Release of Emerging Growth Opportunities reports
The Ministry of Business, Innovation and Employment has released our “An Investor’s Guide to Emerging Growth Opportunities in New Zealand food and beverage exports” (being Stage I & II). Also available are detailed reports on three of the many great opportunities: Honey, Salmon and Alcoholic Spirits.
What is the objective of this report?
The objective is to identify and highlight export categories with the potential to be “the next wine industry”. These are existing exports showing strong growth and global demand and, ideally, are capital intensive and attract a premium for quality.
What are the 20 categories?
The 20 categories are listed in order of best, better and good.
Best: Salmon, Honey, Spirits, Biscuits, Pet food, Cherries
Better: Chocolate, Frozen French fries, Beer, Alcoholic cider, Avocados and Berries
Good: Jams & jellies, Capsicum, Peas, frozen & dried, Sugar confectionery, Soups & broths, Fresh onions, Prepared fish and Beef jerky
Together, New Zealand exports of these 20 categories in 2010 were greater than the wine industry (US$845 million as against US$774 million); and most of these categories are growing faster than all other food and beverage exports. Seventeen out of 20 of the identified growth segments have already attracted foreign and/or private equity investment, indicating that the market itself has identified that these present strong opportunities for growth.
What is the size of the prize?
If all 20 categories achieved their potential we would be looking at exports worth between US$3.5 and US$5 billion, that is, up to approximately US$4 billion additional.
How do other products rate?
Some other categories of product are close behind the ‘top 20’. For instance New Zealand’s sausage exports are worth US$6 million and showing strong growth off a low base. On the other hand, olive oil (US$600,000 in exports) is a much smaller industry than its public profile suggests and would need to undergo significant development if it is to have the same sort of growth potential.
Why were salmon, honey and spirits selected for an in-depth analysis?
These categories scored consistently highly across most criteria. Quantitatively they have shown strong and consistent export growth over time. Qualitatively these categories attract a premium for quality, are able to leverage New Zealand’s image, the New Zealand industry is able to differentiate product in the market and there is growing demand internationally. In addition, the size of the prize is significant; with export potential of honey products estimated at US$150-200 million, spirits at US$300 million and salmon at between US$500 – 700 million.
Who is the report for?
The report is prepared with current and potential investors in New Zealand’s food industry in mind. Information of this type will also benefit:
• Industry participants (firms & individuals);
• Government (across all roles and responsibilities); and
• Scientific researchers (academic, government & corporate).
What is the methodology underpinning the report?
The report takes a business focus and uses a screening methodology typically used in private equity and investment banking work.
All New Zealand food and beverage export categories with an export value of less than US$100m but more than US$2m are screened and evaluated using fair, objective criteria (see p.22 of the report), hence the following are outside scope:
• Large existing F&B export categories (above US$100m, e.g. infant formula);
• Categories with theoretical potential (eg maple syrup ) but no exports;
• Categories below US$2m, some of which have attracted a lot of attention but have yet to show meaningful growth (eg olive oil, with US$0.6m in exports); and
• Non-commercialised scientific research and/or pre-market innovation.
The criteria used include a mixture of quantitative and qualitative metrics looking at their historical performance, competitors and markets. From this evaluation the short list of twenty high–growth potential opportunities is assembled.
Also released were our Stage III reports on:
(Alcoholic Spirits was released in September).