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Farming: What business are farmers in?

05 Dec 2017

“With all the things we are told about the future of farming, how can I tell what is real and what is a dead end?” asked one of my clients the other day. 

Soon after I met a very interesting agri-business leader called Ian Proudfoot. He is the global head of agri-business for KPMG and he is based here in New Zealand.  He was eloquent and clear:

  • Farmers are in the food business. You grow food. Farming is what you do but saying you are a farmer limits you. It is inward looking. On the other hand, by saying “I grow food,” you are focusing outwards, on how your product is consumed by the end user. It is a subtle, but important difference.
  • As a food producer, you are not guaranteed a place at the table. Food is just one form of sustenance and sustenance is the only given. Sustenance can be got in a lot of different forms other than the food you grow. Some food producers are innovating, producing more and more protein from vegetable sources.
  • Focus on consumers. Find out what they are looking for. Strive to understand them. Customers preferences are changing. They are wanting to know where their food comes from (known as provenance). They want a good story behind their food. A growing number of consumers are interested in animal welfare, health and organics.
  • Move up the value chain. Add more value to capture more of the final retail spend.

Proudfoot makes the point that while everyone is focused on producing volume per se they are ignoring other ways of increasing their wealth. And once food producers start to understand their true master, the end client, they change the way they talk with their organisations, with their processing partners and with the public.

Proudfoot suggests that “Creating and capturing value falls on every person and organisation involved in the industry, including farmers, processors and exporters, industry organisations, councils, Maori trusts, iwi and service providers.”

“Only by the whole industry seeking ways to work collaboratively will the move from a producer-focused, volume-based culture to a market-focused, value-based culture happen quickly enough.”

It was interesting to hear Proudfoot describe the percentage of the final retail spend that food producers in New Zealand received:

  • On average New Zealand food and fibre producers receive about 13 cents in every dollar of retail spend
  • Within that, Kiwifruit growers receive about 23 cents in every dollar of retail spend, and
  • Grape growers receive about 2 cents in every dollar of retail spend. These are the two extremes.

Proudfoot adds that “The biggest risk to success is complacency. People don’t recognise the impact structural changes in the Agri-Food sector globally will have on our traditional markets.

Proudfoot notes that “New Zealand is the only developed nation in the world that relies so heavily on growing biological products and selling them to the world to pay for schools, roads, hospitals, overseas trips and the high-tech lifestyle we all aspire to.”

It seems to me, recognising we have a problem before it kills us is the first step. What happens next? With the big picture in mind, take small micro or mini steps. Talk to others about the future of food and your place within it. Develop your language around the subject and this will help expand your thinking. Think about it last thing at night and when you wake up in the morning. Build your confidence with the subject of marketing and read up on current trends. Slowly new insights will come.

More about some of the solutions leaders are advocating next fortnight and some good case studies of farmers moving aggressively up the value chain that I will share with you.

Keep asking great questions …

Donald Rhodes2      

 

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