Group 2

Jeremy Pagel, Zak Kretchman, Robbie Schuler, Andrew Braun, Larry Jacques

History of Kiwi fruit

Kiwi was originally grown on 3,500 hectares of land Currently there are more than 18,000 hectares of land that are planted Kiwi Industry lacked a branded product

Zespri Today
Grower owned corporatized cooperative Main exporter of kiwi fruit in New Zealand $1.5 Billion in exports to over 60 countries

What is Zespris Strategy?

Take a commodity, make it a branded product World-wide brand recognition High quality Standard Meet diverse customer taste preferences

Performance Assessment
Customer Satisfaction
Competitiveness Productivity Profitability

Customer Satisfaction
Zespri ranks high in customer satisfaction due to four main factors:
Branding: links the product to quality, country of origin, and variety (pull) Customer Segmentation: Varying products for varying demands. Green, Gold, Organic, and Value. Sweeter Cultivars: sets the standard, deters competition Year Round Accessibility: maintains retail space, enhances demand, strengthens distributor relationships
Office Locations: New Zealand, Australia, Belgium, China, France, Germany, Italy, Japan, Spain, Sweden, Taiwan, United Kingdom, United States

Consumer Segmentation

Competiveness
Positive Attributes Information Sharing: above and beyond Purchasing Power Returns of Fruit (spoilage, quality) Negative Attributes Labor Costs (negative) Dollar Value NZD compared to EURO,USD,GBP,JPY (volatile)
Hedge against seasonal exchange volatility

Top Kiwi Producing Nations

(83% of all Kiwi Production)

Chili 12% New Zealand 26% Italy 30%

China 32%

Things to Watch

Source: Belrose, Inc., World Kiwifruit Review 2010

Emerging competition (China) Opening Markets (China, Japan)

Exports By Volume

Zespri Global Sales

Global Sales
*ZESPRI Group Limited global sales comprised 109 million trays with 100 million trays from New Zealand and 8.7 million sourced abroad. New Zealand Abroad

% Variety
*The ZESPRI- sourced crop included 72.7 million trays of ZESPRI GREEN, 21.9 million trays of ZESPRI GOLD, 2.9 million trays of ZESPRI GREEN ORGANIC and 2.5 million trays of other kiwifruit.
*Source: plantandfood.co.nz Green Gold Green Organic Other Varieties

Competitors Compared
Area Harvested
(Hectares)

Yield
(Hectogram/Hectare)

Production
(tonnes)

Chile China Italy New Zealand

2010 10,922 Unknown 24,675 12,800 Im

Chile China Italy New Zealand

2010 209,669 Unknown 168,542 295,703

Fc Fc Fc

Chile China Italy New Zealand

2010 229,000 *442,384 415,877 378,500

Im

* Source: Belrose, Inc., World Kiwi Review:2010

Italy appears to be harvesting double the amount of New Zealand.

New Zealand has a yield that is 75% greater than Italys

China and Italy emerge as leaders in production.

(However, Italy is not a strong exporter and China consumes most of its own production)
(Hg/Ha)=(.1Gram / 2.47acres)

[ ] = Official data | Fc = Calculated | data F = FAO estimate | Im = FAO data based on imputation methodology
FAOSTAT | FAO Statistics Division 2012 | 13 February 2012

Competiveness through Innovation

*Innovation Strategy: Optimize core performance Build competitive advantage Pursue growth horizons

*Source: http://www.mirinz.org.nz

Productivity
*Around 250 people work for ZESPRI International Limited globally. *[Their] policy is to recruit and retain qualified people who understand local conditions and the markets in which [they] operate. *[They are] owned by more than 3,000 current and past growers, who are as determined as the ZESPRI Board, Executive Team and staff

SOURCE :Zespri.com

Profitability
NZ has a high cost of production (labor, land, freight) Amazing growing Conditions Unified

Profitability

Profitability
Ability to capitalize on:
Resources
Financial(294.5M), Other Financial Assets (76M( Physical(5.5M)), Technologies, Reputation, Human resources

Capabilities
Corporate Functions, Management Info, R&D, Operations, Design/Marketing, Sales/Distribution

Profitability

+39.8%

Performance Summary
Customer Satisfaction
Competitiveness Productivity Profitability

Strengths
Marketing Consumers Pay Premium Price Setter Advertising Grower Tours In Store Tasting Local Sales Offices Deal Directly with Large Retailers and Distributers

Strengths
Financial
Very Profitable Net Profit was almost 26 million in 2010 Liquid Current Assets - 130 million ROI Consistently around 50%

Operations
Tight Logistical Control (tracking) Licensing Monitor Market Conditions in Growing Season Sales Support in Key Markets 12 Month Supply

Human Resources
Skilled at communicating with growers and customers 117 off shore staff

Strengths
Management CEO hired from within and can communicate very well with growers. Organization Good Public Image Local Sales People Present in Large Markets Information Market Research Studies Two Way Communication with Licensed Growers

Weaknesses
Current Ratio
2009 to 2010 = 1.29 2006 to 2008 = 1.64

Debt to Asset Ratio

.79 in 2010 .52 in 2006

Total Asset Turnover

6.60 in 2006 4.16 in 2010

External Analysis
Porter 5 Forces Analysis
Threat of New Entrants
Threat of Substitutes

Bargaining Power of Suppliers

Bargaining Power of Buyers

External Analysis Cont.

Threat of New Entrants: Weak
High barriers to entry Brand Equity Kiwi fruit is still a competitively small market therefore there are not many newcomers interested

External Analysis Cont.

Threat of Substitutes: Strong
Kiwifruit is very new, many people know little about it Other fruits such as oranges and apples are already a part of many peoples diets Other fruits are very competitive and often priced lower

External Analysis Cont.

Bargaining Power of Suppliers: Weak
Zespri is owned by kiwi growers Bargaining for inputs for kiwi growers: Weak to Medium Zespri can threaten to integrate backwards

External Analysis Cont.

Bargaining Power of Buyers: Low
Zespri sells to many countries around the world Zespri offers differentiated products based on quality and innovation Since Zespri is formed by a large number of producers, increases buyers switching costs to an alternate supplier

External Analysis Cont.

Rivalry: Medium
Zespri doesnt compete for lowest price Constantly working to improve quality Lots of advertising/sales promotion

Opportunities Analysis
Change in buyer demand Information technology Shipping and storage technology Increasing globalization New Fruit Markets

Opportunities Analysis
Cont.
Change in buyer demand:
Kiwifruit is still a niche product Large markets in Europe, China and Japan Untapped markets in US and other countries Introduction of Golden kiwi New customers brought in by health benefits

Opportunities Analysis Cont.

Information technology
Introduction and use of wide spread information technologies helps in marketing and demand figures New scanner data information from retailers keeps real time demand information and reorder needs RFID tagging for traceability of products

Opportunities Analysis Cont.

Shipping and storage technology Faster shipping methods More efficient cooling houses for storing fruit

Opportunities Analysis Cont.

Increasing globalization Use of worldwide production to ensure year round fresh supply

Opportunities Analysis Cont.

New fruit markets Use marketing power Apples and cherries grow in similar climate to kiwifruit Use current supply chain

Threats Analysis
Food Safety
Government Regulations and Taxes South American Kiwifruit Other Kiwifruit Growers

Threats Analysis Cont.

Food Safety Constant scrutiny from consumers and press Increasing concerns over kinds of fertilizers and pesticides used on fruit could limit their use

Threats Analysis Cont.

Government Regulations and Taxes Local governments sales tax and regulations on exports can always increase Over 60 foreign markets

Threats Analysis Cont.

South American Kiwifruit Sell for up to half the price of Zespri at wholesale Potential for market domination Currently lower quality however may improve to compete on standards as well as price

Threats Analysis Cont.

Other Kiwifruit Growers Italy and China produce large amounts of kiwifruit Majority is consumed within the country Does not have very much effect on Zespris world market

Threats Analysis

Strategic Synthesis
Core Competencies
Marketing
Price Setter Local Sales Offices Deal Directly with Large Retailers and Distributers In Store Tasting

Operations
Tight Logistical Control Licensing Monitor Market Conditions in Growing Season

Information
Market Research Studies Two Way Communication with Licensed Growers

Strategic Synthesis Cont.

Competitive Advantages (VIRO)
Marketing
Valuable allows Zespri to be price setters Rare Zespri is the only kiwi marketing organization able to do this Difficult to imitate Zespri has been building this brand for 20 years Organized Zespri Corp. is built around marketing kiwifruit

Future Scenarios
Decline
Supply issues or change in consumer preferences

Same But Better

Continue current cultivar development and marketing and sales strategy, but also add more offshore sales people

Fundamental Change
Spread risk and increase revenue by expanding into other fruit marketing endeavors

Moving Forward
O
Offensive
Strengths > Weaknesses
Turnaround
Alter internal strategy to build new strengths; be turnaround focused

Offense
Exploit current strategy fully; be aggressive

Opportunities > Threats

W
Alter internal & external strategy; be defensive; question existence

S
Alter external strategy to diversify into new opportunities

Defense

Diversification

Critical Strategic Issues

How is Zespri going to gain a better understanding of foreign markets in order to better capitalize on current market growth? How is Zespri going to increase its supply of premium kiwifruit in order to meet this growing demand? How is Zespri going to lower its risk by diversification into other fruit markets?

Questions??