Transforming the food and beverage sector

Speech to the launch of the government's response to the Food and Beverage Taskforce Report, Villa Maria Winery, Auckland

Thank-you for attending this launch of the government’s response to the Food and Beverage Taskforce report. And a special thank-you to Alison Quesnel for hosting us here today at Villa Maria, standing in for George Fistonich who is overseas.

Since the Labour-led government came to power in 1999, we have made growing and transforming New Zealand’s economy one of our highest priorities. In 2004 we decided to focus on the food and beverage sector. The reason is obvious. Half of New Zealand’s exports are food-related. The growth in the sector’s productivity in both on-farm production and in food manufacturing has been consistently above the average for the whole economy and the sector employs one-in-five people.

Just as important, the sector has provided a platform for the development of a whole range of associated high-value industries: for example our strength in dairy commodities provides a critical foundation to develop specialist high value dairy products.

When we talk about economic transformation, this is what we mean - using our existing strengths and capabilities to move into new but related areas of activity.

New Zealand’s food and beverage sector is characterized by innovation and growth, and offers significant long term development potential. It is one of the few sectors where New Zealand has the size and scale to compete effectively on the world stage.

If I were only to have one single outcome from establishing the Food and Beverage Taskforce, it would be to re-affirm the sector’s place in the sun, to communicate its importance to the public at large as a sector with huge opportunities for investment, for entrepreneurial endeavour, for growth and for exciting and rewarding careers.

I think it is fair to say that we handed the taskforce a difficult job and I want to take this opportunity now to thank them for their work and commitment. I want to especially thank taskforce chair Tony Nowell who brought a lot of energy to the process.

One of the key things for me in the taskforce’s report Smart Food, Cool Beverage, New Zealand’s future in the food and beverage sector was the call for leadership and greater collaboration from industry.

I firmly believe the future for this sector lies not only in appropriate and effective levels of government support - but also in everyone working together.

Today I want to drive home the strong message that it’s our attitudes and commitment that will make the difference.

There are challenges: our comparative advantage in pastoral primary production is under threat from low cost competitors, consumers in key markets are raising concerns over food miles and sustainability and our natural resources of land, water and energy are limited.

But there are strengths, too: we have a strong and diversified research infrastructure; a history of innovative and flexible responses to market opportunities; an international reputation for food safety and consistency of product; and we have a closely networked community that can work together to leverage opportunities.

The taskforce said that the future of the sector lay in our collective ability to improve on three fronts at the same time: protecting the existing base by constant improvements in productivity and efficiency; developing new products and processes to capture the opportunities that are opening up in the area where nutrition improves personal health and wellbeing, and penetrating fast-growing emerging markets, particularly Asia.

The government’s response to the taskforce tackles each of these challenges through a work programme of six key initiatives that - appropriately for Export Year - focus on lifting our high value food and beverage exports.

It includes $19 million of additional funding that I am announcing today for expanded in-market assistance for kiwi food and beverage firms to develop new markets.

The other five initiatives are:

• Infrastructure for innovation - Working with key stakeholders in the industry to look at establishing purpose-built pilot scale production and processing facilities for new products;
• Increasing the business capability of food and beverage exporters through an audit and mentoring programme;
• Improving productivity and sustainability in pastoral industries;
• A Food and Beverage Research Roadmap to provide a clear set of directions for food innovation research; and
• A joint government/industry body to oversee and support implementation of the food and beverage Skills Action Plan which the taskforce developed.

These last three initiatives span the strategic priority areas identified by the taskforce.
We’ve also developed a vision for the sector’s future. Much of this vision was derived from the taskforce’s own thinking.

I want to highlight just a few key areas that will, in my view, reveal a transformed food and beverage sector:

• innovation and commercialisation efforts are directed at meeting real market demands;
• greater collaboration in market development efforts;
• a more diversified product base;
• design and marketing work to establish strong brands and grow significant international businesses.

And we need more globally significant food firms. To get there we need more smart outward direct investment to secure ownership of more of the value chain, increase market share in high growth markets and establish all-year round product supply, including production closer to markets.

I think it is important to remember, with a sector of this size and its economic importance, that many things the government does will impact on it. For example in the budget we introduced a research and development (R&D) tax credit which we expect the food industry will benefit from.

As well as the $19 million of additional funding I am announcing today, the budget also included $8 million for climate change research, $12 million additional funding for Pastoral 21; $8 million for research into increasing productivity and sustainability across primary sectors and $14 million for research into innovative foods and other products and an extra $37.4 million to be invested in biosecurity. Recently the Riddet Centre in Palmerston North was recognised as a Centre of Research Excellence with $20 million of funding.

All of these things are earmarked as important to the food and beverage sector. All of them bolster the three strategic priorities the taskforce identified.

Today I want to celebrate the food and beverage industry, but I also want to lay down a challenge.

The challenge is to work together to provide the collaboration and leadership that the taskforce called for. We need a sector that’s thinking smarter, thinking global, and is ready to turn the threats we face into opportunities.

Driving transformation in the food and beverage sector is about identifying and seizing opportunities to build globally significant high-value firms and collaborative projects between firms. Despite the challenges, I believe it can be done. There are ample opportunities and we have great innovative potential. But we need to lift our game in matching innovation to opportunity.

And the government will also do its part. The taskforce recommended that government engage directly with the top-tier of firms in the sector and with key stakeholders.

In my view it is this kind of focused dialogue and engagement where some real gains can be made.

It is about thinking differently to drive the growth of the sector. It is about developing the sophisticated business models, innovative products and marketing skills needed to succeed in increasingly complex markets.

To conclude, I grew up hearing the mantra that farming was the backbone of New Zealand.

Today we are as good at producing as ever, but we need to be equally good at design, marketing, sales, service and the supply of product and process solutions. So that in the future we can say that the backbone of New Zealand is our portfolio of innovative nutrition solutions.

I take my hat off to this country’s food and beverage sector and what it has achieved in the last decade. I look forward to working with the sector over the next months and years to achieve a transformed economy and a better life for New Zealanders as a result.