Kiwifruit exporting model brings high returns to growers
New Zealand’s kiwifruit industry operates under a ‘Single Desk’ structure, whereby government regulations establish Zespri as the primary exporter of New Zealand-grown kiwifruit to all countries other than Australia. New Zealand Kiwifruit Growers Incorporated (NZKGI) commissioned BERL to produce a report to explain the Single Desk structure to new growers, and analyse the benefits, costs, and barriers of the arrangement, commonly referred to as the Single Point of Entry (SPE).
In 2015, New Zealand’s kiwifruit growers participated in a referendum in which 97 percent voted in favour of the SPE structure. Eight years on, the report concludes that the SPE has created a brand that can manage kiwifruit quality and quantity to deliver high returns to kiwifruit growers.
NZKGI CEO Colin Bond says, “It is reassuring for our growers that this report recognises the value that the SPE has brought to the New Zealand kiwifruit industry over the last 24 years. Growers have long supported the SPE as a cornerstone of the success of our industry, and the independent report we have commissioned continues to back this.”
The report points out that Zespri-marketed green and SunGold kiwifruit draw a 10-20 percent higher price than competing varieties in international markets. Furthermore, while the volume of kiwifruit exported has increased by 299 percent since 2000, export receipts have outpaced this, increasing by 571 percent.
The report compared the growth of the value of the kiwifruit industry to the apple industry by assessing growers’ average net income (Orchard Gate Return, or OGR). The report points out that while apple growers’ average OGR increased from $43,600 to $49,000 per hectare between 2015 and 2019, kiwifruit growers’ average OGR outpaced apples by 64 percent, increasing from $60,800 to $107,100 per hectare during the same period. Also, in terms of capital, 2020 data indicated that the sampled kiwifruit orchards were substantially more valuable (at $928,700), and hence profitable, compared to the sampled apple orchards (at $275,300) per hectare.
While the report was favourable to the SPE, it highlighted some limiting factors, such as the probability of disadvantage to smaller groups of growers. This might occur when a set of rules is created under the SPE, for example, the mechanism used to acquire a licence to grow SunGold kiwifruit, which could be prohibitive to those who do not have sufficient capital.
Another barrier of the SPE is that the producer votes, required to be undertaken by growers to decide on important industry decisions, may restrict a rapid reaction by Zespri to respond to changing market conditions. There is also a notable barrier created as a result of Zespri shareholders being a minority of all growers, meaning that growers are unable to vote and exercise a degree of control over Zespri to which they would otherwise be entitled.