Horticulture - profit-enhancing innovations: Q&A
So Brian, my first question to you-- you seem very pessimistic about the growth, particularly the
export growth, opportunities for horticulture given the Free Trade Agreement. A lot of growers I
speak to talk about, in the past, the high exchange rate as being an impediment. So there's a bit of
a disconnect there, it seems to be.
Well, I don't think we're-- I wouldn't have thought we're all that pessimistic. Perhaps realistic
might be a better word. I mean, we're suggesting 1% average year on year over the medium term.
I mean, 1%, in real terms, isn't nothing.
But there are some reasons to think that this growth won't be unlimited. For a start, the decline in
the value of the dollar has already happened, and we don't see too much more of that happening.
We assume that the Australian dollar, which is at $0.78 or something now, will average $0.76
over the medium term.
And the other thing on the dollar, of course, is that the US dollar is not the only game around,
and other currencies are not as strong as the US dollar. Our dollar against the Japanese yen has
stayed pretty much constant. Against the euro, it's, if anything, strengthened a bit. So you know,
those cans of tomatoes coming in from Italy have become slightly more competitive in recent
years.
The trade agreement's certainly a positive. And yeah, some things have already happened. I think
there's been an increase in cherries going into Korea. But a lot of those are things being phased in
over-- well, in the case of China, four years or 10 years. So if we're looking ahead five years,
over the whole range of horticultural products going to all the countries in the world, those free
trade agreements are good, obviously, good rather than bad. But they're just one more little game
for horticulture. They're not going to totally change the face of our exports.
Thanks, Brian. We've got a question.
Trent De Paoli. Harry, this one's for you, mate. Great presentation. What's the silver lining on the
current berry category opportunity? And where do you see that in your business, I don't know,
fast forward 24 months from now? And I'd like a similar comment from Coles, as well.
The fresh berry market's very fascinating. It's our fastest-growing category. Demand's picked up
for probably obvious reasons. We're spending about $52 million this year on eight new berry
projects. So we're thinking double-digit growth for blueberries, raspberries, and probably a little
bit less for strawberries. And we've got new blackberry [INAUDIBLE] coming a little bit later,
in about two years.
So the per-capita consumption of fresh berries in this country is still only 60% of the US
consumption. So there's a lot of room to move, if we do it well. And I think with the new
varieties, we are doing it relatively well.
I think if you go back, the raspberry industry was a niche product four years ago, because they're
very small berries, fairly flavourless, and they had two to three days' shelf life. The Driscoll's
varieties we're now growing have 10 to 12 days' shelf life. And I mentioned the 18 tonnes a
hectare we're getting, albeit with a lot of capital investment. And the market is growing
exponentially, because people are now getting a flavoursome product. What we've been trying to
do is get flavor back into a lot of these products.
So the berries-- I think berries are going to be biggest category in the whole fresh produce
market. Maybe that's putting it a bit ambitious, but that's what we think. But maybe Jackie might
allude to that.
Yeah, so berries would be what we would call an expandable category. So if you've got the
product at the right quality, at the right price, you'll get that incidental pick-up by customers. 40
million customers are week picking up a pound of strawberries or raspberries is a good place to
be.
So I've long felt that our berry category, with the exception, probably, of fresh blueberries, has
been a really underperforming area. Very inconsistent in quality. You know, punnets causing
very variable in size, punnet formation causing bruised and squashed fruit, and things like this.
So I think what the industry has done over the last two or three years to address some of that is
phenomenal, and I can't see any reason why it wouldn't continue to grow dramatically.
As far as the food scare element and the knock-on, I mean, clearly for us, I'm sure everybody in
selling frozen berries, it's been a huge impact. It's definitely affected that category. It'll recover.
I've been through multiple food scares in my time. You know, it'll be all over in six months' time.
Whether that Nanna's brand, as such, will come back-- but it's really just a change of packaging
from their point of view. John West and many others have survived similar food scares in the
past.
So I think it will settle. It always does. We can't grow enough berries in this country for the
demand, anyway. So it's going to have to go back to an imported situation if people want to be
able to do the smoothies and all the rest of it that they've always wanted to do.
So it's not-- you know, it's obviously disastrous for the people concerned. It's disastrous for that
organisation. It's actually disastrous for the Chinese growing industry, many of whom do an
excellent job, as I'm sure many in this room have been up there to see. And you know, we've got
no reason to tar the whole thing with the same brush, and I would strongly advise us not to do
that. But for the grace of God, you know, many, many countries can go into this situation.
And if we were all-- my personal view? If every time there was a food scare, a country was
suddenly banned from supplying food, Australia would have been out of the market with the
Garibaldi incident, if not many other times since. So I think we just need to be a bit more levelheaded around it, is my personal view.
Just to add quickly to something Jackie mentioned, we can and will grow enough fresh berries in
this country. It's the frozen ones that we don't grow.
Yeah. To do the total market of demand, yeah.
That's right.
OK, we've got another question.
It's Paul Fairhall from Austrade. And thanks, Andrew. Two honourable mentions for Austrade
there in your presentation. But my question is to Harry, actually. Would you share with us what
the capital or nature of the operating costs are for moving to protected cropping, just sort of as a
general observation on how that's sort of changed your business model, and how it changes some
of those cost drivers?
Look, it's very capital-intensive. And I guess you don't go into protected crop just to grow more
of the same. You've got to have superior varieties and really, product which have a high value.
But to give you some idea, I think I mentioned the raspberry story, that phenomenal yield
increase. But we also had a very high-value, much sought-after product. If I was just selling
normal garden-variety raspberries, we'd still be field-growing.
And similarly, with the high-tech glasshouse, you get 11 times per square metre the yield out of a
high-tech glasshouse as you do out of field tomatoes, which you need to. Because, for example,
our 20-hectare glass house has $65 billion invested. The new 10-hectare glasshouse we're
building is about $48 billion. So we're not talking about small amounts of money.
So you need to have-- but that new glasshouse is growing high-value snacking tomatoes for
Jackie's company and a couple of others I won't mention. So that's very important, that you've
got the right market pull-through to do that. It's not for the faint-hearted.
But if you look at the way climate change is knocking us, and we've got still a lot of field crops.
And every year, we lose money in some areas because of hailstorms and other-- you know,
superfrosts or high temperatures, or whatever. We're protected somewhat by having geographic
dispersal.
But for our investment across our whole company, we have to have more than half tied up in that
high capitalisation. And that's why we do so much work on R&D and IP, because you've got to
have the high-value crops to go with. I don't know whether that answers your question.
Good day. Rob Harris is my name. I'm with the Weekly Times newspaper. Country of origin
labelling-- obviously, you've all spoken about the importance of branding your products as
Australian and that people want Australian produce. And the smart companies seem to be using
that as a market advantage in their own labelling. Where does government-imposed regulation fit
with that? And how much will it affect your organisations?
You want to start off?
Oh, guess I'd better answer something, hadn't I? OK, so country of origin labelling. I think there's
no doubt that customers, particularly with fresh product, and products that they see as close to
fresh, are asking for more information. The current legislative framework probably doesn't give
them everything that they want to know. So I think it's a case of being very careful about how we
work that through.
So I was looking at an example in our own business, this week, of cashews. Packets of cashews,
you know, we don't do anything that anybody else doesn't do. But they're coming in from about
50 countries, because that's the nature of that industry.
So it says, at the minute, Product of Australia. Now, we can go and say Product of Australia, and
then we can give a whole raft of countries beneath it. Or we can try and work on a situation the
allows us to say something like Africa and India and continental definitions. We've got no issue
with doing it, where it's relevant and meaningful to customers and we can minimise the cost up
the chain.
My personal concern with it, when you move beyond your kind of primary or Stage 1 processed
ingredients, is you've got to be careful not to limit availability and add incredible amounts of cost
into the chain. If you're looking at something like-- I'm trying to think of something now-- a
garnish on a ready meal, you know, that garnish or that spice could come from lots and lots of
countries, and it could move almost weekly or monthly. And you can't be printing packaging
every week or month to keep that information.
So I think we've got to find the tipping point at which it really matters to customers and it drives
their decision-making and it's relevant. And then we've got to find a way to give it to them in a
method that's clear and easy for them to understand.
Everyone is following the legislative framework. And I think, you know, changing the legislation
is fine, and I'm sure there's many people who've got a view, both sides of it. I think you can come
up with sensible legislation. We already, as Coles, we already go beyond the minimum labelling
requirements. So much of our packaged produce-- things like our cranberries, it says, you know,
Product of America on the back. Product of Australia, made from American cranberries. So we
will do that wherever we can. But you've got to recognise that you can limit manufacturers' and
suppliers' ability to supply if you get to tight with that regulation.
Just to add to that, I think it comes back to the categories. And in fresh produce, it's a bit easier,
in most cases. Maybe not cashews, but most fresh produce, it's much, much clearer. What
everyone wants is clarity and honesty. We know that Australian consumers in fresh fruit and
vegetables want Australian for two reasons-- quality and food safety. That's been pretty wellestablished. The supermarkets have done a lot of that work to establish that.
And having said that, it's pretty clear, in most products, we and other people import citrus from
California out of our eight- or nine-month window in Australia. But it's very clear, if you go to
Coles, there'll be Produce of Australian, or Produce of US, or whatever. And that's the way it
should be.
So I think we want clarity. And I think in the fresh produce area, I support a change which gives
us more openness and clarity. But I do understand what Jackie's saying. When you get to the
more complex processing area, it could be a bit of a nightmare. So how they work through that,
I'm really not sure.
Hi, I'm Steve Lapidge from South Australian Research and Development Institute. A question
for Harry. It's not something that's been touched on here, but fruit and veg waste is normally
about 20% on the farm. I'm just interested, with your move to protected cropping, how that's
actually changed that ratio. And in the other way, is there a marketing issue with going too much
to a factory farm, in terms of public feeling?
Right. I'll deal with the last one first. Factory-- yeah. Look, it's a perception. If I took you to our
glasshouses, or to where we grow berries under tunnels, or even mushrooms in factories, they're
very clean and green, I've got to tell you. We've reduced, for example, our pesticide consumption
by 45% in the last four years. In our glasshouse at [INAUDIBLE], within two years, we'll be
pesticide free. And we don't sing the praise about that, but we're very strong believers in
integrated pest management, for example. So it's a bit of a misnomer that factories concentrate
things and they do terrible things to product. So that's, I think, something we've just got to sort of
take on board, that there is a perception, but I think if people see what we do, it's not regarded as
such.
Sorry, the first-- I got wound up on that. The first part of your-Now that you've moved to factory-- sorry, to protected cropping-Oh, the waste. The waste side. Yeah, sure.
Fruit and vegetables-Yeah, yeah. Now, look, a lot of works been done in the agronomy of that. We've got varieties
which suit. Our waste is very much reduced. You'd have to go through individual categories. But
we're running, for example, our glasshouse with tomatoes, between 2% to 5% waste, depending
on the cycle, depending on which [INAUDIBLE] we're harvesting. Field cropping is much
higher, and we've experienced that. There's probably more like the 20%. In blueberries, we're
getting something like 12% to 16% in the field crop, and we're getting about 5% under the
tunnel. So that probably gives you a little bit of a guide.
But can I just add, in a lot of horticultural products, the bigger waste component is actually postharvest. And we spent a lot of time and money working on that. For example, we've extended the
shelf life of our mushrooms by four days, and also reduced the waste by over half, by putting in a
lot of new protocols and spending a lot of money on getting from the harvesting the mushroom
off the bed, packed and through the vacuum chiller, and into our store in under an hour. In under
an hour. Every three [INAUDIBLE] you delay, you lose about a day's shelf life.
So that sounds easy. When you're doing 500 tonnes of mushrooms a week, it's not. So a lot of
work on post-harvest, I'd suggest, is as important as pre-harvest.
Another question? OK, we're getting a bit of mood lighting, so I've got a question for Andrew.
Andrew, you spoke-- and I guess we'll follow up then. Andrew, you spoke about the success of
the citrus initiative into China. Clearly successful. You didn't talk about some mistakes you
made.
So if you could play it all back again, what were two errors you made that I guess you would
revisit? What would you do better, if you were starting this journey again? What were the two
things you'd do better? And you might have done it perfectly.
Oh, no, I wouldn't claim that. Well, I think first of all, we would probably have tackled the
research that was required to get the protocols over the line earlier and invested more in that. I
think our industry now realises that you don't sit back and whinge and say, this is difficult.
Government needs to negotiate something easier. That you can't sit back and wait for the years
and years that it might take for that to happen. You actually just get out there and learn how to do
it, and cost it out, and see whether it's going to be viable.
And in our case, that did eventually work. But you know, there was kind of five, six years that
lapsed there, where things could have happened sooner. So that's one thing.
I think the other would be to probably try to expose our trade a whole lot earlier in the piece to
the realities of China. We did our first trade mission there two years ago. We could we
potentially could have done that a couple of years before that, and more of them. Because if any
of you've been to China, you'll know there's nothing quite like going there and seeing this. It is
an absolute phenomenon. And you've got to understand the place, the people, how fast it moves,
and particularly, what they're looking for.
Thanks, Andrew. And I'd just like to ask everyone to thank our speakers today, Brian, Jackie,
Harry, and Andrew, for sharing their experience with us.
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