Many overseas consumers are unaware their food originates in New Zealand, undermining attempts to promote our “clean and green” and premium brand image, a new study finds.
It shows there are significant opportunities for New Zealand premium consumer food and beverage products in overseas markets but we are missing out because we are not communicating to consumers.
“Maximising Export Returns; Communicating New Zealand’s credence attributes to international consumers”, by Lincoln University Agribusiness and Food Marketing Programme Director Nic Lees and Agribusiness and Economics Research Unit director Professor Caroline Saunders, finds having a visible label and a good relationship with industry buyers could improve the situation.
It explores the opportunities for New Zealand food and beverage exporters to increase returns through communication of the credence attributes of products to consumers and gatekeepers (or the buyers in the supply chain.
Credence attributes are those believed by a consumer to be present in a product even though they can’t see them: such as animal welfare, fair trade, provenance and environmental stewardship.
Mr Lees says respondents consistently identified the lack of a retail brand and absence of a long-term relationship with the partners in the market as the most significant constraints to communicating credence attributes to consumers.
The most important method of communicating credence attributes to the consumer is through product labelling but in overseas markets identification of New Zealand origin is frequently filtered out through the distribution channel where products get further processed, repackaged and rebranded, or became an ingredient in another food product.
He says the majority of New Zealand’s beef and dairy exports are unbranded commodities that enter the manufacturing sector as raw materials or ingredients for processed products.
Likewise, significant proportions of lamb and venison exports enter the food service sector and are delivered to hotels, restaurants and institutions where they are, frequently, not identified to the consumer as being of New Zealand origin.
“As a result, a large percentage of New Zealand food exports do not have New Zealand origin identification or branding at point of purchase. Consequently, New Zealand-specific credence attributes get lost.”
Quality and health attributes, said to be of the highest importance to the consumer, are often ‘wrapped up’ with other credence attributes, such as country of origin, organic, free range, pesticide free and local. These categories are often extrinsic quality attributes provided on the product label and advertising.
Where New Zealand-related brands, or logos occur significant additional information could be associated with them.
The research also indicates the most important method of communication for the wholesaler or retailer is personal communication, which is dependent on the quality of the relationships with the exporters, Mr Lees says.
When New Zealand exporters sell products to brokers or traders, there is often very little communication of credence attributes.
These gatekeepers often have short-term relationships with a number of New Zealand exporters and price is the most significant factor for them. These importers and distributors sometimes actively restrict communication with retail customers and consumers in order to prevent product differentiation and, therefore, their ability to substitute products and suppliers.
He says having the right supply chain partners at all levels of the supply chain is seen as critical to success in the market.
The quality of the partner relationship and the ability to brand products at retail were often inter-related. Some retail gatekeepers actively prevent exporters from promoting their own brands and restrict the amount of information about the products’ attributes communicated to consumers.
Mr Lees says research shows it is possible to effectively communicate the credence attributes of New Zealand’s food products to consumers. New Zealand kiwifruit, wine and some dairy brands were examples of this.
“These products demonstrate it is possible to capture a significant consumer premium for quality attributes that incorporate both the experience and credence attributes valued by consumers. These brands were able to become an effective quality cue or search quality attribute for consumers.”
The report is part of a wider three year project, ‘Maximising Export Returns (MER)’, undertaken by AERU at Lincoln University and funded by the Ministry of Business, Innovation and Employment’s Food and Beverage Information Project. The research will assist in developing premium New Zealand brands, and underpin the growing diversification of the New Zealand economy.
How can we get more value from New Zealand beef and lamb exports?
The New Zealand Government’s has an ambitious goal of lifting total exports to 40 percent of GDP and doubling the value of primary exports by 2025. They have stated that this will involve developing stronger relationships with New Zealand exporters and supporting them to add and capture value from existing markets through supply chain integration, brand promotion and brand protection. New Zealand red meat exports play an important role in this as they represent 11% of total merchandise exports.
There is limited scope for increasing the volume of red meat production in New Zealand due to
land and environmental constraints. This means adding value to these exports is the only alternative. A significant proportion New Zealand’s red meat is still exported in commodity form and fails to achieve a premium for the attributes of its New Zealand origin. Changing this however will require a co-ordinated effort from government, exporters and producers.
Market access and promotion of the NZ Inc brand story can create opportunities for New Zealand exporters, however, capitalising on these initiatives requires companies to develop capabilities and strategies to market and deliver these products to demanding international consumers. These consumers are demanding greater variety and quality in the food they eat. They require a consistent year-round supply of high quality, safe food. They also want food that aligns with their own personal values, which includes credence attributes such as environmental sustainability, animal welfare and fair trade, as well as local and organic production.
To deliver this, it is necessary to have farmer suppliers who can produce the right quality of product when the market requires and who are committed to long-term supply relationships. Without this type of integrated value chain New Zealand will fail to break out of its reliance on agricultural commodities. This research has focused on several New Zealand exporters and their suppliers who have developed relationships with high-end retail customers and have a strategy in place to add value to their products.
Consistently meeting consumer demands is difficult within the constraints of New Zealand’s pasture-based agricultural production systems, as production volume and product specifications are highly dependent on climate.
New Zealand needs to make more of opportunities to create an international food brand and image. Our small size an lack of capital can also be overcome with effective partnerships like the kiwi-Chinese partnership that created the Flat White Cafe in Beijing’s 798 ArtDistrict . Inspired by New Zealand cafe culture it claims to provide the best coffee in Beijing. Established five years ago by Wellington Fidel’s Cafe owner Roger Young and Chinese business partner Michael Hongfu. They now have five cafés in Beijing and also a coffee roasting business called Rickshaw Roasters.
Michael first came to New Zealand in 1989 to study English. Returning to Beijing and addicted to good coffee he started Flat white so he and his friends could get a great coffee. With support from Roger Young from Fidel’s and Geoff Marsland from Havana Coffee they originally used Havana coffee roasted in Wellington and shipped weekly before starting Rickshaw Roasters.
The roasters are small team of Chinese and New Zealanders based in Beijing. They source top quality Arabica beans from around the globe, then import and roast them.
While NZ grown coffee isn’t a New Zealand export the cafe and roasters clearly create a strong New Zealand inspired image in the midst of crowded Beijing. This includes images of cabbage trees, colour prints of Whangamata beaches, pohutakawa trees and white sands. The Flat White Cafe might be a small operation however it demonstrates the potential for different New Zealand sectors to leverage off each other in promoting a consistent New Zealand image and brand.
It also shows how we often miss opportunities where our tourism, food and wine as well as arts and cultural industries could better leverage our limited resources in promoting New Zealand to the world. While traveling in Europe recently I was reminded how little most Europeans know about New Zealand outside of the
United Kingdom. Zespri Kiwifruit and the Lord of the Rings Movies were the images that most easily came to mind. When asked about New Zealand food most could not get past the “Kiwi” (fruit) or mixed up New Zealand and Australian wines “yes I have had some New Zealand wine, thats the one with the yellow kangaroo on it!
While New Zealand food and beverage exports are valued at about NZ$50b little is spent on promoting New Zealand food and beverages internationally. While the New Zealand Tourism board (Tourism New Zealand) has a budget of NZ$113m there is no equivalent agency collectively promoting New Zealand food, wine and other beverages. It is left to individual companies and entrepreneurs like Roger Young and partner Michael Hongfu to create this image and the opportunity to collectively establish a New Zealand reputation for the world best coffee, wine, beef, lamb, venison , apples and kiwifruit is lost. Try entering “New Zealand Food” in google and see what you find.
For most of the last century New Zealand has led the world in efficient production of agricultural products. By the 1950s New Zealand had one of the highest standards of living in the world. This comfortable existence was shaken by the rise of agricultural protectionism and support mechanisms in the 1970s. New Zealand was shut out from traditional markets and needed to compete with subsidised exports that drove down international commodity prices. This began a long decline in New Zealand agriculture, highlighted by Prime Minister, David Lange’s, famous statement that “Agriculture in New Zealand is a sunset industry and manufacturing and tourism will take over.” Fortunately for New Zealand, the demand for our agricultural products is increasing. The rapid urbanisation and economic growth in Asia has seen unprecedented growth in a middle class that is driving demand for New Zealand’s meat and dairy products
While this is good news, it also presents a significant challenge. How can New Zealand turn this period of high agricultural commodity prices into sustainable long-term prosperity? New Zealand, potentially, risks becoming dependent on China in the same way it was dependent on Great Britain for most of the 20th century. Once again, New Zealand may become vulnerable to volatile international commodity prices and changes in foreign countries’ agricultural policies.
Staying in a 100 year old Bed and Breakfast in Brussels (Le Verger) with Sarah, Olivier and their 3 children gives me the opportunity for some informal research interviews. Interestingly Sarah runs a local food co-op, collecting food from a local farm and delivering it to other families in Brussels.
As I sit down to have my Belgian breakfast of croissants, coffee, cheese, prosciutto and yoghurt, my host Olivier asks me about what I am doing here. After explaining about the research project, he soon tells me that New Zealand has a problem because of the distance of transport. New Zealand is so far away how can sending our food to Europe be sustainable? I explain how the sea freight only makes up a small proportion of the carbon footprint and that the production and road transport make up the biggest share. He seems to understand and mentions the latest National Geographic article on food that comments that “local food” is not that sustainable because it can not be scaled to feed the world.
I ask him what New Zealand food products he is aware of in Belgium. He had to think hard for a while then says of course there is wine in the supermarket, white wine and also can be found in the wine specialty stores. He knows about Zespri kiwi’s because it happens the business he works for uses the same marketing and communications company as Zespri. Because of this he knew quite a lot about Zespri even about the problems with PSA disease.
Apart form that he can’t think of much though he then remembers lamb sold at Easter “Le Gigot d’Agneau Pascal”. All the supermarkets had it
for sale and it was so cheap. Everyone new it was New Zealand lamb though it wast specifically advertised as such. The Easter lamb is traditional so the supermarkets sell it below cost (loss leader) as a way to attract customer so they can make their money on the wine, vegetables and other food they buy. They had contacted a specialist butcher to see if they could get some lamb but he said he couldn’t compete because of the low price the supermarkets were offering.
Interesting start to the research, it seems NZ wine had the strongest brand presence followed by Zespri “Kiwi” fruit. This is further confirmed as I reach for the fruit bowl and selected Zespri branded “kiwi” to finish my breakfast. Notice the difference in quality between the New Zealand Zespri and the Italian KingKiwi fruit
Today I begin three weeks of research interviews in Europe on how to increase the value of New Zealand food exports by communicating the “credence attributes” to consumers (see current research for more information). “Credence” means things like our clean green image, animal welfare, food safety or anything else you can’t experience by consuming the product.
I will try to share some of the experiences that won’t be so easy to describe in a written research report, and also encourage readers to make comments, as many of you will have had your own experiences and thoughts that can add to this.