"fresh Thinking "conference

  • John Luxton
Food, Fibre, Biosecurity and Border Control

"Lets have some fresh thinking"

It is a pleasure to be here at your "Fresh Thinking " conference. Your theme of fresh thinking is one that I keenly support.

Your programme yesterday looked excellent. It focused on the opportunities for the future and the excitement that there is in your sector. My only regret is that I was not able to attend and listen to the presentations.

Today's session, in contrast looks at the political side of things. It looks at the "fresh thinking" approach of this Government. The fresh thinking approach that has provided you the opportunity to get your Boards to demonstrate to you their vision and strategic plan for the next century. In other words the opportunity for growers to hear what the fresh thinking of their boards is to meet the challenges of the future.

Your conference then is on the nail. Rather than look back all the time, with narrow, negative perspectives, we need to look and move forward positively.

Today I have been asked to talk about the fresh thinking of the Government which has given you as growers a genuine opportunity to evolve and position your boards for next century's challenges, and what happens post November 15.

Future

As we look forward to the new millennium we can see that tomorrow's market is in new products and ideas, most of which probably have yet to be invented. We do need fresh thinking.

For example new techniques in genetic engineering provide opportunities to assist fruit production in an increasingly fashion conscious market. Some of your sessions yesterday for example looked at "what is our industry's uniqueness and how does this relate to our competitive advantage". You talked about niche and commodity products, high fashion fruit products, knowledge systems. You talked about the next steps to develop/exploit the industry's four identified competencies - innovation, connectivity, knowledge, and clean and green. You talked about the need to avoid the risks of globalisation but thrive as a player in the global village. These all are excellent examples of fresh thinking.

Fran Wilde, Chief Executive of Trade NZ was quoted as saying in this weeks' Herald

"New Zealand must be seen as a producer of high quality niche products and services or it will become a banana republic. If we don't take our own futures into our own hands our kids will blame us and so will our grandchildren. New Zealand's declining gross domestic product and overall export performance were major warnings for the country which have been talking about a global economy for several years," she said.

She went on, " We can't take it easy. Markets are increasingly competitive and there have huge demand in competition for resources - people, technology, directors investment and customers."

Gary Smith, in last year's Apple and Pear Board Annual report simply said, "It is a hugely competitive market and international pressures are giving us two choices : we stay where we are - where the situation can only get worse - or we change, and change immediately. "

Both these people are saying we need fresh thinking. And they are not alone.

How can Government assist in allowing innovation to become an even greater driving force in our horticultural sector? How can we facilitate change in response to technology and the market place.

Technology like the internet means changes in selling and distribution channels. For example I can now purchase all of my fruit and groceries on the internet and have them delivered without going near a supermarket or shop.A small beverage maker in Scotland now sells worldwide without an overseas agent. Amazon Books provides worldwide access to literally thousands of book titles. This is just one example of the challenges, irrespective of politics, to the status quo.

It is in this context that the government has provided growers with the opportunity to have their boards present a vision and strategic plan for their future. Government has simply said, lets have some fresh thinking.

While we have seen some excellent work undertaken by all involved, we cannot have a environment that constrains more investment, more innovation, more trade contacts. We cant have an environment that continues to constrain or even outlaw fresh thinking.

With increasing supply from various parts of the world, the outlook for fruit looks challenging. It is becoming clearer that to sell next years crop in the commodity markets at better market prices is going to be very challenging. We need to be well positioned for the years and challenges ahead.

Government wants to work with your industries, in the interest of growers. There is no question that Producer Boards have contributed to the economic development of New Zealand. But the Government's industry plan process is about fresh thinking and helping the Boards and the primary product sectors evolve to another level in response to their dynamic commercial environments. We need this fresh thinking to ensure that the primary product sectors continue to make their best contribution towards New Zealand's economic development.

The Government has sought a vision for your industry in the future that is sustainable, competitive and profitable. To deliver on this vision each industry will need a viable long-term strategy for the future.

The outcome must ultimately ensure that those within your industry who wish to use alternative approaches or exercise a bit of fresh thinking to promotion, research and development, processing and marketing are accommodated within a reasonable time frame. The industry plan should

clearly outline how you foresee this occurring and the steps you expect will need to be taken in order to achieve this.

Concerns

I know that some growers have some concerns with this fresh thinking approach. I want to touch quickly of four of them.

I agree that if New Zealand is to compete in the international marketplace in the food industry it needs critical mass. There is no proposal to destroy critical mass. But as our major international marketing competitors have demonstrated, you can have critical mass without Government dictating to it. Critical mass should be because of good performance and economics. Getting politicians out of your industries will help build critical mass rather than hinder it.

Perhaps we will see critical mass enhanced in New Zealand's fruit industry as the kiwifruit, apple and pear growers take advantage of possible synergies available when the legislative barrier to having one fruit organization for New Zealand is removed.

The concept of the so called "single seller" seems to be the most controversial of all the issues regarding Producer Board evolution. It is a different issue from critical mass. Actually our producer boards are not single sellers, but rather one of many in the market place. As Gary Smith says" It is a hugely competitive market place."

Our Boards compete vigorously, and well, with their competitors in this marketplace. They are however a single buyer of New Zealand growers crops to export. Put another way it the Apple,Pear and Kiwifruit Boards are the only organisations growers of those fruits have available to sell them marketing services.

While the cut-throat competition in the world market may encourage innovative marketing, there is less incentive for the Board to pass on the best return to their growers who have no alternative after all costs are deducted.

The second issue is that of ownership of board assets. I would expect that growers will be more than happy to continue to own assets that are providing them with a good return. And growers will also be happy to own them if they are happy that those who look after their assets are accountable to them.

The third issue of concern is that of price undercutting. Outlawing others from selling New Zealand fruit from New Zealand, does not prevent undercutting in the international fruit market place by suppliers from any other country. Undercutting happens now. Commodity prices are set by who is prepared to sell an undifferentiated product for the least price.

The best protection against undercutting or commodity prices is to differentiate your producer through excellent service and relationships, brand, product characteristic, use of critical mass and all those other things that you talked about yesterday. But these are all things that can be done without politicians in Wellington poking their noses in. Politicians will not differentiate your product. Unfortunately, sometimes well intentioned legislation, prevents new innovation, new ideas, and fresh thinking from happening.

I know there are other issues of concern as well and I want to cover one more this morning. That is the allegation that this opportunity is solely driven by ideology. I again want to make it quite clear, that is wrong. If this was the case I would have supported Winston Peters in his budget bid to deregulate the Kiwifruit board on Budget night. I didn't support that because I thought it was important that we make these important changes in an evolutionary rather than revolutionary way and enhance our position in a commonsense and careful way.

Post November 15

Instead Government has asked for some fresh thinking. We have given the boards the opportunity to present to you, the growers, and the government their thinking of their vision for the future and their strategic plans.

When the Government receives the Boards strategic plans and future visions, it will view each plan separately, and carefully work with each Board individually on the detail, the stages and consider the timetables proposed. The plans will be tested against criteria that cover the degree or extent to which:

the plan provides the opportunity for the maximisation of returns to producers and to New Zealand as a whole; the proposed commercial structures are flexible and future-oriented (with respect to the industry and their markets); innovation and alternative marketing strategies are encouraged and accommodated (eg. Branding, organics and new products); new investment is encouraged; and existing investment is protected. there is increased transparency from producers' perspective; accountability and governance structures are improved; ownership issues are clarified (including intellectual property rights); commercial objectives are enhanced and facilitated; there is a separation of the regulatory function from commercial operations; the potential for domestic competition is accommodated; the plan maintains the effective management of tariff quota; legislative provisions required to give effect to the plan are identified; the changing international trading environment is recognised and New Zealand's international trade interests and obligations are met; This list is not exhaustive. But it will work in well with some of the strategic planning already underway in most Boards.

It will require a major team effort to work through these plans to evolve and benefit the fruit sector. Government has set up a Ministerial Oversight Group of Ministers and a Producer Board Project Team to work with the Boards. A Ministerial Advisory Group will also provide me with a different perspective on the Boards visions and strategies.

By November 15, all nine boards will have delivered their plans. But as I have said many times before, nothing will change overnight.

After November 15 Government will sit down again with the Boards and identify firstly, the areas where there is quick agreement and possible implementation; secondly, the issues where we will need to work jointly

with the Boards, to negotiate the more complex and difficult issues to get a sensible outcome in the best interest of farmers and growers.

Since becoming Minister of Food and Fibre a little over 2 months ago I have had several ongoing and constructive meetings with the various Boards. In these regular meetings it has been clear that they are putting in an impressive effort to deliver plans which they think will improve your future.

A key concern that I have is, rather than the Government making sweeping changes over night, as some assert, the reality will be that Government may not be able to deliver changes as quickly as some of the Boards want.

While it is important what Government thinks of these plans, what I believe is most important is that you, the growers and owners, are satisfied with the strategic direction and vision which your Board is proposing to take you in to the future.

After your conference on "fresh thinking", are you satisfied that the fresh thinking of the Boards on their vision and their strategic direction will help meet the challenges of the future for you and your industry?

Irrespective of who is in government, the international market for fruit, with forecast increases in volumes, is looking challenging.

Quite simply we cannot continue the downward trend of returns to growers and rural communities. We must take this opportunity for fresh thinking, and ask can we do even better.

And as you know, change, like rust, never sleeps. The recent edition of the Business Weekly says how Edward De Bono tells people around the world that "competence, information and technology - historically the main building blocks for enterprises -have become commodities. In former years you could gain a break on your opponent by cutting costs or adopting new technology. Now everybody is doing roughly the same thing, and the new information systems are available to all. The creative wealth of the future will be innovation."

We cant afford to continue to constrain and outlaw innovation and fresh thinking in a world of increasingly rapid change.

It is vital that the Boards can show you, as growers and owners, that their visions and strategic plans are going to mean that you can take the maximum advantage of the exciting opportunities into the future, and how they are going to turn them into dollars in your bank account.

I know there are some who may disagree with what they believe the Government has set in train.

But rural people deserve this opportunity to have some fresh thinking.

Thank you.