Growers close ranks around Zespri monopoly

Tuesday 30th June 2009

Calls by Turners & Growers for deregulation of the kiwifruit industry are falling on deaf ears among growers and at Parliament, with the Agriculture Minister David Carter saying he will only support change if the industry does.

T&G has issued a 39 page report attacking Zespri's 10 year-old monopoly, claiming that deregulation had been the ultimate aim when the Kiwifruit Marketing Board was disbanded in 1999 and Zespri created as a limited liability company.

However, the president of the New Zealand Kiwifruit Growers Association, Peter Ombler, rejected the report, saying there was "generally no grower support for deregulation".

Zespri also largely dismissed the report, with its Corporate and Grower Services director Carol Ward saying that T&G represented just 1% of the industry, and "a 1% player cannot expect to determine policy for the whole industry".

Deregulation was "not supported by growers, the post-harvest sector, the company's international marketing experts or government, and is therefore not on the agenda".

Carter, who had yet to read the T&G report, told the NZ Herald that if it was clear the majority of growers thought there was a better way to run the kiwifruit industry, "we would certainly be prepared to look at it".

"Likewise if the majority wanted the status quo that would sway me considerably."

The T&G report made a series of documented allegations against the way Zespri, which is predominantly owned by grower-shareholders, markets kiwifruit, accusing the firm of disadvantaging local growers by selling kiwifruit grown all over the world under the Zespri brand while ordering destruction of parts of the New Zealand crop.

In the last season, Zespri had declined a T&G bid for a joint marketing effort involving almost 300,000 trays of New Zealand fruit, forcing T&G to fill market orders from Chile, while Zespri was having growers destroy 2.5 million trays of local production to bolster international market prices.

It accused Zespri of placing growers under onerous "loyalty contracts" which rewarded growers for staying with Zespri but cut their income over multiple years if they failed to renew those contracts - a move which could only be interpreted as Zespri's expectation that deregulation would eventuate in due course since such contracts were unnecessary under current monopoly arrangements.

It also claimed Zespri was making in-roads into the Australian kiwifruit market, which was spefically ruled out in the company's establishing legislation.

However, Ombler said many kiwifruit growers remembered "their poor returns of a couple of decades ago when there were multi-exporters before growers made the decision to move to the current industry structure with Zespri as their marketer". A recent surveys showed 84% of growers still viewed these as the best arrangements.

T&G produced analysis showing that, compared with other horticultural options, kiwifruit had a long history of relative under-performance.

While it appeared that Zespri's commercial returns were above its likely Weighted Average Cost of Capital, they had been falling steadily for several years.

Businesswire.co.nz

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