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Influences

External | Internal | Standards

External influences

As the result of the hard work that has gone on over a long period of time, several of Zespri’s markets are close to stocking exclusively 100% Zespri kiwifruit during its selling season, for example, in Japan and Taiwan where competitors such as Chile have not managed to penetrate the market.

Kiwifruit harvest.

However, a major barrier to this growth has been the challenge of duty or tariff levels. As an example, Zespri currently pays a 45% duty on fruit sold into Korea as opposed to Chile, the major southern hemisphere competitor, who pay around 12%. This is the result of the Free Trade Agreement (FTA) between Korea and Chile, which will see the Chilean tariff reach 0% in the next few years. Where there is such an obvious imbalance in tariff level between New Zealand fruit and competitors, it can pose a significant problem as a lower tariff means that fruit is available at a lower cost to consumers (and thus more attractive) and returns are higher to exporters. One strategy to overcome this has been to work with the New Zealand Government in support of New Zealand’s own FTAs. This has been particularly effective in the case of the China and Malaysia FTAs, where the government has achieved significant reductions in the kiwifruit tariff and given New Zealand fruit an even playing field with its competitors.

China’s FTA in particular is of value to Zespri, where the tariff declines from 20% to 0% as shown in the table below, which highlights how this is phased in:

Exporting from New Zealand to China

Description

Kiwifruit, fresh

Base Rate

20

2008

17.8

2009

15.6

2010

13.3

2011

11.1

2012

8.9

2013

6.7

2014

4.4

2015

2.2

2016

FREE

A parallel strategy for growing the consumer base and awareness has focused on working with the customers around the world to ensure Zespri products are chosen for reasons associated with quality, experience, taste, and brand relationship.

The recent outbreak of Pseudomonas syringae pv actinidiae (Psa) – bacterial vine disease – could also potentially affect the future crop levels and while this is as yet unknown, the company is mindful of the risks and is planning accordingly.

Perhaps the biggest external influence on Zespri’s business in recent times, however, has been the impact and response to the global financial crisis. Like all businesses, Zespri has had to consider the fact that their customers and partners throughout the supply chain are likely to be under increased financial pressure, and are having to compromise or limit consumption. The financial crisis has been wide reaching and has impacted on other significant factors that influence Zespri, in particular the foreign exchange rates and the global demand and price of fuel. Given Zespri’s reliance on sea freight to transport the fruit to market, even a small increase in fuel price or the currency in which it is purchased or for which the fruit is paid for in, can have a significant impact on profitability.

Internal influences

With 2700 orchard owners across New Zealand (4,000 growers globally) Zespri has built an industry of growers who are passionate, committed, and customer-focused. New Zealand’s clean, green image, together with optimal soil, light, temperature, and rain conditions for growing, has given them the competitive edge.

Fruit grading process.

Issues of food safety are supported by programmes encompassing rigorous plant hygiene and quality control systems together with a controlled crop protection programme that is continually improved. All post-harvest suppliers implement recognised Food Safety programmes, such as the HACCP-based British Retail Consortium (BRC) standard, used to identify and manage potential hazards throughout the supply chain.

After fruit has been harvested it must be graded and sorted by specially trained graders who visually inspect the fruit for defects, pests, and diseases. Fruit with defects are removed at this point and the remaining fruit is sorted by size (fruit-weight) before packing.

Most kiwifruit is packed by hand into specifically designed Zespri packaging. The filled boxes or trays are stacked onto pallets before going into cool storage.

Zespri sets the quality standards that are implemented by the industry. Pack-houses and cool stores are Zespri accredited, operating to their own documented quality systems. Quality is managed in several distinct ways. The Quality Controllers who regularly check the fruit attend annual Zespri certification and training programmes while Zespri’s Quality Assessors regularly visit pack-houses and audit against Zespri quality standards. MAF, in turn, undertake audits on Zespri, while pallets and data are thoroughly checked at the wharf.

Consumers are now also demanding traceability of the product throughout the production process as part of the greater global emphasis on food safety. Zespri was one of the first to use the pallet card to track fruit from the market to the orchard it was grown on, giving visibility throughout the supply chain. Zespri representatives sample the product in-market to ensure standards are being maintained to the point of delivery and these results are fed back to growers to complete the quality cycle and drive continuous improvement. This series of audits and checks ensures customers have confidence in Zespri’s ability to provide products of a consistently high quality.

Providing offices with a robust indication of supply in order to confidently commit to their customer sales programme is an important part of the process. Customers’ requirements form demand plans that are used to drive production planning and to understand when customers require product to be delivered into the market.

Kiwifruit flowering.

Zespri liaises closely with suppliers to ensure that fruit is packed to meet customer demands and then works closely with shipping companies to plan optimal modes and timing of delivery to get the right fruit to the right market at the right time in the best possible condition.

By having robust controls and processes to ensure Zespri kiwifruit is in the best quality when it reaches the market, the distributors and consumers have confidence in the brand and the fruit attributes and will often pay a significant premium over competitor fruits.

Zespri spends significant amounts of money on promoting the fruit (in 2009 NZ$86m was spent in advertising and promotion) and this has built brand loyalty with distributors, retailers and consumers, and supports the price premium that Zespri kiwifruit achieves over competitors.

Social and ethical standards

As a global company with a complex international supply chain, it is of the utmost importance that Zespri has high standards of integrity, performance and honesty. This requires that there be systems and procedures in place to deal with any issues which have the potential to impact on the businesses reputation or brand. The recent situation with psa was one such example of how quickly, upon realisation of the situation, Zespri identified the issue and worked with the industry, government, and offshore partners to develop a plan to manage the situation.

The company has extremely good relationships with government authorities worldwide as a result of this approach and is trusted to perform in line with the policies they set down. Delegations of government officials and accreditation bodies regularly visit New Zealand to learn more about the Zespri operation and are able to gain a strong sense of the integrity from the procedures the company follows.

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