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Shaping our slice of heaven 2017 |

 Agribusiness: Maximising value

Agribusiness:
Maximising value
Disruption drivers in agribusiness Agricultural technologies (agritech)
Global growth rate We have identifed two key disruption Technology such as drones, robots and

3.83%
drivers in the agribusiness industry:23 sharing platforms are already available
today. New agricultural technologies
•• Global megatrends that intensify the are likely to trigger further cost
transformation within agribusiness reductions. For example, developments
in agritech have improved the
•• Accelerators that will amplify the speed
availability of information to make
of disruption in agribusiness
better decisions to help farmers
NZ advantage score

16.4
improve productivity gains, develop
Disruption driver 1:
more sustainable farming practices and
Global megatrends
better understand value chains.
The global megatrends that may intensify
the disruption of agribusiness, which are
Increasing value chain integration
also relevant to New Zealand are:
Agribusiness firms have started to
Shift from volume to value integrate vertically to optimise their value
Demographic shifts
Ensuring on-farm productivity gains has within the value chain.28 Looking ahead,
The world population will likely reach
been the recent focus of the agribusiness there is also a need to decrease the
about 9 billion, with the urban middle
industry, resulting in increased export complexity of agribusiness value chains.29
class increasing to 4.9 billion, by 2030.24
volumes and “doing more with less”. A Deloitte study into the agribusiness
To support the resulting increase in
industry found farmers already face high
food demand, the Food and Agricultural
As it stands, New Zealand is the world’s complexity and that tomorrow’s farmers
Organisation (FAO) predicts that food
12th largest agricultural exporter, the top will deal with even more competition
production requirements will need to
dairy product exporter, the top sheep and technologies after the disruption.
increase almost 50% by 2050, from 2012
meat exporter, and second top wool Farmers, therefore, are willing to pay for
production levels.25 Therefore, the FAO
exporter and softwood log exporter. The integrated solutions.30
has emphasised the need to consider
agribusiness industry is producing 70% international trade, natural resources
of New Zealand’s total goods exports.21 Disruption driver 2: Accelerators
and access to food.26
Yet, agribusiness in New Zealand The trends that are accelerating the
captures less than 15% of the potential speed of disruption in the agriculture
Climate change
value of export earnings.22 industry are:31
Changing weather conditions will
impact the future of agribusiness, with
In response, the industry recognises New customer preferences
its likely effect on soil quality and the
the need to shift from a volume-driven Consumers are increasingly aware of
quality of produce. According to the
to value-driven strategy by achieving a health concerns and supply traceability,
Organisation for Economic Co-operation
better balance between greater value and are looking for more personalised
and Development (OECD), considerable
and increased volume. However, a products and solutions on demand. In
efforts have been devoted to developing
number of potential disruptors may addition, consumers are concerned
technologies and practices that can
transform the industry and affect any with reducing ecological footprints and
help the agricultural sector to reduce
value-driven strategy. improving or ensuring sustainability.
its greenhouse gas emissions and
adapt to the impacts of climate change.
The uptake of these climate-friendly
technologies and practices, however,
remains low.27

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Shaping our slice of heaven 2017 |
 Agribusiness: Maximising value

Emerging technologies In Figure 8, we identify some practical Traditionally, international trade requires
Emerging technologies include the solutions to contribute to the shift within the involvement of a specific type of
development of biotechnological the agribusiness industry from a volume- intermediary – a “pure trader”. These
tissues, advanced manufacturing driven to a value-driven strategy. companies are not transporters or
technologies such as 3D printing and producers of goods – their sole business
robotics, and connected devices and Increase efficiency along the supply activity is buying from and/or selling to
sensors that transmit data via mobile value chain overseas actors in the value chain who
and smart connectivity. Another example The average loss of 33% from initial are often not the final consumer.
is autonomous vehicles that perform production to final product means that
tasks like phenotyping and fumigating a large amount of value is lost along the The dominance of these traditional
plants. Driverless vehicles could decrease value chain.33 According to our research, intermediaries is being eroded. Online
transport costs by up to 40%, as well up to 22% of these losses could be saved marketplaces for goods and services
as transport time. This could benefit with more efficient supply chains.34 There have become a feature of international
agribusiness exporters, allowing them to is also an opportunity to optimise the trade. For example, dairy products from
transport goods to a port or airport (and transport and movement of livestock New Zealand’s Fonterra use e-commerce
to a final customer) at lower cost.32 and produce within New Zealand to limit platforms to connect directly with
inefficiencies along the value chain. customers in Asia.
Untapped opportunities for
New Zealand agribusiness Intermediate shifts and integrated Collaboration in global value chains
Although the industry recognises the solutions across the value chain The benefits of better and smarter
need to shift towards a value-driven There is an increasing trend of firms collaboration in global value chains are
strategy, there is a lack of information trying to bridge or skip value chain steps vast and include:36
and debate on practical solutions to and reduce supply chain inefficiency
achieve this goal. through direct-to-consumer delivery and •• Better global connections and
food e-commerce.35 productivity by facilitating innovation

•• Sophistication and diversification of

exports
Figure 8: Strategies to maximise value in agribusiness
•• Enhanced visibility across value
chains

Yet, New Zealand has significantly lower

engagement in global value chains relative
Increase value
chain effciency
to other OECD countries.37 New Zealand’s
low engagement in global value chains
Better
calls for action to remove policy barriers
and smarter that may inhibit participation in them.38
Imtermediate
collaboration
shifts across
across global Pursue new and niche products
the value
value
chain In identifying new products, exporters
chains
must look at New Zealand’s comparative
Maximise advantage in production, its position in
the value of the market, and the information available
agribusiness
on what consumers want. Expanding
into new markets would complement a
Pursue value-focussed strategy. Examples of new
new products Agritech
niches by to increase product opportunities are:
recognising the value
New Zealand’s of exports •• Adding value to raw material ingredients,
advantage which at present are exported as
Maintain unprocessed commodities
the quality of
•• Synthetic meats, which are seen as
products
an environmentally friendly protein
substitute
Source: Deloitte Access Economics

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 Shaping our slice of heaven 2017 |
 Agribusiness: Maximising value

•• Targeting the rising middle class. Challenges for New Zealand’s Alternative protein sources
The rapid increase in incomes in agribusiness industry There is growing worldwide capability
Asia, especially from China, has led to produce protein through alternative
to increased demand for high quality The need for investment in processes that could compete against
agribusiness products sustainable farming practice the traditional way New Zealand has
Increased competition for limited produced protein. For example, firms are
•• Taking full advantage of the information
resources means New Zealand developing plant-based meat and eggs
available on what consumers want.
agribusinesses must look at developing to harness “sustainable protein”.45 How
MBIE recently identified a range of
sustainable farming practices.41 This can New Zealand responds to this market
emerging opportunities for Asian
both reduce input costs and develop a shift will determine how we grow our
consumers from salmon and almonds,
positive reputation among consumers.42 comparative advantage as a producer of
to cherries and kiwifruit39
According to a Deloitte study into the food using more innovative means.
agribusiness industry, contained and
Maintain quality of products
vertical farming are the most recent
New Zealand’s agribusiness industry
innovations that are about to take-off.43 Positioning for prosperity
needs to continue to differentiate itself
There is, however, a concern that the New Zealand can be a long-term
from its global competitors by enhancing
current level of investment in sustainable winner in agribusiness by focussing
its established reputation for “clean and
farming practices may not be enough. its strategy more on growing value
green” high quality produce. Changing
consumer preferences also emphasises rather than volume. Yet, there are
Age of farmers big challenges ahead.
that competing on price alone may not be
The average age of farmers is rising
the most effective strategy in the future.
and currently sits at 48, with over 15% Businesses and government will
New Zealand should be able to increase
of farmers over the age of 65.44 The need to take bold steps to take
the value of exports given consumers
challenge is attracting young people to advantage of the opportunities –
are willing to pay a premium for quality
the agribusiness industry. Many farming especially in the next ten years as
sustainable products.
businesses will also change hands many of the biggest challenges hit
in the coming years because of their home. Important questions need
Adopt agritech
current owners’ age. This may result in to be addressed if agribusiness
Agritech will enable new business models,
a push towards consolidation, which is to remain a key driver for
reduce transaction costs and open up
could help New Zealand agribusinesses prosperity in New Zealand.
access to new global markets. Massey
stay competitive against large, global
University recently found that agritech
corporates that can produce more 1. How do we attract investment
in New Zealand is currently seen as
efficiently at lower costs. to develop sustainable farming
just another tool to provide continuous
improvements and incremental practices?
Rethinking sales channels into China
gains.40 If New Zealand wishes to 2. How do we make agribusiness
New Zealand experience in China has
remain internationally competitive, the attractive to the younger
shown the importance of unofficial
agribusiness industry must look to workforce?
daigou channels, in which products are
explore and accelerate the adoption of
bought offshore on behalf of customers 3. How do we find new ways to
agritech to grow the value of exports.
within China. This is enabled by the effectively target the right
Adopting agritech will increase the value
spread of mobile phones and online consumers to maximise value?
of exports by:
e-commerce platforms like WeChat and
4. How do we respond to the
Alibaba. New Zealand companies have
•• Helping New Zealand agribusiness sustainable protein market
leveraged these channels to gain greater
to be more efficient in coping shift?
access into the Chinese market. But the
with increasing environmental
introduction of a 11.9% tax on daigou 5. How do we ensure regional
constraints
products will put a damper on further co-ordination within
•• Triggering cost reductions growth, forcing New Zealand businesses New Zealand is optimised to
•• Expanding market opportunities to rethink their sales channels into the maximise value?
Chinese market.
Overall, structural change is
necessary to collectively incentivise
and drive change to maximize value
within agribusiness.

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