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Horticulture – profit-enhancing innovations: Q&A

So Brian, my first
question to you– you seem very pessimistic
about the growth, particularly the export growth,
opportunities for horticulture given the Free Trade Agreement. A lot of growers I
speak to talk about, in the past, the high exchange
rate as being an impediment. So there’s a bit of a disconnect
there, it seems to be. Well, I don’t think we’re– I
wouldn’t have thought we’re all that pessimistic. Perhaps realistic
might be a better word. I mean, we’re suggesting
1% average year on year over the medium term. I mean, 1%, in real
terms, isn’t nothing. But there are some reasons to
think that this growth won’t be unlimited. For a start, the decline
in the value of the dollar has already happened, and
we don’t see too much more of that happening. We assume that the
Australian dollar, which is at $0.78 or something
now, will average $0.76 over the medium term. And the other thing on
the dollar, of course, is that the US dollar is
not the only game around, and other currencies are not
as strong as the US dollar. Our dollar against
the Japanese yen has stayed pretty much constant. Against the euro, it’s, if
anything, strengthened a bit. So you know, those cans of
tomatoes coming in from Italy have become slightly more
competitive in recent years. The trade agreement’s
certainly a positive. And yeah, some things
have already happened. I think there’s been an increase
in cherries going into Korea. But a lot of those are things
being phased in over– well, in the case of China,
four years or 10 years. So if we’re looking
ahead five years, over the whole range of
horticultural products going to all the countries
in the world, those free trade agreements
are good, obviously, good rather than bad. But they’re just one more
little game for horticulture. They’re not going to totally
change the face of our exports. Thanks, Brian. We’ve got a question. Trent De Paoli. Harry, this one’s for you, mate. Great presentation. What’s the silver lining on
the current berry category opportunity? And where do you see
that in your business, I don’t know, fast forward
24 months from now? And I’d like a similar
comment from Coles, as well. The fresh berry market’s
very fascinating. It’s our fastest-growing
category. Demand’s picked up for
probably obvious reasons. We’re spending about
$52 million this year on eight new berry projects. So we’re thinking
double-digit growth for blueberries, raspberries,
and probably a little bit less for strawberries. And we’ve got new
blackberry [INAUDIBLE] coming a little bit
later, in about two years. So the per-capita consumption
of fresh berries in this country is still only 60% of
the US consumption. So there’s a lot of room
to move, if we do it well. And I think with
the new varieties, we are doing it relatively well. I think if you go back,
the raspberry industry was a niche product
four years ago, because they’re very small
berries, fairly flavourless, and they had two to
three days’ shelf life. The Driscoll’s varieties
we’re now growing have 10 to 12 days’ shelf life. And I mentioned the
18 tonnes a hectare we’re getting, albeit with
a lot of capital investment. And the market is
growing exponentially, because people are now
getting a flavoursome product. What we’ve been trying
to do is get flavor back into a lot of these products. So the berries– I
think berries are going to be biggest category in
the whole fresh produce market. Maybe that’s putting
it a bit ambitious, but that’s what we think. But maybe Jackie
might allude to that. Yeah, so berries
would be what we would call an expandable category. So if you’ve got the product
at the right quality, at the right price, you’ll
get that incidental pick-up by customers. 40 million customers
are week picking up a pound of strawberries
or raspberries is a good place to be. So I’ve long felt that
our berry category, with the exception, probably,
of fresh blueberries, has been a really
underperforming area. Very inconsistent in quality. You know, punnets causing
very variable in size, punnet formation causing
bruised and squashed fruit, and things like this. So I think what the industry has
done over the last two or three years to address some
of that is phenomenal, and I can’t see any
reason why it wouldn’t continue to grow dramatically. As far as the food scare
element and the knock-on, I mean, clearly for
us, I’m sure everybody in selling frozen berries,
it’s been a huge impact. It’s definitely
affected that category. It’ll recover. I’ve been through multiple
food scares in my time. You know, it’ll be all
over in six months’ time. Whether that Nanna’s brand,
as such, will come back– but it’s really just a
change of packaging from their point of view. John West and many others have
survived similar food scares in the past. So I think it will settle. It always does. We can’t grow enough berries
in this country for the demand, anyway. So it’s going to have to go
back to an imported situation if people want to be able
to do the smoothies and all the rest of it that they’ve
always wanted to do. So it’s not– you
know, it’s obviously disastrous for the
people concerned. It’s disastrous for
that organisation. It’s actually disastrous for
the Chinese growing industry, many of whom do
an excellent job, as I’m sure many in this room
have been up there to see. And you know,
we’ve got no reason to tar the whole thing
with the same brush, and I would strongly
advise us not to do that. But for the grace
of God, you know, many, many countries can
go into this situation. And if we were all–
my personal view? If every time there
was a food scare, a country was suddenly
banned from supplying food, Australia would have been out
of the market with the Garibaldi incident, if not many
other times since. So I think we just need to
be a bit more level-headed around it, is my personal view. Just to add quickly to
something Jackie mentioned, we can and will grow enough
fresh berries in this country. It’s the frozen ones
that we don’t grow. Yeah. To do the total market
of demand, yeah. That’s right. OK, we’ve got another question. It’s Paul Fairhall
from Austrade. And thanks, Andrew. Two honourable mentions
for Austrade there in your presentation. But my question is
to Harry, actually. Would you share with us
what the capital or nature of the operating costs are for
moving to protected cropping, just sort of as a general
observation on how that’s sort of changed
your business model, and how it changes some
of those cost drivers? Look, it’s very
capital-intensive. And I guess you don’t
go into protected crop just to grow more of the same. You’ve got to have superior
varieties and really, product which have a high value. But to give you
some idea, I think I mentioned the raspberry story,
that phenomenal yield increase. But we also had a very
high-value, much sought-after product. If I was just selling normal
garden-variety raspberries, we’d still be field-growing. And similarly, with the
high-tech glasshouse, you get 11 times per
square metre the yield out of a high-tech glasshouse as you
do out of field tomatoes, which you need to. Because, for example, our
20-hectare glass house has $65 billion invested. The new 10-hectare
glasshouse we’re building is about $48 billion. So we’re not talking about
small amounts of money. So you need to have–
but that new glasshouse is growing high-value snacking
tomatoes for Jackie’s company and a couple of others
I won’t mention. So that’s very important, that
you’ve got the right market pull-through to do that. It’s not for the faint-hearted. But if you look at the way
climate change is knocking us, and we’ve got still
a lot of field crops. And every year, we lose
money in some areas because of hailstorms and
other– you know, superfrosts or high
temperatures, or whatever. We’re protected somewhat by
having geographic dispersal. But for our investment
across our whole company, we have to have more than
half tied up in that high capitalisation. And that’s why we do so
much work on R&D and IP, because you’ve got to have the
high-value crops to go with. I don’t know whether that
answers your question. Good day. Rob Harris is my name. I’m with the Weekly
Times newspaper. Country of origin
labelling– obviously, you’ve all spoken about
the importance of branding your products as Australian
and that people want Australian produce. And the smart companies seem
to be using that as a market advantage in their
own labelling. Where does government-imposed
regulation fit with that? And how much will it
affect your organisations? You want to start off? Oh, guess I’d better
answer something, hadn’t I? OK, so country of
origin labelling. I think there’s no doubt
that customers, particularly with fresh product,
and products that they see as close to fresh, are
asking for more information. The current
legislative framework probably doesn’t
give them everything that they want to know. So I think it’s a case of
being very careful about how we work that through. So I was looking at an example
in our own business, this week, of cashews. Packets of cashews, you
know, we don’t do anything that anybody else doesn’t do. But they’re coming in
from about 50 countries, because that’s the
nature of that industry. So it says, at the minute,
Product of Australia. Now, we can go and say
Product of Australia, and then we can give a whole
raft of countries beneath it. Or we can try and
work on a situation the allows us to say something
like Africa and India and continental definitions. We’ve got no issue
with doing it, where it’s relevant and
meaningful to customers and we can minimise the
cost up the chain. My personal concern
with it, when you move beyond
your kind of primary or Stage 1 processed
ingredients, is you’ve got to be careful not
to limit availability and add incredible amounts of
cost into the chain. If you’re looking at
something like– I’m trying to think
of something now– a garnish on a ready
meal, you know, that garnish or that
spice could come from lots and lots of
countries, and it could move almost weekly or monthly. And you can’t be printing
packaging every week or month to keep that information. So I think we’ve got to find
the tipping point at which it really matters to customers and
it drives their decision-making and it’s relevant. And then we’ve got to
find a way to give it to them in a method that’s
clear and easy for them to understand. Everyone is following the
legislative framework. And I think, you know, changing
the legislation is fine, and I’m sure there’s
many people who’ve got a view, both sides of it. I think you can come up
with sensible legislation. We already, as Coles, we already
go beyond the minimum labelling requirements. So much of our
packaged produce– things like our cranberries,
it says, you know, Product of America on the back. Product of Australia, made
from American cranberries. So we will do that
wherever we can. But you’ve got to recognise
that you can limit manufacturers’ and suppliers’
ability to supply if you get to tight with that regulation. Just to add to that, I think it
comes back to the categories. And in fresh produce, it’s
a bit easier, in most cases. Maybe not cashews, but
most fresh produce, it’s much, much clearer. What everyone wants is
clarity and honesty. We know that Australian
consumers in fresh fruit and vegetables want Australian
for two reasons– quality and food safety. That’s been pretty
well-established. The supermarkets have done a lot
of that work to establish that. And having said that, it’s
pretty clear, in most products, we and other people
import citrus from California
out of our eight- or nine-month
window in Australia. But it’s very clear,
if you go to Coles, there’ll be Produce of
Australian, or Produce of US, or whatever. And that’s the way it should be. So I think we want clarity. And I think in the
fresh produce area, I support a change which gives
us more openness and clarity. But I do understand
what Jackie’s saying. When you get to the more
complex processing area, it could be a bit
of a nightmare. So how they work through
that, I’m really not sure. Hi, I’m Steve Lapidge from
South Australian Research and Development Institute. A question for Harry. It’s not something that’s
been touched on here, but fruit and veg waste is
normally about 20% on the farm. I’m just interested, with your
move to protected cropping, how that’s actually
changed that ratio. And in the other way, is
there a marketing issue with going too much
to a factory farm, in terms of public feeling? Right. I’ll deal with the
last one first. Factory– yeah. Look, it’s a perception. If I took you to
our glasshouses, or to where we grow berries
under tunnels, or even mushrooms in factories,
they’re very clean and green, I’ve got to tell you. We’ve reduced, for example, our
pesticide consumption by 45% in the last four years. In our glasshouse at
[INAUDIBLE], within two years, we’ll be pesticide free. And we don’t sing the
praise about that, but we’re very strong believers
in integrated pest management, for example. So it’s a bit of a misnomer that
factories concentrate things and they do terrible
things to product. So that’s, I think,
something we’ve just got to sort of take on board,
that there is a perception, but I think if people
see what we do, it’s not regarded as such. Sorry, the first– I
got wound up on that. The first part of your– Now that you’ve moved
to factory– sorry, to protected cropping– Oh, the waste. The waste side. Yeah, sure. Fruit and vegetables– Yeah, yeah. Now, look, a lot of works been
done in the agronomy of that. We’ve got varieties which suit. Our waste is very much reduced. You’d have to go through
individual categories. But we’re running, for example,
our glasshouse with tomatoes, between 2% to 5% waste,
depending on the cycle, depending on which
[INAUDIBLE] we’re harvesting. Field cropping is much higher,
and we’ve experienced that. There’s probably
more like the 20%. In blueberries, we’re getting
something like 12% to 16% in the field crop, and
we’re getting about 5% under the tunnel. So that probably gives you
a little bit of a guide. But can I just add, in a lot
of horticultural products, the bigger waste component
is actually post-harvest. And we spent a lot of time
and money working on that. For example, we’ve extended
the shelf life of our mushrooms by four days, and also reduced
the waste by over half, by putting in a lot
of new protocols and spending a lot of money
on getting from the harvesting the mushroom off the bed, packed
and through the vacuum chiller, and into our store
in under an hour. In under an hour. Every three [INAUDIBLE]
you delay, you lose about a day’s shelf life. So that sounds easy. When you’re doing 500 tonnes
of mushrooms a week, it’s not. So a lot of work on
post-harvest, I’d suggest, is as important as pre-harvest. Another question? OK, we’re getting a
bit of mood lighting, so I’ve got a
question for Andrew. Andrew, you spoke– and I
guess we’ll follow up then. Andrew, you spoke
about the success of the citrus
initiative into China. Clearly successful. You didn’t talk about
some mistakes you made. So if you could play
it all back again, what were two errors you made
that I guess you would revisit? What would you do
better, if you were starting this journey again? What were the two
things you’d do better? And you might have
done it perfectly. Oh, no, I wouldn’t claim that. Well, I think first of
all, we would probably have tackled the
research that was required to get the protocols
over the line earlier and invested more in that. I think our industry now
realises that you don’t sit back and whinge and
say, this is difficult. Government needs to
negotiate something easier. That you can’t sit back and
wait for the years and years that it might take
for that to happen. You actually just get
out there and learn how to do it, and cost it
out, and see whether it’s going to be viable. And in our case, that
did eventually work. But you know, there
was kind of five, six years that lapsed
there, where things could have happened sooner. So that’s one thing. I think the other would
be to probably try to expose our trade a whole
lot earlier in the piece to the realities of China. We did our first trade
mission there two years ago. We could we
potentially could have done that a couple of years
before that, and more of them. Because if any of you’ve
been to China, you’ll know there’s nothing quite like
going there and seeing this. It is an absolute phenomenon. And you’ve got to understand the
place, the people, how fast it moves, and particularly,
what they’re looking for. Thanks, Andrew. And I’d just like
to ask everyone to thank our speakers
today, Brian, Jackie, Harry, and Andrew, for sharing
their experience with us. [APPLAUSE]

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