Adapting to changing conditions a key to success

Posted by James Ferre on 20th August 2008

New Zealand can no longer rely on being the lowest cost producer, with its food industry needing to raise its game to adapt to the changing economic climate of the global industry, according to Professor of Food Marketing Dr David Hughes from the Imperial College London.

His advice, while primarily directed toward the New Zealand food industry, is also relevant to Australian producers and manufacturers.

Quality products, not fancy packaging
Consumers, despite more difficult economic conditions, are still likely to seek out quality but “fancy packaging” is not the way to convince customers about food quality, according to Dr Hughes. “As shoppers tighten their belts, they are now looking more carefully at premium food prices and questioning why they should pay more for a particular product. We know that they will pay more for a better tasting or healthier product, but they will not pay more simply for fancy packaging,” said Professor Hughes, who was in New Zealand as a part of Rabobank’s Visiting Experts program.

Environmental impact of grain-fed beef
Professor Hughes also anticipates an increased resistance to grain-fed beef products. Environmental groups are raising awareness of developed countries’ poor feed-to-meat conversion ratio of eight kilograms of feed to produce one kilogram of beef. “Extreme food deprivation in African countries, alongside excessive grain-fed meat consumption in some developed countries, will also be highlighted by environmental groups which will further exacerbate the issues,” he warned.

Know what customers value
“It’s not what you grow, it’s what you know,” Professor Hughes advised. “Fundamentally, a business revolves around understanding what your customers value, and what your customers’ customers value, and what they are willing to pay for. Then, it’s simply a matter of delivering what your customers value at a sufficiently low cost so that you can make a good profit.”

Testing the international dairy market
Since New Zealand is not the lowest cost producer of any commodity going forward, now is the right time to test markets for value-added products.

Professor Hughes believes it is a good time to expand supply presence in the international dairy markets and potentially produce goods off-shore. “This will be essential for New Zealand in order to prevent losing out on global market share in dairy products as demand outstrips the country’s ability to expand production at home,” he said.