultimately, low-carbon businesses will be the businesses that prosper and it makes no sense to fall further behind.

74 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 100 Being brave enough to make ourselves truly memorable. The world’s most valuable companies ‘Memorable’ is defined as “easily generally own some of the most remembered… because of being well-known brands rather than the special or unusual”; the challenge most expensive tangible fixed assets. for the whole industry is to lift its Historically, the majority of New game so that it is both special and Zealand organisations have been unusual. We should never forget Oscar comfortable investing in stainless Wilde’s quip: “there is only one thing steel while minimising spend on their in life worse than being talked about, brand and the associated experiences. and that is not being talked about”. (Zespri is the obvious exception to Let’s be brave, stand out and ensure this, where the company’s focus the world is talking about our food, from establishment was maximising beverage, fibre and timber products. the value from kiwifruit intellectual property and the associated brand.) Spending on intangibles like brand, innovation, consumer experience and people comes with bigger risks than does buying new equipment but has greater potential upsides. 99 Recognising that we might do better taking on the world with the Australians. We will never be able to feed the world on our own yet, at times, it feels as though we are more comfortable as the ‘Kiwi battlers’ (celebrating the David-and-Goliath image of little New Zealand fighting our battles alone from the bottom of the South Pacific) than we are being viewed as a valued and professional partner to the purveyors of the finest-quality food to world’s most affluent consumers. Given we are such a small cog in the global food system, we need to work with other organisations to make an impact in a crowded, noisy market. The suggestion was made that our first step should be building stronger relationships with the Australian primary sector. Both countries are net food exporters and both are targeting premium consumers, often with compatible product offerings. There is more in common between the countries than there are issues that divide us and the global market has so many opportunities; we need to move beyond our battler mentality and be open to commercial partnerships with the Australians.

KPMG • 75 THEME 10

New Zealand Food Sharing

Just tried a mixed New Zealand Kiwifruit smoothie in a Tokyo cafe! Yum!

Storytelling in a multi- channel world

76 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 RELEVANT SURVEY RANKINGS TO THIS THEME: When we googled ‘what The simple reality is that, with the exception of their drama content (and 2017 PRIORITY RANK NUMBER: makes a good story?’, the this is not always the sort of drama we first image that came up want to profile – biosecurity incursions, was an infographic that animal welfare failures, flooding, food th safety scares), most of the stories being identified seven traits of a told by or about the agri-food sector fall really good story: trust in well short of the threshold of really good stories. Consequently, the majority don’t 8 the teller, drama, relatability, attract any attention from the wider immersion, simplicity, community (except for those with a good dose of unfortunate drama). Increasing rural / urban agency (the ability to work A really good story is not enough on its understanding out what happens) and own to earn the attention of the wider familiarity. Seeing it laid community. The story needs to bring together relatability, immersion and 2016 PRIORITY RANK NUMBER: 23 out on one simple page familiarity to give it a strong emotional highlighted an issue that appeal. The stories that receive traction was discussed during many today are those that appeal to the heart 2017 PRIORITY RANK NUMBER: in favour of the mind. Just look at The of our conversations this New Zealand Herald almost any day; year: the sector’s inability the headline will not be about monetary policy and interest rates but will feature th to construct and tell really young people struggling to buy a house good stories to the wider or the latest million-dollar suburb. Both approaches tell fundamentally the same 29 community despite having story but one sells newspapers and some deep and very other is read by economists (and there engaging stories to tell. are not too many of them around). Engaging with Even if you have a really good story communities If you think about it, in the terms with a strong emotional connection, suggested above, the trust in the teller there is still the challenge of achieving is missing; there is no shortage of cut-through in today’s disrupted media 2016 PRIORITY RANK NUMBER: 39 drama but there is a lack of relatability market. It is not enough to have your as more people in the community story placed in the newspaper or even to become disconnected from the land. secure air time on the national news as The consequence of this disconnection most people will probably not be reading 2017 PRIORITY RANK NUMBER: is that the stories told by the agri-food the mainstream press or watching sector don’t immerse people; very often, prime-time television. The story needs to they utilise language and arguments the work for people consuming information th audience don’t want to take the time on a smart-phone and through social to understand. The implication of this media in bite-sized chunks, and be EQUAL communication style means that the compelling enough that they will share stories are not simple, it is not easy it. The goal for the sector has to become 37 for the audience to work out creating viral content that educates, what is actually happening (let alone entertains and engages the community what might happen) and the stories and the world about the really good Practical steps to are in no way comfortable for or stories that are contributing to the familiar to most people. minimise food waste prosperity of our country every day.

2016 PRIORITY RANK NUMBER: 38

KPMG • 77 103 Focusing on winning the hearts rather than the minds. Uncertainty surrounding the values of many primary sector organisations means the wider community does not believe the claims made about the contribution they make to the economy. The industry is frustrated because many widely held perceptions are not always fair but, as noted in previous Agendas, perception becomes more important than reality as, ultimately, it shapes government policy. Historically, the industry has focused on trying to win the minds of the community using logic and data. The observation was made that the focus should be on emotionally connecting with and winning the heart of each member of the community. The implications of this are significant and things that are perceived to be broken (even if the data suggests that they are not) need to be fixed. The industry needs to deliver on the pledges that it makes to do things and tell people when they are done. At the same time, the industry needs to make progress on addressing the root causes of the issues it faces, even if these don’t have an immediate impact on community perception, because, over time, these actions will build trust and deliver results.

101 102 Encouraging every farmer Raising the sophistication to tell their story through of the industry’s public social media. face to the world. A clear message from many of our A number of our contributors conversations was that absolutely suggested that the industry needs everybody engaged in the industry has to be smarter in all aspects of its an important role to play in changing communication to the world and could the perceptions the wider community benefit from some central coordination. holds of the agri-food sector. If every Currently, most organisations in the farmer, grower, winemaker, fisherman, agri-food sector do their own things processing plant worker, rural banker, when it comes to communication, marketer and anybody else that makes whereas the challenges often come in their living from the sector took to a highly coordinated manner; the result Facebook, Twitter, Instagram or LinkedIn is that the industry looks confused and shared stories and videos about while the challenger appears credible the work they do, the contribution and consistent. Coordinating messages that it makes to their family, their and responses would help to ensure community, their country and people that there is a positive and proactive around the world, it would help people communication strategy in place. An to understand that the agri-food sector umbrella messaging entity would assist is not made up of faceless entities but in delivering such a strategy. Such an of hundreds of thousands of Kiwis who organisation could also arrange industry want to do the best for their land, their forums to plan media engagements, children and family, and the country. provide training and work with media It would put real faces on the primary organisations (both domestic and sector in the minds of the urban international) to understand better the community and give the opportunity for types of stories and content that will rural and urban people to communicate appeal most to their specific audience directly with each other. demographics.

78 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 104 Avoiding being overly defensive when under challenge from activist organisations. The industry regularly comes under challenge from organisations that focus on addressing a single issue. From our conversations, it is clear that many leaders do not believe that they receive a fair hearing when trying to respond to many of these challenges. This has given rise to a siege mentality. The point was made that some activists are so passionate about their causes that they see no role for a balanced conversation; they consider any data that is presented to respond to their views as little more than ‘alternative facts’. Ensuring that the response to claims is balanced and respectful is critical in order to avoid inflaming difficult situations. If the facts presented are wrong, correct information should be offered but, if any of the claims are valid, these must be acknowledged and detail provided on what is being done to enhance long- term performance. 105 Securing air time on mainstream television for realistic stories. Reality television dominates programming schedules across the world; it is suggested that many people enjoy watching the shows as they are able to build empathy with the cast over the course of a season. Country Calendar has done a great job of attracting an audience in a prime-time slot over the decades, although the point has been made that the farms being featured recently have, increasingly, been operating outside of mainstream farming practices. Country Calendar attracts a mature demographic but does not necessarily appeal to younger people who are looking for sharper, more edgy content. Shows like Deadliest Catch, produced by the Discovery Channel on the Alaskan fisheries, appeal to younger audiences as they illustrate a more realistic and exciting view of how food is produced. The industry needs to support the development of content that tells stories in a compelling way, enables the audience to build empathy with the cast and better understand the highs and lows of delivering premium food products to the world’s most affluent consumers.

KPMG • 79 106 107 Helping the community Highlighting the uniqueness to respond to new of our foods with technologies. geographical indicators. The point was made that, as new Communities in Europe understand technology emerges, its disruptive what farmers and growers are potential challenges many people, with doing in their regions because many laughing at it, trying to regulate the products that they grow have it or desperately trying to ignore it to been given the legal protection of begin with. This will not be an option geographical indication. A whole for the primary sector as it faces up to region benefits from higher prices the global agrarian revolution. As we for its products, higher land values have highlighted on many occasions, and a global reputation that attracts the industry is facing an extended tourists and business to the region. period of significant technology-driven The government is in the process of disruption as everything from what a providing Marlborough Sauvignon farm looks like, through the products Blanc with geographical protection grown, to how that food is processed to support its global reputation as a and distributed to consumers changes. unique, premium product. International Companies and farmers will need to experience suggests that helping the learn to handle technological change Marlborough community to understand to survive. The change-management that the region really does produce capabilities developed to cope with something unique will strengthen technological disruption will be industry/community connectivity. The transferable to the wider community. suggestion was made that we should Telling stories about how being open to seek to secure more geographical technology can deliver increased value, protections for our products: to provide better environmental outcomes and some level of legal protection but also safer working environments will to help local communities to understand assist in breaking down natural that their regions are providing unique, resistance to change. premium food products to the world.

108 Accelerating the pivot towards food by renaming the Ministry. The point was made by a number of contributors that the wider community does not really understand what ‘primary industries’ actually are. While some connect the term to farming, forestry and fisheries, many will think of oil extraction and mining. Few will connect it to the sustainable production of food and nutrition but it is important that this connection becomes more apparent in the minds of the majority of the population The suggestion was made that the Ministry for Primary Industries needs a name change to something that will resonate with the wider community; one name suggested was the Ministry for Food. While it is recognised that the name needs to be appropriate to the competent authority, many believe we could find a more compelling name than the one that we currently have.

80 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 110 Making the story real through immersive experiences. While farm visits provide the opportunity for a visitor to gain a deep understanding of what happens on a single farm, they do not provide a full perspective on the breadth and complexity of the agri-food sector. The suggestion was made that we should explore holding events that make it easy for the wider community to engage in immersive ways with the full breadth of the agri-food sector to obtain a comprehensive understanding of what is done and how it is done. The recent success of the New Zealand AgriFood Investment Week in Palmerston North (which incorporated the New Zealand Rural Games) demonstrated that there is potential in combining events to boost their profile and gain greater engagement with the wider community. The suggestion was made that the industry should host a series of ‘agri- food in the city’ events in major centres over the course of a year, perhaps around the times when established major events are held, to engage more effectively with New Zealanders where they live and play.

109 Supporting farmers who are prepared to open their farms to the community. For residents of Auckland, it is increasingly difficult to find an opportunity to visit a farm and see what really happens on a well-run commercially operated farm. Federated Farmers and some of its members are to be commended for the Farm Open Day programme that they run but the view was expressed that the industry has to do much more to create more opportunities for members of the wider community to visit farms. Having visitors on farms not only helps them understand more about how food is grown, it also helps the farmer to understand the perspectives of the urban community better through the questions they ask and what they are interested in seeing. The wider industry should be supporting farmers who are prepared to open their properties in this way by providing manpower and money to enable them to present safe, well- organised events to the community.

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82 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 Contributors

We have again received extensive Alan Pollard Hayley Moynihan Mike Petersen Alexandra Allan Helen Gear Monique Fiso commentary and insights from Andrew Hill Hilton Collier Murray Gribben our contributors in preparing this Andrew Hoggard Hinerangi Edwards Murray King edition of the Agenda. In total our Andrew Priest Hinerangi Raumati Murray Taggart Andy Macfarlane Howie Gardner Nadine Tunley contributors provided us with over Angus Haslett Ian Boyd Hon. Nathan Guy 250 ideas from which we have Anna Campbell Ian Carter Nick Pyke Arthur Graves Jacqueline Rowarth Olivia Egerton created this Recipe for Action. Barbara Kuriger James Egan Paul Morgan Barry Brook James Ryan Penelope England We trust that we have again Ben Russell James Wallacee Penny Mudford created a useful narrative to Bob Major Jarred Mair Peter Clark Brendan Hoare Jason Te Brake Peter Landon-Lane accelerate the pivot from Caroline Robertson Jen Scoular Peter Nation producer to consumer, from Charles Eason Joanne Finer Peter Reidie volume to value. The potential for Claire Massey John Loughlin Philip Gregan Collier Isaacs John Brackenridge Richard Green New Zealand Agri-Food to grow Colm Hamrogue Jon Tanner Richard Kidd its contribution to our country Craig Greenlees Joseph Scott-Jones Richard Wyeth is significant – every leader we Craig Young Julian Raine Rob Hewett Damien O'Connor Justine Gilliland Rosstan Mazey talked to has a desire to realise Darryn Pegram Kevin Parish Sam Buckle this potential. Dacey Balle Kevin Wilcox Sam Lewis Daryl Johnson Kimberly Crewther Sam Mcivor We would like to thank each David Birkett Lain Jager Sam Robinson David Hemara Lee-Ann Marsh Sarah Foote and every one of our contributors Dawn Sangster Linda Sissons Scott Hanson who gave their time and their Derek Crombie Martyn Dunne Sophie Stanley Dianne Kidd Malcolm Nitschke Sonya Matthews opinions so freely – without your Don Mcfarlane Mark Dewdney Stuart Wright input we would be unable to Duncan Coull Mark Harris Terry Copeland produce the Agenda. Eugenie Sage Mark Ross Tom Bruynel Fatima Imran Mark Wynne Tonde Kaitano Fiona Gower Mark Williamson Tony Egan Gary Hooper Martyn Dunne Volker Kuntzsch Gerard Hickey Mat Cullen Warren Parker Graeme Harrison Matt Bolger Zelda Devilliers Graham Smith Mavis Mullins Grant Watson Michael Brooks Greg Gent Michelle Thompson

We would like to offer special thanks to the people and following organisations featured in the business snap-shots in this volume of the Agenda:

Hiakai Mount Albert Grammar School Dianne & Richard Kidd Primary Collaboration New Zealand Figured Anchor Food Professionals, Fonterra

Foreword Business snap-shot author: Emma Wheeler Hon. Nathan Guy Design and creative: Adam Herlihy

KPMG • 83 KPMG primary sector leaders

We asked our sector leaders what New Zealand food they enjoy the most, or what New Zealand food they are most proud of.

Ian Proudfoot Emma Wheeler Global Head of Agribusiness Manager, Agri-Food KPMG New Zealand KPMG Auckland “I was lucky enough to experience one “Gro wing up with a passion for of Monique Fiso’s meals at the recent nutrition and health, I love having Te Hono Summit. The Kawakawa Ice access to fresh organic produce here Pop sticks clearly in my memory, a truly in New Zealand, knowing that what unique tasting surprise in the middle of I am eating is nutrient rich and full of a fantastic meal packed with authentic nourishment.” New Zealand flavours.”

Robert Lee Patrice Feary Partner, Enterprise Director, Enterprise KPMG Tauranga KPMG Christchurch “Y ou can’t beat Avocado on toast “I look forward to the Bluff oyster season every with tomato, it’s made even more year! Each year the season rolls in they never special as the avocados come disappoint. Whether enjoyed lightly battered from my very own orchard.“ with the family on fish and chip Friday's or  with a little more sophistication and ceremony at a restaurant... they are worth every cent and some!“

Roger Wilson Ian Williamson Partner, Enterprise Partner, Supply chain KPMG Hamilton KPMG Auckland “My meal of choice is a medium “F resh new Zealand rare succulent eye-fillet of beef grown Avocado smash or venison, accompanied by on toast starts my day brown sauce, roast kumara off perfectly.“ and seasonal vegetables.“

Brent Love Andrew Hawkes Director, Farm Enterprise Partner, Enterprise KPMG Timaru KPMG Christchurch “BBQ covered with all of the “As a born and bred Cantabrian, I cannot beat the red meat that NZ agriculture festive season. New potatoes, roast Canterbury provides, we are lucky to lamb or fresh Akaroa salmon. Picking raspberries have it at our gate, the rest and strawberries and shelling freshly picked of the world has to wait for peas is an enduring childhood memory and one our farmers to get to them.“ I enjoy again with my children, even if more end up in mouths than in the bucket for Christmas day.“

84 • KPMG • AGRIBUSINESS AGENDA 2017: VOL 1 Simon Hunter Julia Jones Principal, Advisory Farm Enterprise Specialist KPMG Auckland KPMG Hamilton “Our NZ Food story is something “As a kid I thought eating mussels I have incredible pride in. As Dad had collected, and fresh an industry we need to show meat from the neighbour’s farm courage, unity and a common meant we were poor. I now purpose so we can lift above any appreciate this meant we were challenges to allow our produce very privileged.” to be a star its own unique way.“ 

Tuhi Isaachsen Gary Ivory Dylan Marsh Director, Strategy Partner, Deal Advisory Associate Director, Customer & Pricing KPMG Auckland KPMG Auckland KPMG Auckland “Whole natural foods are a priority “I have extensively travelled the “You just can’t beat a beautiful for me and my family, living in world but never found a wine to piece of venison rump, cooked New Zealand we are lucky to match the exquisite body of a medium rare, swinging more have access to whole grains New Zealand Pinot or Shiraz.“ towards rare.“ and fresh greens which are a family favourite. Our desire is to feed our bodies with pure nutrition directly from nature.“ 

Joe Hanita Riria Te Kanawa Associate Director, Advisory Director, Advisory KPMG Hamilton KPMG Wellington “My most special whanau “Nothing quite like some thinly sliced memories feature kaimoana, flash fried paua, in a touch of our sitting around the kitchen table fabulous NZ butter, a hint of garlic as a young fulla with my Dad and a few spring onions. Mussels and Pop, newspaper spread on the BBQ and fresh gurnard are out, kōura (crayfish) cut in half, close behind. This kai brings back trying to get the last bit of flesh fond memories of whānau holidays out of the legs.“ at the beach.”

Justine Fitzmaurice Louise Webster Vanessa O'Neil Manager, Advisory Founder & CEO Director, Enterprise KPMG Wellington NZ Innovation Council KPMG LAuckland “My favourite New Zealand “ Cherries are my favourite “Earliest export memory. In food is kiwifruit, both green food. The juicy rich taste of 1998 I was in London doing the and gold. It’s instantly a hot central Otago summer traditional kiwi OE, I funded my recognisable as from New as a child... to me some of next trip by joining the Marks and Zealand and is the perfect the best innovation happens Spencer UK Food & Wine team. nutritious and tasty snack.” in nature.“ In my interview solely on the basis I was from New Zealand they had expectations of me being their next sauvignon blanc sommelier. I knew then that New Zealand wine had a strong global reputation. Luckily for them (and the NZ Wine industry) I went into the marketing team not the wine one.” Mike Clarke Andrew Tub Partner, ITA Partner, Performance KPMG Auckland KPMG Auckland “Being English I am partial “After spending years living to a great cup of tea but in Wellington and having now I live in New Zealand the quality wine country of I like to give it a bit of Martinborough just over the kiwi sweetness, so I hill, I became partial to the full add a spoon of Manuka bodied creamy mouth feel of honey to every cup.“ a Martinborough Chardonnay.“  

KPMG • 85 Contacts

Ian Proudfoot Global Head of Agribusiness Auckland T: +64 (9) 367 5882 E: [email protected] linkedin.com/in/iproudfoot @IProudfoot_KPMG

Simon Hunter Agri-Food Advisory Lead Auckland T: +64 (9) 367 5811 E: [email protected] linkedin.com/in/simonmhunter

Roger Wilson Farm Enterprise Hamilton T: +64 (7) 858 6520 E: [email protected] linkedin.com/in/rogerpwilson

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© 2017 KPMG, a New Zealand partnership and a member firm of the KPMG network of independent member This publication has been firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. printed on B&F paper The information contained herein is of a general nature and is not intended to address the circumstances of any particular which is FSC certified. individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such The pulp from this paper information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on has been sourced from a such information without appropriate professional advice after a thorough examination of the particular situation. 01951 well managed forest.