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[Robert Hayes addressed the Testing the Waters Symposium, Agriculture Victoria in 1995, in his capacity as a hydroponic grower since 1983 and as the then President of the Australian Hydroponics Association Inc.; several of the observations in this article were first made then; the current article has been updated by the author]
Robert Hayes was a field grower of herbs from 1978 until 1982. In 1989, he formed a partnership with his wife to produce and market fresh culinary herbs under the brand name Herbzest. In 1993, the company Freshzest was incorporated.
A research and development greenhouse was first established near Leongatha in 1982 to trial hydroponically grown herbs.
A substrate drain to waste hydroponic system was chosen over other techniques trialled including NFT, root spraying and flood and drain systems.
Research into the herb market was also conducted. From 1978 to 1982, the target market was the restaurant/hotel wholesale trade in fresh herbs.
In 1983 to 1985 research was also carried out to identify retail consumer requirements and trends in the usage of fresh herbs.
The three key consumer issues to emerge were:
Although there was a trend towards convenience foods at this time, there was also the emergence of the health conscious consumer who was buying fresh produce for home consumption.
A major problem was the delivery of a herb product with acceptable shelf life and reasonable quality when consumed, after passing through a typically unreliable supply chain.
Post-harvest handling techniques and product packaging and presentation were investigated and an education campaign undertaken with the company's customers to show them proper handling practices.
This challenge was referred to as the 'long march to idiot proofing' the product's supply chain.
In 1988, they developed a borrowing proposal for the bank, but were referred to the bank's finance company who took a second mortgage over their home and loaned the money at extortionate interest rates.
Although they had thoroughly researched the herb business, the economic recession began within six months. Although the plan had been to produce a profit by the start of 1991, the Hayes were not able to make any drawings from the business until 1995, as indicated in the table on page 10.
The figures in the table include interest and depreciation. Capital invested included greenhouses, plant and equipment, research and development costs and unfunded operating losses from 1989. No land cost has been included. The management input from 1983 to 1995 has also not been accounted for!
Lessons to be learnt
Crop yield per square metre in the original planning was based on the experience from relatively small but intensively managed trials in a greenhouse.
Commercial implementation results in far lower yields. After ten years of commercial production, these experimental yields are now being approached.
Predictions of 100% first grade product sold at premium prices are unrealistic.
The risk associated with the environmental conditions should not be under-estimated.
In 1991, 175 km/hour winds trashed most of the greenhouses. Insurance in horticulture is difficult to find and costly, particularly for greenhouses.
The Hayes underestimated their costs, particularly the overhead costs, and failed to recognise the complexity of managing their staff. Labour represents nearly 50% of costs.
Small variations in staff productivity can result in very large effects on the bottom line.
Fixed overheads create a threshold level of turnover which must be achieved before profitability commences.
The Hayes under-estimated this required level of turnover significantly.
A completely new type of business with no model to copy and a new product presentation for the market, takes time to develop and establish.
It takes time to establish a reputation in the market-place as a reliable supplier of quality product.
It also takes time to learn the nuances of seasonal variation and the effects they can have on consistent quality.
It is necessary to focus on developing systems to grow, pack and deliver a product that the retail consumer is prepared to pay for.
The price/quality relationship is often difficult to establish in the minds of many of the intermediaries in the market place.
There is a need to develop a set of product and delivery characteristics which together with an integrated HACCP-based food safety program, means repeatable quality delivered as and when needed by the customer.
What turned the Hayes' business around was a staff productivity bonus scheme developed and implemented in 1994.
The staff are now intimately involved in every aspect of the business and they have a common interest in productivity improvement by way of the bonus scheme. Their remuneration is now at least 20% above the equivalent Federal award and the business has significantly improving profitability, after appropriately compensating the management.
This business survived whereas many others did not.
It is somewhat unique yet the business aspects can be considered universal in their application yet often sadly lacking in horticulture.
Hydroponics
This is the science/art of supplying crop plants with the optimum nutrient supply for its requirements. Most definitions preclude soil as a medium yet the Hayes' system mimics the role of soil in many ways.
A nutrient solution is applied through drip irrigation onto a sand bed (substrate) with the excess (approximately 20% to 25%) running off into a waste collection system.
All waste nutrient is collected, redosed and recirculated. Disposal of this waste nutrient is a significant problem.
Hydroponics is a production technique which offers many significant advantages over conventional production techniques:
To maximise any investment in greenhouses and environmental modification such as heating and ventilation, hydroponics is required.
The Hayes have invested 5-10% of their plant and equipment capital in plant nutrition.
Any crop plant provided with the optimum nutrients and soil moisture will be productive, whether it is in the field or in a controlled environmental system. However, such a system is easier to achieve with hydroponics.
Summary of the performance of Freshzest Pty Ltd:
Any claims made by authors in the Australian New Crops Newsletter are presented by the Editors in good faith. Readers would be wise to critically examine the circumstances associated with any claims to determine the applicability of such claims to their specific set of circumstances. This material can be reproduced, with the provision that the source and the author (or editors, if applicable) are acknowledged and the use is for information or educational purposes. Contact with the original author is probably wise since the material may require updating or amendment if used in other publications. Material sourced from the Australian New Crops Newsletter cannot be used out of context or for commercial purposes not related to its original purpose in the newsletter
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