What Would Synlait Be Worth to Fonterra or a2 Milk?
Speculation of a possible joint move by Fonterra and a2 Milk to buy Synlait raises a much bigger strategic question, says agribusiness expert Dr Nic Lees.
John Keogh, who advises companies and governments, says Ireland has its act together in particular with its Origin Green brand based on the sustainability of Irish primary products.
Keogh, speaking at MPI's PGP expo, said Ireland is now regarded as a top brand worldwide, but NZ by comparison is at best "aspirational".
Keogh says NZ's problem in part is that some market access and food promotion is determined by MPI, whereas Ireland has Bord Bia (Irish Food Board), with a better structure and able to accelerate marketing and branding.
He says NZ has a fantastic brand but companies aren't leveraging off it as much as they should. NZ's brand story is powerful but needs more collaboration by the Government and private companies.
The brand story is important to consumers, especially young people, Keogh says.
"When deciding about a product the consumer wants to know where it came from, is it genuine and more increasingly is that product produced sustainably and was there slavery involved in it? It's much broader than just the product itself and it goes back to the practices of the company in that country, their farming and manufacturing processes."
Keogh says consumer demand for information about products varies from country to country and even within countries. For example, consumers in California tend to be more discerning than those in other states. In Europe it can also vary between countries.
"But Asia is in a scary position right now. China is worried about the authenticity of products, extremely worried about product safety and there is a lack of trust in the governmental frameworks to assure the safety of their products.
"Where I live in Vietnam, it's like a mini China with several articles appearing monthly in magazines about the issues in food safety and how the government does not have good control of that. The World Bank has just given Vietnam $50 million to work on food safety and I believe they are also giving China about $500 million to work on that."
Keogh says consumers' use of technology to trace the origin and other information about products is becoming widespread. One supermarket giant in Europe, Metro AG, has an independent platform to which producers can upload information about their products and consumers can download it.
Government role critical
New Zealand producers and the Government need to work together on branding and food safety issues, says John Keogh.
He says Chinese consumers may not always believe the data provided by a company, but government endorsement gives it much more credibility.
The role of the NZ Government in negotiating import protocols with its counterparts in China is critical to the future of exports there.
"I see a risk right now for your wine, honey and dairy. If you're not careful the Chinese will mandate national solutions used in China, and they will come here and tell your food companies they want them to use [Chinese] product identification and anti-counterfeit measures on those products. I think this is happening now in some instances."
Keogh says NZ needs a national solution based on global standards and equal with what China is trying to achieve. MPI needs to be a little more forceful with trading partners, not just accepting of those countries' preferred protocols.
The consequences of NZ having to meet food safety strategies imposed by many different countries could negatively affect Fonterra.
