Zespri reaps benefits of dairy primary growth partnership

The government's primary growth partnership geared toward driving change in the dairy sector had an unlikely partner: kiwifruit export marketing body Zespri International.

The $170 million innovation investment involving the Ministry for Primary Industries and commercial partners, including DairyNZ and Fonterra Cooperative Group, is in its seventh and final year. The partnership focused on creating new products, lifting productivity, improving environmental protection and building capability, and includes a raft of projects aimed at boosting the economy by $2.7 billion a year by 2020. The private sector contributed $85 million while the government contributed the other $85 million.

Fonterra programme manager Andrew Fletcher said the connection between work that Fonterra carried out as part of the PGP and Zespri "comes back to the way we experience food. It's not just taste that drives our liking, but a big part of it is structure," he said at a briefing in Wellington.

Food structure science was critical to work at Fonterra in its bid to create things like cream that no longer had to be refrigerated in order to whip properly as well as mozzarella cheese, and Fletcher noted kiwifruit has a real "Goldilocks spot" - neither too firm nor too soft. The question became "how do we apply the tools of food structure science to making fruit," he said.

Kylie Phillips, innovation leader at Zespri, said there have been multiple benefits to consumers, growers and the company itself. Zespri is currently a $2 billion industry and aims to be a $4.5 billion industry by 2025 and 'innovation will fuel that next $2.5 billion growth," said Phillips. "The research conducted as part of this PGP programme will help us achieve that goal," she said.

The biological variability of the fruit is "quite an issue for us," in particular when it comes to storage, she said. The PGP research has made it possible to progress toward being able to predict which kiwifruit can be kept longer in cool storage, something critical given that the fruit is shipped to markets across the globe. "This program has allowed us to get a better understanding of kiwifruit physiology and how some of these advanced technologies can be applied to kiwifruit," she said.

The end result is that Zespri has reduced fruit quality costs by managing fruit inventory as it can sell some fruit early if it knows it won't store as well.

The incentives are high as "sometimes these costs can be over $100 million," Phillips said. It has also made it possible to deliver value to customer relationships as "our customers offshore want to be receiving consistent product every time," she said. Finally, it helps protect the Zespri brand. "Consumers sometimes pay double the price for the Zespri brand compared to others so we want them to have a premium eating experience very time."

Phillips said the research had also made it possible to decrease so-called "chilling injury," which leads to mushy fruit if it is chilled too fast. In 2015 in green kiwifruit alone Zespri had $160 million of fruit loss and around one-third of that was due to chilling injury, she said. Research has also focused on designing supply chains that can handle increased volumes as the industry continues rapid growth, she said.

Zespri general manager innovation Carol Ward said "as an industry partner, we see the value that comes out of these programmes," despite not being part of the dairy value chain. As the seven-year programme wraps up "we are picking up the mantel and looking at plans on how we make these investments ensuring in terms of the value they bring back into our economy," she said.

Fonterra's Fletcher said that a key focus in the final year of the PGP is to make sure the projects are in a safe pair of hands. "We are doing a set of projects that are about catalysing change and the burden is now on industry to make sure that's embedded," he said.

(BusinessDesk)