New Zealand needs to add more value to food exports before shipping them overseas in order to help the economy catch up with Australia by 2025, according to a report commissioned by the government.
The report focussed on the growth of the country's processed food and beverage (F&B) exports, saying they were the biggest lever available in the quest to double New Zealand exports per capita by 2025.
Based on the experience of its temperate climate, small country peers, New Zealand should be looking to at least double its exports per capita if it wanted a 60% increase in GDP per capita by 2025, the report says.
"To double exports in 15 years, we must work with what we’ve got – the biggest lever available is food and beverage exports (53% of export value)," the report says.
"While New Zealand achieves good F&B exports per capita, it achieves poor F&B exports per square kilometre; we would appear to have “spare capacity” to export more," it says.
"However, declining available farm land and falling overall animal numbers strongly suggest that the path to exporting more F&B in the future is not just “more of the same”."
"In many traditional sectors, New Zealand has failed to forward integrate along the value chain," it says.
"New Zealand still significantly makes ingredients, which are sold to food manufacturers, who add value by turning them into processed foods ready for consumers."
"Relative to peers, New Zealand has good F&B exports per capita; however, our mix is currently skewed towards traditional minimally-processed products; we underperform in added-value processed foods."
"Adding-value is an obvious idea; historically there have been major barriers limiting the ability of New Zealand food processors to move into value-added processed foods; this will not be true in the future."
Minister of economic development Gerry Brownlee said the report identified "a number of reasons why New Zealand can and should build its focus on processed foods, including growing global demand and New Zealand’s strong history of food exports".
“The maths is pretty simple – a kilo of infant formula is worth ten times the value of a kilo of milk powder – so we know which one New Zealand should be selling,” Brownlee said.
Here is the initial press release from economic development minister Gerry Brownlee:
A report released today suggests New Zealand could double the value of its food exports, and offers insights into how this could be done, Minister for Economic development Gerry Brownlee says.
Moving to the centre: the future of the New Zealand food industry was commissioned from Coriolis Research by the Ministry of Economic Development and focuses on food exports to Australia.
It shows that New Zealand’s exports of high-value processed food products to Australia are not just large at $877 million in 2009 (excluding wine), they are also growing rapidly.
“New Zealand is achieving success in Australia across a wide range of non-traditional foods and beverages; these are our growth stars and the foundation of future export growth to the world,” Mr Brownlee said.
“The report is valuable for New Zealand food manufacturers looking to increase their export earnings.
“We know that New Zealand needs to sell more added-value food products, and these exports to Australia show it can be done.
“The government has already invested heavily in a food innovation network to help companies develop innovative, higher-value products.”
The report identifies that there are major opportunities for New Zealand processed food exporters in Australia.
“It is our closest market, culturally similar but with 22.5 million people, and of course low barriers through the CER agreement.
“Processed foods companies can grow their sales in Australia and use it as a stepping stone to other markets.”
Mr Brownlee said the report’s high-level analysis would help individual firms decide where to focus their in-depth research efforts.
The report identifies a number of reasons why New Zealand can and should build its focus on processed foods, including growing global demand and New Zealand’s strong history of food exports.
It focuses on four specific product areas: chocolate and confectionary, baked goods, frozen French fries, and infant formula.
“The maths is pretty simple – a kilo of infant formula is worth ten times the value of a kilo of milk powder – so we know which one New Zealand should be selling,” Mr Brownlee said.
The report’s title, “moving to the centre,” is a reference to the central aisles of supermarkets where processed foods are stocked, rather than the walls where meat, milk, and fruit and vegetables are found.
(Updates with more from the report).