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Speaker 1: The information provided in this program is of a general

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Speaker 1: nature and is not intended to be personalized financial advice.

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Speaker 1: We encourage you to seek appropriate advice from a qualified

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Speaker 1: professional to suit your individual circumstances. One of our leading

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Speaker 1: horticultural exporters just had one of its largest harvests ever,

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Speaker 1: meaning Kiwifruit Growers is set to receive a sweet yield

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Speaker 1: this season. So what seeds is this brief planting for

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Speaker 1: the future?

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Speaker 2: This year, the yields of returned we're back to our

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Speaker 2: biggest ever crop will be over one hundred and ninety

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Speaker 2: million trades markets. We're applying a lot of investment in people,

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Speaker 2: opening offices and putting more sales and marketing investment behind

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Speaker 2: the USA and Vietnam. We have about five thousand hectares

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Speaker 2: around the world now growing outside of New Zealand, but

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Speaker 2: it's not enough.

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Speaker 1: Dan Matheson has worked at Zesbury for more than twenty years,

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Speaker 1: the past seven as its CEO, but he's on the

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Speaker 1: way out and is passing the reins to Jason to

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Speaker 1: break Zesbury's existing chief operating officer. I know what you're thinking.

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Speaker 1: He just turned thirty six, but Primary Industries is in

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Speaker 1: his blunt raised on a dairy farm in the wikatur

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Speaker 1: At age twenty, Jason set out to lead Zesbury gunning

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Speaker 1: for the gig. Since the day he started, Dan says

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Speaker 1: he's leaving growers in good hands and our export let

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Speaker 1: economy depends on it. Zesbury saw just shy of four

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Speaker 1: billion dollars worth of kiwi fruit sold globally last financial year.

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Speaker 1: It's on track to top that this year with the record

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Speaker 1: harvest of one hundred and ninety three million trays of

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Speaker 1: fruit supplied by growers, but less than fifty percent of

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Speaker 1: Zesbrey's two eight hundred kiwi fruit suppliers owned shares in

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Speaker 1: the company. Something it hopes to change the way it

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Speaker 1: works is Zesprey as effectively a marketing company for them.

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Speaker 1: It has the right by law to exclusively sell New

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Speaker 1: Zealand's kiwi fruit overseas except in Australia. It's a strategy

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Speaker 1: referred to as the single Desk, which, according to a

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Speaker 1: Berle Economic report, has seen it spend more than one

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Speaker 1: billion dollars promoting the fruit over six years. The company

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Speaker 1: has come a long way since twenty ten, when the

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Speaker 1: PSA vine disease devastated its growers. Gold variety. Since then,

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Speaker 1: COVID labor shortages and cyclones caused constant challenges too, but

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Speaker 1: Dan says that's all behind it and the future looks

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Speaker 1: much more fruitful. Well, Dan, thank you archie doing.

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Speaker 3: That's good to be here.

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Speaker 1: You've always got to get the gun boots out.

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Speaker 3: Yeah I haven't actually got I haven't had time to

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Speaker 3: put mine on yet.

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Speaker 1: It's okay. Everyone knows you're the part.

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Speaker 3: Hopefully we won't need them over the next few days.

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Speaker 1: Last time I was here last year, we had a

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Speaker 1: quick chat and it was obviously not as positive as

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Speaker 1: it is now. Yields were lower. There were clearly them

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Speaker 1: were the challenges as well, but you must have some

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Speaker 1: pretty happy growers this year.

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Speaker 3: It's been a really tough two years.

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Speaker 2: We've been hit by the labor shortages and then a

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Speaker 2: whole lot of climatic events which have just made it

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Speaker 2: really hard for growers to make money. And it's actually

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Speaker 2: not just key we for it growers, but across the

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Speaker 2: whole horticultural sector, not just in New Zealand but around

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Speaker 2: the world. So when you get hit with those things,

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Speaker 2: and it's funny. I often have been talking to grows

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Speaker 2: about this analogy that Actually the CEO of Ali Barber

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Speaker 2: Jack Maher, talked about, which is, you know today is raining,

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Speaker 2: Tomorrow is going to be really stormy, but if you

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Speaker 2: stick in there and you make the right changes, the

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Speaker 2: day after tomorrow, the sun's going to come out. And

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Speaker 2: I've been saying that to grows for the last couple

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Speaker 2: of years, and actually I think their patients with the

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Speaker 2: sun not coming out with starting to wear a little thin.

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Speaker 2: So it's actually been really nice to work through those

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Speaker 2: last couple of years make the necessary changes across the

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Speaker 2: supply chain to ensure we're doing everything within our control

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Speaker 2: to get a better quality fruit and then to see

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Speaker 2: it come through execute our plans.

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Speaker 3: Well.

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Speaker 2: Twenty twenty three saw this big size lift in value,

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Speaker 2: which was great, but low yields so not great for

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Speaker 2: profitability on the orchard.

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Speaker 3: And then this year the yields have returned.

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Speaker 2: We're back to our biggest ever crop will be over

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Speaker 2: one hundred and ninety million trays something like seven hundred

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Speaker 2: and fifty ton of kiwi fruit, and we're going to

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Speaker 2: be able to hold a lot of.

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Speaker 3: That value as we go through the season.

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Speaker 2: So that's going to be fantastic for growers who are

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Speaker 2: finally going to be getting some financial benefit and reward.

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Speaker 1: If we look across that whole supply chain, I kind

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Speaker 1: of see it in three parts, as you're slightly mentioned there,

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Speaker 1: the beginning being the actual production right and then also

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Speaker 1: the middle being the exporting, the logistics, the marketing with

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Speaker 1: esp replays a very large part internationally, and then the

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Speaker 1: price that can be demanded for it, and then the

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Speaker 1: yield that can be returned to growers. Can you give

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Speaker 1: me a score on each of those pieces and how

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Speaker 1: they're going.

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Speaker 3: It's well, yeah, and I think there's one.

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Speaker 2: There's one other component, which is actually the innovation, even

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Speaker 2: right at the front end, to make sure that we're

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Speaker 2: getting the right varieties grown in the right way.

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Speaker 3: That then the growers can.

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Speaker 2: Really start to improve through their own orchard management practices

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Speaker 2: and techniques to deliver great outcomes off the orchards. And

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Speaker 2: across all of those we've just seen a real difference

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Speaker 2: in an outcome. So firstly, I think the growers have

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Speaker 2: really paid more attention on their orchard. I think if

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Speaker 2: you go back to the twenty twenty two season, one

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Speaker 2: of the big problems was we didn't have enough people

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Speaker 2: and the quality that fruit at harvest time was not great.

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Speaker 2: It was getting damaged as it was going into the

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Speaker 2: picking bags. Growers have been really deliberate to make sure

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Speaker 2: that they've got good quality workers, good quality people on

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Speaker 2: their orchard, they've got good supervision, and so that whole

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Speaker 2: piece has just improved dramatically from where it was just

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Speaker 2: a couple of years ago. I think in the pack

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Speaker 2: houses themselves, our supply chain partners, they also have invested

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Speaker 2: in a lot of people looking at quality management, not

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Speaker 2: just people, but also technologies to ensure that that fruit

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Speaker 2: coming off is meeting that consistent standard that we know

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Speaker 2: our customers want, and our consumers want if they're going

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Speaker 2: to pay top dollar for So that's been a real.

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Speaker 3: Big tich as well.

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Speaker 2: And then market side, you know, we can sell it

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Speaker 2: if we get good quality and the plans have been

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Speaker 2: put in place, and what we've been doing now is

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Speaker 2: executing those plans really well. So I think you give

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Speaker 2: it a big tick across all those three areas. And

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Speaker 2: obviously right back at the beginning, we've got a great

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Speaker 2: variety that's come through the innovation pipeline.

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Speaker 1: Yeah, I was going to ask you about that. Actually,

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Speaker 1: there's different values captured for different varieties. Ruby red is

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Speaker 1: coming through and that can capture up to twenty six

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Speaker 1: dollars New Zealand a tray compared to are currently nine

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Speaker 1: for green. Talk to me about the opportunity for that,

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Speaker 1: and surely we'll growers are wanting to get in on

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Speaker 1: that exactly.

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Speaker 2: Look, so some gold has been a real revelation and

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Speaker 2: the fruit basket, it's just got this beautiful combination of

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Speaker 2: being a fruit that's good for growers to grow. It

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Speaker 2: can get high yields and you can grow good consistent quality,

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Speaker 2: but it's also got a flavor and taste and health

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Speaker 2: and nutrition platform that really delivers for consumers.

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Speaker 1: It doesn't make your tongue feel for after.

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Speaker 2: We shouldn let it with the skin on. I used

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Speaker 2: to do that on the way to rugby practice. It

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Speaker 2: would be with the skin on. We don't market it

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Speaker 2: like that, particularly in our Asian markets. So that's been

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Speaker 2: really successful and on the back of that, we've been

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Speaker 2: looking at what comes next and what's clear is that

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Speaker 2: there wasn't a variety that was that sort of really

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Speaker 2: impactful red color with that nice bery under flavor, undertone flavor,

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Speaker 2: and that's come through in our ruby red, and it's

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Speaker 2: been hard for grows to get the head around. It's

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Speaker 2: not as easy to grow as sun gold. But actually

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Speaker 2: in market it's doing very, very well. It's so impactful

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Speaker 2: that color when you see it, and the flavor is

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Speaker 2: quite unique. There's not much else like that in the

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Speaker 2: fruit basket, so we've still got a way to go.

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Speaker 2: The twenty six dollars you're talking about is exciting, but

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Speaker 2: I just caution you on the terms of the yield

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Speaker 2: is much different where only you know this year will

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Speaker 2: be one point five million trays of gold versus one

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Speaker 2: hundred and twenty four million trays of Sorry I've read

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Speaker 2: because one hundred and twenty four million trays of some gold.

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Speaker 2: So there's still a long way to go, but we're

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Speaker 2: pretty excited that this red variety will continue to get

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Speaker 2: a premium over some gold, and provided we can get

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Speaker 2: the grower side of things right so they can get

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Speaker 2: those yields up, we think there's a real successful story

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Speaker 2: there as well.

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Speaker 1: And yield is always crucial for growers obviously, but it

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Speaker 1: feels like more crucial now because of the increased cost

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Speaker 1: that they're facing on orchids. Talk me through what you've

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Speaker 1: seen an inflation over the past few years, and if

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Speaker 1: it's actually easing off now like we're told this.

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Speaker 2: I mean, we went through that just that rapid increase

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Speaker 2: in costs which was you know, just dramatic for grower

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Speaker 2: profitability and had a very negative impact. And so we

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Speaker 2: are starting to see that start to settle, so you know,

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Speaker 2: the cost of people. With a lot more people coming

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Speaker 2: back into the industry, it means that that's starting to

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Speaker 2: flatten off. Shipping costs have moderated somewhat. The New Zealand

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Speaker 2: position to get our fruit to rest of world is

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Speaker 2: still pretty tight. So even though you've seen greater capacity

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Speaker 2: in shipping, particularly in the transatlantic routes, you're not seeing

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Speaker 2: it as quite as beneficial from Europe and from Asia.

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Speaker 3: Into New Zealand and out of New Zealand.

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Speaker 2: So there's still there's you know, those rates are still

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Speaker 2: at high levels and we would like.

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Speaker 3: To see those come back.

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Speaker 2: I think the other area has been on the quality itself.

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Speaker 2: So the quality cost for our growers has been significant,

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Speaker 2: particularly in twenty twenty two, hit with really challenging weather conditions,

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Speaker 2: which meant that that fruit, you know, Nick's bruises and

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Speaker 2: scuffs it meant that that fruit just wasn't lasting through

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Speaker 2: relatively long transit times into market, and so when it

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Speaker 2: turned up there was a lot of fruit loss. All

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Speaker 2: that cost has been incurred and now you actually have

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Speaker 2: to unfortunately put it in you know, not into consumer's mouth.

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Speaker 2: So that's not great. So he asked, we're seeing a

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Speaker 2: remarkable improvement there. To give you an idea, twenty twenty two,

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Speaker 2: five hundred and thirty million dollars it cost us in

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Speaker 2: the total cost of quality. So that's fruit loss in

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Speaker 2: New Zealand, that's our customer claims and our fruit loss

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Speaker 2: in the marketplace. This year, we're talking about a cost

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Speaker 2: of around one hundred and sixty million, so that's money

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Speaker 2: that's going back into grow as pockets and as much needed.

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Speaker 1: Still a lot, though, isn't it.

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Speaker 3: There's still a lot.

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Speaker 2: But remember we are a long way from the rest

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Speaker 2: of world and so there is always going to be

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Speaker 2: a cost to get our fruit to market in great condition.

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Speaker 1: Another cost is obviously interest costs. Yep, how are your

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Speaker 1: growers going with that? And our banks being content them

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Speaker 1: at the mind?

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Speaker 2: Well, I think it's tough across the board, as you know. Well,

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Speaker 2: I think banks have been really supportive. I think the

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Speaker 2: rural banks that really have supported our industry for many,

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Speaker 2: many years can see that actually this is a tough period.

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Speaker 2: Future is looking very bright. We've got strong consumer demand,

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Speaker 2: we've got great varieties coming through, and those costs are

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Speaker 2: starting to moderate somewhat, and so they've been making sure

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Speaker 2: that they're giving whatever support they can to grow us,

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Speaker 2: to get us through this tough patch and ensure that

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Speaker 2: we've got the financial means to grow again as we've

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Speaker 2: come back into some positive space.

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Speaker 1: Talking about the rest of the world, because we are

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Speaker 1: in the bottom corner of it here in New Zealand,

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Speaker 1: can you talk me through your major market splits. Where

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Speaker 1: are your biggest export earners currently and where do you

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Speaker 1: see the biggest opportunities still to come.

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Speaker 2: Yeah, that's it's a really exciting question. We've got very

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Speaker 2: strong markets in Europe. So in Europe, France, Spain, Italy,

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Speaker 2: Germany and the Benilux region are all markets that have

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Speaker 2: historically been very strong for US, but are actually shown

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Speaker 2: very strong growth signs as well, particularly grown by the

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Speaker 2: greater consumption of sun gold, so that's really pleasing. And

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Speaker 2: then in Asia we've got the greater China region, which

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Speaker 2: is made up of mainland China, Taiwan, and Hong Kong.

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Speaker 2: That's continuing to grow really well for US, and it

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Speaker 2: makes up about just under thirty percent of our total volume,

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Speaker 2: around thirty to thirty five percent of our total volume.

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Speaker 2: And then you've got Asia Pacific, with the two superstars

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Speaker 2: there being Japan and Korea, which.

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Speaker 3: Have been long term markets for US, which have.

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Speaker 2: Done well but again continuing to grow at a very

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Speaker 2: strong rate. And so those regions are our three sort

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Speaker 2: of core regions for US, and they're all doing.

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Speaker 3: Very very well for us.

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Speaker 2: They've had a lack of fruit in the last two years,

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Speaker 2: and we've been able to now give a lot more

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Speaker 2: fruit to our customers and consumers again in those markets,

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Speaker 2: and we've seem very strong demand on the back of

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Speaker 2: our great quality but also our strong sales and marketing programs.

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Speaker 2: We have also got some new markets coming through which

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Speaker 2: are very exciting. So two of our fastest growth markets

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Speaker 2: markets we're implying a lot of investment in people, opening

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Speaker 2: offices and putting more sales and marketing investment behind the

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Speaker 2: USA and Vietnam, and both of those markets are still

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Speaker 2: a very low penetration rate markets, but we're seeing strong

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Speaker 2: we will see strong growth in those markets for the future.

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Speaker 1: On Europe specifically because it is quite a decent contributor already.

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Speaker 1: Aren't you seeing increased competition from some other premium fruit

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Speaker 1: suppliers in that market.

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Speaker 3: Yeah.

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Speaker 2: The fruit market in general is becoming a lot more crowded,

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Speaker 2: so you are seeing more new varieties, not necessarily in

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Speaker 2: the Key we fruit space, but across the global fruit bowl.

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Speaker 2: And so that means you've got to be on your

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Speaker 2: game all the time to ensure that you're giving your

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Speaker 2: customers and consumers a reason to buy your fruit. And

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Speaker 2: that comes through our brand, which represents great quality, health

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Speaker 2: and nutrition and great taste, and we invest a lot

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Speaker 2: behind that.

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Speaker 3: So we're quite unique in.

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Speaker 2: The fruit market at Basket because we have the means

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Speaker 2: to be able to do that. Partner with our retailers,

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Speaker 2: put a lot of investment in store, raise the profile

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Speaker 2: of our fruit, get our consumers to notice it, get

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Speaker 2: them to love it, and get them to keep coming

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Speaker 2: back and buying more. And I see a lot more

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Speaker 2: opportunity for growth on the back of that model in

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Speaker 2: the future.

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Speaker 1: I hear fruit just arrived in the US and May.

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Speaker 1: So last month, what are they willing to pay for?

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Speaker 1: It is been demand.

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Speaker 3: There a really strong demand.

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Speaker 2: I think, in fact, just looking at some numbers earlier

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Speaker 2: this morning, I think we're about thirty five percent out

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Speaker 2: on last year. So that's a really pleasing start off.

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Speaker 2: More volumet too, that is volume right, Pricing across the

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Speaker 2: border is pretty consistent with last year. I think we've

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Speaker 2: seen some markets where with the increase in volume, pricings

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Speaker 2: coming back a little bit. But certainly in those markets

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Speaker 2: where we've got strong penetration and growth rates, we've been

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Speaker 2: out to hold as much of that value from twenty

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Speaker 2: twenty three as we could.

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Speaker 1: Dan, you've spoken a lot about fruit quality, obviously very

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Speaker 1: critical for this company. You do have production offshore which

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Speaker 1: helps for resilience of fruit quality and times like last

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Speaker 1: year where we had two cyclones that impacted your growers.

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Speaker 1: What are the expansion plans there, Do you have plans

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Speaker 1: to grow that and how a growers kind of feel

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Speaker 1: about that if you.

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Speaker 2: Did, a big part of our strategy is to ensure

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Speaker 2: that we've got the best quality Kiwi fruit available for

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Speaker 2: consumers for as much of the year as we can.

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Speaker 2: We are able to deliver a lot of that out

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Speaker 2: of New Zealand, so you know, depending on market, between six, seven,

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Speaker 2: sometimes eight months, but then we run out of fruit

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Speaker 2: and we see a lot of Northern Hemisphere Kiwi fruit

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Speaker 2: moving into the shelf space and the demand that we've created,

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Speaker 2: and so we have been now since the late nineteen

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Speaker 2: nineties trying to grow our counter seasonal supply primarily out

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Speaker 2: of Europe, primarily Italy, France, with some growing volumes of

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Speaker 2: green now out of Greece, and we have about five

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Speaker 2: thousand hectares around the world now growing outside of New Zealand,

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Speaker 2: but it's not enough. And so one of the discussions

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Speaker 2: that we're having with the industry right now is we've

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Speaker 2: reached five thousand hectares, we've seen good value for that,

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Speaker 2: we're protecting the shelf space, which is fantastic and giving

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Speaker 2: those consumers great quality fruit for even when the New

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Speaker 2: Zealand season five.

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Speaker 3: But we're well short of the demand picture and that's.

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Speaker 2: Allowing more and more other Kiwi fruit supplies to come

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Speaker 2: in and take that shelf space. And so the discussions

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Speaker 2: that we'll be having with the industry over the next

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Speaker 2: few months is what are we going to do about that.

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Speaker 2: We're at five thousand hectares, what should our expansion plans be,

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Speaker 2: and certainly there's a strong case to continue to expand

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Speaker 2: and make sure we've got that fruit available for customers

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Speaker 2: and consumers for a lot longer period throughout the year.

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Speaker 1: Those discussions, I can imagine are interesting because you need

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Speaker 1: grower approval to make expansions like that, but not all

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Speaker 1: growers are shareholders and receiving dividends out of zesprey. There's

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Speaker 1: plans to change that with initiatives on the table. How

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Speaker 1: do you see them going through over the next few months.

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Speaker 1: Do you think that they're going to get the tick?

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Speaker 3: Yeah, I think they will.

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Speaker 2: I think growers more and more, particularly now visiting the

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Speaker 2: markets again and actually seeing the increase of other brands

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Speaker 2: of Kiwi fruit starting to come into the supermarkets. I

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Speaker 2: think they'll realize that it's important that we have the

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Speaker 2: Zespri brand there for as much of the year as

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Speaker 2: we can because that allows us to control the interchange.

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Speaker 2: So manage our New Zealand supply, then work with our

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Speaker 2: retailers with our non New Zealand Zespri branded fruit, and

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Speaker 2: then manage that also when our next new Zealand season

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Speaker 2: starts again and that gives us continuity.

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Speaker 3: It allows us to get maximum value from all the.

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Speaker 2: Marketing investment we make, but importantly ensure that we're creating

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Speaker 2: a premium quality Kiwi fruit that holds the value and

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Speaker 2: that's only that can only be good for the next

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Speaker 2: New Zealand season where we're trying to get good, consistent

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Speaker 2: pricing again in that following year. So I think growers

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Speaker 2: we'll understand that we've got a lot of discussions to have.

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Speaker 2: Let's remember that growers have been away from the markets

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Speaker 2: for a long time with COVID and so we see

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Speaker 2: more and more growers now visiting the market. It's been

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Speaker 2: able to see the competition that's coming firsthand and are

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Speaker 2: now absolute receptive and wanting to engage in this discussion

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Speaker 2: about what do we do with our New Zealand our

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Speaker 2: non New Zealand supply volumes from here.

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Speaker 1: They also need cash flow after the past couple of years,

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Speaker 1: So how realistic is it. Do you think that some

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Speaker 1: of them will give their payments back to you and

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Speaker 1: receive shares instead.

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Speaker 3: Oh, I think it's really realistic.

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Speaker 2: I think growers in the last couple of years have

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Speaker 2: seen that actually resilience in the balance sheet is really important.

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Speaker 2: It's probably not enough anymore just to have your autid

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Speaker 2: gate return. You need to have other flows of value.

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Speaker 2: And our non New Zealand supply business gives us just

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Speaker 2: that value from the offshore production, also value from increasing

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Speaker 2: our license as well of new varieties, and so it's

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Speaker 2: important to build that strength in your balance sheet to

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Speaker 2: be able to ward off the climate change impacts which

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Speaker 2: will come back and hit us again. I think we're

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Speaker 2: going to have some clear air for the next little while,

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Speaker 2: but this is horticulture and those risks always exist. So

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Speaker 2: I think growers have to think about it from the

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Speaker 2: overall resilience of their balance sheet perspective, and they'll see

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Speaker 2: that actually buying Zespriy shares and getting a strong dividend

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Speaker 2: from those shares is something that can only be valuable

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Speaker 2: for going.

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Speaker 1: This is the farewell tour, isn't it. How do you

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Speaker 1: feel about actually leaving?

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Speaker 2: It's been here at the field days. It's a bit

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Speaker 2: bit a sweet, to be honest. It's on one side,

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Speaker 2: you know, very sad to be leaving. This will be

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Speaker 2: my last field days with Zesprey and it's been a

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Speaker 2: great journey over the last twenty one years, and I've

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Speaker 2: had the privilege to be CEO for seven of those,

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Speaker 2: and so on that side, it's a bit sad, But

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Speaker 2: on the other side, I'm so pleased that actually I'm

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Speaker 2: leaving at a time when the industry is in good

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Speaker 2: heart strong returns starting to come back into the industry,

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Speaker 2: with a clear strategy for the future and with a

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Speaker 2: great leadership coming through.

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Speaker 3: Too.

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Speaker 2: Delighted that the board made the decision to appoint an

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Speaker 2: internal candidate, Jason, to break into the new CEO role.

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Speaker 1: Was he your peck?

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Speaker 2: Yeah, absolutely so. Jason as an outstanding person and leader.

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Speaker 2: He has a track record of delivering across the primary

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Speaker 2: sector and very rolls. But in the last eighteen months

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Speaker 2: he has been the leader that's helped us turn the

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Speaker 2: ship on quality. Of course, working with many others across

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Speaker 2: Zesbury and the industry to do that, but he's been

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Speaker 2: at the forefront of making those core decisions in terms

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Speaker 2: of how we change our supply chain to ensure we

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Speaker 2: can get good quality fruit into market. So he comes

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Speaker 2: with really strong credentials. He's got a very good vision

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Speaker 2: for the future, really clear, and that's going to be

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Speaker 2: a combination of fresh ideas but also continuity, which is

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Speaker 2: really really important for our industry.

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Speaker 1: Well, I'm sure I'm not the only person to tell you,

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Speaker 1: but you are going to be stalling this growers, tell me,

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Speaker 1: so enjoy the US and perhaps next time we do

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Speaker 1: this it might be in California on a very far.

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Speaker 3: That would be.

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Speaker 1: That sounds pretty good. Go well and enjoy it.

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Speaker 3: Thanks so much.

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Speaker 1: Thanks Dan,