Turners & Growers makes direct appeal to growers in push to crack Zespri's monopoly

Thursday 24th September 2009

Turners & Growers, the listed horticultural exporter and owner of the ENZA apple brand, has made a direct appeal to kiwifruit growers to support its drive to crack open Zespri’s monopoly on some $1 billion of export fruit.

T&G chairman Tony Gibbs said there’s no proof that Zespri is doing a good job for its growers or shareholders, and that it’s impossible to obtain reports, surveys and analyses on the costs or benefits flowing from the monopoly. The claims are in a discussion document being mailed to growers, which was released to the NZX today.

Last year Zespri exported a record 106 million trays of kiwifruit, up 9% on the previous year’s output, according to Ministry of Agriculture and Forestry figures. According to Zespri, orchard gate returns per tray of green kiwifruit slipped to $3.68 in 2009 from $4.09 in 2007.

Gibbs contends that opening up exports to competition would benefit the industry. “No matter how much Zespri underperforms or how little it returns on shareholders’ capital, no one can take Zespri over,” he said. “Zespri trumpets how much it spends on innovation each year. But if other exporters could compete with Zespri, the total spend on innovation would be higher and the innovation would be more effective.”

Unlike the former Kiwifruit Marketing Board, which had to buy all the fruit growers produced, Zespri is a company, not a growers’ co-operative. Zespri is obliged to look after its shareholders, not the interests of growers or the industry as a whole, Gibbs said. At times, this may mean dumping New Zealand grown fruit while promoting overseas grown kiwifruit under its Zespri brand.

Zespri executives weren’t immediately available to comment on the Gibbs’ note to growers.

Under its structure Zespri’s growers are not necessarily the same as its shareholders. According to its 2009 annual report, at least 453 of Zespri’s 2,710 New Zealand suppliers in 2008/2009 were not shareholders of Zespri.

“Those shareholders who own a higher proportion of Zespri shares than the proportion of fruit they supply benefit each time Zespri allocates a dollar to shareholders rather than growers,” said Gibbs. “Conversely, growers miss out if they do not own any Zespri shares or own less shares than the amount of fruit they supply.”

The standalone Kiwifruit New Zealand, which occupies the same building as Zespri in Mount Maunganui, is supposed to allocate a proportion of the nation’s crop for collaborative marketing arrangements.

Gibbs said T&G was only allocated 1.3% of the 2008/2009 fruit for collaborative marketing. He also accuses Zespri of “collaborating with itself” under the marketing arrangements.

Theoretically, Zespri was meant to be a temporary commercial arrangement following its establishment in 1999. Since then, Gibbs says, Zespri’s performance has been unimpressive, and while production has increased orchard gate returns and profit have fallen.

“No one should be forced to contract with Zespri,” Gibbs said. “Growers who want to stay with Zespri can. Those who don’t should be allowed to deal with someone else.”

Businesswire.co.nz

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