Foreign capital needed to boost Kiwi food and beverage sector: Government agency

By Ankush Chibber

- Last updated on GMT

Related tags: New zealand, Milk

Foreign capital needed to drive New Zealand's food sector - the key is in the export sector a Ministry report has said.
Foreign capital needed to drive New Zealand's food sector - the key is in the export sector a Ministry report has said.
New Zealand’s food and beverage industry must shift to producing end products in a bid to drive its export market, but this transition will require hefty foreign capital, a Ministry report said.

The Ministry of Economic Development report, assisted by research firm Coriolis, said New Zealand has a large role to play in the global push for increased food production.

However, it noted its food and beverage export sector, while significant, only accounts for 2.5% of global food trade and there is much untapped capacity to produce and trade more.

New Zealand’s food & beverage manufacturing sector is sizeable; pulling in around NZ$38bn and comprising almost 2,000 enterprises, employing 80,000 people, data showed.

“The 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,”​ the Ministry said.

To achieve this target, New Zealand must turn ingredients into processed foods over the next 20 years, it said, for example manufacturing infant formula instead of milk powder.

Give the nod to foreign capital

This transition will require large amounts of new investment (around triple) in research, plants and equipment, sales, and marketing to achieve the growth target, the report forecast.

Currently, producer owned co-operatives strive to maximise returns to members, which limits availability of capital to fund growth, it said, and to date four of the top five New Zealand food and beverage firms are owned by farmers.

“Nevertheless, international investors are providing a large and constant in-flow of capital, particularly in the areas of strong growth potential going forward, which are beverages and processed foods,”​ the Ministry said.

“Looking at the ownership of the turnover of the top 64 New Zealand food and beverage firms, we find 60% are owned by farmers, 75% owned by New Zealanders, 14% by other Anglo-Saxon countries, 3% by Europeans and 8% by Asians,”​ it detailed.”

Asia is the new Frontier

There is an increasing demand for premium, high quality food and beverages across Asia, driven by a rising middle class with increasing disposable income, it detailed, and New Zealand can fulfill these demands.

“New Zealand is in the middle of a fundamental transition from feeding Westerners to feeding the Asia Pacific.  This transition is driving rapid change in the food industry in what is being produced and where it is being sold,”​ the report detailed.  

Key exports to Asia include milk powder for Asian dairy factories, used to produce yoghurt and other dairy products, frozen chips and hamburgers, processed cheese for the food service sector and gold kiwifruit.

“The emerging middle income consumers of Asia are signalling quite strongly they want high quality, premium branded, high status products.  New Zealand requires a new skill set and mentality to succeed in these markets,” ​the report said. 

Related topics: Markets, Oceania, Industry growth

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