We regularly hear the refrain that Fonterra needs to create more value added business. With the potential opening up of the global dairy trade if the TPP reaches a conclusion, the international dairy trade will only become more competitive. Conditions for a small dairy producing nation further from major markets that any of its competitors are likely to become more challenging than ever.
Macroeconomic data shows that the global demand for dairy protein will continue to grow. The challenge for New Zealand is that many large dairy producing nations are better positioned to take advantage of this growth in the pure commodity space. New Zealand’s clean green reputation is key to the value our brand. However as more produce comes on line in the cutthroat commodities trading environment this may give us a small premium but only on top of falling long term average prices.
So what is the future value of New Zealand dairy products? Some have said that we have to produce the next Nestle, that we have missed the boat having not creating a global FMCG multinational from our antipodean base. FMCG is one of the most competitive and specialised areas in the world and one where New Zealand has limited expertise. We do however have other areas where we are world leaders.
Historically New Zealand dairy companies have been at the forefront of innovation. They have led the export of butter, the creation of Semi-soft, extracting colostrum and lactoferrin, giving the world Dairy Whip or creating bespoke cheeses for global pizza chains. New Zealand scientists have been creating value for specialists businesses in food, nutrition, health and medical sectors for decades. The products are cutting edge and high value and doing more of it will continue to add value to the milk take in large volumes.
In a world where the importance of convenience and health in food and beverage grows every day New Zealand’s competitive strength is the ability to create new solutions for manufacturers around the world. The opportunity is to develop an industry mind-set focused on being the first to identify emerging opportunities, challenges and needs in global food sectors and bringing novel, compelling solutions developed in the dairy innovation hotspot of New Zealand.
How to get there? Develop a national culture of investigation and exploration. See the value in taking the time to understand the emerging needs beyond commodity supply in growing markets and bring those insights into the New Zealand dairy innovation hubs. Challenge the way things are done now and ask why they couldn’t be done in a better way. Then develop ‘the way’.
In addition send the innovators out and collaborate with thinkers around the world. Not annually but continually. Invention feeds invention and hothousing with other great minds will continuously feed new thinking into the New Zealand innovation process. Look outside the industry and identify fresh inspiration.
Getting ahead of the innovation and value curve will require over-commitment in the development of insights and developing the skillsets to transfer insights into commercial reality.
What other options are there for building innovative market led value into New Zealand’s most valuable agricultural industry?