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Advice on Publications Available.Anthony Hotson
Tuckombil Native Foods
Telephone: 02 6628 5558
Facsimile: 02 6628 5558
Email: ahotson@nor.com.au
[This article first appeared in the Technical Journal of the Australian Rainforest Bushfood Industry Association, Issue 7: 9-13. It is reproduced with the kind permission of the author. Anthony Hotson is the Vice President of the Australian Rainforest Bushfood Industry Association Inc., which can be contacted at:
PO Box 6407
South Lismore NSW 2480
Telephone: 017 924 196
Facsimile: 02 6679 3019.
This article comprises three parts; they were written to satisfy the requirements of a unit of study in a tertiary educational context. Their inclusion in the ARBIA Journal and this newsletter is for the potential interest of their content. These articles do not claim to be a thorough or exhaustive analysis of the subject]
Part 1. Analysing the Value Chain(s) of the Native Australian (Bush) Food Industry.
Other parts of this article:
Part 2. Developing Suitable Collaborative Relationships within the Native Australian (Bush) Food Industry
Part 3. Investigating and Planning the Establishment of a Producer Network in the Native Australian (Bush) Food Industry.
Copyright of this article remains with the author, Anthony Hotson (May 1998)
1. Executive Summary
Analysis of the Native Australian (Bush) Food Industry shows that an opportunity exists for collaborative marketing on the part of smaller growers who are presently:
This has meant that many smaller growers have been or soon will be locked out of certain market sectors or all markets during periods of over-supply.
This report offers an outline of the value networks which make up the industry and raises issues integral to the successful marketing of product within those networks.
2. Introduction
The industry focused on in this report is that of the emerging commercial Native Australian Food industry, or 'Bushfood' industry. It is an industry based around the cultivation of indigenous food and spice plants for use as flavouring agents, condiments, foodstuffs, with some potential for medicinal and cosmetic usage.
Being a new industry means that information about the industry is difficult to obtain and is often not reliable. Marketing issues within the industry are very much in a state of flux. This also means that there are many industry weaknesses and many opportunities to resolve them.
3. The Value Chain
The network of people and organisations involved in the production, delivery and consumption of bushfood and bushfood-containing products can be outlined as follows:
3.1 Wild Harvesters
Structure:
Collectors of produce from natural stands or amenity horticulture plantings in urban, rural and wilderness areas.
Functions:
Collection and selling of raw produce; Part-processing.
Technologies:
Hand harvesting, decentralised storage.
Relationships:
Networking with processors and brokers
Indigenous community involvement.
Economics:
Decreasing importance in some species as cultivated production increases.
Will remain an essential sector for non-cultivated species and perhaps a certified niche product category (1)
3.2 Bushfood consultants and Educators
Structures:
Training courses offered by various TAFE colleges, private individuals and consultation by individuals experienced in production
Functions:
Advising growers on issues of agronomy, orchard layout, species selection and market status.
Training industry operators.
Technologies:
TAFE facilities, demonstration sites
Relationships:
Loose industry input toward training curricula and focus (2)
Economics:
Point of technology transfer, often profit margin-creating technologies.
3.3 Growers
Structures:
Orchardists with plantations of between 100 and 5,000 plants.
Many mixed species polycultural plantings with larger orchards mostly monocultural blocks.
Operators have varying degrees of horticultural expertise and varying degrees of mechanisation, ranging from ride-on lawnmowers and secateurs to mid-horsepower tractors and conventional orchard equipment.
Various production methods, including hydroponics, certified biodynamic, certified and uncertified organic, and conventional methods.
Functions:
Selling of raw product, part processing and packing.
Minimal value adding.
Many are affiliated with industry associations which are mainly grower-based (3)
Technologies:
Mostly hand harvesting, small-scale processing in low volumes.
Cool storage.
Relationships:
Not economically allied with others
Some loose agreements between some growers and processors.
Some involvement with national industry association.
Association has alliance with national peak industry body.
Economics:
Many orchards yet to come into production.
Some prices rapidly coming down, some to the point of no demand.
Growers are 'price takers'.
Prices uneconomic for an increasing number of growers.
3.4 Agribusiness growers
Structures:
A loose collection of growers semi-organised under the aegis of private companies offering agronomic advice, planting material and purchase of produce.
Mostly monocultural plantations from 1000 to 10,000 plants.
Some companies with in-house certification schemes for 'chemical residue free' status for export markets.
Functions:
Selling of raw product.
Technologies:
(Developing) contract mechanical harvesting and bulk handling (4)
Relationships:
Growers dependant on ethics and acumen of company directors.
Growers with little industry involvement.
Economics:
On paper returns seem healthy enough to cover contingencies.
Highly untested high volume market.
Unproven technologies imperative to predicted margin.
3.5 Agribusiness companies
Structures:
Large plantations in development funded by tax-incentive-driven investment schemes. Around 800,000 plants, mostly one species in monocultural plantation (5)
Vertically integrated companies, large budgets, specialist consultants employed, export orientated but supplying national markets, some to company restaurants.
Functions:
Plant selection and supply.
Grower liaison.
Production and supply of raw product.
Processing, packing and dispatch.
Marketing, market liaison and research, broker liaison.
Product development.
Technologies:
High volume propagation in specialised nursery structures.
Mechanised planting, harvesting, and processing (6)
Relationships:
Separate from majority of the industry.
Government support through investment incentives, training grants.
Economics:
Artificial floor allowing expansion of production.
Untested market in high volume.
High efficiencies in production enables drastic lowering of price and saturation of existing markets.
Capital raised allows for market creation, research and development.
3.6 Brokers
Structures:
Small agents co-ordinating wild harvest, purchasing produce and selling on to processing companies.
Functions:
Liaison with processors, growers and marketeers.
Storage and dispatch of produce.
Technologies:
Minimal.
Relationships:
Link between wild harvesters and processors
Indigenous community links.
Economics:
Fee volumetric charging in general.
3.7 Processing companies and food manufacturers
Structures:
Small 2 to 10 employee businesses solely processing raw produce into value-added bushfood products.
Larger food manufacturing companies with existing product such as breads, flours, teas, ice-creams, into which bushfood ingredients have been incorporated.
Functions:
Processing, packing, selling, dispatch.
Storage, warehousing.
Liaising with growers, brokers, retailers.
Market research.
Marketing.
Technologies:
Some specialised technologies for specific products and their handling ability (7)
General food manufacturing technologies.
Conventional transportation.
Relationships:
Existing relationships with distributors and transportation from existing food industry players.
Some small specialist companies owned by agribusiness companies or directors, vertically integrated with such.
Economics:
Slowing of market demand has been observed (8)
Research needed into appropriate marketing images and target sectors.
3.8 Export brokers
Structures:
International contact points who liaise between overseas markets and exporters, generally working for commission on sales volume, sometimes on retainer system to companies (9)
Functions:
Liaison with international food manufacturers.
Liaison with processors, government bodies.
Technologies:
Internet usage.
Relationships:
Contact points for networks of overseas buyers.
Providers of some market intelligence.
Economics:
Fee for service, particularly commission-based structures.
Retainer system used for more stable or competitive markets.
3.9 Wholesale/retail sector
Structures:
Restaurants, tourist complexes, food manufacturers, small regional retailers, some supermarkets.
Functions:
Purchasers of value-added product (spices, jams, sauces, pasta).
Purchasers of bulk part-processed product for incorporation into restaurant menus and value-added products.
Point of sale for value-added products.
Advertising and promotion of product by some operators.
Collectors of market information and consumer preferences.
Points of revenue collection and determination of return to growers.
Technologies:
Storage, cool storage, frozen storage.
Conventional promotion and display.
Some internet marketing.
Relationships:
Networks of purchasers and on-sellers with good market information.
Economics:
Small specialised operators expanding, niche markets.
Major supermarket trials unsuccessful.
Tourism-affiliated markets most accepting of product (10).
3.10 Consumers
Structures:
Diners in regional restaurants and tourism facilities, home chefs. international tourists and overseas consumers.
Functions:
Feedback directly or via consumption trends to industry players.
Revenue supply for entire industry and players in the value chain.
Technologies:
Hip-pocket to taste-buds nervous response mechanism.
Relationships:
Source of very important marketing information.
Revenue stream which may or may not maintain its loyalty to the industry (11).
Economics:
As market is being pushed to expand there is price sensitivity encountered.
Export sector and high acceptance end of market most economic at higher volume.
3.11 Biomedicinal companies
Structures:
Certain species yielding aromatic oils have potential for cosmetic and medicinal use and are being purchased by such companies (12).
Functions:
Research and development of potential market significance.
Technologies:
Biomedicinal market will have its own production criteria.
Relationships:
Important in developmental stages of new industrial markets.
Economics:
Potentially larger than food sector.
3.12 Government bodies
Structures:
Government schemes offering financial incentives for the development of new industries, particularly in relation to drought affected rural and regional Australia are playing a part in some operators' and companies' establishment.
Tax-incentive-driven investment schemes also offer an artificially cushioned environment in which to establish some sectors of the industry.
Research and development grants are being delivered by government bodies such as RIRDC and advice and contact networks for exporters are also being
delivered through state and regional development organisations (13).
Departments of Agriculture provide basic services and facilities to growers.
Functions:
Distribute information and assistance.
Assist in research and development relating to the industry.
Provide services to industry.
Disseminate financial assistance to industry sectors.
Technologies:
Research laboratories
Information databases.
Communication networks.
Relationships:
Sector sensitive to political climate.
Committees of regional development boards access network of other industries' value chains.
Economics:
Incentives advantage larger operations in the industry.
Government subsidies make for an uncompetitive market.
4. The marketing problems, challenges and opportunities:
When the value chain is analysed, there are many shortcomings for the producer. There are problems directly related to the newness of the crops being grown such as:
There are also more general problems associated with:
For some industry players, it is not so much a question of opportunity as a need for survival and the development of a sustainable industry.
There needs to be a much more professional approach to the marketing of the industry and that involves a more integrated approach to production and its relationship to marketing.
Blind production is stupidity in the ever-competitive world of primary production.
In order to sustain the level of organisation and cohesion necessary to provide an economic, co-ordinated and business-like approach to the marketing of produce, a critical mass is needed. Before such a critical mass is attained, however, there will exist a market over-supply and industry disorder unless some sort of cohesive structure is in place to co-ordinate the industry's growth. A means toward this would be collaborative marketing and a strong and representative peak industry body.
5. Identifying the opportunity
As the industry has expanded and changed, the market and margin of producers has not kept pace.
One sector of the industry which has become particularly vulnerable is that of the small (>3 Ha) polycultural orchardists. These growers have been enticed into the industry over the past five or so years by the lure of high (some would say inflated) returns per Ha. These returns offered a niche for holdings which would have otherwise not been viable.
These orchards, in general, have been established using poly- and/or perma-cultural ideals. Due to their high production costs and low efficiencies (due to low scope for mechanisation), they are locked into only supplying high value niche specialty sectors within what is already a high value-low volume market.
As new players in the industry have taken production into a more economic scale and agribusiness ventures have established themselves, the value of certain products at the farm gate has fallen dramatically and even reached a point of saturation. These small players in the industry can no longer sell their product. What income they were dependent on has not eventuated, rendering any advanced planning redundant.
In the climate of economic rendering which is presently shaping the horticultural industry, the key qualities for success which are emerging include:
These qualities are far from the grasp of the individual poly-cultural orchardist, particularly one in the business of new crops.
Successful marketing of any crop is difficult and the largely unknown crops of the Bushfood species are doubly so.
As the true costs of marketing the industry and its produce become clear, collaborative relationships between growers are now emerging as an imperative. Collective marketing, generally within regional production areas, is needed to facilitate the coordination of quality assurance schemes regarding food safety guarantees, consistency of grading, qualities of production methods and ethics.
It is also needed to attain the critical mass needed to cope with the expenses of infrastructure such as processing and packaging facilities, and personnel to co-ordinate distribution and liaise with all the players within the value chain. Liaison is needed to communicate successes and shortcomings of the process and to assist with predicting the need for market expansion or reduction.
Other benefits may exist with providing a co-ordinating body which is sufficiently removed from the producers to maintain a clear economic focus yet be close to producer control and communication.
6. Evaluating the opportunity
Collaborative Marketing can take several forms. Loose alliances between growers and processors can be established through goodwill over a period of time. These relationships are not necessarily solid in times of margin erosion or market shift.
Strategic Alliances are generally characterised by groups or firms of similar size investing in each others' organisations so as to provide financial commitment to the success of the relationship and the benefits it provides. To attain a similar size to a small processor, growers must form a marketing group of growers.
To ensure commitment to this group, the growers must have some reasonably substantial financial investment in the group so as to provide sufficient disincentive to selling their produce to other parties. This is often difficult to achieve for small growers who may be in precarious financial standing.
An outgrowth or development from a marketing group may be a marketing co-operative. This too must have significant financial commitment from its members. The cooperative must then form strategic alliances with relevant market players to ensure the stability of its markets and maintain market intelligence through feed-back from the value chain.
A different organisational structure may be a limited liability company, which may offer greater flexibility of financial management than a cooperative.
The benefits of collaborative marketing groups can be a levelling of the playing field to some extent for the growers, thus giving growers' interests a greater opportunity to be maintained in the value chain.
Collaborative marketing also facilitates discipline in production and marketing activities to provide a direct and complementary relationship between the two. It can also create a structure for provision and coordination of the essential elements of successful marketing of the industry and its produce such as:
References
1. Kable, J. (1996) Bushfood on the Tweed, Conference papers.
2. Forrest, D. (1997) TAFE educator (pers. comm.).
3. ARBIA (Australian Rainforest Bushfood Industry Association) Survey results (1997).
4. Bennet, T (1997) Director ANFRD (Australian Native Food Resource Development Pty Ltd). (pers. comm.).
5. Anon. Northern Star newspaper (1997) "Lemon Myrtle prospects up", Thursday 15th May.
6. Bennet, T. (1997) (pers. comm.).
7. Cherikoff, V (1998) Director, Bushtucker Supply Australia (pers. comm.).
8. Cherikoff, V (1998) Director, Bushtucker Supply Australia (pers. comm.).
9. Milgate, B. (1998) Director ANFRD, ANFRD News Sheet.25 February 1998.
10. The Proprietor, "F'Foodies", Alstonville, NSW. (pers. comm.).
11. Consumers, Wollongbar Autumn Garden Fair, April 1998 (pers. comm.).
12. The Pharmaceutical Plant Company, Melbourne (pers. comm.)
13. RIRDC report, ARBIA Technical Journal Autumn 1998, cover article.
Continued with Part 2:
Developing Suitable Collaborative Relationships within the Native Australian (Bush) Food Industry
Concluded with Part 3:
Investigating and Planning the Establishment of a Producer Network in the Native Australian (Bush) Food Industry.
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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