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Scaling up the food value chain

Why ship the raw product – milk powder, sides of sheep and beef, bulk fruit and veges (and water) – offshore for third party processors to cream the profits, when we could be doing so much more to ramp up the revenues returning to the Bay?

Keith Newman09 February 2017

BB33

‘Add value in the food chain’ is a decades old mantra.

But it’s mere rhetoric, unless we support and capitalise on the success of existing entrepreneurs, niche exporters, and the next generation of smart companies wanting to add a premium to brand Hawke’s Bay and the good things that grow here.

Dozens of artisan food businesses are already achieving international success … we’ll tell some of their stories here. And more could join them by increasing our processing capabilities and scaling-up the best businesses for a future beyond weekend markets and specialist outlets.

Our plethora of ingredients can be mixed and matched, packed and despatched in endless combinations, with most kinds of fruit and vegetables already finding ready markets.

There’s high demand on our processing facilities, preparing and packaging various combinations for restaurants and home freezers or creating relishes, jams, sauces, pickles, pastes, snacks and health treats for supermarkets and gourmet food outlets.

A new Regional Economic Development Strategy (REDS) is explicit about supercharging food and beverage, which Business Hawke’s Bay confi rms is ‘the’ priority sector.

Cathryn Rusby, who’s been BHB’s food and beverage manager since mid-2014, is hopeful the strategy can attract new food processors, give start-ups a hand-up, and grow new value-added businesses. While all councils endorse REDS, she notes that delivering on all the talk means “someone’s going to have to put some money into this.”

Premium products

Among the projects Business HB is backing are processors and nutritional product companies wanting to develop an export

“I’m encouraging other companies to go certified organic because it’s a lot easier to sell and the demand is skyrocketing. The amount of sprays used even in our community is absolutely, horrendously, disgusting.”

Heather Smith 

market for sheep and goat dairy, who need national or regional support to invest in “large buildings with lots of stainless steel”.

Rusby says there are at least a dozen farmers already in the fi eld or interested in converting or diversifying, “but no one locally to turn that milk into powder”.

Sheep milk is considered healthier than cows’, and Europe, Asia and the Middle East customers are prepared to pay good money for goat milk powder for use in supplements and formulas for infants, toddlers and aged people.

And as the deer market recovers from a massive downsizing, new ideas will enable an improved return on investment.

Gevir Deer Velvet, a health supplement with over 300 active components derived from ‘renewable’ antlers, was created by smart farmers from Takapau and is now sold in over 300 retail outlets nationwide, with exports to Thailand, Hong Kong and Australia.

Silver Fern Farms, with a strong local presence, successfully brands prime cuts including venison, and Bay-based entrepreneur, First Light, processes 15% of our national red deer kill annually.

It supplies branded venison steaks to Marks and Spencer and Waitrose chains in the UK and Whole Foods supermarkets in the US and is planning expansion once deer numbers grow.

First Light’s big story, however, is about 180 farmer-suppliers who now have a greater return from their pastures by replacing traditional cattle with wagyu beef for export.

Corn backlash

Jason Ross, one of three First Light directors, says the opportunity arose after the massive obesity problem in the US was partly traced back to 1950s corn subsidies when farmers moved cattle off pastures onto corn feedlots.

Jason Ross

The biggest market is California, where Ross says people are eating healthier and becoming “change agents” for the American diet. Other markets include the UK, Scandanavia and Europe. Jason Ross, First Light

Fast forward to the 2000s, with doctors claiming 80% of US supermarket products contain corn in some shape or form, resulting in over-indulgence in fructose and corn-fed protein. Their solution: “Stop drinking four litres of Coke a day and do away with grain-fed protein”.

Grass-fed beef consumption began growing at a 25% compound rate annually over a decade from a relatively small base, but Americans resisted the change as the meat was mostly “lean, tough and often dry”.

First Light directors made their move in 2008, investing in wagyu beef which are typically raised in feed lots in Japan to achieve the desired marbling eff ect and tender meat.

“We are the only grass-fed wagyu company in the world,” says Ross. Around 95% of the meat is exported. In 2016 First Light processed 4,500 wagyu cattle and in 2019 it expects 15,000.

“A lot of people who don’t normally like olives, like ours. Our hand-made artisan approach gives good control over the whole process, including the flavours,” Geoff Crawford, Telegraph Hill

The biggest market is California, where Ross says people are eating healthier and becoming “change agents” for the American diet. Other markets include the UK, Scandanavia and Europe.

Hawke’s Bay’s relative isolation remains an impediment, with processing plants needing to be more central; venison is processed in Feilding and the beef in Hamilton.

The 4-5 kilogram selected cuts are vacuum packed and exported to secondary processing plants in destination markets where they are cut into steaks.

Ross says Hawke’s Bay farmers need to think beyond commodity markets if they want to get greater value for their eff orts and more “control over their destiny”.

Pick and mix options

Business HB’s Rusby says we need more processing capabilities to sit alongside our supply chain and logistics capabilities to capitalise on the region’s food potential.

Heinz Wattie’s and McCain clearly add huge value to locally-sourced fruit and vegetables which they process, can, freeze and brand for themselves and others.

A range of smaller processing plants including ENZAFOODS, Vegees, Frupak and Greenmount Foods are kept busy freezing, squeezing, teasing, dicing, slicing and pulping for various end-products.

The partly-developed Tomoana Food Hub, on twelve hectares of the old Tomoana Freezing Works land in Elders Road, aims to encourage more processing fi rms to locate there as part of a cluster of complementary businesses.

Trevor Taylor and his sons purchased the land fifteen years ago when they established Tomoana Warehousing, off ering freezers and storage facilities to clients. The most recent tenant is Chinese- owned New Zealand Miracle Water (NZMW) with Jamestrong Packaging also on site.

In mid-November Maungaharuri- Tangitu Trust took a 25% share in the hub, planning to construct purpose-built premises for high-quality food processors, technologists and innovators.

Business chairman Dr Andrew West wants to replicate the success of the Waikato Innovation Park – based on dairy, red meat and agri-technology – with a stronger focus here on fruit and seafood.

West, who’s also chairman of the Waikato park, envisions a multi-tenanted building as the fi rst step in an eco-system of agri- tech companies and is hopeful of central and local government financial assistance.

Geoff Crawford Photo: Sarah Cates

“This is an opportunity to accelerate the sophistication of food and beverage in Hawke’s Bay creating a richer, deeper industry with more dynamism and support for small companies working in with larger established companies.”

Fun with feijoas

Heather Smith acquired a large block of land south-east of Havelock North for an organic farm on her arrival from Vermont in the US in the late 1990s. After one bite of a feijoa – “the fl avour was so unique” – she planted an orchard of 2,000 trees.

She evolved creative ways to repurpose the humble fruit after four years research and is now passionate about promoting its potential to the world.

Smith found working with food engineers and commercial kitchens too costly and ended up partnering with Glen Reid of Vegees in Omahu Road, Hastings, who cuts, slices peels and freezes for Heather’s Feijoas.

“They created business for themselves by helping me. Now we’re working on opportunities in Japan”.

Her freeze-dried packs of feijoa wedge snacks are trending in local natural food stores and a test run of 7,000 one-kilogram bags of frozen peeled or whole feijoas for smoothies, yoghurt, ice cream and other products, further proved she’s on the right track.

Whakatu-based Frupak processes apples, apricots and other fruits into puree, pie mixes and baby food and is handling her feijoa puree and juice concentrate. “It costs them to do small runs so they’re hoping things will scale up. There’s a sense of working together for future benefits.”

A company in Levin processes her freeze dried product and Smith is now researching how to make her wedge snacks more aff ordable.

She’s expanding export options for puree, concentrate juice and freeze dried powder in 20 kilogram bags or 200 litre drums as food ingredients.

“I’m encouraging other companies to go certifi ed organic because it’s a lot easier to sell and the demand is skyrocketing. The amount of sprays used even in our community is absolutely, horrendously, disgusting.”

Meanwhile Smith continues to run cattle and sheep on her 275 hectare farm, providing organically grown meat for a local butcher to process; her farm manager sells organic eggs around the region; and the certified wool from her sheep goes straight to the USA. “They can’t get enough of it”.

Olive groove

Sheer determination and the “desire to produce a nice olive…a better product than those being imported”, motivated Telegraph Hill owner Geoff Crawford to create the fi rst and largest commercial producer of table olives in New Zealand.

Who would have thought the ordinary olive could be presented in so many forms and fl avours? Lemon grass, kaffi r lime and chilli; lemon and herb or burnt orange and fennel; an apricot and olive tagine sauce; chicken marbella sauce, date and olive relish…balsamic drizzle?

Telegraph Hill grew from a shed and a small grove in 2001 to a full-blown operation contracting 6,000 olive trees around Hawke’s Bay, now selling around 23 tonnes of table olives and 20 tonnes of oil annually.

“A lot of people who don’t normally like olives, like ours. Our hand-made artisan approach gives good control over the whole process, including the flavours,” says Crawford.

“I didn’t see something wasted and think where can I sell it; I saw markets that wanted products and sourced to meet that demand,” Angela Payne, Agri-labs 

Serious research was required to get the process right and acquire equipment that didn’t cost the earth, most of which was acquired on-line or developed locally.

The right food technology and tasting programmes and a lot of patience are required. It takes about 6-8 months – including washing, sorting, brining and fermentation – before olives are ready to eat, says Crawford.

On a research visit to Spain he was “mind-boggled” at the scale of production from co-operative manufacturers who get government subsidies and keep investing because “they don’t get taxed unless they take profit out.”

Telegraph Hill, with assistance from the Icehouse programme, is working to expand and sell more product locally, and for export opportunities in Japan, where its Manuka smoke infused balsamic drizzle is fi nding a niche … enhancing the fl avour of octopus.

Angela Payne. Photo: Sarah Cates

Profitable waste stream

Angela Payne, owner of Agri-labs in Waipukurau, a veterinary nurse specialising in parasitology, was asked by a meat company to evaluate separating animal by- products for the pharmaceutical sector.

After a change of ownership the company lost interest, but Payne, aware of the potential, carried on, with Richmond Meats off ering her facilities.

From 1999 she began transforming a waste stream into a profit stream by sourcing and exporting ingredients for medical, pharmaceutical, dietary and nutritional products from pig farms, horse studs and sheep farmers.

The business grew by word of mouth, with Payne investing in her own lab, processing and pack house facilities and expanding fourfold in the past two decades. “I didn’t see something wasted and think where can I sell it; I saw markets that wanted products and sourced to meet that demand,” she says.

Farmers deliver frozen product to the Agri-labs Waipukurau factory where by- products are treated, freeze-dried or turned into a serum for export as bulk powder, in capsules or for petfood. Denmark, Germany and Japan want frozen product to process, while the US typically buys bulk powder.

Sheep placenta remains the number one ingredient, although horse, pig and deer placenta are also in demand as a rich source of protein and hormones, including estrogen and progesterone.

Agri-labs is “ticking along nicely” now having stabilised at around $3 million annual turnover. After dropping some less profi table products, Payne is now consolidating for more strategic growth.

The key, she says, is providing ingredients for others to add value. “If you add the value the customer wants to add themselves, you do yourself out of business.”

Looking for a leg-up?

Business HB is the central source for food industry advice on investment, capability and leadership development, HR, exporting, concerns around health and safety, and food safety.

It works closely with the NZ Food Innovation Network (NZFIN), which has commercial kitchens and extrusion equipment and hubs that have partnerships with universities and food technologists.

East Coast representative, Sally Gallagher, worked with many Hawke’s Bay companies over her six years in the job. The week BayBuzz called she’d just joined a start-up food business but was still fielding calls.

She was helping artisan companies who make “beautiful product on a small scale, to industrialise”. That might mean scaling up, automating, packaging or changing formulations “to get a longer shelf life to meet requirements beyond the local Farmers Market.”

Gallagher says “so much cool stuff ” is going on in the Bay at all stages of the food business with many good food technologists and networks to connect people to resources.

The key is finding what the market needs and putting it together in the right form. “No region has everything … a number of Hawke’s Bay companies are manufacturing in other parts of the country.”

Business HB’s Rusby says “the whole membership thing is outdated…that’s not how we operate these days…unless you can off er a clear value proposition as to why I should give you $200 a year in subs.”

That, and the fact some resources off ered by Business HB were being duplicated, contributed to the demise of Food HB in September 2015.

As founder and part-owner of The Damson Collection – adding value to plums – Rusby knows first-hand that costs add up with subs for Tourism HB, the Chamber of Commerce and the markets, alongside compliance costs and the overheads of health and safety. “It’s very tough”.

Heather’s Feijoas found it too costly, complex and time consuming applying for funding or seeking professional advice, so Heather Smith attended courses, kept asking questions, built relationships with like-minded businesses and found ways to share resources.

Geoff Crawford of Telegraph Hill olivery also found experts charged “astronomically” and most official sources were only good at telling him how they could help after the event. He attended courses and simply got on with it.

Angela Payne of Agri-labs, grateful for free access to facilities to get her started, continues to “pay it forward”. She’s off ered her export-certified facilities to a few start-ups “as long as they clean up after themselves” and opened her premises for short-run contract fruit and vegetable processing.

Sharing resources, advice and goodwill to help someone else get on track with a great idea, might be the mark of how a cohesive, connected community gives itself a leg-up.

Examples like these provide evidence that Hawke’s Bay food entrepreneurs are looking to own more of the value chain … and capable. Yet it’s still an economic trickle compared to the huge potential to add profi table premiums to the basic ‘ingredients’ our region grows.

Keith Newman09 February 2017

BB33

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