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Uncategorized / July 2, 2021

NZKGI Performance and Supply Portfolio

Our Purpose

NZKGI monitors Zespri and industry performance to ensure the industry works in the best interests of all kiwifruit Growers. NZKGI works with all industry players to understand the operational and economic dynamics, while establishing and maintaining important industry relationships to position NZKGI as a credible voice for effective industry representation.

Through project implementation and monitoring, the Performance and Supply portfolio has continuously delivered a range of audits and practical outcomes with Growers best interests at the fore. Here are some of the portfolio highlights and achievements from recent years:

 

Zespri Monitoring

Monitoring of Zespri has been ongoing through regular meetings between Zespri’s Senior Executive and Supply team alongside NZKGI’s Executive and Forum members to review issues and relevant topics. This includes Zespri’s five-year plan, performance in the market, forecasts and grower payments.

NZKGI facilitated an independent audit over the Zespri administered Growers’ Pool, which was conducted in August 2017 to provide a level of assurance to growers that allocation between the Corporate and the Pool, and allocation between Pools, is accurate. NZKGI’s Performance and Supply Manager also worked alongside the audit team.

The audit found no material misstatements and no material errors requiring adjustment. The auditors made some recommendations for improvement to areas of the Pool Policy manual and accounting system controls, and NZKGI monitored completion of these for the 2019 season.

To ensure that these changes have been implemented correctly NZKGI has initiated a follow-up audit to take place in September 2021.

 

Zespri Funding

Following the successful Kiwifruit Industry Strategy Project (KISP) Referendum in March 2015, a ‘Margin Implementation Working Group’ was established to focus on achieving simplicity, transparency and a fair allocation of costs between Zespri and the NZ Grower pools.

In 2016, NZKGI commissioned an expert to assist in the review of the margin proposal, with an agreement on the basis for margin calculation achieved in June.

Then in 2017, a new enduring funding model to calculate Zespri’s margin was implemented. NZKGI was a key contributor to the discussion, making sure that the proposed model follows the principles outlined by the KISP process. The model utilises the loyalty payment to provide a profit share back to Growers in a transparent way.

 

Zespri Key Performance Indicators (KPIs)

As an outcome of the KISP process, one essential element of the Performance and Supply portfolio is the establishment of a series of KPIs that provides Growers with an authoritative and robust assessment of Zespri’s performance.

These KPI’s have been agreed with the NZKGI’s Executive Committee and Forum, as well as Zespri management. As a result, NZKGI produces an Annual KPI Grower Dashboard to coincide with the Annual Reports of Zespri, NZKGI, Kiwifruit Vine Health and Kiwifruit New Zealand, which is released in July/August each year.

In 2019, the annual Zespri KPI document was further developed from the initial set of metrics. The inclusion of independently measured data on brand awareness in the key markets allowed for an external measurement of Zespri’s in-market effectiveness. In 2020 commentary and interpretation of the metrics was added to provide more analysis to growers.

 

Supply Entity Training

Supply Entity Training aims to increase the governance and oversight skills of growers on supply entities. To achieve this, sessions on governance, directors’ responsibility, running meetings, understanding financial reports and Supply Entity structures were run.

 

Supply and Payment Oversight

NZKGI monitors industry supply and payment issues throughout the year, particularly through Forum meetings. Two grower representatives participate in the Industry Supply Group (ISG) meetings and five grower representatives participate in the Industry Advisory Council (IAC), ensuring equitable outcomes for all growers around supply and payment issues.

 

Supply Agreement

NZKGI representatives and staff have taken an active role in the review of several parts of the Annual Supply Agreement, including the Maturity review, Period 1 review, Schedule 2, Period 1 and time model, Pack differential and incentives model and Supplier Accountability. The additional expertise has allowed for more understanding on how supply agreement changes can impact Growers.

 

Supply Chain End-to-End Process

The NZKGI Industry Supply Group (ISG) representatives and Performance and Supply Manager participated in an ISG market visit to the USA, Japan and China in 2019. They valued seeing the whole industry picture and the work that goes into the total supply chain to deliver a premium product to the market. This facilitates a more proactive and knowledgeable approach to portfolio activities.

 

Grower Fact Sheets

A series of topical Grower fact sheets were produced in 2017, dedicated to specific subjects and are stored on the NZKGI website. The fact sheets are to serve as short, up-to-date overviews, together with links (where applicable) to more in-depth information. Topics have included hail insurance and insurance costs allocated to the Grower Pools.

 

KiwiStart, Time and Taste Committee (KTTC)

A small committee of Forum members was established in 2019 to review the KiwiStart and Time models, as well as the Maximum Taste Payment (MTP). The committee were satisfied that the models were working satisfactorily; however, they identified some areas that could be improved. Principle papers for KiwiStart, Time and Crop Management were also developed.

 

Hayward 2018 Cost of Quality

Due to concerns about the high cost of quality for Hayward fruit after the 2018 harvest, NZKGI undertook an in-depth review in 2019. It analysed various factors that could affect quality, including crop estimates, market run rates, shipping, advanced movement, in market stock levels, supplier accountability and crop management.

There was no single conclusion; however, there were slower shipping mid-season and higher onshore inventory levels that would have resulted in fruit softening and higher in-market stock levels towards the end of the season, leading to higher than normal customer claims. In addition, the decision to crop manage was too late to manage softer lines. The findings of the NZKGI report resulted in new monitoring, including reviewing market run rates, the supplier accountability framework and crop management principles.

 

Taste and Maturity Testing Review

In 2020, NZKGI took a significant role in the COVID-19 response and worked with other industry representatives to create a feasible operational solution in the wake of Eurofins inability to test fruit.

After the removal of taste payments for 2020, a review was performed to reassess the way Growers are paid for taste and other associated incentives, and how maturity testing works to make it scalable and robust for the future while being fair for all Growers. A NZKGI survey open to all Growers was collated to allow Grower views to feed in from the start of this process.

At the end of the review, a second survey was initiated to assess Grower’s agreement on the taste recommendations. The results of this survey guided the NZKGI forum in their vote on the recommendations.