An Investor s Guide to the New Zealand Food & Beverage Industry

Transcription

1 An Investor s Guide to the New Zealand Food & Beverage Industry Final Report October 2011; v1.2 This information was prepared by Coriolis solely for the use of our client; it is not to be relied on by any third party without prior written consent.

2 Coriolis is a strategic management consulting and market research firm We work with organisations to help them grow. For corporations, that often means developing strategies for revenue growth. For governments, it means working on national economic development. For non profits, it means helping to grow their social impact. We address all the problems that are involved in growth: strategy, marketing, pricing, innovation, new product development, new markets, organisation, leadership, economic competitiveness. We bring to our clients specialised industry and functional expertise. We invest significant resources in building knowledge. We see it as our mission to bring this knowledge to our clients and we publish much of it for the benefit of others. A hallmark of our work is rigorous, fact based analysis, grounded in proven methodologies. We rely on data because it provides clarity and aligns people. However, we deliver results, not reports. To that end, we work side by side with our clients to create and implement practical solutions. The Coriolis name The coriolis force, named for French physicist Gaspard Coriolis ( ), may be seen on a large scale in the movement of winds and ocean currents on the rotating earth. It dominates weather patterns, producing the counterclockwise flow observed around low pressure zones in the Northern Hemisphere and the clockwise flow around such zones in the Southern Hemisphere. To us it means understanding the big picture before you get into the details. PO Box , Victoria Street West, Auckland 1142, New Zealand Tel:

3 The objective of this document is to make a strong, factual case for investment in the New Zealand food and beverage industry. This investment can come from existing investors or those new to the sector. This investment can come from global sources or New Zealand. The document acts as an entry portal to the wealth of further information available in on the sector in the New Zealand Government s Food & Beverage Information Project.

4 EXECUTIVE SUMMARY New Zealand is well positioned to triple its food and beverage exports over the next 15 years; investors will participate in this success General - New Zealand is a developed, temperate climate country in the Asia Pacific region. It is a stable democracy with strong economic freedoms (Index of Economic Freedom #4), excellent investor protection (World Bank #1) and low corruption (Transparency International #1). It is by almost all measures the most attractive investment destination in the temperate zone of the Southern Hemisphere. Food & beverages - Food and beverage exports are important to New Zealand and the country is a major F&B exporter. New Zealand s F&B exports are growing strongly and the country s export performance is strong and improving relative to peers. - The country has demonstrated capability in the production of temperate climate food and beverages. It is the largest exporter in the world of dairy products and lamb and a major exporter of beef, kiwifruit, apples and seafood. Drivers - The success of New Zealand in temperate foods is built around a natural environment conducive to agriculture. New Zealand surrounded by the Pacific Ocean has the light of Spain with the climate of Bordeaux. This climate will also moderate the effects of global warming going forward (relative to large continents). - The country s farmers are highly productive and efficient. The country has no agricultural subsidies and regulation is generally rational and light handed. - New Zealand has a supportive infrastructure for food and beverages along the total value chain. - New Zealand is a leader in food safety and product traceability. Customers and consumers around the world trust food and beverages produced in New Zealand. - In science, New Zealand spends more than half a billion dollars a year on Agri Food research across a wide range of areas, from fruit genetics to nutraceuticals. The country is also home to four major universities respected globally for their Agri food research. Opportunities - While New Zealand is a major global F&B exporter, the country has significant untapped capacity to export more. New Zealand is a country the size of Italy with the population of Singapore. However Italy feeds a domestic population of 60m people and exports twice as much F&B as New Zealand. - The New Zealand Government has set a target of tripling the country s food and beverage exports over the next 15 years. This will be achieved through both growth of existing major sectors and the newer emerging growth stars. - New Zealand is a young country still discovering its comparative advantages and new industries continue to emerge. In the past twenty years New Zealand wine, honey, aquaculture and avocados have all emerged from almost nothing into world leading sectors. - New Zealand has attracted investment in F&B manufacturing from around the world. Global leaders have already endorsed New Zealand by investing in manufacturing in the country and 25% of the F&B manufacturing sector is foreign owned. PAGE 4

5 NEW ZEALAND OVERVIEW New Zealand is a developed, temperate climate country in the Asia Pacific region that is an attractive investment destination Basic details on New Zealand (2011) Population New Zealand 4.4m (2011e) Population growth rate 0.88% (11e) Area Coastline 267,710km 2 (similar to Italy) 15,134km (more than China; less than the US) Population density 16/km th highest in world GDP US$140b 1 (nominal) (similar to the Ukraine) GDP per capita Currency Politics $32,145 (nominal) (similar to Italy or Spain) 24 th highest in world 2 New Zealand dollar (NZD) US$0.82 (8/2011) Parliamentary democracy Index of Economic Freedom 2 Corruption Index #4 in the world (above the US and Switzerland) #1 (tied with Singapore and Denmark) Investor Protection (World Bank) #1 PAGE 5 1. The New Zealand economy is the same size as the 76 smallest economies in the world; nd at PPP exchange rates; Source: Statistics New Zealand; CIA World Fact Book 2008; Wikipedia; The Heritage Foundation (IoEF); Transparency International; World Bank; Coriolis analysis

6 LOTS OF LAND & COAST; FEW PEOPLE New Zealand is a mid sized country similar in size to Italy and the UK with lots of coastline but a relatively small population; as a result it produces more food than it consumes and exports the surplus New Zealand vs. twenty select peers Country area (sqkm; 000) Coastline length (km; 000) Population (people; m; 2010) Chile 756 Japan 29,751 Japan 127 France 633 Norway 25,148 Germany 82 Spain 506 New Zealand 15,134 France 65 Sweden 441 United Kingdom 12,429 United Kingdom 62 Japan Germany Finland Italy Denmark Chile 7,600 7,314 6,435 More than China! (14,500km) Italy Spain Chile Norway 324 Iceland 4,988 Netherlands 17 Italy 301 Spain 4,964 Belgium 11 New Zealand 270 France 3,427 Portugal 11 United Kingdom Uruguay Iceland Portugal Austria Ireland Denmark Switzerland Netherlands Belgium Israel Sweden Germany Portugal Ireland Finland Uruguay Netherlands Israel Belgium Austria Switzerland 3,218 2,389 1,793 1,448 1, Sweden Austria Switzerland Israel Denmark Finland Norway Ireland New Zealand Uruguay Iceland PAGE 6 Source: CIA World Fact Book; UN Popstat; Coriolis analysis

7 MAJOR F&B EXPORTER Food and beverage exports are important to New Zealand and the country is a major F&B exporter Food & Beverages as a percent of New Zealand s total export value (%; 2010) Total F&B export value: New Zealand vs. peers (US$b; 2010) Germany $59 France $58 Netherlands $56 Spain $35 Italy $34 Belgium $34 United Kingdom $24 New Zealand $17 Other products 46% Food & Beverages 54% Denmark Chile Ireland Austria $11 $11 $10 $17 Norway Sweden Switzerland $9 $7 $7 NZ exports 4x as much food as Japan! Portugal $5 Japan $4 Iceland $2 Israel $2 Finland $2 PAGE 7 Source: UN Comtrade database; Coriolis analysis

8 GROWING STRONGLY New Zealand s food & beverage exports are growing strongly and the country s relative performance is improving 15 year compound annual growth rate (CAGR) in total food & beverage export value: New Zealand vs. identified climatic peers (%; non inflation adjusted; 2010 or latest available) Germany Chile Belgium Austria Ireland France UK Spain Finland Switzerland USA Italy Australia Iceland Sweden Denmark Canada New Zealand Netherlands Norway Argentina Portugal Uruguay South Africa N/A N/A 22.6% 21.8% 19.1% 18.4% 18.3% 17.0% 15.5% 15.1% 14.0% 13.6% 13.5% 13.0% 12.8% 12.5% 12.0% 11.5% 10.8% 10.6% # % 9.9% 9.3% 9.2% Chile Spain Austria Ireland Portugal Belgium Norway Italy Germany Switzerland Sweden Netherlands UK New Zealand France Finland Denmark Argentina Uruguay Iceland Canada USA Australia South Africa 12.0% 9.0% 8.3% 7.7% 7.7% 7.5% 7.3% 7.0% 6.5% 6.2% 6.1% 5.9% 5.7% 5.7% #14 5.7% 5.6% 5.3% 5.0% 4.9% 4.3% 3.6% 2.8% 2.2% 0.1% Austria Sweden Uruguay Switzerland Chile Portugal Argentina Spain New Zealand South Africa Norway Canada Germany Italy Belgium Australia USA Finland Netherlands UK France Denmark Iceland Ireland 11.3% 10.3% 9.3% 8.4% 8.0% 7.5% 7.3% 7.1% 7.0% #9 6.9% 6.9% 6.5% 6.2% 5.8% 5.1% 4.9% 4.6% 4.3% 4.3% 3.0% 2.7% 2.6% 2.2% 1.6% PAGE 8 Source: UN Comtrade database; Coriolis analysis

9 ATTRACTING GLOBAL INVESTMENT Food & beverage manufacturing has attracted investment from around the world EXAMPLES: Significant investors in F&B manufacturing in New Zealand (Current as of 2011) Asia Australia Europe North America PAGE 9 Source: Coriolis

10 RANGE OF SECTORS New Zealand food exports are spread across a range of product sectors; while all are achieving export value growth, processed foods and beverages stand out as growth stars New Zealand F&B export value by major segment (US$b; 2010) New Zealand F&B export value by major segment (US$b; non inflation adjusted; 1995 vs. 2010) 15 year CAGR (95 10) Other beverages $0.2 1% $16.7 $1.0 Beverages 7% 17% Wine $0.8 5% $1.5 Processed 12% Other foods $0.3 2% Other produce $0.4 3% Apples $0.2 1% Processed foods $1.5 9% Whole milk powder $3.1 18% $0.3 $1.3 $1.0 Other Produce Seafood 4% 3% 2% Aquaculture $0.2 1% Kiwifruit $0.7 4% Wild seafood $0.8 5% Skim milk powder $1.0 6% Butter $1.5 9% Dairy $7.8b 47% $6.1 $3.7 Meat 5% Other meat $0.4 2% Meat $3.7b 22% Lamb $1.9 12% Beef $1.4 8% Total = US$16.7b Other dairy $1.1 7% Cheese $1.0 6% $0.2 $0.3 $0.1 $0.8 $0.8 $7.8 $1.8 $ Dairy 9% PAGE 10 Source: UN Comtrade database; Coriolis analysis

11 SECTORS IDENTIFIED FOR GROWTH Within processed foods and beverages, a number of sub sectors are emerging as areas of particularly high growth potential Sector Sub sector Export value (US$m) Drivers of growth Processed foods Current Target (2025) Infant formula $422m $2b Long history of innovation in milk powder World s first milk powder plant in 1904 Major government funded milk powder research program s New Zealand is the largest producer of milk powder in the world New Zealand amajor supplier to all major global infant formula manufacturers Confectionery $254m $1b Importance of dairy as a key ingredient for milk chocolate Frozen meals & sides $150m+ $1b Pioneered international frozen meat shipments in 1882 Major government funded meat research program s Strong capabilities in frozen technology, production and logistics Pet food $186m $1b Building on existing strength in meat and specialty baking Invention of Tux dog biscuits in 1954 (Now Nestle/Purina) Beverages Wine $774mb $3b On going rapid growth of wine industry Leveraging Marlborough Sauvignon blanc into other varieties/regions Achieving success against world s best (i.e. France) in all key markets Spirits $83m $500m Building on premium position in wine Rapidly emerging sector with strong growth potential PAGE 11 Source: UN Comtrade database; Coriolis analysis

12 LEADERS NEED TO BE HERE In most cases global leaders have already endorsed New Zealand s strengths in these sectors by investing in manufacturing in the country Target segment Current situation Global leaders that have invested in New Zealand Frozen meals & sides Pet food Three of the largest frozen meals and sides producers in the world manufacture in New Zealand Three of the largest pet food producers in the world manufacture in New Zealand Wine & Spirits Three of top five US wine companies in New Zealand Three of top five Australian wine companies in New Zealand Three of top four Japanese beverage companies in New Zealand The three largest alcoholic beverages firms in Europe have invested in New Zealand Confectionery Second largest confectionery producer in the world in New Zealand Infant formula Two largest producers of infant formula i n the world manufacture in New Zealand PAGE 12

13 RANGE OF DESTINATIONS New Zealand exports food and beverages to a wide range of destinations; Asia is now the largest destination region taking ~40%; China is the single largest destination and Asian countries 10 of top 25 destinations New Zealand F&B export value by region (US$b; 2010) Top 25 F&B export country destinations by value (US$b; 2010) China+HK $2.3 SS Africa $0.4 3% Australia $1.8 South Asia $0.4 2% North Africa/ Middle East Central Asia NA/ME/CA $1.6 9% C&S America $0.9 5% Europe/Russia $2.8 17% Europe USA Japan United Kingdom Indonesia Taiwan $0.5 $0.5 $0.8 $1.1 $1.8 $1.7 Philippines $0.4 North America $2.0 12% Malaysia South Korea $0.4 $0.4 Asian markets ~40% East Asia $4.3 26% Australia/Pacific $2.1 13% Saudi Arabia Singapore Venezuela Thailand $0.4 $0.4 $0.3 $0.3 Canada $0.3 SE Asia $2.3 13% United Arab Emirates Mexico $0.2 $0.2 Sri Lanka $0.2 Total = $16.7b Russia $0.2 PAGE 13 NA/ME/CA = North Africa/Middle East/Central Asia; Note: totals may not add due to rounding; Source: UN Comtrade database; Coriolis analysis

14 SHIFTING RAPIDLY TO ASIA New Zealand in the middle of a fundamental transition from feeding Westerners to feeding the Asia Pacific region Share of New Zealand F&B export value by region (% of US$; ) 3% 2% 0% 7% 3% 10% 76% 7% 3% 0% 5% 4% 27% 11% 12% 8% 9% 4% 9% 10% 5% 6% 7% 20% 23% 16% 19% 6% 8% 15% 6% 8% 7% 7% 8% 22% 23% 24% 22% 23% 10% 12% 11% 5% 6% 7% 8% 8% 8% 9% 9% 11% 15% 21% 18% 26% 14% 10% 10% 13% E Asia SE Asia North Africa/ Middle East Central Asia Other Australia/ Oceania 53% 44% 12% N America 34% 25% 30% 29% 23% 23% 17% Europe PAGE 14 NA/ME/CA = North Africa/Middle East/Central Asia; Source: UN Comtrade database; Coriolis analysis

15 GROWTH MATRIX Growth is being driven by the Asia Pacific region and other markets of the future F&B export value growth matrix 28% 26% 24% SS Africa Size of bubble = export value (US$b; 2010) 22% Small but fast growing 20% Solid performers 10 year value CAGR (00 10) 18% 16% 14% 12% South Asia North Africa/ Middle East Central Asia SE Asia Australia/Pacific East Asia!!!! 10% 8% 6% C&S America Europe/Russia 4% North America 2% 0% $0.0 $0.2 $0.4 $0.6 $0.8 $1.0 Traditional markets but slow growing $1.2 $1.4 $1.6 $1.8 $2.0 $2.2 $2.4 $2.6 $2.8 $3.0 $ year absolute value growth (US$b; 2010) PAGE 15 Source: UN Comtrade database; Coriolis analysis

16 FREE TRADE AGREEMENTS New Zealand has free trade agreements either in place or proposed with most of the Asia Pacific region Existing Proposed PAGE 16 Source: Wikipedia (public domain) with Coriolis additions using MFAT data

17 MAJOR F&B FIRM TURNOVER BY OWNERSHIP The NZ F&B industry has attracted investment from a wide range of sources; 25% of the investment in the New Zealand food & beverage industry is from outside the country Turnover of top 64 New Zealand F&B firms by ownership type/country (% of NZ$m; 2010e) Iwi 1% Listed 1% Private 14% Charity 0% Australia 8% Anglo Saxon 14% USA 5% Canada 1% United Kingdom 1% 75% Swiss 1% France 1% Netherlands 1% European 3% International 25% Japan 5% Russia 0% Farmers 59% Hong Kong 1% Singapore 1% China 0% Malaysia 0% Thailand 0% Asia 8% TOTAL = NZ$38.9b PAGE 17 Note: Uses share of turnover of top 64 firms as a proxy for investment; Source: Coriolis

18 DRIVER OF SUCCESS IN F&B New Zealand has a long history of achieving success in food & beverages due to its supportive ecosystem Identified business eco system drivers of success of the New Zealand F&B sector Area Detail Implication Skills & experience One in five people employed in the wider F&B value chain Wide range of available talent on which to draw Long history in food production Deep embedded knowledge of critical issues Science & innovation Spends more than half a billion dollars a year on Agri Food research Nine government scientific agencies doing F&B research Available for industry to tap into for growth Strong pool of available research skills and capability Four major universities renown globally for their Agri food research Food safety Globally respected food safety standards Products accepted by even most critical companies/countries National animal identification and tracing scheme (NAIT) Animals to be traced from birth to slaughter Biosecurity Relatively free from many plant and animal diseases Productivity and yields are higher in many sectors Access to many otherwise protected markets (e.g. Australia) Regulation Joint food safety and packaging regulation with Australia Both markets can be served with the exact same product Sustainable production Primarily grass fed pastoral production of meat & dairy Ranked most sustainable wild catch fishery in the world Consumers offered a more healthy product Consumer can feel good about buying PAGE 18 Source: Coriolis

19 STRONG GOVERNMENT F&B RESEARCH CAPACITY New Zealand supports scientific research in food and beverages through a strong group of government research agencies Major New Zealand Government research institutes doing F&B research (2011) Year founded Plant & Food 1928/ 1992 AgResearch 1926/ 1992 # of staff 900+ $118m 875 $156m Annual budget Key areas of strength in F&B For more information Fruit breeding (bred Jazz, Envy & Smitten apples and Zespri Gold kiwifruit) Wide range of other F&B research Strong in dairy and meat Wide range of other F&B research Landcare $62m Sustainable land management Soils and land use $128m $54m $63m $18m $6m $9m Seafood: wild capture and aquaculture Food safety & biosecurity Water, waste water and irrigation Bio manufacturing Aquaculture National Centre of Research Excellence bring together scientists from Massey University (host institution), the University of Otago, The University of Auckland, AgResearch and Plant & Food Research. Global expertise on future foods, functional foods and individualised foods including personalised nutrition. Bio security & sustainable production systems Centre of Research Excellence PAGE 19 Source: various annual reports and websites; Coriolis analysis

20 STRONG ACADEMIC F&B RESEARCH CAPACITY Significant food and beverage research is also conducted across four internationally recognised Universities Major Universities in New Zealand doing F&B research (2011) Year founded # of staff ,725 $889m Annual budget Key areas of strength in F&B For more information Wide range of research across total F&B value chain ,829 $425m Wide range of research across total F&B value chain $94m Wide range of research across total F&B value chain ,751 $586m Wide range of research across total F&B value chain PAGE 20 Source: various annual reports and websites; Coriolis analysis

21 NEW ZEALAND FOOD INNOVATION (NZFI) The New Zealand Government has recently demonstrated its commitment to the industry by creating and funding New Zealand Food Innovation (NZFI) a network of four food industry R&D and pilot plant centres NZFI Auckland NZFI Waikato NZFI South Island NZFI Palmerston North Location Focus Capability Auckland Waikato Palmerston North Processed/FMCG foods Space/equipment for hire Export registrations ~1000 kg/shift Dairy & Infant Formula ~500 kg/hour Dairy Fruit & vegetables All Food and Beverage Extrusion & milling/blending UHT/Beverage High pressure processing Freeze drying General processing Multiple packaging styles Production kitchen Spray dryer Evaporator Other dairy equipment Packing South Island All Food and Beverage Sourcing of: pilot equipment technical expertise business expertise Same equipment range as Manukau (1/5 th scale) Same equipment range as Waikato (1/20 th scale) Post harvest technologies Meat and small goods pilot plant PAGE 21 Source: NZFI

22 F&B INFORMATION PROJECT Depending on your area or areas of interest, the Food & Beverage Information Project has a wide range of sector level analysis available Structure of information available to investors under the New Zealand Food & Beverage Information Project (Oct 2011) You are here Investor s Guide Your next stop Dairy Sector Meat Sector Seafood Sector Produce Sector Processed Foods Sector Beverages Sector Nutraceuticals Sector Markets PAGE 22

23 FOR MORE INFORMATION For more information or assistance in investing in the New Zealand food and beverage industry contact: Agency Key areas of responsibility and support for investors in NZ F&B Introduction, coordination and communication services Contact details Trade promotion Export development nzte/pages/new zealand offices.aspx Economic Development Policy aspx Research goals & priorities Scientific research funding Trade relationships Trade policy, including trade negotiations and offshore market access barriers Biosecurity Agricultural production Food safety the Ministry/Contact us/index.php maf/contact us Immigration systems Labour market/employment relations In addition, lead report author Tim Morris of Coriolis is happy to answer any questions from potential investor about the research. PAGE 23

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