Agribusiness: Zespri’s moves are bearing fruit (NZ Herald)

Kiwifruit marketer is building a stronger foundation in China, writes Tim McCready.

Global marketer Zespri is focused on returning sustainable wealth to kiwifruit growers — not only in regional areas of New Zealand but also in rural China.

It is planning to nearly double its global sales revenue to $4.5 billion by 2025, and this strong growth will directly benefit the kiwifruit growing areas.

David Courtney, Zespri’s Chief Grower and Alliances Officer, says “the objective of our business is to return sustainable wealth to kiwifruit growers and the communities they live in — firstly in New Zealand, but ultimately communities around the world as well”.

Last year Zespri’s global sales increased 6 per cent to $2.39b. Courtney says the sales directly brought in about $620 million for Te Puke, $160m for Katikati, $135m for Ōpōtiki and almost $50m for Northland — a total of $965m to the key kiwifruit growing areas in New Zealand.

Courtney says as the number grows to $4.5b, and kiwifruit expands outside the Bay of Plenty, “we hope that those (new) regions will really start to generate strong value back into their communities.

“Should our growing trials in China be successful, we also look forward to being able to return money back into rural communities in China where we partner with growers to grow kiwifruit — as is the case in Italy, France, Korea and Japan today.”

The mainland China region has just headed Japan as Zespri’s No 1 market, with sales having grown 10 times from $50m in 2007 — just under 5 per cent of global sales — to $505m, representing more than 20 per cent of global sales. Zespri believes sales revenue in the mainland China region will grow to $1b by 2025 — accounting for 25 per cent of global sales. With this in mind, Zespri is looking to source its own kiwifruit grown in China and is into year three of a proof-of-concept trial.

Zespri signed a memorandum of understanding with The People’s Government of Shaanxi Province in 2015, outlining the shared intention to develop the kiwifruit industry in the province, and also to establish trial production.

Zespri reached a high-level agreement with the Shaanxi provincial government to establish a centre of excellence to support research, expert exchanges and grower information.

Courtney says to date Zespri has found no insurmountable barriers to producing quality fruit in China, and work is underway to test Chinese-grown kiwifruit with local consumers.

“Of course, the greatest test for us is that we have to protect the (Zespri) brand. New Zealand kiwifruit growers — rightly so — are deeply passionate and protective of their brand, and we cannot put the brand on any fruit that would put at risk their investment over time.

“To support our efforts, it’s that level of investment behind the border in terms of building our brand, taking control of our supply chain, and potentially sourcing fruit under the Zespri brand that has allowed us to place really strong confidence in our future in China — and feed that back into our 10-year growth ambitions,” says Courtney.

Zespri’s distribution to China has changed dramatically since it first sent shipments of kiwifruit in 2000. There were no staff based in China and Zespri sold its kiwifruit to a distributor and left its business with them. “We now know that to succeed (in China), we have to take control of our business and invest heavily in people to be able to drive the business forward,” says Courtney.

Today Zespri has 57 people running targeted sales and marketing programmes in China.

“We invest about $30 million each year into our brand, and that money is invested into consumers and trade, and working with distributors and retailers around the country to make sure they understand the Zespri brand, the values we stand for, and the quality proposition we’re trying to get across to our consumers.

“Because of that marketing, Zespri is now the number one or number two fruit brand in all the tier one and tier two cities in China. That beats out big brands like Dole and Sunkist — which is quite remarkable when you think kiwifruit is only a tiny amount of the fruit bowl. We’re really holding our own against those big categories such as bananas and citrus,” says Courtney.

Zespri is now holding some kiwifruit inventory in China and selling directly to customers through e-commerce channels.

One of them is Fruit Day, which aims to sell 1.5 to 2 million trays of kiwifruit this year online and through its 10 retail stores.

Courtney says holding inventory in-market has given Zespri “a much better view of the supply chain end-to-end and making sure the product that gets to consumers is in the best quality possible.”