New Zealand primary sector producers can achieve significantly higher returns for products by cashing in on a “green premium”, new research shows.
Released by Lincoln University’s Agribusiness and Economics Research Unit (AERU), and funded by Our Land and Water, the research reveals New Zealand producers are creating higher returns from sustainably-produced primary products.
In some cases that premium is 20-100% greater than non-sustainably produced equivalents.
Lead researcher Professor Paul Dalziel said regardless of the sector or ownership structure, greater value can be generated when primary producers are part of a high-functioning value chain that’s committed to shared sustainable values.
“The idea is that we are producing a quality product that consumers recognise as quality, not just because it tastes great and looks great but also because it has been produced with care for the environment,” Dalziel said.
“Because producers are connected to their local community, because there is an authentic story embedded in a product, and it is a quality product, consumers are willing to pay a premium for that experience.”
The study aimed to identify the common attributes of successful primary sector exporters of products such as honey, wine, dairy, beef, fruit – even jewellery and an emerging cosmetics brand – as well as Māori-owned and family-owned businesses.
Beef + Lamb NZ’s Taste Pure Nature campaign was an example of the success of value chain thinking, he said. Using AERU insights, BLNZ has the potential to achieve a 20% price premium in the United States and add $238 million in export returns by promoting sustainability.
Ngāi Tahu created a value chain with South Island Pounamu by registering the stone, using approved artists for carving, recording its weight and origin and enabling purchasers of art to trace the stone’s history through unique codes and photographs. That has provided a premium of between 40% and 100% over competitors.
“That is an outstanding example of where the producer is connecting with consumers to create and capture value,” Dalziel said.
NZ has been a world market leader in the primary industry for a long time “but the world is changing”.
“We have to work harder to understand what it is the final consumer values and how can we align that to our own values on the farm and in the orchard.”
It is not easy for some smaller producers to benefit from the value chain concept as research has shown the importance of scale. While there is enthusiasm about the concept from producers, there is also anxiety, particularly over additional costs.
However, Dalziel said, producers are already making significant changes to farming practices because of concerns about the environment, and are incurring those costs.
“It’s always possible to price yourself out of the market but there is also a possibility you are incurring costs in order to have positive environmental impacts that your consumers would value, if only we could tell them about it.”
The research identified nine attributes for successful value chains.
“The most important, what we consider the core, is a commitment to shared values by every part of the chain, whether it’s the retailer, distributor, or suppliers. These values could be environmental factors such as carbon neutrality or social values such as origins or whakapapa – the point is that the values are understood and expressed all the way from the growers to the consumers,” Dalziel said.
The research also backs the view of a longstanding campaign by AERU director Professor Caroline Saunders, “that not an ounce of product leaves the country without a premium being attached to it”.
Saunders said the value chain research is an important contribution to NZ’s ongoing journey from “volume to value”.
“New Zealand producers are at the forefront of sustainable practices but have not enjoyed the premium they deserve. This research shows how through greater collaboration and a commitment to sustainable values, as a nation we can enjoy greater financial rewards while also enhancing our natural environment,” she said.
