New Zealand’s economy relies heavily on the Food and Fibre sector for its economic prosperity. However, consumers in our high-value export markets now demand better transparency and alignment with social and environmental standards. This poses challenges for the sector in maintaining its world-leading status, while managing increasing levels of risk from things such as severe weather events, market demand fluctuations, and pests and diseases.
As part of an exploration of resilience in the Food and Fibre sector, we analysed the different components and drivers of the current sector situation including market and retailer demands, industry structure, regulatory settings, and leadership.
Market and retailer demands
Consumer influence in our high-value export markets is driving both retailer commitments to change, and our Government's commitment to international agreements.
These global market demands manifest in two distinct ways:
FMCG companies and retailers are undertaking significant initiatives to address their climate impact. An example is Nestle's commitment to reduce emissions by 50% by 2030 and achieve Net Zero by 2050. They are often responding to financial institutions that have climate-related disclosure requirements (from financial market regulation). These initiatives arguably have a more profound impact on supplier behaviour than politically directed on-farm government regulation.
Government-led regulations are under consideration to ensure New Zealand meets its international commitments in our high-value export markets. Driven by the expectations of consumers and voters, and their respective governments, these direct regulatory changes include the pricing of on-farm agricultural greenhouse gas emissions, carbon border adjustment mechanisms, and provisions in FTAs (free trade agreements).
The role of leadership and industry bodies
Food and Fibre industry bodies are in a pivotal position. Their primary responsibility is to support their members to adapt to market trends and environmental requirements, while advocating for the sector’s best interests to the government.
The role of Food and Fibre industry bodies is to:
Advocate for and advance their industry.
Coordinate and finance research and development to improve productivity, sustainability, and innovation.
Pool resources for marketing and promotion to increase visibility, demand, and social licence of products, training opportunities, jobs, and the industry at large.
Facilitate and provide coordinated information and support services (extension) for their industry.
In order to better understand how the current model of sector leadership, advocacy, and extension is working in the face of increasing adversity and change, it is helpful to look at how the current system came about.
A changing focus for industry bodies
In the past, industry bodies focused on increasing product quantity, market access, quality, skilled labour, and R&D. However, modern demands have shifted towards addressing stricter consumer demands, such as reducing environmental degradation. Ensuring government regulations align with market demands is now a priority.
Previously, industry bodies had to balance advocating for slower environmental and social regulations while preparing for consumer-driven changes. Now, with a government focused on deregulation in agriculture, industry bodies face the challenge of helping their members meet progressive consumer demands that may surpass regulations. This creates tension between government and market demands, and industry bodies act as advocates and pacemakers to maintain sustainable progress.
Consideration of the whole value-chain and the demands of the consumer
Industry bodies, by definition in the Commodity Levies Act, are siloed; serving one product at only one stage of its value-chain. It is clear that the longer term challenges and consumer demands facing the sector are relatively similar across industries. While coordination mechanisms exist between industries and through the value-chains, the sector as a whole struggles with duplication of effort in areas of strategic importance, and misalignment with the consumer at the end of the value-chain.
Where industry bodies collect a levy on a quantity basis rather than a value basis, the incentive is to increase units of production rather than increase the value of that production by responding to consumer demands.
Industry-good in the face of adversity
The Commodity Levies Act requires industry bodies to spend their annual levy in that financial year. While this may seem to be a prudent requirement to ensure farmers’, growers’, and processors’ money is used in a timely manner to support positive outcomes, it poses an issue when considering the annual volatility of primary sector products in an increasingly high-risk environment. Member-fee funded industry bodies have a similar issue - members stop paying when they have tight margins and do not see the immediate benefit.
As seen in 2023 during the severe North Island weather events, including Cyclone Gabrielle, the needs of industries can be most significant in, and after, a crisis. The advocacy, coordination, and communication functions of industry bodies arguably deliver the best return on investment for their respective industries when a crisis response is required. Providing maximum support is challenging when the income that supports those industry bodies, and the resources they provide, is significantly reduced due to lost production. Longer-term initiatives to support the industry, such as advancing strategies for environmental and workforce outcomes, are also de-prioritised during such periods.
Best land use versus mono-product
Because commodity levies are set ‘per product’ there is little incentive for industry bodies to look after members seeking to change production types. While demands for land owners and lessors to consider diverse production systems are increasing, the R&D, extension, education, training, and advocacy to support a transition is missing.
Growers and farmers who run multiple productive operations pay multiple levies to different organisations, all collected in different ways by each industry body. This administrative and engagement burden further limits land users from attempting to run operations that are more diverse.
Considerations for New Zealand’s Food and Fibre leadership
How should leadership in the Food and Fibre sector be structured to respond to the evolving risk landscape and necessary change required by its members?
How do we balance consumer/retailer demands, government(s) agendas, and producers' needs to best advance the Food and Fibre sector in the current structure?
Critical success factors
A forward looking approach to integrated risk mitigation in the face of increasing uncertainty for producers and processors. This includes strong crisis planning to mitigate the cost and de-prioritisation of long-term work programmes.
Collaborative models that understand and accommodate the risks each player faces, and in which scenarios.
Consumer demand driven, value-chain collaboration to respond to consume/retailer demands, and government(s) agendas.
Agile government regulation of the Food and Fibre sector that enables the sector to respond to consumer/retailer signals and demands.
Efficiencies by centralising core administrative functions for industry leadership and responses.
How we can help
At PwC, we have a dedicated sector team with a strong understanding of the current model of sector leadership, advocacy and extension, and we are committed to the future success of Aotearoa. We bring blended teams of strategy, policy and regulatory expertise alongside strong operational and execution experience. If you'd like to learn more or discuss these opportunities in more detail, reach out to one of our team.
Contact us
