A Study of Structures for the Feijoa Industry

Client Introduction New Zealand Feijoa Growers Association (NZFGA) 200 Grower Members Funded by levies collected at first point of sale Purpose: Form grower groups so they can achieve greater supply volumes Cannot actively participate in market activities

Problem Background Passionate and innovative growers Constraints: – Small production volumes – Competition between growers in local market – Fragmented industry structure Domestic coordination required for increased viability and profitability of growers

Problem Statement and Objectives Determine a structure that will allow the New Zealand Feijoa industry to improve viability. 1.Identify supply chain segments 2.Analyse and recommend potential structures for each segment 3.Recommend a possible industry structure

Methodology 1.Weekly group meetings and task division 2.Literature review 3.Analyse current structure 4.Determine interview questions 5.Interview industry participants – 7 growers – 4 representatives from comparable industries – 1 current marketer 6.Segment recommendation 7.Industry recommendation

Ethical Issues Communication barriers Commercial sensitivity – Personal – Corporate Willingness to participate – Interview – Recorded Bias

Current Supply Chain Fragmented Key Segments – Packing – Processing – Marketing – Exporting Product Manufacturer ProcessorProcurement Products Additives Growers Farmers Market Overseas MarketLocal Retailer  Supermarket  Independent Wholesaler  Wholesale Foodservice Pack house Exporter Marketers Flee Market

Results Processing Advantages – Growth in products and demand – Low cost production Disadvantages – Price undercutting – Low to negative margin Recommendation Status Quo Packing Advantages – Flexibility – Innovative- low cost – Individual control Disadvantages – Lack of standardisation – Lack of funds – Volume Recommendation Regional Co-operatives

Exporting Advantages – Can be good returns – Proactive and passionate Disadvantages – Risk – Cost – Quality control – Lack of international consumer knowledge Recommendation Horticulture Export Authority Marketing Advantages – Market information – Farmers market takes out middleman Disadvantages – Not well known – Grower individuality – Seasonality – Too many domestically Recommendation Company Results

New Generation Co-operative Supply only by members 1 tree = 1 share Recommended Industry Structure Growers Regional Packhouses Markets Responsible for:  Packing  Procurement  Processing  Marketing  Quality Standards National Cooperative Information Flow Produce Flow KEY

Recommendation Implementation Range of passionate growers and an independent to drive proposal Produce prospectus Grower uptake – regional launches Required production density Implement prospectus – legal formation

Acknowledgements Tim Harper (President NZFGA) Representatives from: – Feijoa Growers – Marketing – Kiwifruit industry – Avocado industry – Blackberry industry – Blackcurrant industry Faciltator – Dr. Elena Garnevska (Massey University) Massey University – Dr. Andrew East – Daniel Conforte

Cooperatives (Chaddad and Cook, 2004)

New Zealand Feijoa Production GrowersArea PlantedCrop VolumeDomestic ConsumptionExport nohatonnes($m)($m)fob Source: Horticulture New Zealand Fresh Facts 2011

Detail of Recommendation Goal: 90% registered members by year 5 Supply: – Only by members – 100% of production Payment – Based on production – Minimum price plus pool payment Terms of Trade – 20% of minimum price at time of supply

Costs – Establishment costs covered from investment – Variable costs paid from revenue – Paid out of retained earnings Shareholding – 1 share = 1 tree – Share value: Market value Voting Rights – 1 share = 1 vote – Capped at 5%

Board – 3 growers – 2 independents Redemption – No exit within 1st 3 years – Shares valued at time of exit – Commitment by September 1 prior to supply season – Payment made by August 31 year following non supply – Shares transferable with sale and lease of trees HEA : – Look to establish after 7 years

Prices