Phil Edmonds
It wasn’t long ago that New Zealand farmers might have said consu-what?, when asked about the influence consumers have in determining their farm production systems. But if that kind of bewilderment still exists it needs to be consigned to the past, according to a recent Government-commissioned report, which suggests farmers, not just market representatives need get up close to, and take direction from, overseas consumers in a potentially ‘now or never’ moment.
An extensive report on the future challenges for NZ land-based farming systems published by the Ministry for Business, Innovation and Employment in April identified three megatrends likely to be paradigm-shifting for farmers. The findings were mostly unsurprising, with the industry already aware of the need to address and act on the emergence of environmental consciousness and transformational science.
The third megatrend identified – ‘changing consumer views and preferences’ – has also been well signposted but stands apart for being something farmers have tended to brush aside as a problem for other players in the supply chain to deal with.
However, the report is clear that underestimating the importance of farmers playing a role in addressing changing consumer preferences cannot continue if NZ is to stand the best possible chance of maintaining sustainable levels of demand for our primary sector products.
Farmers still have some justification in seeing their value is in supplying processors with the best quality milk or meat they can and relying on others to obtain the best possible price in the market.
One of the reports key findings somewhat provocatively suggests NZ primary producers are not taking advantage of their ability to get close to consumers.
This finding was underscored by speakers at the recent Grow 2019 NZ Agri Summit. Beef + Lamb NZ director Melissa Clark-Reynolds said NZ farmers will continue to focus on how technology will affect farm production, but really needed to be investing in farming business models that can find ways to market direct to consumers.
The implication is that NZ farmers will happily adopt new science and techniques to compete on a productive level – as they have always done as a matter of course. But switching on to a new marketing culture provides a much bigger, and different challenge, and one that individual farmers are going to have to contemplate.
This, then raises a number of key questions for NZ farmers; is it realistically possible for those operating existing and well-established production-focused farming systems to get closer to consumers?
FIRST, THE STATUS QUO, ‘NO’ ARGUMENT
While eager to impress on the need for farmers to get closer to consumers, the MBIE report acknowledged pastoral farming often has marginal profitability with little if any money available to invest in game-changing system innovation.
It also noted it is unlikely farmers will willingly invest in the means to connect with consumers if it will fundamentally disrupt their own industry. If farmers are going to invest to counter future challenges to their businesses, they are more likely to do so if it makes their current farming system operate more efficiently (production-based science, for example).
There’s also no getting away from the fact that despite the advent of the internet, farmers are still far from the market, which in many cases is the other side of the world. And let’s also acknowledge a high proportion of NZ’s dairy and red meat customers are still faceless – milk powder, butter and meat land in foreign food manufacturer bulk bins, not on restaurant plates.
As a result, farmers still have some justification in seeing their value is in supplying processors with the best quality milk or meat they can and relying on others to obtain the best possible price in the market. This attitude is not based on a lack of understanding of the importance of changing consumer preferences, but there is a resignation at the improbability of connecting with consumers in international markets, a long way down the chain of processors, manufacturers, distributors, agents, supermarkets and so on.
SOME SMALL STEPS TOWARDS THE CONSUMER
Some enlightened industry representatives see this as ‘head-in-the-sand’ stuff. But farmers are increasingly looking at nuanced, pragmatic solutions that acknowledge consumer preferences, none more so than putting pressure on their peers to lift their game on environmental and animal welfare standards.
Farmers know there is a need to act more collectively and not ‘let the team down’, as a means to help others validate product claims on NZ’s superior farming standards with discerning consumers. In recent times when individual animal welfare failures are reported for example, there are no shortage of farmers willing to publicly deplore such actions.
There can be no doubt that this will help to maintain NZ’s existing reputation in the market for producing safe and high-quality agricultural products, but it isn’t narrowing the supply chain.
‘WHY AND HOW’ ABOUT THE CONSUMER
Stoke-based dairy farmer and member of the Government-appointed Primary Sector Council, Julian Raine is unequivocal about the value farmers can obtain by getting into the market and talking to consumers.
Raine believes it is a cop out for farmers to claim they can have no influence on consumers, and their role should remain behind the farmgate. In the first instance, he says there should be interaction between farmers and their processor.
“Processors should be organising visits to market and farmers should be shown the feedback from such visits, including customer feedback through complaints processes.”
Raine says he has made definitive changes to his dairy operation based on consumer feedback obtained in the market.
“We stopped feeding palm kernel for example, as a result of what customers told us. The customers didn’t really care whether palm kernel was sustainable or not, they just said we don’t want you to use it. We didn’t argue and we just stopped using it.”
This is the kind of insight farmers who remain behind the farmgate are unlikely to fully appreciate, no more so than because it raises the inconvenient truths that science and logic is not what is important to consumers, rather their beliefs are driven more by how they ‘feel’. It might be hard to stomach, but farm production systems are going to have to be determined by feelings rather than science.
Raine thinks processors should be doing more to encourage farmers to make market visits and engage with consumers. He says that for one it would help processors make farmers realise why they insist on certain standards. Market visits would heighten farmers understanding of what goes on behind the stainless-steel door – why processors manufacture butter or milk powder or other products exactly the way they do.
Getting closer to consumers would also do more to make farmers realise they are fundamentally ‘food handlers’.
NZ-listed dairy company Synlait has positioned itself as disruptive with a determination to drive value through new thinking. Synlait’s national milk supply manager David Williams says this involves connecting consumers with its farmer suppliers.
“Many customers see the company’s Lead With Pride supplier programme that guarantees its milk has been sustainably produced as a real point of difference and an advantage of partnering with Synlait.”
Williams says Lead With Pride has been driven by what Synlait’s customers want. “We have customers who are concerned about the sustainability of the palm oil industry for example, and as a result we have introduced a voluntary palm kernel payment incentive that we pay to Lead With Pride certified farms who choose not to feed palm kernel to help address this concern.”
Similarly, Synlait farmers are rewarded for meeting product specifications demanded by the a2 Milk Company (milk only supplied from a2 cows) and Munchkin (never grain-fed, never-housed and only fed feed grown in NZ).
In terms of enabling a direct connection between farmers with customers as advocated by Julian Raine, Williams noted Synlait has facilitated an alternative to farmers travelling to market.
“We often have customers visit farms which supply Synlait, which gives both the farmer and the customer a chance to learn more about each other. We also involve farms in customer campaigns, for example we’ve had a number of Munchkin advertisements and product launches out on our supplier farms.”
MORE ‘SOFT’ SCIENCE WILL HELP
Beyond individual efforts and supportive processors, how can the farming industry be more savvy in appealing directly to consumers? The MBIE report says with the help of better research, analysis and insights.
The report notes that to date NZ has not invested in the skills needed to obtain consumer insight and action that knowledge, and has consequently missed information on consumer requirements, including provenance.
This oversight is starting to be addressed by a range of providers including the MPI and the Agribusiness and Economics Research Unit (AERU) based at Lincoln University, who have taken steps to help farmers at least become more mindful of what they can do to help satisfy consumers without having direct contact.
Julian Raine agrees there should be more invested in consumer research, although he cautions that it shouldn’t provide an excuse for farmers to sit back and be told what to do.
“You can have tasting panels and consumer insight reports, but there is nothing better, and it hits home to you more, if you actually go and see where and how your product is being sold.”
Under the previous government MPI established an Economic Intelligence Unit (EIU) to provide market information covering the primary industries, including the dairy industry.
The Market Insights team works with internal and external stakeholders on examining a range of consumer trends and insights, and its reports are often co-developed with primary sector businesses. Recent examples include identifying potential pricing premiums for sustainable farming practices to help inform an environmental and social farming initiative for a leading NZ co-operative. MPI says the target audience for its work includes rural professionals and primary industry participants.
BRAND AMBASSADORS, AND LOOK TO THE AIR
AERU has also been busy, carrying out research that is designed to identify what step changes NZ farmers can take to get into markets, interact with customers and obtain premium prices.
AERU director Caroline Saunders says she is focused on exploring value chains that take the value back to farmers.
“One way is using brand ambassadors in market. Farmers may still not necessarily have the power – there will be a supermarket in there, but if New Zealand producers have gone into markets to support the supermarkets selling that product, or enhance the value proposition, the supermarket is less likely to drop the product.”
For farmers to command more power in the value chain, Saunders says it is going to be a case of considering new business models.
“NZ’s primary sector export history is very much based on a transactional business model – low cost, very good at supply, race to the bottom, good at quality product. But New Zealand farmers need to look towards a value driven model.
“This will be much more about relationships, collaboration, networking and being market orientated. It will require more trust but will be critical in getting high value premiums back to NZ.”
Essentially, a successful model will be one where there is shared belief and values among all the participants including farmers and consumers.
“Under the current transactional model there might be common values, but there is no way of sharing them – up or down the chain.”
This may well mean farmers having to consider choosing a processor that shares the values which they represent. Farmers might need to move around the country to find that processor, who may operate at a smaller scale, but has the facilities to get to premium markets.
However, it need not all be about change. Saunders says the value that comes from investing in consumer insight research can unveil findings that show farmers could be making more of what they already do.
“Farmers may well be already doing things that international consumers want, but don’t know it. Air quality is a good example. Among the findings from Asian consumer surveys we have undertaken is the importance placed on the air quality where the product has been produced. We’ve said to the industry you should be monitoring air quality to validate and promote it. Air quality is something New Zealand could really sell in market.”
