NOTICE: Hard copies of the Australian New Crops Newsletter are available from the publisher, Dr Rob Fletcher. Details of availability are included in the
Advice on Publications Available.[Extracted with the collaboration of the author from the publication of this name prepared for the 'Supermarket to Asia: the Delicatessen Program' by Agriculture, Fisheries and Forestry - Australia].
Contact:
Deborah Gifford
Food and Agribusiness Industries Division
Agriculture Fisheries and Forestry - Australia
Telephone: 02 6272 3785
Facsimile: 02 6272 3025
Email: deborah.gifford@affa.gov.au
Introduction
The world food business is changing, driven by new social and economic conditions.
Affluent consumers are demanding highly specialised, almost individualised products and services, as well as greater consistency and quality in traditional food products and their number are increasing. There will be 850 million more affluent consumers by the year 2010 than there are now. Despite recent set backs in Asia, 60-70% of these new affluent consumers will live outside the European Union, USA and Japan (John Johns, New Rural Industries Conference, Perth, October, 1998).
In response to demands from new customers in new locations for new products and services, many food suppliers are developing new ways of doing business. Major multinational companies in particular are building global networks and supply chains, aimed at identifying and supplying new consumer needs and markets.
Capturing these opportunities may mean:
Over the short term, increased food exports can be achieved through innovations in existing products and markets. However, over the long term, if Australia is to improve its position as a global food supplier, the country must identify new food industries and products. This will require new skills and competencies as well.
Understanding and responding to consumer needs is vital.
Traditionally, the food export business has been production driven:
The new approach needs to be market driven, with the focus on the customer:
(from John Jones, New Rural Industries Conference, Perth, October, 1998).
Delicatessen Pilot Projects on Challenges
What are the challenges facing Australian food supply chains in their attempts to satisfy overseas consumer needs?
The Supermarket to Asia: Delicatessen Program was initiated by the Commonwealth Government in 1997. Eight Pilot Projects were established to investigate the challenges faced by producers exporting to Asia:
Exploiting a New Product Opportunity
1. Identification of Opportunities
Skills Required:
In the traditional approach to product development, producers are initially concerned with growing the source crop. A market-driven approach requires understanding of the market, competitor activity and consumer needs. In-market research requires skills and experience which are costly to hire.
Specific information on niche products can only be gained through direct contact with the relevant market and once collected is not likely to be publicly disseminated. Gross market consumption data or high overseas in-market prices are often misleading.
A commercial outcome can often hinge on specific details, such as the customer's cultural sensitivities to a product or technical details of processing. If a product has never been exported before, then market access, quarantine and food safety protocols are required.
Information gaps, barriers and skills to be learnt at this stage of exploiting a new product opportunity have been defined in Table 1.
2. Selection of a Target Opportunity
Skills required:
The safer diversification options for rural producers and food processors are to develop innovations of existing products or to enter new markets with existing products. However, Australia in the long term, needs to identify and develop new industries and products.
Australian rural producers have often not had the opportunity to acquire business skills or to develop entrepreneurial flair. Hence, they are not likely to be able to think laterally about the off-farm issues which will impact on new business.
Decision making by rural producers is currently characterised by a number of factors:
Most grower networks have a small proportion of members leading the search for new business, selecting opportunities and undertaking the initial development (see Table 2).
Producers, especially cash-starved family operations, see the risks of diversification as too great.
Manatech (1996) classified 86% of Australian farmers as traditional or 'existing business expanders' with the remainder being 'new domestic growth seekers' or exporters (Table 2). From the table, it is evident that the skill requirements of the 'new domestic growth seekers' and exporters are demanding.
To meet customer requirements in terms of the product and the related service, to capture an opportunity competitively and to generate sustainable business returns, it is necessary to understand:
Selection of new opportunities must be approached holistically, but must seek to identify the competitive edge or fatal flaw that will determine the commercial outcome. Plenty of time and money has been wasted investigating agronomic suitability and efficiency, with little chance of recouping the outlay.
Opportunity selection needs to fit the business aspirations and goals, capabilities and resources (both current and potential) and the social and competitive environment in the market.
Information gaps, barriers and skills deficits at this stage of exploiting a new product opportunity have been defined as indicated in Table 3.
3. Commercialisation
Skills required:
Because of the range of skills needed, it is impossible for an individual producer or group of producers to have access to all the desirable resources for commercialisation of an opportunity, such as:
Strategies for accessing these resources, such as hiring consultants or forming chain partnerships, are essential. It is necessary to understand the resources required, before an appropriate partner or consultant can be chosen. Trial-and-error is often the only way to determine whether the right choice has been made.
Business skills training, information sharing services/networks, business clustering and mentoring are needed to overcome these skills and knowledge deficits in Australian agribusiness.
Barriers to the Flow of Market and Product Information to Producers
Processors and traders further up the supply chain can withhold information on costs and returns from producers in order to maximise their own returns, through the control of processing, marketing and distribution.
Specific niche product information is usually developed through commercial relationships and is therefore confidential and available only to those involved. Because of the costs involved in accumulating such information, those involved wish to secure as much of the potential benefits as possible.
The competitive culture amongst producers restricts information sharing and co-operation. Nearly three quarters of rural producers surveyed in 1996 had no involvement in networking activities, but amongst those involved in export, 43% were involved in networking (Manatec, 1996).
State Agriculture and Regional Development departments are among the primary instigators of new agricultural development. However, the lack of a common approach and poor co-ordination across industry sectors, states and various levels of government is preventing the sharing of information and the optimisation of national export performance. For example, there are several projects involved with edamame (vegetable soybean) and daikon in Australia.
There is no mechanism for co-ordinating information between government departments, agencies and industry on the production and marketing of niche agricultural products or for feeding this information back to producers.
New Product Information Needs
Information available to producers to assist with their decision making about new product opportunities needs to be:
Information gaps, barriers and skills deficits at this stage of exploiting a new product opportunity have been defined in Table 4.
Written information such as guidelines, broad market trends, quantitative data, directories and opportunity summaries are useful background information only. Face-to-face contact with experienced people is the most valuable.
Information only becomes knowledge if the right questions are asked, the quality of the information can be assessed, the information can be appropriately interpreted and recommendations made.
However, contact visits are only useful if the enquirer understands his/her own goals and needs. A single visit can be misleading with respect to the long term prospects of a market.
Exporters can learn from other Australian businesses already doing business in a market. Accessing the right experience is often the key to turning information into valuable decisions.
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
Contact: Dr Rob Fletcher, School of Land and Food, The University of Queensland Gatton College, 4345; Telephone: 07 5460 1311 or 07 5460 1301; Facsimile: 07 5460 1112; International facsimile: 61 7 5460 1112; Email:
r.fletcher@mailbox.uq.edu.au[
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GK; latest update 17 October 2001 by: RF