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President’s Pen
Graham Wiggins, President NZKGI
Graham Wiggins
GROWER RETURNS
The continued high exchange rate has
largely contributed to poor fi nancial returns
for all of us. In some cases high reject rates
and / or fruit loss compounded by the poor
returns has resulted in absolutely disastrous
orchard gate returns this year. At NZKGI we
know this because we are taking your
phone calls asking for help. Without doubt
this season has been the worst season we
as an industry have experienced for many
years.
But our fi nancial problems are not all down
to the high exchange rate. Over the last two
seasons the cost of getting our fruit to our
markets has dramatically increased. I am
convinced that the only way to return the
industry to fi nancially viable orchard gate
returns is to dramatically reduce our supply
chain costs. A change in the exchange rate
will be of great assistance but the long term
viability of our industry depends on
constantly removing costs from the supply
chain. My view is that at least NZ$100
million, roughly one dollar a tray, needs to
be removed, and that we need to constantly
focus on cost effi ciencies. I hasten to add
this cannot be at the cost of value and the
factors that generate our premium return.
I’ll give you one example. If two fruit sizes,
say 30’s and 33’s, were combined, the
resulting savings are estimated to be around
NZ$10 million. This option is being
investigated with the markets being asked
how this will affect their ability to get top
price.
WAR ON COSTS
In recognition of the need to get cost out of
the supply chain the Industry Advisory
Council at its October meeting declared a
war on costs and set up a small group to
identify cost savings. This group includes
grower, postharvest and ZESPRI
representatives and will identify initiatives
for immediate cost savings. This is a good
start. But to succeed it needs 100 per cent
commitment from all of the industry.
I give you my and NZKGI’s total commitment
that we will do all that we can to ensure that
real cost savings are made and returned to
you in your orchard gate return.
Although the cost to growers for running
NZKGI is less than 0.008 of a cent, NZKGI
itself is leading the way. Our fi nancial year
ends on 31 March 2008, but we are striving
to return 12 per cent of our allocated
funding back to the grower pool for this
fi nancial year. NZKGI’s Forum members
have taken an immediate 18 per cent cut in
their meeting fees. For the 2008 / 2009
fi nancial year we are working to reduce our
grower funding by 20 per cent on a
permanent basis. We are doing this by reconsidering
the ways in which we work to
fi nd smarter and more cost effective ways
of working without losing effectiveness. This
is a tough but necessary challenge.
SINGLE POINT OF ENTRY
The foundation of the current industry
structure is the industry’s single point of
entry (SPE) – in short ZESPRI’s marketing
monopoly. The SPE came about as a result
of the failings of the multi-exporter model.
Its creation was supported by the vast
majority of growers and from what I’ve seen
that support continues today.
The SPE provides essential advantages in a
year like the current one when grower
returns are under extreme pressure. It is not
hard to imagine what returns would be like
if competing marketers had all marketed
the increased volume of fruit to the highest
paying markets.
For the SPE to remain in place it must
continue to serve all growers. The key
measure from the growers’ point of view is
growers’ return. Therefore the current
situation is putting the SPE at risk. The
Industry Advisory Council’s (IAC) war on
costs is appropriate and timely. Removing
costs is one way in which to increase
growers’ return. The IAC’s war on costs
needs to impact growers’ returns from the
2008 season onward. This is needed to
maintain growers’ confi dence in not only
the future of their industry but of the SPE
itself.
COST CUTTING PLEDGES
To meet this immediate need NZKGI has
invited industry participants to pledge cost
cutting that will directly benefi t the growers’
returns.
NZ KIWIFRUIT JOURNAL JANUARY / FEBRUARY 2008
51