Protectionism in our backyard

Driving home from work in Wellington I pass a huge Turners and Growers billboard near the Beehive, and there is now another near the airport. I think they’re innovative.

  

The billboards are a small move in a big battle to remove New Zealand’s last remaining, innovation stifling, export monopoly.

The company Zespri has a monopoly on exporting New Zealand kiwifruit to all countries except Australia. Technically a monopsony, because they have a monopoly on buying all kiwifruit from New Zealand growers who wish to export their produce outside Australasia, Zespri is one of only two single-desk sellers of agricultural products left in the developed world.

On the issue, Agriculture Minister David Carter has said the government will be guided by what most growers want – but what about the other growers? Blocking non-Zespri growers from exporting overseas because they are a minority is like banning all dairy producers who don’t supply Fonterra from exporting overseas. Fonterra is subject to competition as Zespri should be.

An Australian Productivity Commission research paper said that pooling of returns across growers “tends to reward lower-valued products at the expense of higher valued products, discouraging the more efficient and innovative producers”. If Zespri is doing as well as it claims, it should have nothing to fear from innovative competition. And what is wrong with competition? In Econ 101 you will learn that a monopoly exporter selling 10 units into an overseas market won’t normally get a better price than two suppliers selling 5 units of the same product. Obviously a firm with rivals will be more innovative and efficient than a monopoly.

Meanwhile a recent Turners & Growers press release, Turners & Growers ‘Mobbed’ by Media And Buyers At Asia Fruit Logistica, highlights missed opportunities:

Buyers here are fascinated with the look of our ENZARed kiwifruit and love the flavour. ENZA Gold is also proving extremely popular and the combination of new high quality apple and kiwifruit varieties under the ENZA brand is creating strong demand. Buyers here want New Zealand kiwifruit. They can’t believe that there’s a monopoly around New Zealand kiwifruit.

Quite rightly the New Zealand government has pushed strongly on the world stage for the freeing-up of trade barriers – yet the Zespri monopoly is blatant protectionism right in our back yard.

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17 thoughts on “Protectionism in our backyard

  1. Pingback: Tweets that mention Protectionism in our backyard « Roger Kerr, New Zealand Business Roundtable Executive Director -- Topsy.com

  2. Well said Roger. In the last month there was an article by one of the Zespri supporters in which the writer said “we need to give up some freedom ” this was in relation to keeping the Zespri monopoly, in support of the monopoly.
    What about the growers who understand what freedom is.
    Cheers

  3. This is an absolute crock of shit. Gibbs returns nothing like the value to HIS growers that Zespri returns to their growers. Zespri is NOT a monopoly and Gibbs is not interested in improving returns to growers. Just ask any of his apple growers.

  4. Protectionist to who? I am a Queen Street grower, and am heartened at the solidarity of kiwifruit grower over the single desk structure. Act party, and business roundtable can promote deregulation all they like but the collective will of growers is sensible, not theoretical. The single desk takes out volatility (the bane of every business). There are several exporters working with Zespri to sell NZ kiwifruit but they must demonstrate benefit to the sector in terms of growing the market and maximising margin. Having multiple exporters, trading off Brand NZ, but wanting to clip-the-ticket would create tension, during the recent(and ongoing) financial crisis , International channels would have played NZ exporters off against each other, and screwed the price down. Exporters would have got their margin, growers would have got small change. Instead and incredibly, Zespri increased sales volumes and price. Growing kiwifruit is almost a bankable horticultural enterprise. And all of this doesn’t impact the NZ consumer, kiwifruit are cheap as chips at green grocers. And in terms of innovation, growers are rapidly moving over to new varieties, visit any kiwifruit orchard around the country and there is a good chance they will have stump grafted [an extensively tested] new zespri variety. It is conceivable that in 10 years, NZ will be importing the traditional green Hayward from Chile as NZ growers will have moved on to new varieties with PVR protection, and we will leave the rest of the world to battle over the low margin Hayward variety. That’s how NZ inc should work.

  5. You state
    “And what is wrong with competition? In Econ 101 you will learn that a monopoly exporter selling 10 units into an overseas market won’t normally get a better price than two suppliers selling 5 units of the same product”.
    I ask, why not ask an apple grower or a sheep or beef grower if the Econ 101 txt book is correct.

  6. I support T&G to the hilt,Zespri is protection for it’s shareholders not the backbone of the industry the Grower. If Zestpri are so good at what they do , they should be able it against competition in the market. Why not do a true and closed indipentent vote and servey on what growers want and not let the bullies at voting at meetings over ride everything or the big players in the industry, who only want to protect there investments eg shareholdings in Zespri

  7. Growers, think about it before the court case Zespri ; T&G . Zespri new varities where avalible to all growers at a reasonable price , Now that they have won the first round the allowcation process has changed again dictated by the big boy and Zespri protectionism to maximise returns to Zespri shareholders. So bring on competition in the industry

  8. Having sold fruit through the multi exporter and single desk regime i know where i get the best return.Look how well the apple growers are
    fairing under multi exporter with many going broke due to shocking returns from their exporter’s .Collaborative marketing licences are available to any exporters how want to export kiwifruit outside Australia and new zealand.You only have to look at Chile to see how Kiwifruit growers are fairing with many pulling out kiwifruit due to the poor returns they are receiving.Again under a multi exporter regime.I’m sure if you were a Kiwifruit grower you would want the best return you could get and that is through Zespri.Many sheep and beef farmer i speak to wish they were operating under a coordinated single desk industry of the likes of Zespri.

  9. Interesting that Tony Gibbs fought to retain the single desk with apples 10 years ago. Since deregulation that market has stagnated, while kiwifruit has experienced spectacular growth. Secondly, Zespri does not have a monopoly and other growers are not blocked from exporting kiwifruit outside NZ and Aust. They have the opportunity (and many do) to export through collaberative marketing arrangments.

  10. How much is Turners paying you. I suggest that you have not had any expereance in any horticulture business. NOt a Grower thats for sure.
    Your understand of compatition is incorrect. I expereanced your type of compatition back in 1989 when there was some 17 exporters. I would suggest you stick to commenting on something you know about. Get your head out of the sand.

  11. Roger, The billboards are the only innovative thing T & G are doing. I thought you were an intelligent man who would have checked out all the facts before bursting forth into Twitter. Firstly anyone can apply to export Kiwifruit to the world through Kiwifruit New Zealand. There are only 2 criteria that have to be met. The proposal must increase the overall wealth of NZ kiwifruit suppliers(growers) & they must collaborate with Zespri. This is of course written in the regulations.
    You state that a company will be more innovative than a monopoly. Who is spending in excess of $8 million a year on R & D into new varieties. Zespri. Who has just commercialised another 2 gold & 1 sweet green variety in 2010. Zespri. Who has exciting new varities in precommercialisation trials. Zespri.
    Who talks about innovative new varieties but only hold licenses or agreements to sell & grow in the sothern Hemisphere. Turners & Growers. Who show off “their” red variety as new when it has been available ex China for some years. Turners & Growers.
    Roger, I suggest you talk to some apple growers who Have ENZA Jazz apples & find out how well they are doing with T & G’s exclusive & branded position. I look forward to your reply

  12. What absolute uninformed and unresearched dribble.
    Put some skin in the game and I doubt you would barking on about philosophical rhetoric. It doesn’t feed your kids or pay bills. Do you have any idea what a success story the Kiwifruit industry is? Or don’t you want to know because it doesn’t fit your ideology?
    How about just a micro second of journalistic research? Do you have any idea what deregulation has delivered to the apple industry? Turners have broken that toy and now screaming and dummy spitting like a spoilt child pointing at the Kiwi Fruit Industry. The same micro second of journalistic research might just look at Turners appalling performance and question how playing in a slightly bigger sand pit will be the panacea to all ills. Growers, the Government and the Judiciary have made it abundantly clear yet the board of Turners have announced their intention to spend yet more share holders funds appealing the court case. Frankly the board may as well take a few wheelbarrows full of cash to the casino.. the odds are likely to be better.. or would that be reckless?

  13. What’s your problem? You represent a business organisation that seeks to help members achieve their goals. I am a kiiwifruit grower, have over the past 30 years have worked hard, brought up, with my wife, 4 children on 3ha canopy kiwifruit, now with 4.5 canopy ha I keep 2 employees and their families in work. How? By marketing my fruit through an organisation we growers own, that remits most of the returns to growers, that invests in our industry more than any other NZ farming organisation does, also a significant % more than does Turners. What value do you put on an industry that does this, exhibiting a growth in revenue returns greater than Fonterra.
    Of course Turners want to get their hands on the money that can be made by kiwifruit growers, so they can boost a dismal sharemarket price and remit profits presently going to growers to their shareholders. Roger Kerr, I challenge you to scrutinise what Turners did to the apple industry. Consider how quickly virtually no profitable family orchards have been left in existence in NZ. Make a critical analysis of the overseas funds gained from apples. Compare it with kiwifruit. Why would you want to see competing exporters cause the loss of livelihood for small growers like me, lose earnings for NZ as a whole and substitute a clever, innovative, market led, grower friendly organisation that we have now got? Shame on you! I thought you were supportive of business people, not just corporates.
    Murray Reid

  14. When I read your comment Roger, I have to assume you know absolutely nothing about the NZ kiwifruit industry and how successful and innovative it is. You could start by reading about the ‘collaborative marketing’ side of the existing structure.

    Yes you are entitled to an ‘idealistic opinion’ based on Econ 101 theory, however as a kiwifruit grower I’m relieved that the current Government have taken more time to scratch below the surface and understand how the existing structure is working so well. The benefits for the NZ public and economy are huge.

    Only NZ kiwifruit growers can buy Zespri shares and consequently a large percentage of growers own shares in Zespri. Over 90% of kiwifruit growers support the current structure. That’s an outstanding mandate, one that any government would go giddy over, and yet Zespri remain humble and continue to build the foundation for NZ kiwifruit growers stronger each year.

    We are very fortunate to have a practical example right in our back yard of exactly what will happen if we lose our existing structure…’The NZ Apple Industry’

    If you want to do something really valuable Roger, throw out your old text books and use your educated mind to write a new one; on how lucratively the NZ Kiwifruit Industry has performed with the current structure. Because if you don’t, someone else will…and Universities all around the world will use it for many years to come.

    Darren Chinnery

  15. Pingback: Unresearched dribble?! « Roger Kerr, New Zealand Business Roundtable Executive Director

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