Every year KPMG surveys agribusiness leaders to rank the most important issues facing our food business. In past years, having completed the roundtable conversations, the underpinning narrative for our KPMG Agribusiness Agenda report has been relatively straightforward to distil from contributors’ comments.
Not this year.
Ian Proudfoot is the National Industry Leader – Agri-Food & Global Head of Agribusiness for KPMG
There is no single theme, trend, or story that nicely summarises the perspectives we heard from industry leaders. It is a muddled, opportunity-packed, risk-burdened story of high highs and almost as low lows. But it is one of an industry where each leader is working in their way through the fatigue we wrote about last year (which has gone nowhere and, if anything, is just an additional year more draining) to show the resolve and resilience necessary to identify and catch the opportunities that are flying at them from a variety of directions.
It is a muddled, opportunity packed, risk-burdened story of high highs and almost as low lows.
In last year’s Agenda, we described the world as VUCA squared. Today, I am not sure what to call it, but it is more volatile, uncertain, complex, and ambiguous than last year. We have added disconnection from communities, curated facts, volatile economics, political populism, and the unexpected happening (think the invasion of Ukraine) to our existing six VUCA elements, (and we have upgraded the impact of climate to the impact of nature more broadly).
The assortment of issues that organisations have to balance to create and capture opportunities has increased. They are, in the main, doing a remarkable job to keep trading, keep growing and keep delivering record returns to the New Zealand economy at the exact time such returns are so desperately needed.
Thoughts from beyond our bubble
While I have not yet headed offshore, some contributors were able to provide firsthand accounts of what is happening in the world beyond our borders. One contributor noted, having recently returned from a trip, that they were feeling less resilient than they have done at any time in their professional career. They noted it was the first time they have not had all the tools they need in their toolbox to respond to the battles that they must fight. They talked about a world that appears to be driven by fear rather than purpose and of so many of the factors that will define the sector’s future, feeling like they are currently outside of organisational control.
Given the strong returns being generated across the sector at the current time, it should not be a difficult decision to make, for once the cash is available to invest in the future. However, there is a risk that if we keep winning on the commodity cycle (as we are doing in red meat and dairy) that we are not proactive in taking control of the things we can change that will assist in creating a sustainable competitive advantage.
Laser-focused on our sustainable competitive advantage
Our historic competitive advantage has been our ability to grow grass and convert this into dairy or red meat protein using a relatively low-cost production system. While our ability to grow pasture remains world-leading, our ability to do it at low cost has evaporated. With the increasing costs of people and the need to meet necessary environmental regulations, costs are heading in one direction. Consequently, we need to think deeply about what a sustainable competitive advantage could be in the future for New Zealand-based value chains.
Traditionally, competitive advantage has been viewed through a production lens, but as one contributor suggested, we should be thinking much more about what we can do in Aotearoa that is distinct, unique, and sustainable in the eyes of our consumers. This means determining that our competitive advantage or advantages may not come from tangible things that sit within our control but could come from intellectual property, a health attribute, or a brand story. In a world where these intangible elements are differentiating products in the minds of consumers, it will be increasingly difficult for a traditional New Zealand-centric, production-based value chain to achieve a distinct and valuable sustainable competitive advantage.
What’s important to us
For the 12th year in a row, World-class Biosecurity has taken the overall #1 spot. In fact, there is no change in the top 3 with signing high-quality trade agreements and delivering broadband equality to all, again taking #2 and #3 respectively.
We can create the future we want
Given our need to invest time, effort, and capital into what we can control, how do we find and develop product attributes that will attract consumers and provide a sustainable competitive advantage, even if that period of benefit is shorter than it has been in the past?
We must also choose to build our future value chains around globally relevant, science-based, nature positive, health engendering opportunities that have the potential to be scaled quickly enabling us to leverage our competitive advantage while it exists.
We can choose the efforts we make to understand current and potential consumers and the problems they have or will have. To create a competitive advantage, we need to look beyond today’s issues, to develop plausible scenarios for the future that will guide us to the likely problems people will be seeking solutions to in five or ten years.
We can choose the people we bring into our organisations; diverse thinkers who can look at problems through the eyes of a consumer and apply both modern science and mātauranga knowledge to find ways to solve future problems.
We can choose the partnerships that we build with organisations worldwide to give us the best chance to find the right knowledge to create a solution.
We can choose how we interact with nature to ensure the platform that our product is grown on is in balance (whether that be in New Zealand or elsewhere around the world).
We can make choices around every key element of a product that we offer to the world.
We must also choose to build our future value chains around globally relevant, science-based, nature-positive, health-engendering opportunities that have the potential to be scaled quickly enabling us to leverage our competitive advantage while it exists.
Ian Proudfoot is the National Industry Leader – Agri-Food & Global Head of Agribusiness for KPMG
Read the full KPMG Agenda report here
