Loading ...The latest edition of The New Zealand Farmers Weekly has two articles drawing on the material in Industry Snapshot component of the New Zealand Food & Beverage Information Project.
“The government’s declared goal of tripling the food and beverage sector’s contribution to export earnings over the next 15 years is a bold one and faces the challenge of a “missing middle”… read more.
Radio New Zealand’s Morning Report discusses some of the implications of the recently completed New Zealand F&B Industry Snapshot, part of the Food & Beverage Information Project.
Alex Tarrant at interest.co.nz has written a great summary of some of the themes that come out of our just released F&B Information Project Industry Snapshot:
“New Zealand has a ‘missing middle’ of large food and beverage export firms, needs to intensify production, and process more primary products before exporting them, a report commissioned by the Ministry of Economic Development says. The amount of capital invested in the food and beverage industry needed to be trebled over the next fifteen years, as firms needed to make significant increases in investment to transition to selling more packaged goods. Firms in the industry were generally farmer-owned and hence were under-capitalised for expansion up the value-added chain….”
Read the rest here…
Economic Development Minister Steven Joyce has welcomed a new report that provides wide-ranging insights into the food and beverage industry. “The Food and Beverage Information Project’s Industry Snapshot is the definitive outline of the state of the industry in New Zealand,” Mr Joyce says.
“Food and beverage is a great Kiwi success story and there are huge opportunities opening up. Asia now buys 40 per cent of our total food and beverage exports while the UK buys only 5 per cent. The rising Asian middle class is demanding high-quality products and New Zealand is in an excellent position to meet that demand.”
The Industry Snapshot is part of the Food and Beverage Information Project, launched late last year by the Minister of Economic Development. It is the most comprehensive analysis of the New Zealand food and beverage industry ever undertaken.
The report shows that 75 per cent of the top 64 food industry firms by turnover are owned by New Zealanders, with Japan, Australia and the US accounting for the majority of foreign ownership.
“The Food and Beverage Industry Snapshot lays down the challenge. It shows us where the industry is doing well and where we need to do more work to build our competitiveness and capture more value in global markets,” Mr Joyce says.
“The industry exports $25 billion in food and beverages each year. Much of this is ingredients which others use to make finished products. The report estimates that international consumers pay from $140-$200 billion at the checkout counter for food products that are primarily of New Zealand origin.
“It’s not all about producing more. It’s also about capturing more of that value for New Zealand. New Zealand is about the same size as Italy, yet Italy exports twice as much food and beverage by value as New Zealand as well as feeding a population of 60 million.”
For more information visit www.foodandbeverage.govt.nz
Today’s New Zealand Herald has an article on the expected growth of internet sales:
“Retail analyst Tim Morris, of Coriolis Research, said a 15 to 20 per cent saturation point sounded about right, although some segments of retail would be more adversely affected by the shift to online than others. Bricks-and-mortar retail had a future, he said. “There will always be malls, just what’s in those malls may change.”
Today’s New Zealand Herald quotes Coriolis director Tim Morris:
“Retail analyst Tim Morris, of Coriolis Research, says Domino’s has been “winning the war” against Pizza Hut internationally for the past 20 years. The firm’s franchised business model gives it its edge in the Australasian quick service pizza market, he says. “Franchisees control cost better and they don’t really price their own time because they’re mad entrepreneurs.”
Today’s Wall Street Journal quotes Coriolis:
“Fonterra Cooperative Group Ltd. of New Zealand, one of the world’s largest dairy exporters, is greatly expanding in China in a major push to gain ground in the country after a 2008 milk contamination scandal at its Chinese partner tarnished its original growth plans…
“Fonterra will have to prove that it is indispensable in China,” said Tim Morris, director of food management consultancy Coriolis Ltd. For the time being, China needs Fonterra’s supplies, but there will come a time when the country will be able to produce all the milk it needs, Mr. Morris said.”
Coriolis Director Tim Morris recently presented the Investor’s Guide to the New Zealand Food & Beverage Industry at the World Halal Forum in Malaysia. Following his presentation he was interviewed by Amilin TV:
WARC, which bills itself as “the most comprehensive marketing information service in the world” (!) picked up on the Choice story on the growth of private label in Australia and built on it. They quoted Coriolis Director Tim Morris:
The analysis suggested this formed part of a broader issue of branded products “disappearing” from Coles and Woolworths, harming manufacturers and often being replaced by “copycat” own-label lines. ”At the end of the day, the retailer owns the store and can do whatever they want,” Tim Morris, managing director of Coriolis Research, the consultancy, said. ”They can put rival products on the bottom or top shelf, and their own products at eye level. They can manipulate the price. The only controls are competition and the consumer.”
Choice “The People’s Watchdog” of Australia has an article about the recent growth of store brands in the Australian market. The article features commentary from Coriolis director Tim Morris:
“But supermarket shelves aren’t flexible – there’s little room for growth beyond the initial supermarket floor plan. A supermarket’s own brand needn’t worry about a shelf space squeeze. Where two brands compete for the same shelf, and one brand’s parent owns that shelf, it’s not hard to tell who the winner will be. “At the end of the day, the retailer owns the store and can do whatever they want,” says Tim Morris, managing director of NZ strategic management consulting and market research firm Coriolis Research. “They can put rival products on the bottom or top shelf, and their own products at eye level. They can manipulate the price. The only controls are competition and the consumer.”…
Australia is in a relatively early phase of home brand expansion. One of the world leaders is the UK where, according to a 2011 Nielsen report, private label sales account for 52% of supermarket sales. The UK’s four majors, Tesco, Asda, Sainsbury’s and Morrisons, have a combined market share of about 76%. Individually, they hold from about 12% to just under 30% of the market.
Morris says that while the UK supermarket landscape is generally positive, private label expansion can go too far, as happened in Sainsbury’s a few years ago. “[They] just kept increasing the number of private labels and removing brands. They tried to jam private label down people’s throats – it was up to 70% in stores. Customers didn’t want to shop there.”
As Sainsbury’s was aggressively expanding its private label offering, its competitors were moving at a slower pace. So customers went to those shops where choice still existed and, Morris says, Sainsbury’s sales dropped and so they had to wind it back.
While Sainsbury’s ventured into an aggressive private label expansion alone, Coles and Woolworths continue their much safer game of follow the leader – each time one launches a new pricing strategy, the other follows. IBISWorld says that “the battle of the private labels is expected to intensify”.
But Australian consumers aren’t powerless, because the war for shelf space is really just a battle for your shopping dollars. Morris says it’s a simple case of money talks. “Say you go shopping one day and your favourite brand of marmalade is gone. If you complain and then go to other stores, the marmalade will return.”…
Is the quality of cheaper home brand products consistent with those produced by big-name brands? In our previous large-scale private label versus leading brand taste and nutrition tests (see CHOICE, September and October 2010, or log on to choice.com.au/privatebrand), the results were mixed.
Morris believes home brand quality has been sketchy in the past. “Australia went through a period of bastardised products. When a brand owner is selling quality they have to draw a line in the sand and say they can’t make it any cheaper than that. When you make private label, the retailer can tell the manufacturer to make it cheaper, and they will.” Read the whole article here…
Two years after we circulated it among our clients and select other interested parties, we have today released our report “Fonterra and the New Zealand dairy industry: options going forward” to a wider audience.
While “yesterday’s news is only good for wrapping fish,” hopefully some will find this of more general interest.
From today’s Dominion Post:
“The menu may seem healthier at McDonald’s with a new salad initiative but dietitians are still not convinced. Customers can now choose salad instead of fries with all combos for the same price…
Retail analyst Tim Morris, of Coriolis Research, said food outlets globally were trying hard not to be seen as part of the problem. As with any new product, there would be higher costs initially but profit margins could grow depending on success, he said.
“To their credit, they do try. Anything that works they get into and they push. Look at the success of McCafe.”
Mr Morris said McDonald’s had been trying to “make salads make sense” for a long time. The problem with making salads profitable was that consumers often said they were after healthy options but would change their minds at the counter and go for the fries.”
From today’s Business Day:
“Moves overseas to converge physical retailing with online sales have been ruled out – for now – by the country’s biggest listed retailer, the Warehouse…
Retail analyst Tim Morris of Coriolis said click and collect had been around for a long time in the supermarket industry, but it was difficult to make it cost-effective. ”Depending on the product, the challenge with it is, it’s a cost-adding exercise.”
Overseas, the world’s biggest general retailer, Wal-mart, had not embraced it, and those that were doing it well had both scale and a sophisticated approach to inventory, shipping and returns. Morris said the Warehouse would be better to “stick to its knitting”.”
From today’s Food Navigator Asia:
“Manuka honey, a native New Zealand honey, came to prominence in the late 1980’s when research by Professor Peter Molan of the University of Waikato demonstrated its potent antibacterial effect and this activity subsequently became known as the ‘Unique Manuka Factor’…
Estimates from a government sponsored report on the country’s food and beverage market (Coriolis Limited. October 2011) suggest that the total turnover for all honey in New Zealand, which is sold for its benefit as a health food or therapeutic is approximately NZ$170 million per year. This includes both manuka and non-manuka honeys.”
Read the Nutraceuticals report from the F&B Information Project here.
Today’s Dominion Post discusses electronics chain Dick Smith:
“Tim Morris, a retail analyst for Coriolis, said Dick Smith had given up a viable niche to try to foot it with mainstream electronics retailers. ”If you needed some little connector, say if you had a phone and computer and were trying to plug the two into each other, where did you go? You went to Dick Smith.
“They reduced their range and … tried to move to a new position but they really didn’t make a go of it. They’ve lost their way. The whole space is so competitive.”
Jaycar had moved into the space of selling cables and connectors and in mainstream retailing JB Hi-Fi appeared to be “eating everyone else’s lunch”, he said.
JB Hi-Fi had a strong value message and its model of selling a big range of media including CDs and DVDs, as well as the big gadgets, was working. ”You go in there because you think you might get a CD or the new video game … and you end up buying a MP3 player or a tablet or a television.”
Cutting Dick Smith loose would let Woolworths focus on Masters – its store set up to challenge Bunnings in Australia, Morris said.”
From Today’s Food Navigator Asia:
“New Zealand’s natural products industry has exceeded revenues of NZ$1billion (US$823.2m) which highlights the significance of this sector and its growth potential, especially in exports…
Research on New Zealand’s nutraceuticals and foods for health sector, compiled by consultancy firm Coriolis, noted that Natural Products New Zealand has articulated a growth target of $5 billion by 2025. It predicted that an 11% year on year growth will be required to reach this target…
The Coriolis research suggested that industry collaboration and consolidation is required within New Zealand’s natural products industry as it is a highly fragmented industry with small and under-resourced companies.
It noted that a wide range of points in the supply chain that could benefit from increased economies of scale and that industry and science must align to become innovative.
Coriolis suggested that investors should focus on proven products achieving traction in export markets, such as Manuka honey, green-lipped mussel extracts and dairy-related or derived nutraceuticals.”
Read the Nutraceuticals report from the F&B Information Project here.
Food Navigator Asia has published an article based on our recent work for the New Zealand Food & Beverage Information Project.
“New Zealand’s food and beverage sector does have the growth potential to reach government targets of tripling exports over the next 15 years, with opportunities in processed foods and beverages, according to report.
New Zealand can hit government targets and triple its export market
The report compiled by research company, Coriolis, and commissioned by New Zealand’s government, identified “significant untapped capacity” in its food and beverage industry and suggested that it can export more…”
Read more here.
Today’s Waikato Times (among others) has an article on online Christmas shopping quoting Coriolis’ resident retail guru:
“Tim Morris, a retail analyst for Coriolis, says although online shopping is clearly gaining ground here, there are structural issues to deal with.
“There’s an issue in New Zealand of scale. You’re servicing a market of four million people and to do it properly, to reduce cost, you’ve got to build a huge packing warehouse.”
“EziBuy do a really good job but they have got the business and scale to build a proper warehouse that packs orders on demand and ships them to people around New Zealand and Australia . . . they can’t reduce costs that much unless they are efficient behind the scenes.
“The success of Trade Me suggests that online retailing has further to run but I don’t think this Christmas is going to be it.”"
An article in FMCG Magazine about the New Zealand Food & Grocery Council’s annual conference said:
“A report produced for the Ministry of Economic Development by Coriolis Research was the standout feature of the 2011 New Zealand Food and Grocery Council conference held in Wellington at the beginning of November. As evidence that the food production sector has a bright future it was a breath of fresh air for delegates, and for those who see export business opportunities for food processing it added weight to recent advances such as the Food Bowl production development facility in Manukau.
While for many the conference highlight was a rare opportunity to dine in the banquet hall at Parliament’s Beehive, complete with entertainment by the Topp Twins, it was the intensive data rich compilation of the Coriolis report that stood out as the salient feature of the conference. While the report is available online to all who are interested in reading it in full, its presentation was revelatory for many as it dispelled a number of myths about the food export sector that have hampered its development in the past.
One of these was the claim that New Zealand is isolated from its markets. While the report was commissioned to understand the drivers of the growth and success of processed food exports to Australia, it made clear that the enormous potential of other Asian and Pacific markets was well within our neighbourhood. It also compared New Zealand with real competitors and similar sized nations, rather than with the giants of China, Japan and the United States. By matching New Zealand’s performance with nations such as Denmark, Switzerland, Norway and Austria, the real advantages of our food business were enhanced.
With data showing that exports of food to Australia have been growing at double digit rates to a current level of NZ$2 billion a year, with half in high value processed foods, the report stimulated a lot of discussion amongst delegates. Some even questioned whether the food industry was getting the level of recognition from government that was commensurate with a sector that shows food is the biggest lever in the New Zealand economy…
… the Coriolis research was the most talked about presentation at the conference.”
Today’s Dominion Post discusses the “supermarket wars”:
“Retail analyst Tim Morris, of Coriolis Research, an Auckland market research firm, says store brands do well when the economy is down. “But when the economy is roaring away, consumers return to the brands they know and love.”
Mr Morris says that often when store brands grow in popularity, it is the smaller manufacturers being squeezed out, while loyalty to popular brands remains strong. But manufacturers can sometimes have the option of producing the supermarket’s own store brand products to remain profitable…
Coles and Woolworths are accused of mirroring designs, colours, names and labels of well- known brands. Mr Morris says this is a common trend worldwide, though not seen much in New Zealand.
“It’s just a game that is played. Manufacturers are constantly concerned about it but it doesn’t really impact the number one brand.”
Products like yoghurt and vitamins are constantly changing so copycat brands find it easier to focus on the basic products like bags of sugar, which generally can’t change much. ”There’s always something going on, it is constant tech-warfare. Some categories are very resistant to private labels.”
Mr Morris says consumers are generally very loyal to brands even if there is no real logical difference. Customers have strong brand loyalty to some products and in areas like tobacco, razor blades and hair-dye store brands will never do as well.
“Dairy is more susceptible to private labels because there’s not much innovation. New Zealand is a long way away from the rest of the world. We are just seeing the slow and gradual growth of private labels.”
