Mood of the Boardroom: Escalating costs prove a big concern (NZ Herald)

Mood of the Boardroom: Escalating costs prove a big concern (NZ Herald)

Business chiefs have sent a strong message to the Labour Government concerning the escalating costs associated with conducting business.

When asked whether government actions over the past three years have elevated the cost of doing business, a resounding 93 per cent of respondents to the Deloitte and Chapman Tripp election survey, conducted by BusinessNZ, said “yes”. Just 5 per cent of respondents said “no”, while 3 per cent were “unsure”.

Data from Statistics NZ shows that profit margins for businesses are lower than pre-Covid levels. Price increases for the non-financial sector of the economy show that 75 per cent of inflation in the three years to 2022 has come from the increase in the cost of inputs (goods and services) and the remainder is evenly split between wages and profits.

Taking a closer look at this in the survey’s findings, a notable 64 per cent of respondents say that their tax compliance costs have increased over the last three years. Just 1 per cent say that costs have reduced, while 36 per cent say that costs have remained the same.

Three Waters

Earlier this year, the Government unveiled its shakeup of the Three Waters reforms.

After considerable pushback from councils, it abandoned its original plans to establish four mega water entities, and instead has proposed creating 10 water entities under the umbrella, Affordable Water Reform. It says this new structure strikes the right balance between ensuring cost savings in the delivery of water infrastructure, while also ensuring that the water entities are strongly grounded in their local communities.

Labour says that the cost of fixing the country’s broken water infrastructure is estimated at $185 billion over the next 30 years, and that local councils cannot afford this on their own. They suggest that households in some areas could see rates rise up to $9730 per year by 2054 if nothing is done.

Business chiefs were asked whether they believe region-focused delivery of Three Waters services by new public sector entities that are separate from territorial local authorities will bring about the types of economic gains that the Government has outlined.

They are not convinced, with 80 per cent of respondents saying it won’t. Only 8 per cent said it will deliver substantive economic gains, while 12 per cent were unsure.

Other political parties were asked whether they support the current Three Waters (Affordable Water) proposal. Their responses are:

  • Act: No.
  • Green: We are pleased that the Government has increased the number of water entities to ensure a closer connection with communities they serve. But we still have significant concerns that the current proposals don’t do enough to guarantee public ownership and protect nature. The failure to separate stormwater management is another missed opportunity.
  • Labour: Yes. The cost of fixing our broken water infrastructure is estimated at $185b over the next 30 years. Local councils cannot afford this on their own, and households in some areas could see rates rise up to $9,730 per year by 2054 if we do nothing.
  • Te Pati Maori: No, because Maori ownership rights and entitlements have yet to be determined.
  • National: No. Labour’s policy is just Three Waters under a new name, with the same asset confiscation, broken governance and bureaucratic centralisation. We will repeal Labour’s three waters and return assets to local hands.
  • New Zealand First: No. It is a racist Trojan Horse masquerading as a solution. And the fiscals behind it have already be thrown into serious question.

Resource Management reforms

Last month, the government passed its Resource Management Act replacement, ending 30 years of the RMA.

Two acts, the Natural and Built Environments Act and the Spatial Planning Act, make way for a new planning regime which aims to cut down the number of plans councils are required to produce.

Environment Minister David Parker praised the simplification offered by the new resource management system.

“At the moment, there are over 100 RMA plans, those are cut down to 16 better plans that will be structured in a similar way and therefore are easier to follow, are made faster and result in more permitted activities, lower land prices, lower consenting costs and better environmental outcomes,” Parker said.

He added it will “save homeowners, infrastructure providers, a lot of money — hundreds of millions of dollars have been here”.

When asked whether the legislation replacing the Resource Management Act will satisfactorily support economic development while also protecting and restoring the environment, only 7 per cent of respondents said “yes”. The majority — some 59 per cent — responded “no”, while 34 per cent are “unsure”.

The legislation is hotly contested. When political parties were asked by BusinessNZ whether they support the changes to the Resource Management Act, they responded:

  • Act: Act has released a policy to replace the RMA which puts property rights and local decision-making at the centre.
  • Green: We supported the Natural and Built Environments Bill and the Spatial Planning Bill to the Select Committee but will continue to push for improvements to ensure that nature and the climate are at the heart of the system.
  • Labour: Yes. The new resource management system will better protect the environment while cutting red tape, lowering costs and shortening the time it takes to approve new homes and key infrastructure projects. It is expected to cut costs to users by 19 per cent.
  • Te Pati Maori: Yes.
  • National: No. We will repeal Labour’s RMA replacement bills by Christmas 2023.
  • New Zealand First: No. New Zealand First does not support the expansion of Treaty references in the new legislation or the inclusion of spiritual beliefs in water management.

Climate change

Business chiefs were asked: Do you believe New Zealand needs to increase its investment in adaption to climate change?

Over half of all respondents — 51 per cent — believe New Zealand needs to increase investment in this area. Some 30 per cent responded “no”, while a further 19 per cent are “unsure”.

There was consensus from political parties on this front too. When asked the same question, all parties broadly agreed that more investment in adaption to climate change is required:

  • Act: Yes. Act believes climate change spending should be focused on adaptation rather than mitigation.
  • Green: We supported the Natural and Built Environments Bill and the Spatial Planning Bill, to the Select Committee but will continue to push for improvements to ensure that nature and the climate are at the heart of the system.
  • Labour: Budget 2023 allocated $6b in initial funding for a National Resilience Plan for infrastructure. The Government also released New Zealand’s first Emissions Reduction Plan in May last year.
  • Te Pati Maori: Yes.
  • National: New Zealand will need to invest more in future-proofed infrastructure to ensure we can meet the adaptation challenge. National will work in good faith to make sure that cost is appropriately distributed.
  • New Zealand First: Yes. New Zealand First was already doing this with the allocations from the Provincial Growth Fund to adaptation initiatives.

Digging into this a little deeper, business leaders were also asked how climate change is impacting their business. The top three responses to this question were its impact on the cost of inputs to business (59 per cent), the cost of insurance (53 per cent) and the cost of products or services (48 per cent).

Infrastructure

BusinessNZ respondents were asked to rank various types of New Zealand’s infrastructure in terms of which has the most potential to contribute to New Zealand’s business growth.

Transport infrastructure (roads, rail and ports) was the clear frontrunner, receiving a score of 4.4/5. This outpaced other options, with energy infrastructure (electricity and gas) receiving a score of 3.9/5, telecommunications scoring 3.8/5 and water scoring 3.3/5.

Just over half of respondents — 51 per cent — agree with an increase in user charges to help fund infrastructure build. Some 30 per cent disagree.

The survey results underscore the escalating apprehension among businesses regarding future energy costs, with 75 per cent of respondents acknowledging this as a concern. Just 21 per cent say the cost of energy isn’t of concern to them.

BusinessNZ asked respondents whether the Government has effectively managed the allocation of infrastructure spending.

Only 4 per cent of respondents believe that the current balance of investment, including the allocation between significant projects and smaller initiatives and the distribution across regions, is appropriate.

In contrast, a substantial 74 per cent expressed strong reservations, indicating that they perceive the Government’s approach to infrastructure spending as falling short of the mark. A further 22 per cent responded that they are uncertain.

Political parties were asked whether they support supplying major infrastructure services through public-private partnerships:

  • Act: Yes.
  • Green: Major infrastructure services that deliver essential public services such as energy and water should exist for the public good, not for profit. The Green Party prioritises Maori, community and public ownership over private profit.
  • Labour: We are open to alternative funding and financing tools, such as public-private partnerships and congestion charging however our current policy precludes PPPs in health, education, and corrections.
  • Te Pati Maori: Yes.
  • National: Yes.
  • New Zealand First: New Zealand First has been reluctant to support public-private partnerships in the past, where KPIs have not been met, but would not rule them out if there was accountable public oversight before and after establishment.

Skills and human capital

Education is heating up to be a major issue during the campaign, with data showing achievement for students is declining. Of the roughly 64,000 students who left school in 2022, only half attained NCEA 3 or above. A quarter left without NCEA 2, considered the minimum level needed to pursue work or further study, while 15 per cent failed to reach NCEA 1.

BusinessNZ respondents were asked whether compulsoryeducation is setting up young people with the skills they need to succeed in the future. Only 21 per cent of those surveyed responded “yes”. A significant 68 per cent said “no”, while a further 12 per cent were “unsure”.

In a follow-up question, business leaders were asked what skills and human capital issues the Government should be focusing on.

The top three responses were: attracting and retaining skilled migrants (40 per cent), increasing the literacy, numeracy and basic skills of the workforce (40 per cent) and taking a more company and industry-oriented approach towards developing solutions to skill gaps and labour market constraints (31 per cent).

Fair pay, employment relations

Legislation governing Fair Pay Agreements was enacted last year, establishing legally binding agreements that outline the minimum employment terms applicable to all employees within a given industry or occupation. These encompass various aspects, including standard working hours, minimum wage, training, and leave entitlements. Anticipation surrounding the impact of these agreements on various businesses and sectors is a topic of significant concern for business leaders.

When asked about the impact of the agreements, just 9 per cent of respondents foresee a positive effect on their businesses or sectors. In contrast, 39 per cent anticipate adverse consequences as a result of these agreements. A further 23 per cent remain uncertain about potential implications, and 29 per cent believe fair pay agreements will have no discernible effect on their businesses or sectors.

Political parties were asked if they support fair pay agreements:

  • Act: No. They allow a tiny percentage of employees to make decisions affecting 100 per cent in the sector and will make doing business significantly more difficult, regulated and expensive, especially for SMEs.
  • Green: Yes. Fair Pay Agreements will ensure that more New Zealanders are paid fairly for the work they do. They will also make an important contribution to closing the ethnic and gender pay gaps.
  • Labour: Yes. They will improve employment conditions by enabling employers and employees to bargain collectively for industry or occupation-wide minimum employment terms.
  • Te Pati Maori: We support Fair Pay Agreements, because we believe in a fair and decent workplace, and a fair and decent society.
  • National: No. National has committed to repealing the legislation within our first 100 days.

Fair Pay Agreements are not about fair pay. They’re about imposing mandatory union deals that force a one-size-fits all approach on Kiwi workplaces.

Agribusiness & Trade: Evolving to rapidly changing consumer preferences

Agribusiness & Trade: Evolving to rapidly changing consumer preferences

Fonterra’s vice-president of food service for Greater China Justin Dai, says the $2 billion food service business the global dairy giant operates in China is evolving to keep ahead of rapidly changing consumer preferences.

Fonterra’s focus on localisation and innovation and the fusion of dairy goodness with local preferences in China has been a pillar of its success.

An example of this is the innovative “cheese dirty coffee” launched a year ago, a drink that combines espresso with milk, cream, cream cheese and butter.

“I know it sounds a bit odd,” Dai told the 2023 China Business Summit. “But when this dirty coffee was launched about a year ago, it was an immediate hit. It was launched by one of the large local coffee chains in China, and in the first week nationwide more than six million cups were sold.”

Fonterra’s commitment to innovation is underscored by the establishment of five application centres in China over the past decade, in Shanghai, Beijing, Guangzhou, Chengdu and a newly opened facility in Shenzhen.

The centres are a base for collaborative creativity, both within Fonterra and also with external stakeholders including bakeries, coffee shops, restaurants and retailers.

“This is an advantage we have in China, to work together with our customers to drive innovation,” Dai says. “We have strong confidence in the outlook of China. Demand is coming back, and we have the confidence to continue innovation.

“We will continue to invest in our partnership with our customers, going broader and deeper with our partners to continue to bring the goodness of New Zealand dairy into Chinese consumers’ recipes.”

Through Anchor Food Professionals, Fonterra serves four major channels within China’s food service market: bakery, beverage, dining and the rapidly growing retail food service sector. Its reach spans over 470 cities, including all tier one and tier two cities, along with hundreds of tier three and tier four cities, in partnership with its authorised Anchor distributors.

Key trends shaping the market:

● Gen-Z’s affinity for traditional Chinese pastries infused with dairy is creating new culinary opportunities.

● Social media’s pervasive influence is revolutionising buying behaviour, prompting an intense marketing arms race.

● The interplay between premium and mass markets is intensifying competition and redefining strategies.

● Fast, bold innovation is blurring channel boundaries and redefining the industry.

● The shift towards varied dining occasions, encompassing online, offline and food service retail, is altering consumption habits.

● Niche brands and the untapped potential of lower-tier cities present vast growth opportunities.

Agribusiness & Trade: Comvita embarks on sustainable strategy

Agribusiness & Trade: Comvita embarks on sustainable strategy

Despite the pandemic and border restrictions, New Zealand mānuka honey exporter Comvita was able to elevate its market share in mainland China from 39 per cent to an impressive 60 per cent.

Andy Chen, Regional CEO APAC for Comvita, shared the story behind this success at the China Business Summit last month.

He explained that the brand’s New Zealand origin and reputation as the largest mānuka honey manufacturer had been key selling points in the past, but these narratives lost their effectiveness several years ago, resulting in a plateau in growth.

Chen explained that the China market is constantly changing. “In the last 5000 years of China, the only thing that has never changed is change,” he told the Summit.

“Chinese consumers are very open-minded. They embrace new stuff every day, but they are also impatient. We need new stories for them.”

In 2020, under the guidance of new leadership led by group chief executive David Banfield, the honey company began sharing the “Why Comvita?” story. Comvita began highlighting its strengths as a business — that it is not only a leader from New Zealand in terms of beekeeping, but also emphasising its position as the only brand worldwide to ensure quality control from “land to hand”, including comprehensive soil health management and rigorous testing procedures. Storytelling around these areas helped Comvita connect with Chinese consumers and secure rapid growth in the Chinese market.

In 2022, Comvita again adapted, this time asking: “What is more relevant to Chinese consumers after the pandemic?”

Chen says Comvita’s consumers tend to be upper-middle class, well-educated, and environmentally conscious even before the pandemic. As a response, Comvita unveiled its “Harmony Plan,” demonstrating its commitment to sustainability, carbon neutrality by 2025, and bee welfare initiatives.

As part of this, Comvita is committed to achieving carbon neutrality by 2025, and ultimately becoming carbon positive by 2030. It is minimising its environmental impact through carbon reduction and improving the circularity of its packaging.

Comvita has committed to the rescue of 10 million bees annually and aspires to extend this to 100 million. It is achieving this by being at the forefront of ethical bee welfare standards, and through its global partnerships with dedicated beekeepers and rescuers, uniting efforts to protect hives and uplift the welfare of bees.

Another key aspect of Comvita’s Harmony Plan is nurturing biodiversity and restoring natural ecosystems. It is planting native bush and trees across New Zealand and has plans to do so in China. It has committed 1 per cent of its profits to local communities, giving employees a day off each year to help people in the communities around them.

Chen told the China Business Summit that these narratives, underpinned by tangible and demonstrable actions, are resonating well among its customers — particularly those residing in Tier-1 Chinese cities such as Beijing, Shanghai and Guangzhou — and have enabled Comvita’s remarkable growth in the region to continue.

“We are real, we are genuine, and we are leveraging our industry knowledge and expertise to help people and the communities wherever we go,” he says.

China Business Summit 2023: Rebuilding tourism and education links

New Zealand’s thriving tourism and export education links with China were heavily impacted during the pandemic years, enduring significant challenges and setbacks. The reopening of borders has seen a remarkable revitalisation of these connections. The return of foreign tourists has been a prominent bright spot for New Zealand’s economy, and there has been a notable increase in study visa approvals, particularly for universities. This panel will share perspectives on the changed landscape, including new strategies adopted to rebuild business, and the inspiring wins and war stories that have emerged along the way, showcasing the resilience and adaptability of the sectors.

  • Lisa Li, Managing Director, China Travel Service
  • Grant Webster, Chief Executive, Tourism Holdings
  • Professor Dawn Freshwater, Vice-Chancellor, University of Auckland
  • Dr Wiremu Doherty, Chief Executive, Te Whare Wānanga o Awanuiārangi
  • Moderator: Tim McCready

 

China Business Summit 2023: Marketing health, wellness and innovation to China

This session will uncover the strategies, insights, and innovative approaches that have made Comvita and Fonterra leading names in the industry. Speakers will share the intricacies of navigating and innovating for Chinese market and effectively promoting health and wellness to the region.

  • Andy Chen, Regional CEO, APAC, Comvita
  • Justin Dai, Vice President Foodservice, Fonterra Greater China
  • Moderator: Tim McCready

 

China Business Summit 2023: Prize draw

Prize draw courtesy of Air New Zealand with Auckland Business Chamber’s Live and Digital events coordinator Katy Riddell.

 

China Business Summit 2023: Call to order

MC: Tim McCready

China Business Summit 2023: Summit close

MC: Tim McCready

Future of Consumption (Asia NZ Foundation & Auckland Business Chamber)

FUTURE OF CONSUMPTION – SESSION ONE from Auckland Business Chamber on Vimeo.

FUTURE OF CONSUMPTION – SESSION TWO from Auckland Business Chamber on Vimeo.

 

The future of consumption is constantly evolving, with new technologies and innovative practices transforming the way we consume foods to the sustainable practices we adopt. From sustainability and vertical farming to cell-based cuisine, the future of consumption is full of exciting developments.

To help you stay ahead of the curve and gain valuable insights, you will learn about the impact of sustainability, vertical farming, and cell-based cuisine on the future of food, as well as how these practices are being implemented in the industry.

Join the Asia New Zealand Foundation and the Auckland Business Chamber for two sessions delivered digitally on the 20th of June.  These sessions will take a deep dive into these seismic changes with business leaders from the Asia region to discuss the forces, the opportunities, and the challenges that are shaping the future of consumption.