Is this the beginning of the end or the end of the ...

IS THIS THE BEGINNING OF THE END OR THE END OF THE BEGINNING?Finding the future of the New Zealand food and beverage industry

DISCUSSION DOCUMENT; v1.01; Late 2019

DISCUSSION DOCUMENT

IS THIS THE BEGINNING OF THE END OR THE END OF THE BEGINNING?Finding the future of the New Zealand food and beverage industry

Late 2019

V1.01

DISCLAIMERCOPYRIGHT

All photos used in this discussion document were either sourced by Coriolis from The New Zealand Story, a range of stock photography providers as documented or are low resolution, complete product/brand for illustrative purposes used under fair dealing/fair use for both ‘research and study’ and ‘review and criticism’. Our usage of them complies with New Zealand law or their various license agreements.

Other than where we use or cite the work of others, this work is licensed under the Creative Commons Attribution 3.0 New Zealand licence. In essence, you are free to copy, distribute and adapt the work, as long as you attribute the work and abide by the other licence terms.

To view a copy of this licence, visit http://creativecommons.org/licenses/by/3.0/nz/.

LIMITATIONS

This work is based on secondary market research, analysis of information available (e.g. Statistics NZ), and a range of interviews with industry participants and industry experts. Coriolis have not independently verified this information and make no representation or warranty, express or implied, that such information is accurate or complete. In many cases regional data is incomplete or not available and therefore research includes significant modelling and estimates.

If at any point you are unclear where a number came from or how a conclusion was derived, please contact the authors directly. We are always happy to discuss our work with interested parties.

3

http://creativecommons.org/licenses/by/3.0/nz/

4

This discussion document exists to not to give you the answer, but to spark thought and discussion on the

future of New Zealand’s largest industry.The views expressed are those of the Coriolis team

involved and do not represent Government policy, or the views of the Ministry of Primary Industries, the Ministry of Business, Innovation and Employment or

New Zealand Trade and Enterprise.

The wider food chain directly employs one in five working people in New Zealand

Doing something other than working

13%

F&B Chain10%

Employed in other sectors

42%

Under 1520%

Over 6515% Primary

25%

F&B Mnfg.19%F&B

Whls.7%

F&B Retailing

18%

5

NZ POPULATION BY EMPLOYMENTPeople; m; 2017

FOOD CHAIN EMPLOYMENT BY SECTORPeople; %; 2017

Whls – wholesaling; Mnfg – manufacturing; Source: Statistics NZ; Coriolis analysis and classifications

… or one in five of working population

Total = 4.8m Total = 493,000

Foodservice31%

NOTE: Tight definition; excludes all inputs and support services; if included likely closer to 1/3

In regions outside of Wellington & Auckland, this wider food chain directly employs 20-40% of the working population

0%

5%

10%

15%

20%

25%

30%

35%

40%

Wellington

Auckland

Bay of Plenty

Canterbury

Otago

Mana-W

anga

Northland

Waikato

Nelson/Tasm

an

West C

oast

Hawke's Bay

Gisborne

Taranaki

Marlborough

Southland

6

PERCENT OF REGIONAL EMPLOYMENT IN THE FOOD CHAIN% of employees; 2018

Source: Statistics NZ; Coriolis analysis and classifications

Food Retail & Foodservice

Primary

Processing

Wholesaling

NOTE: Tight definition; excludes all inputs and support services; if included likely closer to 1/3

Food & beverage is the major New Zealand export industry, accounting for almost half of total goods and services exports

7

TOTAL NEW ZEALAND EXPORT OF GOODS AND SERVICES BY CATEGORYNZ$; b; 2017

Source: SNZ; Coriolis analysis and classifications

TravelWood & WoolFood & Beverage Other Goods ServicesTop Secret Oil & Minerals

$5.1$9.0$33.6

Metals$1.9

Oil$0.9Food & Beverage

$33.6

Other services$0.8

$16.6

Minerals$0.1

$1.0$1.7

Wood & products$6.0

$6.5Animal biproducts

$0.5

Chemicals$1.0

Travel $13.8

Transportation $2.7

Communications services $0.1

Plastics/Rubbers$0.5

Other$0.4

Machinery / Electrical$2.1

Medical Devices, other$0.7

Vehicles$0.3

Confidential/other

$1.7

Skins, Leather, & Furs$0.4

Royalties and licence fees $0.4

Business services$1.9

Media$0.3

Stone/Glass$0.7

Financial services $0.7

Apparel$0.1

Textiles$0.2

Wool$0.5

Computer and information services $0.7

The food & beverage industry achieves a large trade surplus, while most other sectors are underperforming or in deficit

8

NET TRADE POSITION IN TOTAL NEW ZEALAND TRADE (EXPORTS-IMPORTS) NZ$; b; 2017


-$15

-$10

-$5

$0

$5

$10

$15

$20

$25

$30

Food & Beverage

Travel

Wood &

Products

Confidential/Other

Wool

Animal Biproducts

Media

Financial Services

Skins, Leather, & Furs

Comm

unications Services

Minerals

Computer and Info Services

Stone/Glass

Textiles

Royalties and Licence Fees

Metals

Other Services

Medical Devices, O

ther

Business Services

Transportation

Apparel

Other

Plastics/Rubbers

Chemicals

Oil

Vehicles

Machinery / Electrical

TRADE DEFICIT

TRADE SURPLUS

NET DEFICIT-$347m

Food & beverage is growing exports strongly, where most other sectors are underperforming or going backwards

9

10 YEAR NET CHANGE IN TOTAL NEW ZEALAND EXPORTS NZ$; b; 2007-2017


-$3

-$1

$1

$3

$5

$7

$9

$11

$13

$15

Food & Beverage

Travel

Wood &

Products

Confidential/Other

Business Services

Financial Services

Computer and Info Services

Transportation

Stone/Glass

Medical Devices, O

ther

Royalties and Licence Fees

Media

Animal Biproducts

Chemicals

Other Services

Plastics/Rubbers

Minerals

Other

Textiles

Apparel

Skins, Leather, & Furs

Vehicles

Comm

services

Wool

Machinery / Electrical

Metals

Oil

EXPORTSSHRINKING

EXPORTSGROWING

New Zealand has the highest ‘revealed comparative advantage’ in food & beverage of any major exporter

10

REVEALED COMPARATIVE ADVANTAGE IN FOOD & BEVERAGERCI index; top 54 exporting countries; 2016

Source: UN Comtrade; SNZ; Wikipedia; Coriolis analysis and classifications

0

1

2

3

4

5

6

7

8

New

Zealand

Arg

entina

Ukraine

Brazil

Chile

Peru

Denm

ark

Indonesia

Colom

bia

Netherla

nds

Spain

Australia

Thailand

Vietna

m

France

Poland

India

South Africa

Portugal

Turkey

Ireland

Ma

laysia

Belgium

Norw

ay

USA

Italy

Roma

nia

Hunga

ry

Philippines

Austria

Canad

a

Mexico

Swed

en

United

Kingdom

Germ

any

Czech Rep

ublic

Russia

Kaza

khstan

Slovakia

Israel

China

Switzerla

nd

Finland

Singap

ore

UA

E

Saudi Arab

ia

Taiwan

Hong

Kong SAR

South Korea

Japan

Kuwa

it

Algeria

Qa

tar

Iraq

Yet, there is a strong consensus in New Zealand that agriculture cannot continue to grow

11

“We can only feed 40 million people”

“Agriculture is a sunset industry”

“We need to produce less not more”

“We are at the limits of the environment”

“We can’t possibly produce any more”

“Farmers are already producing too much”

This report strongly disagrees with this consensus

THE NEW ZEALAND CONSENSUSINSIDE THE “PASTORAL” BUBBLE THINKING

THE HERETICAL PARADIGMOUTSIDE THE BUBBLE THINKING

New Zealand is a major food producer that leads the world;New Zealand agriculture is highly productive

New Zealand is a minor food producer that uses a large amount of land to produce very little relative output

Current New Zealand land use is ideal and optimal as it was determined by market forces

Land use is a high risk discovery process with no one right answer. Current land use is the result of historical activity

The plants and animals produced in New Zealand are highly suited to the New Zealand environment (climatic and growing

conditions) and thus will not change

New Zealand is a large country without a single monolithic climate. Regions vary dramatically in their natural endowment.

The animals and plants currently produced are a result of the country or origin of past waves of immigrants

The government does not have a role to play in new industry development; just enforce the rules

The government has played a massive role in the development of all major agricultural products in New Zealand;* the government

will need to play a role in the development of new products

New Zealand land use will not change significantly going forward New Zealand land use will continue to change

New Zealand is globally competitive in the products it currently produces in large quantities; it is not competitive in the products it does not produce or produces in small quantities; therefore New

Zealand cannot produce new products as it will not be competitive

Agricultural competitiveness is a dynamic system; new producers can and do enter markets; new entrants start in smaller niche segments and “climb down the cost curve” as volumes grow

No one wants to work in agriculture and there is currently a shortages of low cost labour; therefore agriculture cannot grow

Other rich, developed countries similar to New Zealand employ significantly larger numbers of people in agriculture; technological change is occurring and products vary in their level of automation

12

Broadly speaking, there are three key drivers available to increase revenue and employment in the agrifood chain

13

Improving yields

Changing land use

Increasing irrigation

Using high productivity production systems (e.g.

aquaculture)

Re-evaluate viability of non-agricultural lands

Limit flow of lands out of agriculture (e.g. urban growth)

Improving products

Improve positioning

Transforming product

LAND IN PRODUCTION

(Hectares)

OUTPUT PER HECTARE

(T/ha)

VALUE ADDED PER TONNE

($/t)X X =

REVENUE & JOBS

1 2 3

1. MORE FARM LANDNew Zealand is unlikely to bring new land into agriculture

14

Re-evaluate viability of non-agricultural lands

Limit flow of lands out of agriculture (e.g. urban growth)

LAND IN PRODUCTION

(Hectares)

1

Defined as 200 nautical miles from coastline

Food production uses almost half of New Zealand’s land and much of its oceans

15

NEW ZEALAND LAND USEkm2; 000; 2010

NZ ECONOMIC ZONE*Area; depth; 2018

*EEZ; Note: a nautical mile is 1,852 metres; Source: Statistics NZ; Department of Conservation; Sealord; Coriolis analysis

Farming126

47%

Forestry (private)16 6%

National parks & reserves71 26%

Other DOC14 5%

Other41 16%

TOTAL = 268,000 km2

Other government landsNon-Ag Tribal Lands

Lifestyle blocksCities and towns

Idle landsOther

New Zealand already farms a reasonable percent of its total land area, similar to France or Italy, but much less than Ireland

0% 20% 40% 60% 80% 100%

NebraskaNorth DakotaSouth Dakota

KansasIowa

QueenslandTexas

WyomingNevada

New MexicoIllinois

IrelandOklahoma

MontanaUnited Kingdom

NSWUtah

ColoradoIndiana

DenmarkArizonaMissouri

RomaniaNetherlands

HungaryMinnesota

LuxembourgOhio

VictoriaSouth Aust ralia

GermanyPoland

16

SHARE OF TOTAL LAND AREA USED IN AGRICULTURE INCLUDING PASTURE/RANGE% of hectares; 2017 or as available

Source: Eurostat; Statistics Canada; USDA Census of Agriculture; ABS; Statistics NZ; Ministry for the Environment (NZ); CIA World Factbook; Coriolis analysis

0% 20% 40% 60% 80% 100%

LithuaniaOregon

SpainIdaho

CzechiaBelgium

KentuckyNew Zealand

FranceItaly

BulgariaPortugalSlovakia

Northern TerritoryWisconsinArkansas

DelawareCalifornia

MaltaGreece

WashingtonTennessee

AustriaSaskatchewan

LatviaPrince Edward Island

Western AustraliaMaryland

CroatiaHawaii

MichiganMississippi

0% 20% 40% 60% 80% 100%

LouisianaSlovenia

FloridaEstonia

VirginiaNew YorkTasmania

PennsylvaniaAlberta

North CarolinaAlabamaGeorgia

South CarolinaWest Virginia

VermontCyprus

New JerseyManitoba

SwedenFinland

Rhode IslandConnecticut

MassachusettsOntario

New HampshireMaine

Nova ScotiaNew Brunswick

QuebecBrit ish Columbia

AlaskaNewfoundland

The amount of land in agriculture in New Zealand has been trending down since the 80’s

-

5,000,000

10,000,000

15,000,000

20,000,000

189

1

189

4

189

7

190

0

190

3

190

6

190

9

191

2

191

5

191

8

192

1

192

4

192

7

193

0

193

3

193

6

193

9

194

2

194

5

194

8

195

1

195

4

195

7

196

0

196

3

196

6

196

9

197

2

197

5

197

8

198

1

198

4

198

7

199

0

199

3

199

6

199

9

200

2

200

5

200

8

201

1

201

4

201

7

17

TOTAL NEW ZEALAND AREA IN FARMING AND PRIVATE FORESTRYHectares; 1891-2018

Source: various editions of “A Statistical Account of the Seven Colonies of Australasia”; New Zealand Department of Statistics; Statistics New Zealand; Coriolis analysis

In 2018 New Zealand is now back where it was in 1898

1994-2018Discussed next page

In the last 25 years alone, a large amount of land (-17%) has left farming

1994 Lost 2018

Lost 94-18 Arablefodder

Arablefood

VegetablesFruit & Nuts WineGrapes

18

TOTAL AREA ON FARMSHectares; 1994-2018

AREA LOST RELATIVE TO SOME USESHectares; lost 94-18 or 2018

Source: Statistics New Zealand; Coriolis analysis

16,606,969

-2,882,465

13,724,504

-2,882,465

33,98134,50042,800132,400

342,900

Since 1994 New Zealand has lost -2.88m hectares of land from farming, or five times as much area as is currently in all

plant based foods

Current Area

-17%

2. HIGHER PRODUCTIVITYNew Zealand is increasing output of existing land through transitioning to higher productivity animal and plant systems

19

LAND IN PRODUCTION

(Hectares)

OUTPUT PER HECTARE

(T/ha)X

ANIMALBASED

PRODUCTION

PLANTBASED

PRODUCTION

1 2

Can we increase productivity (more output from inputs)?; products vary dramatically in terms of value created per hectare

$649 $882 $919 $933 $1,650 $2,401 $2,443 $2,485 $2,949 $2,998 $4,292 $7,900 $10,373 $11,950 $13,765 $17,211 $19,522 $20,475 $20,745 $26,196 $28,861 $34,136

$46,786 $79,400

$26,400 $80,000

$840,000

Cattle/Sheep meatRapeseed

DeerLinseed

Maize, greenOats

BarleyPeas, dry

WheatPeas, green

MaizeDairy

Pumpkins, similarCurrants

Broccoli, similarAvocados

GrapesSweet potatoes

PotatoesLettuce

Onions, similarCarrots, similar

ApplesKiwifruit

MusselsOystersSalmon

20

REALISED NEW ZEALAND “FARMGATE” VALUE PER HECTARE OF TOTAL SPACENZ$/hectare; 2017 or as available

Note: excludes high productivity, but primarily indoor animals (pigs, chickens, milking sheep and milking goats); Source: UN FAO; UN FISHSTAT; Plant & Food Research Fresh Facts; Statistics NZ; DairyNZ; Beef&Lamb NZ; Zespri; NZKS; Coriolis analysis

Top25 by area

sorted by

value per

hectare

Analysis uses total available area, not necessarily all of which is used at any one time

Only a small amount of New Zealand’s land is currently used at high productivity to create significant value per hectare

NEW ZEALAND AGRICULTURAL LAND USE: AREA VS AG VALUE PER HECTARENZ$; actual; hectares; 2017 or as available

Note: Other Hort here also includes nursery and floriculture unable to remove due to limitations of available data; Source: UN FAO database (populated by MPI); PFR Fresh Facts; Zespri Annual Report; NZW annual report; Ministry for the Environment; Statistics NZ; CIA World Factbook; Coriolis analysis

Non-Agricultural

Kiwifruit

Other H

ort

Sheep/Beef/Grain

Wine

Dairy

Forestry

Other livestock

$0$750$2,700

$7,900

$19,400

$34,600

$4,600

$79,400

Proportional to total land area of New Zealand; sqkm; 2017

Average farmgate value per

hectareNZ$; 2017

Ag land average

$2,200/ha

(Kiwifruit)

(Other Hort)

(Wine)

EXCLUDES AQUACULTURE

As a result, New Zealand currently produces an average of 11 on-farm jobs per 1,000 hectares of agricultural land

NEW ZEALAND AGRICULTURAL LAND AREA VS ON-FARM JOBS PER 1,000 HECTARESHeadcount/1,000 ha of farmland; actual; hectares; 2017 or as available

Note: Other Hort here also includes nursery and floriculture unable to remove due to limitations of available data; Source: UN FAO database (populated by MPI); PFR Fresh Facts; Zespri Annual Report; NZW annual report; Ministry for the Environment; Statistics NZ; CIA World Factbook; Coriolis analysis

Kiwifruit

Sheep, Beef Cattle and Grain Farming

Other hort

Other Livestock

Wine

Dairy Cattle

516

28

126

273

366

Proportional to total agricultural area of New Zealand; hectares; 2017

Average jobs

created per 1,000

hectare;Headcount;

2018

New Zealand creates an average of 11 on-farm jobs per 1,000 hectare of

agricultural land

(Kiwifruit)

(Other Hort)

(Wine)

EXCLUDES AQUACULTURE

At 11 jobs per hectare, New Zealand is performing like a desert region, rather than a temperate climate foodbowl

23

TEXAS8

NEW ZEALAND

11

ALASKA11

IRELAND22

ITALY68

NETHERLANDS106

There is a strong high level case that New Zealand can create more on-farm jobs

-

50

100

150

200

250

300

350

ConnecticutM

assachusettsRhode IslandM

altaN

ewfoundland

New

JerseyRom

aniaSloveniaBulgariaCyprusN

ew Ham

pshireN

ova ScotiaPortugalPolandN

etherlandsM

aineG

reeceBritish Colum

biaN

ew Brunsw

ickItalyCroatiaPennsylvaniaVerm

ontAustriaHungaryQ

uebecW

est VirginiaN

orth Carolina

Hawaii

FloridaW

ashingtonBelgiumSouth CarolinaM

arylandO

ntarioCzechiaG

eorgiaPrince Edw

ard IslandVirginiaFinlandN

ew York

Germ

anyM

ichiganTennesseeLithuaniaDelaw

areSpainAlabam

aCaliforniaKentuckyO

hioW

isconsinLuxembourgFranceLatviaSlovakiaDenmarkUnited KingdomIrelandSwedenLouisianaM

ississippiIndianaEstoniaArkansasM

issouriM

innesotaIow

aO

regonIllinoisAlaskaN

ew Zealand

Oklahom

aM

anitobaTexasIdahoAlbertaKansasColoradoN

ebraskaSaskatchewanUtahSouth DakotaN

orth Dakota

ArizonaN

ew M

exicoM

ontanaW

yoming

Nevada

24

ON-FARM JOBS PER 1,000 HECTARES: NZ VS. PEERSHeadcount/1,000 ha of farmland; 2017 or as available

Source: Eurostat; CIA World Fact Book; StatisticsNZ; USDA NASS; USDA Census of Agriculture; UN FAO AgStat; MPI; LCDB database; Coriolis analysis and estimates

New Zealand

11

Germany34Ireland

22

Italy68

UK23

Netherlands106

France26

New Zealand is moving to higher productivity animal production systems

25

LAND IN PRODUCTION

(Hectares)

OUTPUT PER HECTARE

(T/ha)X

ANIMALBASED

PRODUCTION

PLANTBASED

PRODUCTION

WANDERING AROUND

SUPPLEMENTARY FEEDING

BARNSAQUA-

CULTURE

1 2

Unlike other countries, New Zealand still uses most of its agricultural land for “low density/extensive” animal systems

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Scottish Hig

hland

s

New

Zealand

Ireland

SW Scotland

West W

ales/Valleys

East W

ales

Northern Irela

nd

Devon

Eastern Scotla

nd

United

Kingdom

Slovenia

Portugal

Luxembourg

NE Scotland

Austria

Greece

Netherla

nds

Croa

tia

Belgium

Romania

Latvia

Spain

France

Estonia

Germ

any

Slovakia

Czechia

Lithuania

Bulgaria

Italy

Poland

Sweden

Hunga

ry

Denm

ark

Cyp

rus

Finland

Malta

Grassland & Fodder Crops Grains, Vegetable, Fruit & Nuts

26

SHARE OF AGRICULTURAL FARMLAND IN GRASSLAND/PASTURE: NZ VS. EU% of agricultural area; 2018 or as available

*New Zealand agriculture follows the ‘idealised’ British Isles pastoralist world view; Source: Eurostat; CIA World Fact Book; StatisticsNZ; UN FAO AgStat; MPI; LCDB database; Coriolis analysis and estimates

Places that sent many immigrants to New Zealand*

Places that did not send many immigrants to New Zealand

# OF DEERHead; m; 1999-2018

FISH CAPTURETonnes; 000; 1997-2017

Production of New Zealand’s “low density/extensive” animal systems is falling

-

10

20

30

40

50

60

70

80

1984

1987

1990

1993

1996

1999

2002

2005

2008

2011

2014

2017

27

# OF SHEEPHead; m; 1984-2018

Source: Statistics NZ; UN FAO FishStat; Coriolis analysis

# OF BEEF CATTLEHead; m; 1974-2018

-

1

2

3

4

5

6

7

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

-

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

-

100.0

200.0

300.0

400.0

500.0

600.0

700.0

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

New Zealand “low density/extensive” animals are low yield relative to other developed countries and regions

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Brazil

Chile

Uruguay

New

Zealand

Ireland

Tasm

ania

Germ

any

UK

Netherla

nds

Ca

nada

Denm

ark

Neva

da

Ca

lifornia

Arizona

Idaho

New

Mexico

Colorad

o

Israel

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Albania

Roma

niaBulg

ariaN

ew Zealand

Ukraine

Monteneg

roN

etherland

sSerbiaG

reeceC

roatia

Switzerla

ndC

anada

Portugal

Hunga

rySlova

kiaD

enmark

Spain

Australia

Norw

ay

ItalyC

zechiaPolandBelgiumFinlandFra

nceG

erma

nySw

eden

United

KingdomIrela

ndA

ustriaU

SA

28

MILK PER COW PER YEARLitres; 2018 or as available

MEAT PER CATTLE ANIMAL KILLEDKG; 2018 or as available

Source: StatisticsNZ; UN FAO AgStat; Coriolis analysis

Wandering Around Barn

3x

2x

New Zealand’s “low density/extensive” animal products often sell at a discount, not a premium to world prices

29

GLOBAL CHEESE TRADE: VOL VS. VALExport tonnes; US$/t; 2016

GLOBAL BEEF TRADE: VOL VS. VALExport tonnes; US$/t; 2018

Source: UN Comtrade database; Coriolis classifications and analysis

Proportional to 2018 global export volume; US$ / kg FOB

Belgium

Mexico

Australia

Germ

any

Canada

Argentina

ItalyU

ruguay

New

Zealand

SpainFrance

Poland

Other

Paraguay

Brazil India

United Kingdom

Ireland

USA

Netherlands

$4.92

$4.78$4.72 $4.43

$4.34

$4.22

$4.03

$3.04

$6.53

$4.99$5.15

$7.18

$6.27$6.24

$5.70

$5.67

$5.59$5.49

$5.44

$5.28

Proportional to 2018 global export volume; US$ / kg FOB

Australia

Austria

Belgium

Denm

ark

Italy

EgyptIreland

Spain

France

New

Zealand

Other

Belarus

Germany Poland

USA

Saudi Arabia

United Kingdom

Greece

Switzerland

Netherlands

$5.32

$4.08

$4.44

$3.84

$3.75

$3.57

$4.20

$4.01

$4.65

$5.53

$4.29

$9.31

$6.43

$4.74$4.88

$4.21

$4.66

$4.53

$7.80

$4.39

Average $5.03

Average $4.66

BRITISH COLUMBIA WALESTASMANIA OREGON

ITALY

NETHERLANDSIRELAND

Being a stable, picturesque country with functioning environmental regulation in the temperate zone (Clean & Green) is not a “moat”

30

BAVARIA WISCONSIN

SWITZERLAND DENMARK FRANCE

New Zealand is increasing supplementary feeding, through both (1) feed grain production and (2) animal feed imports

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

199

61

997

199

81

999

200

02

001

200

22

003

200

42

005

200

62

007

200

82

009

201

02

011

201

22

013

201

42

015

201

62

017

201

8

Grains Animal feeds

31

AREA IN FODDER GRAINSHectares; 2002 vs. 2016

IMPORTS OF ANIMAL FEEDS/PKE*/ETC.Tonnes; 000; 1996-2018

*PKE = Palm Kernel Expeller; Source: StatisticsNZ; UN Comtrade database; LCDB database; Coriolis classifications and analysis

46,330

291,745

2002 2016

Apparent area of all non-market cash crops

New Zealand production of barn raised animal protein is growing

-

50

100

150

200

250

196

11

965

196

91

973

197

71

981

198

51

989

199

31

997

200

12

005

200

92

013

201

7

32

POULTRY MEATTonnes; 000; 1961-2017

EGGSTonnes; 000; 1994-2017

*Mix of barn and grazing; Source: Statistics NZ; UN FAO AgStat; Coriolis analysis and estimates

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

201

1

201

3

201

5

Goat Sheep

MILKING SHEEP/GOATS*Headcount; 1995-2016

-

10

20

30

40

50

60

199

4

199

6

199

8

200

0

200

2

200

4

200

6

200

8

201

0

201

2

201

4

201

6

Poultry meat has been a long term growth platform for NZ; a simple model suggests production will exceed lamb by 2028

0

100

200

300

400

500

600

700

1985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021202220232024202520262027202820292030

33

NEW ZEALAND MEAT PRODUCTION VOLUME: LAMB VS POULTRYT; 000; 1985-2017; 2017-2030f

Source: UN FAO AgStat; Coriolis analysis and modelling

Sheep meat

Poultry meat

Simple extrapolation

New Zealand aquaculture production was growing until it was stalled by “non-market action”

34

AVAILABLE AREA VS. AQUACULTUREkm2; 2018

TONNES AQUACULTURET; 000; 1980-2018

Source: UN FishStat; Statistics NZ; MPI/MAF/MoF; industry sources; Coriolis analysis and estimates

-

20

40

60

80

100

120

198

01

982

198

41

986

198

81

990

199

21

994

199

61

998

200

02

002

200

42

006

200

82

010

201

22

014

201

6

Mussels

Salmon

Oysters

4,083,744

464,537

4,301 57

Sea Area Land area Inland water Aquaculture

Stalled

Aquaculture currently uses 0.001% of New Zealand’s water space

New Zealand has clear potential to produce more aquaculture

35

MATRIX: TONNES/KILOMETRE VS DOLLARS/KILOMETRE VS TOTAL INDUSTRY VALUET/km (actual); US$/km (actual); total US$m; 2018 or as available

Source: UN FAO FishStat; Eurostat; MPI; CIA World Fact Book; Coriolis analysis

60 14030 702010 50400

$300,000

$250,000

$0

$200,000

$150,000

$50,000

$350,000

$100,000

EstoniaIceland Latvia

Bulgaria

SloveniaUK Lithuania SpainTurkeyIreland

Romania Poland

NetherlandsFrance

Norway

Belgium

Cyprus

$1,000

Finland

DenmarkSweden

Croatia

PortugalGreece

NZ

GermanyItaly

Tonnes of aquaculture produced per kilometre of coastline; t/km; 2018 or as available

US$ per kilometre of

coastline;2018 or as

available

Size of bubble is proportional to total value; a bubble this size is US$1b

New Zealand is increasing production higher productivity plant production systems

36

LAND IN PRODUCTION

(Hectares)

OUTPUT PER HECTARE

(T/ha)X

ANIMALBASED

PRODUCTION

PLANTBASED

PRODUCTION

ARABLECROPS

PROTECTED CROPPING

TREE CROPS(FRUIT & NUTS)

MECHANICALLYHARVESTEDVEGETABLES

1 2

Most New Zealand farm land is currently used to to graze animals; only 2.2% of all land is used for plant based foods

Other Hort0.32%

Kiwifruit0.05%

Wine0.14% Arable crops

1.69%

Sheep/Beef36%

Dairy5%

Other livestock1%

Forestry7%

Non-Agricultural49%

37

NEW ZEALAND AGRICULTURAL LAND USEArea; % of area; 2017

Source: UN FAO database (populated by MPI); PFR Fresh Facts; Zespri Annual Report; NZW annual report; Ministry for the Environment; Statistics NZ; CIA World Factbook; Coriolis analysis

TOTAL = 264,537 sqkm

Grazing animals41% of all land97% of ag (x forestry)

Plant based foods2.2%

44% of all land

New Zealand currently performs like a desert country in share of land in plant based foods (grains, vegetables, fruit & nuts)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

Monaco

Vatican City

Western Sahara

Djibouti

Iceland

Oman

Mongolia

Mauritania

Suriname

New Caledonia

Botswana

Bahamas

Kuwait

United Arab Emirates

Namibia

Libya

Qatar

Saudi Arabia

Gabon

Democratic Republic of the Cong

o

Republic of the Congo

Somalia

New Zealand

Andorra

Faroe Islands

Papua New Guinea

Guyana

Norway

Chile

Turks and Caicos Islands

Yemen

Bhutan

Singapore

Brunei

Colombia

Jordan

Central African Republic

Algeria

Solomon Islands

Egypt

Bolivia

Cayman Islands

Venezuela

Chad

Angola

Peru

Turkmenistan

Belize

Zambia

Canada

Equa

torial Guinea

Mali

Australia

Sweden

Mozambique

Eritrea

Laos

French Polynesia

Madagascar

Tajikistan

Kyrgyzstan

Liberia

Russia

Finland

Georgia

Bahrain

U.S. Virgin Islands

Iraq

Kazakhstan

Isle of Man

Brazil

Slovenia

Panama

Netherlands Antilles

South Africa

Lesotho

Ecuador

Uruguay

Aruba

Samoa

Swaziland

Kenya

Switzerland

Uzbekistan

Paragua

y

Costa Rica

Vanuatu

Iran

Afgha

nistan

Puerto Rico

Cape Verde

Niger

Japan

Saint Pierre and Miquelon

China

Cyprus

Palau

Honduras

Mexico

Fiji

Montenegro

Argentina

Guinea

Timor-Leste

Nicaragua

Estonia

Guinea-Bissau

Seychelles

Ireland

Sudan

Nepal

Ethiopia

Cameroon

Tanzania

San Marino

United States

Austria

Northern Mariana Islands

Israel

South Korea

Croatia

Armenia

Senegal

Macedonia

Palestine[3]

Burma

Latvia

Portugal

Montserrat

Bermud

a

Jamaica

Morocco

Burkina Faso

North Korea

Bosnia and Herzegovina

Guam

Saint Kitts and Nevis

Malaysia

Antigua and Barbuda

Guatemala

Cote d'Ivoire

Cambodia

Trinidad and Tobago

Lebanon

Luxembourg

American Samoa

Cook Islands

Liechtenstein

Indonesia

United Kingdom

Albania

Azerbaijan

Sierra Leone

Benin

British Virgin Islands

Dominican Republic

Niue

Belarus

Belgium

Greece

Pakistan

Saint Lucia

Slovakia

Turkey

Netherlands

Syria

Italy

Bulgaria

Dominica

Ghana

Vietnam

Tunisia

Spain

Malta

Germany

France

Grenada

Lithuania

Saint Vincent and the Grenadines

Philippines

Sri Lanka

Cuba

Tonga

Poland

Barbados

Thailand

Malawi

Mauritius

Romania

Serbia

Gambia

Czech Republic

Wallis and Futuna

Maldives

El Salvador

Nigeria

Uganda

Haiti

Togo

São Tomé and Príncipe

Gaza Strip

Hungary

Kiribati

Micronesia

Burundi

Marshall Isla

nds

India

Rwanda

Ukraine

Denmark

Moldova

Bangladesh

Tuvalu

Comoros

38

SHARE OF TOTAL COUNTRY AREA IN GRAINS, VEGETABLES, FRUIT & NUTS% of total area; N=Earth; 2015 or as available

Source: UN FAO AgStat; CIA World Factbook; Coriolis analysis

New Zealand

SaudiArabia

JapanIreland

Italy France

Yemen

UK

New Zealand currently uses an almost negligible amount of total land in arable crops

0%

10%

20%

30%

40%

50%

60%

70%

80%

NZ

Wales

N. Ireland

Ireland

Scotland

Netherlands

Norw

ay

Luxembourg

Slovenia

Belgium

Cyprus

Greece

Sweden

Italy

Latvia

Austria

England

Spain

France

Estonia

Croatia

Germ

any

Lithuania

Slovakia

Finland

Czech Republic

Romania

Denmark

Poland

Bulgaria

Hungary

39

SHARE OF TOTAL COUNTRY AREA IN ARABLE GRAINS & PULSES**% of area; ha; 2018 or as available

*New Zealand agriculture appears to be overweighed to the ‘idealised’ British Isles pastoralist world view; ** excludes fodder crops; Source: Eurostat; CIA World Fact Book; StatisticsNZ; UN FAO AgStat; MPI; LCDB database; Coriolis analysis and estimates

Major contributors to early NZ colonists*

New Zealand is moving to more crop farms with more area per farm and more overall area in arable crops

2,472

3,219

2002 2018

40

CROP FARM UNITS#; 02vs18

AVERAGE AREA/UNITm2; 02vs17/18*

*Uses 2017 area over 2018 units (no 2018 area available); ** Includes fodder; Source: Statistics NZ; UN FAO; MAF/MPI; Ministry for the Environment; Coriolis analysis

TOTAL AREA IN CROPS**m2; 02vs17

90

139

2002 2018

222,791

448,777

2002 2017

New Zealand can produce more mechanically harvestable vegetables

216,108 112,603

418,853 55,412

274,889 300,568

200,113 55,051

17,875 43,075

17,519 124,614

26,674 25,681

233,772 30,660

164,739 5,871

24,729 663 13,585

30,359 9,420 20,012

12,338 6,557 1,998

23,027 26,547 28,710

15,544 374,936

636

NetherlandsBelgiumPoland

DenmarkRomania

GermanyUnited Kingdom

SerbiaAlbaniaPortugal

SwitzerlandItaly

LatviaLithuania

FranceAustriaSpain

SloveniaHungary

LuxembourgCroatiaGreece

SlovakiaBulgariaIrelandEstonia

MontenegroNew Zealand

FinlandSwedenNorwayCanadaIceland

41

AREA IN MHV*Hectares; 2017

% OF TOTAL AREA% of country; km2; 2017

* MHV = Mechanically Harvestable Vegetables (defined as potatoes, sweet potatoes, other root crops, onions, carrots, cabbages, cauliflower and similar); Source: UN FAO; CIA World Factbook; Coriolis analysis

HOW MUCH ADDITIONAL LAND WOULD COME ONLINE IF NZ MATCHED THIS PEER?Model; New NZ ha in MHV; 2020+

5.8%3.7%

1.3%1.3%

1.2%0.8%0.8%

0.6%0.6%

0.5%0.4%0.4%0.4%0.4%0.4%0.4%0.3%0.3%0.3%0.3%0.2%0.2%0.2%0.2%0.2%0.1%0.1%0.1%0.1%0.1%0.0%0.0%0.0%


DenmarkRomania



SwitzerlandItaly

LatviaLithuania

FranceAustriaSpain

SloveniaHungary





1,541,734 974,595

339,273 324,750 288,849

204,614 199,797

145,480 145,145

103,484 91,747 88,821 88,723 83,341 76,885 75,845 65,031 55,299 48,869 46,315 41,897 39,199 28,932 25,788 24,460 16,185 16,098 -

(1,810)(5,434)

(10,043)(12,871)(21,357)


DenmarkRomania



SwitzerlandItaly

LatviaLithuania

FranceAustriaSpain

SloveniaHungary





Countries in the actual arctic circle

New Zealand can produce more fruit, nuts and wine grapes

4,576,628 2,604,547

678,766 426,502

614,689 328,948

1,820,962 682,921

80,382 822,258

39,948 103,886 163,324

43,092 105,288

3,210 42,869 47,249 15,677

379,190 186,321

55,134 25,819 137,173

14,042 60,918 12,718 8,336 3,332 14,190 8,716

189,443 8,000 -

SpainItaly

PortugalSerbia

GreeceHungary

FranceRomaniaAlbaniaPoland

SloveniaCroatia

BulgariaBelgiumAustria

LuxembourgNetherlandsSwitzerlandMontenegro

GermanyBelarus

LithuaniaSlovakia

New ZealandEstonia

United KingdomLatvia

DenmarkIrelandFinland

NorwayCanadaSwedenIceland

42

AREA IN F, N & WGHectares; 2018 or as available

% OF TOTAL AREA% of country SQKM; 2018 or as

Source: UN FAO AgStat; ; CIA World Factbook; Coriolis analysis

IF NZ MATCHED THIS PEERS %?New NZ ha in FNWG; 2020+

9.0%8.6%

7.4%4.8%

4.7%3.5%

2.9%2.9%2.8%

2.6%2.0%1.8%

1.5%1.4%

1.3%1.2%1.1%1.1%1.1%1.1%

0.9%0.8%

0.5%0.5%

0.3%0.3%0.2%0.2%

0.0%0.0%0.0%0.0%0.0%0.0%

SpainItaly

PortugalSerbia

GreeceHungary


SloveniaCroatia



GermanyBelarus

LithuaniaSlovakia

New ZealandEstonia




2,309,164 2,200,563

1,856,353 1,168,321 1,122,731

819,201 641,088 637,636 619,077 574,066

395,783 359,306

261,223 244,606 202,359 198,557 173,226 172,373 169,814 150,014 105,571 91,187

5,239 -

(53,199)(69,341)(83,892)(84,855)

(124,349)(125,832)(129,893)(132,041)(132,271)(137,173)

SpainItaly

PortugalSerbia

GreeceHungary


SloveniaCroatia



GermanyBelarus

LithuaniaSlovakia

New ZealandEstonia




Countries in the actual arctic circle

Peers suggest there are opportunities to increase the amount of crop produced in greenhouses

89,600

81,000

72,800

71,698 57,444

49,746

49,049

26,500 15,000

14,981

7,560

5,400

4,670

2,790

2,700

2,700

2,286

2,200

2,100

1,600

1,341

1,200

1,075

1,000

688

418

209

150

115

80

Netherla

nds

China

Italy

Spain

South Korea

Turkey

Japan

France

United

States

Greece

Poland

Hunga

ry

Germ

any

Romania

Ukraine

Portugal

Ca

nada

Arg

entina

Chile

Belgium

Australia

Colum

bia

Bulgaria

Serbia

New

Zealand

Austria

Switzerla

nd

Ireland

Denm

ark

Czech Rep

.

43

AREA IN GREENHOUSE/UNDER COVER: NEW ZEALAND VS. SELECT PEERSHectare; 2014 or as available

NOTE: Data is from a wide range of sources and may not be perfectly comparable; many countries include glasshouse, greenhouse/PE tunnel & low tunnel; range of estimates for China (up to 2,760,000ha); Source: Cuesta Roble Consulting; “Greenhouse production systems in Mediterranean area” Leonardi/De Pascale May 2010; “Greenhouse Technology Globally: The future of food”; Coriolis analysis

The Netherlands has more area in horticulture

inside than New Zealand has outside

3. ADDING VALUEThe third potential driver is to add more value to existing output

44

Improving products

Improve positioning

Transforming product

LAND IN PRODUCTION

(Hectares)

OUTPUT PER HECTARE

(T/ha)


($/t)X X =

REVENUE & JOBS

1 2 3

New Zealand’s food & beverage exports are currently still over-weighted to low value-added, unprocessed ingredients

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Switzerland

United Kingdom

Italy

Japan

Germ

any

Ireland

Netherlands

Sweden

Finland

Spain

Denmark

Canada

New

Zealand

45

AGRIFOOD EXPORTS VALUE SHARE BY SEGMENT: NZ VS OTHER RICH COUNTRIES% of value; 2017

Source: UN Comtrade database; Coriolis classifications and analysis

Beverages

Processed FoodsOilseeds, Oils & Fats

Produce

Dairy

Seafood

Meat

Grains

CLEAR STRATEGIC DIRECTION

New Zealand predominantly sells ingredients to others; as a result, it is currently missing out on food manufacturing jobs

46

FIGURE 1: FLOW OF NEW ZEALAND MILK POWDER FROM THE FARMER TO CONSUMERSimplified model

Photo credit: public domain; Source: Coriolis

Baked goods

Dairy products

Infant formula

Specialised nutritionals

Proc. meat/analogs

Beverages

Nutrition bars

Condiments

Confectionery

Dessert-type snacks

Pet foods

Savoury items

FARMERS(milk)

DAIRY PROCESSORS(milk powder)

FOOD MANUFACTURERS(processed foods)

RETAILERS(products)

CONSUMERS(food)

POTENTIAL NEW JOBS

The New Zealand food industry has a clear strategic direction towards greater product complexity

47Source: The Investor’s Guide to the New Zealand Processed Foods Industry 2017; Photo credit: various firms or fair use; low resolution; complete product/brand for illustrative purposes

BulkPowder

Retail MilkPowder

Retail Infant

Formula

Medical & Specialty

Infant Formula

IngredientChocolate

Crumb

Instant Chocolate

Drink

Retail BarChocolate

Assorted/MixedChocolates

Complexity

Fresh Canned Frozen Meal

Complexity

BasicHoney

ManukaHoney

ManukaHoney

Lozenges

MedicalHoney

New Zealand has large and growing volumes of raw materials suitable for making more complex, consumer-ready products

48

TOTAL NEW ZEALAND FOOD PRODUCTION VOLUME AT FARM GATE1T; 000; 1961-2018

1. Dockside for seafood production; *Milk is milk solids; meat is dressed but bone-in; seafood is green weight as reported; **Fruit includes wine grapes; honey line is thickened to make it visible; Source: United Nations FAOStat & FishStat; MAF/MPI; Coriolis analysis

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

196

1

196

3

196

5

196

7

196

9

197

1

197

3

197

5

197

7

197

9

198

1

198

3

198

5

198

7

198

9

199

1

199

3

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

201

1

201

3

201

5

201

7

Cereals

Vegetables

Fruit**

EggsSeafood

Meat

Dairy*

Honey

CAGR(61-18)2.1%

Peers suggest New Zealand can create more processed foods jobs from its abundant raw materials

8.7

6.7 6.1 6.0

5.3

4.4 3.9 3.8 3.8 3.8 3.6 3.5 3.5 3.3 3.2 3.1

2.2 2.2 2.1 2.0 1.9 1.9 1.9 1.8 1.8 1.7 1.6 1.6 1.5 1.2

Estonia

United Kingdom

United States

Switzerland

Croatia

Slovenia

Czechia

Slovakia

Finland

Hungary

Lithuania

Ireland

Canada

Sweden

Latvia

Australia

Germ

any

Denmark

Austria

Portugal

Italy

Poland

Romania

New

Zealand

Greece

France

Belgium

Norw

ay

Spain

Iceland

49

PROCESSED FOODS JOBS PER 1,000 TONNE RAW MATERIALS* Headcount/1,000t; 2018 or as available

*Non-grain based; Source: UN FAO AgStat; UN FAO FishStat; Eurostat; Statistics Canada; US DOL; USDA NASS; Statistics NZ; Australian Bureau of Statistics; Coriolis classification and analysis

Going forward, growth will come from creating more output from less land and selling it as complex products at a higher prices

50

LAND IN PRODUCTION

(Hectares)

OUTPUT PER HECTARE

(T/ha)


($/t)X X =

REVENUE & JOBS

1 2 3

UNLIKELY YES YES

38

18 1510 7 5 3 2 2

38

1815

107

53 2 2

A B C D E F G H I

38

18 1510 7 5 3 2 2

7

-1

28

-1

28

112 18

8

A B C D E F G H I

In practice, growth will require some sectors to grow much larger, as other sectors have growth constraints

51

MODEL 1: EVERYTHING DOUBLES MODEL 2: SOME GROW/OTHER NO GROWTH

Source: Coriolis

100

+100

100

+100

- Simple story: “Rising tide lifts all ships”

- Assumes all sectors can double in the timeframe

- Often how it is “spun” politically

- Unlikely in reality

- More complex story: “The Good, the Bad and the Ugly”

- Assumes some sectors cannot grow significantly

- Other sectors will need to grow 5x or 10x to compensate

- Peer group regions suggest this is the likely outcome

10 10

50

100

Potential Growth Sector "A" Potential Growth Sector "B"

Therefore there is a need to focus efforts in sectors with the potential to grow five or ten times larger

52

SIMPLE GROWTH MODEL SHOWING 5X OR 10X GROWTH

Source: Coriolis

5x

10x

Numerous product categories have been identified that can contribute to this growth

DAIRY RED MEAT POULTRY SEAFOOD F&V

Advanced/Medical Infant Formula

Meat-Based Snacks Further Domestic Consumption

Atlantic Salmon Under Cover/Glasshouse

Root Crops

Processing VegetablesDairy-Based Nutritionals

Target Key Export Markets

Branded, Packaged Consumer Case Ready Nuts

Region Suitable Aquaculture

ApplesNon-Cow Dairy Develop Value Added Products KiwifruitConsumer-Ready

Convenience Meals AvocadosSpecialty Cheese Alternative Poultry Species Emerging Fruit

ARABLE/GRAIN OTHER FOODS PROCESSED FOODS WINE OTHER BEVERAGES

High Dairy Baked Products Honey Nutraceuticals Sparkling Wine Alcoholic Spirits

Oat ‘Milk’ Pet Food Water‘Cognac’Seeds Eggs Confectionery/Snacking Cider & Similar

Non-Marlborough RedsHemp (F&B usage) New & Innovative Foods Premium Non-Alcoholic

53

IDENTIFIED PRODUCT CATEGORIES THAT CAN CONTRIBUTE TO GROWTHModel; 2019

Source: Coriolis analysis

Realising this growth opportunity requires three specific sets of potential investors

54Source: Coriolis analysis

EXISTING LARGE FIRMS

AT SCALE

NEW LARGE INVESTORS WITH SCALE AND SKILLS

NEW AND EMERGING

FIRMS

REINVESTMENT ATTRACTION NURTURING

- Remove barriers to investment

- Ensure available capital is reinvested in New Zealand (not elsewhere)

- Sell New Zealand; make the case for investment in F&B here

- Identify the right investors (rather than ‘waiting for the phone to ring’)

- Focus on firms able to add value to New Zealand volume

- Sell New Zealand; make the case for investment in F&B here

- Encourage both existing small firms and new start-ups

- Focus effort on scaling small and medium firms into large, globally competitive firms at scale (currently falling over here)

Is this the beginning of the end or the end of the ...

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