ZESPRI GLOBAL SUPPLY UPDATE
Last month, we let the industry know that we would be proceeding with a producer vote seeking support to expand Zespri Global Supply (ZGS). This follows engagement with growers over recent months to explain our ZGS strategy and more recently, what growers will be asked to vote on.
All producers will soon receive a brochure on the Producer Vote which provides the background to what ZGS does now, the strategy for expansion, the risks and benefits of the proposal and details on the voting process. More information is available on the Producer Vote website https://zespriproducervote.zespri.com/.
In our discussions with growers so far, these are some of the common questions that we have been asked. What is the financial benefit of ZGS to the New Zealand grower? There are three areas where we can estimate financial benefits from achieving 12-month supply:
- Reduction in promotional spend required to ‘start the season’ – estimated at 12-16 cents per tray or $40 million per year in 2030 by independent research company Kantar.
- Reduction in overhead costs - estimated to be 6 cents per tray (or $16 million) in 2030.
- Reduction in tariffs - achieved through Free Trade Agreements including $20 million per year in Korea and the $50 million per year in Europe (on current volumes which are expected to grow, along with the level savings) with the deal concluded at the end of June. Korea and the $50 million per year in Europe (on current volumes which are expected to grow, along with the level savings) with the deal concluded at the end of June.
Is the ZGS fruit the same quality as New Zealand fruit?
Zespri Kiwifruit produced or procured by ZGS has equivalent standards and auditing systems in place to New Zealand fruit. ZGS growers must comply with Zespri’s crop protection programmes, pass maturity and residue testing, and meet Zespri quality standards. You can find more information on the performance of ZGS fruit here: https://zespriproducervote.zespri.com/zgs-performance
Do ZGS growers pay for licence?
ZGS growers are not able to buy Zespri SunGold Kiwifruit licence. Instead, growers are authorised by Zespri to grow Zespri SunGold Kiwifruit in accordance with contract conditions. ZGS growers do not own the licence and instead pay through an increased annual commission charge, rather than a single licence fee. ZGS growers can’t sell this licence and Zespri can cancel their authorisation to grow Zespri SunGold Kiwifruit if they don’t meet the terms of the contract.
Does ZGS cost me money as a New Zealand grower?
The costs of operating ZGS (overheads) are funded through the commission that ZGS growers pay so there is no cost to NZ growers. In fact, the growth of ZGS is expected to save New Zealand growers six cents per tray on overhead costs in 2030. This is because in addition to funding the direct costs of operating ZGS, ZGS growers also contribute to costs of other Zespri business segments. As ZGS volume grows, so will its contribution to the costs of running the global Zespri business.
How do you manage the cross-over between New Zealand and ZGS seasons – are New Zealand sales impacted?
Our aim is to always have Zespri Kiwifruit on the shelf in key markets and this means there will sometimes be a cross-over as we transition between New Zealand and ZGS fruit supply at the start and end of the New Zealand season. During this period, New Zealand fruit sales will be prioritised as we look to avoid disruption of sales and promotional planning and maximise the benefits of 12-month supply. The aim is to ensure that New Zealand fruit sales are not disadvantaged by the presence of ZGS fruit.
Why are you asking for approval to plant up to an additional 10,000 hectares of Zespri SunGold Kiwifruit?
With the current ZGS approval of 5,000 hectares of offshore Zespri SunGold Kiwifruit, there is a significant gap between demand and supply which will widen over coming years. Our modelling shows that under the current approved plantings, ZGS will achieve only 35 percent of target demand for Zespri SunGold Kiwifruit in 2030 and we won’t be able to achieve 12-month supply. If approval is given to increase plantings by up to an additional 10,000 hectares, our modelling shows that it will allow ZGS to supply up to 93 percent of target demand (depending on yields achieved) for Zespri SunGold Kiwifruit by 2030, in the New Zealand off-season.
How will you ensure that you aren’t oversupplying the market and impacting on New Zealand fruit sales?
While we are asking for approval to plant up to another 10,000 hectares of Zespri SunGold Kiwifruit, Zespri needs to regularly check that the planting plan is still appropriate to keep demand ahead of supply. To provide growers with confidence in this process, we have introduced a two phase approach:
- The first phase allows for up to 6,000 additional hectares to be planted by 31 March 2028.
- The second phase allows for up to an additional 4,000 hectares to be planted by 31 March 2031, following an annual check that demand is at least 10 million trays above supply.
The supply and demand check will be undertaken by the Zespri Board in consultation with NZKGI and each year from 2023, planting progress will be reported to industry. The approval for new planting will end on 31 March 2031 and Zespri will need to come back to growers through a producer vote to undertake further planting beyond this date.