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.
MC: Tim McCready
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.
It’s clear that the capital markets will continue to face significant headwinds, with many of the same pressures and external forces that have shaped the sector in recent years still in play.
Persistently high inflation remains a top concern. While it remains stubbornly elevated, there are encouraging signs that it may have peaked after a considerable effort from central banks to rein in spending.
Much of the supply chain disruption caused by Russia’s invasion of Ukraine has stabilised, but persistent geopolitical tensions and fragmentation, particularly between China and the United States, continue to pose a risk to economic and financial stability.
Adding to the complexity, the pandemic-induced global talent shortage is still acutely felt in multiple sectors, including certain areas of the capital markets.
Gaining momentum are several megatrends that have become entwined with the capital markets sector. These include the rapid technological evolution, the growing need for robust cybersecurity measures to protect against digital threats, and the ever-increasing demand for sustainable investment options.
Against this backdrop, here is a wrap of some of the key issues that are likely to shape the capital markets over the coming year.
Despite a challenging global economic environment, the Asia-Pacific region is expected to offer some hope for the coming year.
Earlier this month, the International Monetary Fund (IMF) released a report on the region, noting that despite weakening external demand — such as the downturn in demand for tech exports — domestic demand has remained strong. China’s reopening is providing fresh impetus to the region and a glimmer of optimism for the rest of the world.
The IMF projects Asia-Pacific’s GDP to increase this year to 4.6 per cent, after growing 3.8 per cent in 2022 and contributing around 70 per cent of global growth. This will be driven primarily by the recovery in China as a result of its reopening and surging consumption, along with resilient growth in India.
It said the near-term economic impact of China’s recovery “will likely vary across countries, with those more heavily reliant on tourism likely reaping the most benefit,” and expects the rise in China’s imports to be most strongly reflected in services.
But despite its optimism for the region, the IMF downgraded its projections for Japan, Australia, New Zealand, Singapore and South Korea.
“Stronger external demand from China will provide some respite to advanced economies in the region, but is expected to be largely outweighed by the drag from other domestic and external factors,” it said.
A few months ago, ChatGPT was launched publicly and has quickly disrupted diverse sectors.
Analysts at Goldman Sachs believe artificial intelligence (AI) algorithms could ultimately replace 300 million jobs, and with its ability to interpret vast amounts of data and identify patterns, AI is expected to significantly disrupt the capital markets.
Recently, the University of Florida analysed the accuracy of ChatGPT in predicting whether a news item would affect stock prices positively or negatively.
The results showed AI could make accurate predictions on stock performance and demonstrated that traditional models did not provide any further predictive power over ChatGPT.
Since AI algorithms can process market data in real time, they can react to changes faster than ever before. This will inevitably lead to more algorithmic trading, where machines are able to make trades at the appropriate time without human intervention.
Financial firms are already using AI to understand their customers better. As this tool is refined, it will be able to assist in developing more personalised products and services based on customer behaviour and potentially other public data, such as social media activity.
AI-driven technologies are also being used to detect fraud and money laundering. By analysing large pools of data and identifying suspicious patterns, AI can help financial institutions prevent fraud far more quickly than before.
While AI offers an exciting future for the capital markets, there are some concerns that its increased use could have negative consequences, such as creating market bubbles or amplifying financial instability. But despite that, the rapid introduction of AI tools means that by this time next year, they will undoubtedly have had a significant impact on the sector, offering faster and more accurate decision-making and analysis.
Investing with ESG principles in mind has become a hot topic and the fastest-growing segment of the asset management industry.
ESG principles consider environmental, social and governance factors alongside financials.
Ethical investment principles saw companies unwind their investments in Russia last year and the pandemic highlighted the need to consider societal impacts alongside investments. Locally, the recent climate events highlighted the importance of integrating ESG factors into investment strategies.
Despite growing interest in sustainable investing, the number of new sustainable fund launches has declined this year, according to financial services firm Morningstar. Regulatory uncertainty and increasing concerns about greenwashing are likely contributing to this trend, highlighting the need for greater transparency and accountability in the ESG space.
But while major investors continue to emphasise the importance and performance of ESG investing, some of Wall Street’s largest asset managers, private equity firms and brokers have warned that a backlash against sustainable investing has become a significant risk.
Larry Fink, CEO of BlackRock — one of the world’s largest asset managers — was one of the early and vocal supporters of ESG and stakeholder capitalism. However, in his annual letter this year, he de-emphasised ESG investing and entirely avoided using the three-letter acronym.
ESG has become a complex and challenging topic, particularly in the United States, where anti-ESG sentiment has gained momentum. Republican governors from at least 19 US states have pledged to resist ESG investing, and high-profile Republican figures Mitch McConnell and Ron DeSantis have campaigned against the use of strategies that penalise fossil fuel producers.
According to Fink, Republican state treasurers withdrew around US$4 billion ($6.3 billion) from BlackRock last year.
There are indications that US investors’ interest in green investing is waning due to repeated attacks on “woke capitalism”.
Scepticism towards ESG investing is likely compounded by the poor performance recently by technology stocks — a sector that green funds typically favour.
Alternative investments, or “alts”, are gaining popularity and finding their way into the portfolios of everyday investors.
These investments, which include hedge funds, private equity, venture capital, cryptocurrencies, commodities and rare collectables, have little or no correlation with traditional asset classes like stocks and bonds, providing investors with more diversification options.
The alternative investment industry gained momentum and accessibility after the economic downturn in 2008. With last year’s volatile stock market and the anticipation of slower growth and persistently high inflation, demand for alternative investing continues to rise.
Previously, alternative assets were only easily accessible to sophisticated investors. However, the growing number of alternative exchange-traded funds (ETFs) and managed funds are making them more mainstream, as investors look beyond conventional asset classes for returns in an unpredictable year.
The coming general election is poised to have a significant impact on New Zealand’s capital markets.
Current polling suggests Labour v National could be one of the closest contests in some time, and likely to hinge on the decisions of kingmaker coalition parties — potentially Te Pāti Māori or New Zealand First.
Elections are viewed as significant risk events for market participants due to the potential changes in government policy and associated uncertainty.
It is already clear that wealth inequality, tax and inflation will feature prominently in the upcoming political debates and investors will be closely assessing the policies, platforms, and “bottom lines” of parties, and their wider implications for the economy and capital markets.
In the lead-up to October 14, the stage is set for a period of increased fluctuations in share prices and currency value, and uncertainty in the capital markets.
Deloitte Top 200: Sustainable Business Leadership: KMD Brands
For the second year in a row, KMD Brands has been acknowledged for its relentless focus on sustainability, taking out the Deloitte Top 200 Sustainable Business Leadership award.
The global outdoor, lifestyle and sports company, formally known as Kathmandu Holdings, is the parent company to three iconic brands — Kathmandu, Oboz and Rip Curl.
Kathmandu gained B-Corp certification in 2019, becoming the largest Australasian retailer to be certified through the stringent process which recognises the highest standards of environmental and social performance. The company continues to push for sustainable practices with both surfwear brand Rip Curl and hiking footwear brand Oboz also working toward gaining B-Corp certification in FY23.
KMD Brands’ consistency and leadership in putting sustainability at the heart of its strategy, along with its strong targets and transparent approach was why the Deloitte Top 200 judges awarded it in this category again — a company they say others should compare themselves to as part of their own sustainability journey.
“Kathmandu has significantly influenced Oboz and Ripcurl and the three brands combined are making real evolutionary strides,” says Top 200 judge Hinerangi Raumati-Tu’ua. “KMD Brands’ focus on sustainability is broader than just themselves — they also work closely with their suppliers. It is clear that KMD Brands is focused on being a global leader in environmental, social and governance (ESG).”
Chief Legal and ESG officer at KMD Brands, Frances Blundell, says that love of and connection to the outdoors is a foundation for all the company’s brands. “We are very aware of our responsibility to protect and preserve the natural environment and the communities around it — otherwise there won’t be anywhere left for our customers and our products to get out there and enjoy.”
The judges were impressed with KMD Brands’ action towards its science-based targets to reduce emissions in line with the Paris Climate Agreement goals. It aims to reduce absolute Scope 1 and 2 emissions by a minimum of 47 per cent by 2030 from an FY19 base year, and absolute Scope 3 emissions by a minimum of 28 per cent.
Last year, KMD Brands secured what was then New Zealand’s largest sustainability-linked loan. The A$100 million loan is tied to ESG targets. In the first year, the emissions reduction target was achieved for Kathmandu, triggering a discounted interest rate.
KMD Brands’ transition to a circular business model will see it eliminate what it calls a “take-make-waste” approach to business. The concept now forms a core base for its work, including boosting the responsible material content in its products from materials that are regenerative, recycled or recyclable, bio-based, biodegradable, responsibly farmed or grown.
Blundell says the starting point for circularity is durability and making products that last many years and can be used for a long time.
“We want to avoid resources becoming waste and ending up in landfill,” she says. “This is a huge industry-wide issue. Each of our brands are setting their own specific goals, including using materials that can be regenerated, that come from recycled sources or can be recycled.”
As part of this commitment to circular thinking, KMD Brands is working on repurposing and recycling its own waste products. Taking neoprene offcuts from Rip Curl’s factory and recycling them into carpet underlay has diverted 133 tonnes of neoprene from landfill in the past year.
Rip Curl also introduced a world-first wetsuit take-back programme across Australia. It accepts wetsuits from any brand and repurposes them into soft-fall matting for playgrounds and outdoor gyms. The programme is now being expanded into the US, France, Spain and Portugal.
To ensure recognition of the interdependence between people and the planet is embedded into the mindset and expectations of employees, KMD Brands has amended its group code of ethics. ESG responsibilities have been added to job descriptions for all KMD Brands employees, and ESG-related objectives are now part of its employee goal-setting and performance review process. “The team is engaged with our sustainability values and motivated by the conversations happening in the business to embed ESG within decision-making,” Blundell says.
“Most people now know that they have a responsibility, and they want to contribute. Being part of something bigger than yourself is a really empowering feeling.”
New Zealand’s largest renewable generator, Meridian Energy, generates its electricity from 100 per cent renewable sources — wind, hydro and solar.
Top 200 judge Hinerangi Raumati-Tu’ua notes Meridian has done a significant reset on its sustainability strategy that has driven ambitious targets and meaningful actions that are shifting the dial.
“It is good to see them embracing their role in New Zealand’s low carbon transition over and above ‘business as usual’ and committing capital in a way that is focused on delivering at pace given the urgency of climate change,” she says.
As part of its refreshed Climate Action Plan, Meridian plans to take ambitious action to achieve its “Half by 30″ target, reducing its gross operational emissions by FY30 from an FY21 baseline — including all scope 1, 2 and 3 categories.
Meridian has recently widened its focus from clean energy to bring a lens on “a fairer and healthier world”, which is driving a more holistic approach to its sustainability efforts.
This includes the adoption of the updated GRI (Global Reporting Initiative) standards that move away from evaluating materiality based on issues that immediately influence stakeholder decision-making to actual and potential positive and negative impacts on the environment, economy and people — including human rights.
Head of corporate affairs and sustainability Claire Shaw says this is part of the company’s efforts to future-proof its approach to sustainability.
“We have to act with integrity — which means doing all the big things really well, but also thinking about the impacts on others,” she says.
“You make different decisions when you put people at the heart of the transition. This is pushing us to think more broadly about ESG beyond delivering on decarbonisation.”
Since 2019, Meridian has achieved net zero carbon across the operations of its business. Where it can’t currently reduce its operational emissions, Meridian has purchased and surrendered gold standard, and verified emission reductions.
Meridian’s Forever Forests programme will see it displace this by creating its own carbon sink, investing in permanent forests in New Zealand and transitioning them to be 100 per cent native over time.
The judges were particularly impressed with how Meridian is leaning into its role to support New Zealand’s net zero by 2050 targets and its transition to a more sustainable, low-emissions economy.
Meridian continues to develop its renewable energy development pipeline to grow generation capacity, which will help the Government meet its target of 50 per cent of total final energy consumption to come from renewable sources by 2035.
Meridian continues to work with customers to accelerate the electrification of industrial heat away from coal and of transportation, and is exploring the economic, environmental and energy security opportunities of green hydrogen production.
Shaw says that Meridian’s size and scale means it thinks carefully about the impact of the systems that it operates in as it grows renewable energy for the country.
“We continue to respect our role as kaitiaki of the assets we are responsible for and we challenge ourselves to create long-term positive impact for New Zealand as a whole. If we do it well, we’ll unlock a future that’s good for tangata whenua, good for our customers, good for communities and our shareholders.”
Fisher & Paykel Healthcare (FPH) considers corporate social responsibility and sustainability to be inextricably linked to the way it does business.
The health equipment manufacturer, designer and marketer has a strong focus on the environment, responsible sourcing and efficient use of materials, waste reduction, and modern slavery, and has articulated its intentions in these areas in a new environmental and social responsibility policy.
“We have always had waste reduction optimisation in our DNA,” says Jonti Rhodes, vice president — supply chain, facilities & sustainability.
“But more recently we made a strong commitment to leaving a positive lasting impact on society and the environment. Not only through the products we provide, but also the environment, the community, and our carbon footprint.”
FPH recently formed a governance group with representatives from across the business to provide long-term strategic direction on how the business will continue to make progress in the most material areas.
The Top 200 judges note that there is real evidence of the company’s sustainability commitments and a clear intention to embed them into the nature of the business.
They were particularly impressed with the sustainability and social responsibility coverage in FPH’s annual report, and the balanced reporting that discusses the trade-offs between doing what is right for the patient and the many challenges to the environment this brings.
“Fisher & Paykel Healthcare has undergone a significant ramp up in sustainability initiatives in the last few years with key efforts on engaging with people across the business and making real change,” says Top 200 judge Raumati-Tu’ua.
“There is a real focus on key initiatives that can affect the wider industry and not just its own operations, including eco-design, sustainable packaging, bio-based and circular materials, and environmental lifecycle assessment.”
During the Covid-19 pandemic, demand for some of FPH’s key products increased by four to five times. This necessitated the need to work 24/7, resulting in higher electricity use and other direct emissions during the 2021 financial year.
But in the long term as Covid-19 diminishes, FPH is committed to decoupling carbon emissions from production levels. It has been piloting an internal carbon price during FY22 to factor carbon impact into its business decisions.
FPH has been measuring its carbon footprint since 2012, and since 2019 has set ambitious science-based targets for Scope 1 and 2 carbon emissions, along with a Scope 3 supplier engagement target.
It will launch a new sustainable procurement framework to suppliers in FY23 and FY24, selecting and collaborating with those that align with its values, while also providing education and support on relevant standards.
“As a large company, we have some resources that others don’t,” says Rhodes. “You can’t just expel those companies that aren’t meeting your standard — we are engaging the supply network and bringing them up to speed with what is needed.”
The judges also commend FPH’s efforts to nurture a positive and inclusive culture based on trust and respect. As part of this, it has established employee groups formed around shared identities and experiences and the judges recognise the improvement in the company’s diversity and inclusion statistics over the last year.
The Sustainable Business Leadership award is sponsored by The Aotearoa Circle.
Agribusiness: CEOs of NZ’s largest exporters to China talk strategy (NZ Herald)
Miles Hurrell is chief executive of Fonterra, the world’s largest dairy exporter.
This year marks 50 years of diplomatic relations between New Zealand and China, a significant milestone in the relationship with our largest trading partner.
Fonterra CEO Miles Hurrell says the dairy co-operative also entered the China market 50 years ago and it continues to be a strategically important market, receiving around one-third of its milk.
The dairy giant’s strategy in China is to meet the growing need of customers and consumers for high-quality nutrition and provide premium dairy to its people both online and in-store.
“China is an important part of the global industry supply chain. Innovation, sustainability and efficiency have seen us succeed over the past 40 plus years and we firmly believe these will underpin our future growth,” Hurrell told the China Business Summit which took place earlier this month.
Despite some softening due to Covid-19, Fonterra continues to see firm demand in China in the medium to long term.
“In this current financial year, our ingredients business continues to benefit from strong demand and great margins — especially for proteins.”
There is a strong alignment between Fonterra’s key priorities and those of the Chinese Government. China has been actively pushing for its residents to increase dairy consumption, advising an intake of 300g per person. On the sustainability front, China has indicated bold plans to have its emissions peak before 2030 and ultimately achieve carbon neutrality before 2060.
“There are good examples of us working together on addressing these challenges,” says Hurrell.
“We were pleased to launch our carbon zero butter at the 2021 China International Import Expo and are working with customers in China to deliver sustainable solutions that contribute to their carbon reduction objectives.”
Hurrell says the farming systems that New Zealand operates — not just from a dairy perspective — put this country in a strong position from a sustainability perspective.
“Chinese consumers value what we produce here in New Zealand and the way that we produce it and care for our animals and our land. They are prepared to pay for that.”
Fonterra is not complacent and is focusing on product innovation in high-value, niche categories. It is also looking to grow its food service in China by entering more Tier 3 to Tier 5 cities.
Hurrell doesn’t expect sales volumes in China to grow beyond the current third of Fonterra’s exports. “I wouldn’t see our supply to China increasing, but I don’t see it falling away anytime soon either.”
He says that increasingly, more markets are understanding what New Zealand produces and the provenance story that goes with it.
“The rest of the world is starting to recognise the importance of what we do.”
Zespri chief executive Dan Mathieson says relationships are critical to its success in China.
Zespri has been in China for 20 years, and it represents a significant market for the kiwifruit marketer — making up 25 per cent of total sales and one of its highest-returning markets.
“We have a very strong position in China with healthy, nutritious foods that their consumers want,” Zespri CEO Dan Mathieson told the summit.
In the early days of its relationship with China, Zespri operated from a distance and had no real understanding of the intricacies of the market. “Fast forward to today, we now have 100 people in China across all of the critical elements of partnership building, and that serves us in very good stead,” Mathieson says.
That partnership building includes a shift from Zespri being a “value taker” in the early years of the relationship, to now investing in China itself. “In the last decade we’ve really doubled down our focus on social contribution and trying to work in a sustainable way with our partners in China — and there’s a lot more of that to come.”
Mathieson says it is the strength of the relationships Zespri has in China that has enabled it to overcome challenges in recent years.
“We were nervous about engaging with Chinese officials and partners for a long time. We didn’t understand each other and tiptoed around issues. But we now understand that we want to have the upfront conversations. If you’ve got challenges, you need to put them on the table. You won’t always find an immediate solution, but at least you go away from that meeting with everyone thinking about the same challenges and trying to find solutions.”
After a small sample of its kiwifruit tested positive for Covid-19 during routine testing at a retailer in China, Zespri launched emergency management plans that included cooperating with relevant government agencies to trace the product shipment. “It was the relationships with our partners in China and with government agencies that alerted us to the issues quickly and gave us the space to respond and minimise disruption to our sales and reputational damage to the brand.”
Another significant challenge for the business has been the lockdowns in Shanghai.
Within six weeks, Zespri had to divert all its vessels from the Shanghai Port to another port a few hours down the coast. “Normally that does not happen — there is a lot of process and procedure to go through,” Mathieson says. “But the relationships we built up over nearly two decades helped us to move quickly and successfully import the same amount of kiwifruit.”
Mathieson says Zespri’s relationships will be essential to helping it continue to expand its sales in China in second, third and fourth-tier cities. It plans to double its current sales volumes by 2030 and expects online sales to expand from 30 per cent to 50 per cent.
At the recent US Business Summit, Rocket Lab’s Peter Beck told the audience that the number one problem New Zealand entrepreneurs have is they don’t think big enough.
“Think bigger. Way, way bigger,” he urged. “If you’re starting a company, it is a hard painful thing to do. Don’t start a company with the aim of building a $100 million dollar company — build a $100 billion company and set your sights high.
“I was born at the bottom of the South Island in Invercargill, and if I can build a space company then anyone can do anything. There is no barrier.”
This view was shared by the local venture capital (VC) community at a recent panel event on venture capital, organised by the Angel Association New Zealand and NZ Private Capital. The panel said that while the differences of five years ago between the US and New Zealand VC firms are starting to coalesce, kiwi startups still need to learn aspirations from the United States.
However, some of this may be attributed to another difference the panellists identified – NZ companies tend to be much more capital efficient than US venture-backed startups.
“The US is probably looking for unicorns more,” said Movac partner David Beard, referring to startups valued by investors at more than $1 billion.
“Sometimes the decisions you have to make as a founder to be a unicorn require you to introduce significant risk to your business. In New Zealand, we are a little more balanced where we want our entrepreneurs at a fundamental level to succeed and work out what the measured risk is instead.”
Given the current economic climate, operating as a VC in a bear market inevitably took centre stage at the panel discussion.
Beard explained that the nature of VC investing means that the current climate is negligible since investments, whether they were made over the past two years or will be made in the coming years, would not be realised until an initial public offering (IPO) or sale in a bull market.
“We might have a two-year hiccup, which will see a shift in mode setting from ‘growth at any cost’ to ‘growth with some efficiency around it’,” he said. “Founders and venture capital firms will need to make sure that they are making the best use of the money they have for the next couple of years — it’s about being a bit more sensible.”
A lot of big funds have been raised in recent years in the US, which has seen investors look worldwide for deal flow. Pitchbook data shows that VCs raised more money for new funds in the first quarter of 2022 than in the entirety of 2019.
But these new funds haven’t translated into more investments into startups, with VCs keeping ‘dry powder’ — uninvested capital — aside for existing portfolio companies in case they need more support than they have in the past.
Beard has started to see global funds retract. “We need to make sure we have companies we can fund in New Zealand through co-investment, and make sure the good ones get the resources and money they need over the next few years,” he said.
“Expectations of wildly growing high valuations and selling in three years might have been possible recently, but now we need to be more pragmatic.”
Punakaiki Fund’s Nadine Hill told the audience that the inflationary environment will provide fuel to help accelerate change.
“We saw in Covid how important technology solutions were for people. With inflation, it has never been more important to take costs out of business, and do business and life better,” she said. “We are not traders, we’re not trying to buy low and sell high, we are trying to build companies over the longer-term.”
GD1’s founding partner Chintaka Ranatunga shared this sentiment. While the next three years will likely see a higher failure rate among early-stage startups than in recent years, he also expects to see the creation of exciting new companies.
“This kind of environment is a great time to start something, we will see companies become stronger and have better access to talent,” he said. “Despite the doom and gloom, I am optimistic about the three-year outlook — remembering that for most of us it is a 10-year game, rather than a short-term one.”
An important aspect of a deep-tech VC’s role is to consider: “what is life going to be like in 2030?” — a world that might be without petrol and plastic.
To a certain extent, this means that ESG (environmental, social, governance) principles are naturally incorporated into decision-making.
GD1 continues to see significant demand from its institutional, private wealth and other investors to closely consider ESG metrics.
“We have a bunch of exclusionary criteria around sectors, along with ESG and diversity clauses in our term sheets,” said Ranatunga, with GD1 actively working on requirements for companies to report back.
Pacific Channel’s Kieran Jina said that investors in his deep-tech VC ultimately want to invest in things that will make them feel good.
“If you have a company that adheres to ESG principles, it is more likely to meet that requirement.”
But he acknowledges the increasing concerns of greenwashing and accurate reporting of ESG metrics.
“Measuring is always going to be problematic, and it can become very subjective,” he said.
“The harder aspect has been in the governance area.
“A lot of companies that come to us haven’t necessarily thought about that — if we applied a negative filter to our decision-making then there wouldn’t be a pipeline left.”