New Horizons 2015 Apple and Pear Industry Plan
Introduction from the APAL Chairman This strategic plan for the Australian apple and pear industry highlights that change is inevitable, urgent and fundamental to the future success of the industry. It is clear that business as usual is not an option if the industry is to secure a profitable future in the next five years and beyond in what promises to be a much more competitive and international business environment. Importantly, the consultation process for developing the plan revealed that industry members are already aware of the major changes that lie ahead. The challenge now is to respond strategically so that the industry can innovate and positively influence its own future. The plan, developed with support from Horticulture Australia Limited, calls for increased coordination of efforts for industry success. I see a need for better coordination at the farm level, through the supply chain, with other fruit industries in Australia, with the Federal government and state government research organisations and potentially with overseas industries where there are tangible benefits to be gained. I am confident that coordinated action and innovation is very achievable for the apple and pear industry. There is already a track record of success in working together to innovate and implement change. A good example is the cooperation between the Federal government and industry to roll out the successful national Future Orchards program during 2006 to 2010 to facilitate adoption of world class high-density orchard systems. Apple and Pear Australia Ltd is also committed to playing a leading role in facilitating change across businesses and industry associations. However, it is important to be clear that this is a plan for the industry and not simply a guide for industry associations. There is a real sense of urgency to accelerate change and reposition the industry over the term of the plan. It will mean establishing momentum over the first two years. The responsibility for successful implementation of the plan rests with industry associations, governments, growers and supply chain businesses collectively. Effective communication, engagement and coordination of efforts within and between organisations will be critically important to secure a positive future for Australia’s apple and pear industries. I trust that all organisations and businesses will consider this plan in their individual decisionmaking, including the allocation of resources and prioritisation of action. I encourage all industry participants to embrace this plan and be an active part of transforming the future of our industry during the next five years.
Darral Ashton Chairman Apple and Pear Australia Ltd March 2010
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Apple and Pear Industry Plan 2015 Overview In the next five years the Australian apple and pear industry will undergo transformational change as it further integrates with the global economy. This plan is designed to provide the industry with an opportunity to make changes on its own terms. The apple and pear industry faces considerable challenges in the short to medium term. Without clear priorities and effective national action by the Australian industry, import competition has the potential to significantly reduce the size of the industry within the life of this plan. However, if proactive, the industry will have the opportunity to adjust and remain competitive. More than ever there is an imperative to apply limited and valuable industry resources in targeted ways that can make a real difference to industry prosperity and sustainability. This new strategic plan for the apple and pear industry is designed to help provide that sharp focus. The plan was developed through a systematic process of researching the current industry situation and external trends, analysing industry data, and reviewing the industry within the context of the government’s priorities in agriculture, climate change and the environment. Exploring possible scenario’s of alternative industry futures and direct engagement with more than fifty industry stakeholders from across the supply chain were used to validate issues and test ideas. The plan’s development was guided by an industry steering committee involving representatives from Apple and Pear Australia Ltd and Horticulture Australia Ltd (HAL). The process of formulating this plan confirmed that there are no simple solutions that will assure success in an increasingly competitive operating environment for the apple and pear industry. Instead, a targeted approach where the industry invests it’s resources in those areas considered likely to generate the highest value is critical. This is not a plan intended to offer all things to all people. It is a plan to help the industry adapt on several priority fronts over the next five years and meet the challenges of existing and new competition and increasingly discriminating consumers. This plan outlines strategic directions and broad actions for the apple and pear industry as a whole, not just for growers. The activities outlined in this plan will be incorporated into the fiveyear research and development investment plan, the three-year domestic marketing plan and the five-year export marketing plan all of which are managed by HAL. They will also be incorporated into APAL’s Business plan and the Industry Communications Plan. The R&D investment plan will be developed by June 2010 and the domestic marketing plan by August 2010. The export plan will be finalised in 2011. This strategic plan provides clear directions in three key areas where effective collaboration can transform the industry over the next five years. Success depends on moving forward in each of these areas in a coordinated way. The key areas include: 1.
Stimulate demand through product quality and innovation
2.
Retain and expand export markets
3.
Deliver valued industry services
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The benefit from successful implementation of this plan will be a stronger, competitive, profitable and sustainable Australian apple and pear industry.
The strategies and actions outlined within this plan are consistent with the Australian Government’s broad objectives of achieving an environmentally sustainable Australia, promoting and maintaining good health, and enabling agricultural industries to adapt to compete in a fast-changing international economic environment. More specifically, the actions dovetail with the Government’s rural R&D priorities, which are: ¾
Improving productivity and adding value;
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A better understanding of supply chains and market requirements;
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Effective and sustainable resource management;
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Adapting to and mitigating the effects of climate variability and climate change;
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Protecting the industry and environment from biosecurity threats;
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Improving skills and leadership;
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Promote the development and application of innovation and know-how.
Further information on the National Research Priorities is available at: http://www.arc.gov.au/about_arc/national_research_priorities.htm. While Apple and Pear Australia Limited has a central role in facilitating the successful implementation of the plan, responsibility for implementation rests with industry associations, governments, HAL and businesses collectively. Successful implementation will require many organisations and businesses across the industry to consider the plan in their individual decisionmaking, including the allocation of resources.
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The Apple and Pear Industry Plan - New Horizons 2015 The Reality in 2010 ¾ ¾ ¾ ¾ ¾ ¾ ¾ ¾
Consumer demand for Australian apples and pears is in decline. Domestic competition from a variety of local and imported fruits has intensified. Imported apple juice concentrate dominates the domestic market and limits the local market for lower quality fruit. Competition from imported fresh apples is likely within the next year or two. Apple and pear exports are declining rapidly. Grower numbers and profitability are declining as costs rise and market share shrinks. The industry could contract by 20-40 per cent within five years, even with a proactive industry response. Climate change and environmental issues are placing pressure on sustainable farm practices and consumerretailer perceptions
Industry Strategic Intent What: To consistently produce apples and pears of superior eating quality, focusing on varieties that are sought after by consumers in the domestic market and selected overseas markets where premium quality is valued How: By Industry and Government stakeholders working collaboratively to reposition the Apple and Pear Industry and transform competitiveness by delivering valued services that support innovation
Primary 1. Stimulate domestic demand by 5% through product quality and innovation
2. Expand apple and pear export markets to 10 per cent of marketable product exported by 2015
1.1 Improve consistency of product quality to match consumer expectations. 1.2 Enhance orchard productivity and management 1.3 Coordinate industry product promotion and marketing programs 1.4 Facilitate variety transition to match changing markets 1.5 Enhance industry value within the community
2.1 Define and understand overseas markets that offer profitable export opportunities 2.2 Develop collaborative approaches to enter and expand selected export markets 2.3 Resolve technical market access issues in target markets 2.4 Monitor export market competitor activities
Enabling 3. Ensure industry has the resources and capability to achieve primary objectives 3.1 Adapt industry services to meet changing needs of growers 3.2 Improve quality and flows of information for decision-making across the supply chain 3.3 Invest in leadership and people development
The Reality in 2015 The Australian Apple and Pear Industry is world competitive; satisfying consumer demand for its products and with sustained profitability
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2005-2010 Plan The objectives of the 2005 to 2010 apple and pear industry strategic plan were: ¾
To improve the understanding of the commercial reality facing participants in the apple & pear supply chain
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To ensure that apple and pear supply chains meets market expectations
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To better service and support partners in all key market segments
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To improve the yields from apple and pear orchard production
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To protect the integrity of the product supply chain in terms of biosecurity relying on pure science
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To build a positive culture within the industry and a corresponding positive external image to improve its attractiveness as a destination for skills and capital
The Australian apple and pear industry has achieved major changes due to its implementation of the 2005 to 2010 Strategic Plan. The most profound change has come about due to the implementation of the Future Orchards 2012 program, which has led growers and the industry to have greater understanding of the commercial reality facing the industry and to improve apple and pear productivity. This has provided a solid basis for the industry to meet front-on the challenges that are described in the 2010 to 2015 plan. Grower responses to a telephone survey in 2008 compared to a survey in 2006 showed major improvements in industry communication, growers having a better sense of where the industry is heading and making changes to orchard practices to improve production efficiency. The most disappointing outcome from the 2005-2010 plan was the lack of progress achieved in improving consumer perceptions and expectations of apples and pears. Product consistency continues to plague the industry and increased per capita consumption will be difficult without progress in this area. While some good initiatives have advanced industry leadership issues more work needs to be progressed to ensure that the skills and capabilities are available for the future.
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About the 2010 - 2015 Plan Increasing complexity, competition, uncertainty and volatility in markets is now a feature of the operating environment for businesses across the Australian economy, including those involved in meeting consumer demand for apples and pears. This national plan for the apple and pear industry provides a mechanism to develop a unity of purpose across the industry in responding to the significant challenges and opportunities ahead – particularly for those actions that involve the efforts of more than one organisation or business. The purpose of developing the new industry strategic plan was to: 1. Develop a shared understanding on the overall direction, key strategic issues and the critical actions required to influence the profitability, resilience and sustainability of the industry in the medium to long term 2. Guide the investment of research, development and marketing funds provided by both apple and pear growers and the Australian government from 2010 - 2015 3. Enable allied service providers such as the public and commercial research and development community to align their resources and effort with that of the industry 4. Demonstrate to consumers, customers, the community and government the positive actions the industry is taking in response to shifting demand and vigorous competition. The strategic plan was developed through a systematic process of researching the current industry situation and external trends, analysing industry data, exploring possible scenarios of alternative industry futures and direct engagement with industry stakeholders to identify and prioritise issues and test ideas. Preparation of the strategy was guided by an industry steering committee involving representatives from Apple and Pear Australia Ltd and Horticulture Australia Ltd. The process to develop the strategy included three stages: 1. Research, analysis and industry issue validation Desktop research to bring together relevant information from within and outside the apple and pear industry, analysis to identify apparent industry issues, interviewing people to validate and fine tune the understanding and significance of issues. 2. Establishing priorities and needs Identification of the issues or areas of investment that are most likely to have an impact on the profitability and sustainability of the industry. These issues were prioritised for action using a needs analysis method. 3. Strategy formulation and validation The final phase drew together all information and insights into formulation of a draft industry strategic plan. Scenarios of possible industry futures were used to stimulate strategic thinking amongst the steering committee and develop a robust strategy. The planning process involved industry consultations with more than 50 people including: -
Four regional focus groups with apple and pear growers (Young, Stanthorpe, Melbourne and Lenswood).
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Individual interviews with more than 25 supply chain participants involved in retailing, exporting, research, packing, marketing, wholesaling and private consultancies.
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Snapshot of The Australian Apple and Pear Industry Measured in terms of gross value of production (GVP), the apple and pear industry is the third largest horticultural industry in Australia after grapes and citrus. With an estimated gross value of $450 million, production is spread across most states. The major apple and pear producing areas are Stanthorpe in Southern Queensland, Orange and Batlow in New South Wales, the Goulburn Valley and Southern Victoria, Huon Valley in Tasmania, Adelaide Hills in South Australia and the Donnybrook and Manjimup regions in Western Australia.
WA, 31,528, 12% QLD, 35,486, 13%
TAS, 30,222, 11%
SA , 19,256, 7% NSW , 44,912, 17% VIC , 104,002, 40%
Figure 1: Apple production for each state in 2008 (tonnes, per cent of national production) Source: APAL data
NSW , 561, 0% QLD, 649, 1% WA, 7,147, 6% TAS, 960, 1%
VIC , 113,308, 88%
SA , 4,935, 4%
Figure 2: Pear production for each state in 2008 (tonnes, per cent of national production), Source: APAL data
Victoria is Australia's largest producer of apples and pears, generally producing approximately 40 per cent of the nation's apples and close to 90 per cent of the nation's pears - mostly from the Goulburn Valley area around Shepparton. New South Wales and Western Australia are the next largest producing states.
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Australia represents around 0.8 per cent of world production of apples and 1.4 per cent of world pear production. The Australian industry is unique in terms of its very strong domestic focus, low exports and minimal import competition. Apples are among Australian consumers top three favorite fruits with an average of 78 per cent of respondents to a regular industry survey having purchased apples in the past month. Domestic consumption of fresh apples in 2007 stood at approximately 9kg per person per annum. An industry ‘taking stock’ study in 2005 found that about 20 per cent of the apple crop goes to concentrated apple juice (CAJ), fresh apple juice or pie apple, but volumes directed to processing have since fallen each year to 13 per cent in 2008. Import competition is an important factor in the juice market. CAJ is imported at very low cost and this in turn impacts on the prices paid to growers for fruit that is suitable only for processing. Pears are also a classic, mainstream product for Australian consumers but they do not occupy a position as a staple fresh fruit. Approximately 40 per cent of Australian grown pears are sold fresh, with the balance of the crop processed (canned). The pear industry is relatively internationalized compared to the apple industry. It is already subject to import competition from China, although the level of imports remains low. The industry is currently exporting larger volumes of fresh fruit with approximately four per cent of pear production exported in 2008 compared to only 1.3 per cent for the apple industry. Approximately 1100 businesses are involved in the growing of apples and pears nationally. Major supermarkets and independent retailers are the main points of purchase for consumers of apples and pears, with food service businesses accounting for a much smaller component of supply. Apple and Pear Australia Limited (APAL) is the peak industry body representing growers. APAL works closely with Horticulture Australia Limited (HAL) which is responsible for the investment of industry levies for research and development (R&D) and marketing. In 2008/09 the industry invested approximately $5.6m on R&D (including matched government funds) and $2.2m on marketing and promotional activities. An additional $1.479m was invested in 2008/09 in R&D through voluntary contributions (including matched funds provided by the federal government). Six state Associations are members of APAL and play an active role in organization and issue management at the local and state levels. The Australian Fresh Fruit Company (AFFCO) is another important industry organization. AFFCO provides information and development services to a national network of growers and has a coordination role to optimize the Pink Lady export programme.
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Commercial Trends and Challenges The Australian apple and pear industry is at a challenging point in its history. While the industry is mature, relatively large in domestic terms and occupies established positions in domestic markets for fresh fruit, the continuation of this position is less than assured. Maintaining and growing consumer demand is essential for a mature industry that has large, relatively inflexible investment in orchards. However both domestic consumer interest and consumption trends are currently challenging for the industry. Recent industry research by Dangar (2008, unpublished) found that the Australian apple consumer is not highly engaged with the product and purchase is driven primarily by habit. It also identified widespread consumer perceptions that the quality of fruit is variable and an inhibitor to increased consumption. Industry research also reveals that pear consumers are disengaged, with the fruit often forgotten, seen as boring or simply unripe and too difficult to consume compared to other fruit options. At the time this strategy was developed, oversupply issues were emerging in the domestic apple market. These mirror international trends where the world supply of apples continues to exceed world demand, keeping prices soft. The industry has recognised these various challenges and implemented tailored promotional programs in response. However, it will take coordinated effort across the industry and some time before these trends can be effectively reversed. The most important factor will be improving the quality of the product (as opposed to the promotion of it) to ensure the industry meets or exceeds consumer expectations. Continuing to shift to new varieties that interest the consumer and progressively reducing the supply of older varieties that are not highly valued is also an important part of repositioning the product over time. The established position of apples and pears with consumers is also being challenged by competing fruits. The progressive introduction of new fruit imports including apples will challenge Australian apple and pears in their seasonal window and throughout the year. Already table grapes and cherries from California have made significant in-roads into the Australian retail market in recent years. This has exacerbated the competition presented by the improvement in the availability, presentation and quality of Australian summer-fruits, cherries, and mangoes. Snack-foods too have achieved a marked and growing presence, consequentially depressing demand for Australian apples and pears. The potential for apple imports is the key uncertainty facing the industry. While this has been a threat for many years, the almost unanimous expectation amongst key players in the industry is that apple import competition will become a reality within a year or two. In the absence of industry action to improve competitiveness, fresh apple imports have the potential to reduce Australian domestic market share by up to a third and the returns to the industry by up to 40 per cent. A key reason for imports being such a serious threat is that the apple and pear industry is not highly competitive in international terms. Australian apple orchard productivity, at an estimated 15.3 tonnes per hectare, lags well behind the world’s best such as 55.8 and 35.3 tonnes per hectare in New Zealand & Italy respectively (World Apple Review, 2009). Australian pear orchard productivity at 25.4 tonnes per hectare also lags well behind the world’s better producers such as Chile and The Netherlands at 43.7 and 36.0 tonnes a hectare respectively (World Pear Review, 2009).
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In 2006 the industry launched the ‘Future Orchards 2012’ project to raise the awareness of apple and pear orchard businesses about the advantages of moving to high density production systems. Industry surveys in 2006 and 2008 report that one third of growers had part of their orchards planted at high densities of 2500+ trees per hectare. This trend will need to continue along with other productivity improvements if the industry is to close the gap with international competitors. Another reason that imports are a significant threat is the reliance of the industry on the domestic market. The industry has only a minimal profile in export markets and lacks a committed export culture. Given that Australia is not highly cost competitive compared to key competitors it must compete for premium, high value market share. Australian apple exports fall into two classes – high value branded product which is sent under the Pink Lady™ program to the United Kingdom and commodity style apples exported to India, Malaysia, Taiwan and Asian markets. Competition on price has seen the volume of Australian apple exports decrease from 36,700t in 2000 to 3,353t in 2008. Pear exports have also declined from 19,908t in 2000 to 5,157t in 2008. This is a major strategic weakness for the industry. Many of the trends and challenges described above are not new for the industry and have been continuing to emerge for up to a decade or more in some cases. Consultations with key businesses and organisations throughout the industry confirm that these issues are widely recognised and the consensus on the nature and seriousness of them is relatively strong.
Apple and Pear Export Trends Source: APAL data 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2002
2003
2004
2005
% Total Apple Production
2006
2007
2008
% Total Pear Production
The current trajectory for the industry as a whole is one of decline in market share in the fruit category. At this point the rate of market share decline is relatively slow. Within the next five years this trajectory could continue or it could accelerate rapidly depending on uncertain market and economic factors. In this environment the industry must take some bold steps to arrest the decline and create opportunities for profitable growth.
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The change process has already begun in some key areas such as productivity and marketing promotions. To improve its position in the next five years, the pace of change in the industry needs to accelerate and the scope of this change needs to be widened to include a focus on product quality, international markets and the most effective use of industry resources. While consultation surrounding this strategy has shown that many in the industry are ready for change and see themselves and their peers as better prepared, there is also a large group that is adopting a wait and see approach. The strength of the trends and the potential impact of the challenges mean that such a passive approach is highly risky. While the apple and pear industry faces a number of threats on the commercial front, environmental issues will also create challenges over the next five years. Growers and the community alike have concerns about the use of sustainable farm practices, particularly with regard to soil condition, water availability and usage, pest management and chemical usage. Climate variability, climate change and government policy measures in response to them will also influence the direction of the apple and pear industry. Farm management practices and processes used along the supply change will also need to adapt to increased consumer concerns regarding the environment and climate change in general as well as to specific matters such as residue levels and food miles.
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Industry Strategy The industry strategy over the next five years is to consistently produce apples and pears of superior eating quality, focusing on varieties that are sought after by consumers in the domestic market and selected overseas markets where premium quality is valued. Vision:
By 2015 the Australian apple and pear industry will be world competitive in satisfying consumer demand for its products and be achieving sustained profitability.
Mission:
By apple and pear industry and government stakeholders working collaboratively, reposition the apple and pear industry and transform competitiveness by delivering valued services that support innovation .
In short, the new strategic plan involves a major repositioning of the industry over the next five years to arrest industry decline. It will involve investment in targeted initiatives to build domestic demand, increase productivity and raise exports. Analysis conducted in the formulation of this plan considered various scenarios of possible industry futures. The scenarios were developed using the Centre for International Economics’ Hi-Link model (2009, unpublished) under the horticultural industry’s Future Focus program. The findings indicated that the potential payoffs of the proposed initiatives are: -
Stimulating a 10 per cent increase in domestic demand could raise annual farm gate income by about $20m
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Increasing on farm productivity by 10 per cent could also raise farm gate income by around $20m annually
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Increasing packing and transport productivity by 10 per cent could provide payoffs of $10m per year to farm gate income and
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Increasing export demand (from the presently low base) by 10 per cent could provide annual benefits of around $2.5m.
These potential payoffs provide insight on the relative benefits of targeted initiatives, but must be balanced against the likely costs of their successful implementation. This plan proposes an integrated series of strategies that provide a workable and cost-effective way forward for the apple and pear industries. Nevertheless, the Plan acknowledges that the foremost industry priority is to stimulate domestic consumption as the bulk demand for Australian product will be from the domestic market. The focus and challenge will be to ensure that the greater part of any growth in domestic consumption is met by a competitive Australian product rather than imported apples. The second priority is to grow exports from their current very low base to have at least 10 per cent of marketable product exported by 2015. The third and final priority is to ensure that enabling structures and services are put in place to ensure that these two objectives can be achieved and that a profitable and sustainable industry can be maintained.
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1. Stimulate domestic demand by five per cent through product quality and innovation The five years to 2015 will challenge the industry to stimulate demand from domestic consumers. Given the reliance of the industry on the domestic market this is the key to industry performance and must be the main area of focus and investment. Product quality and consistency is the key issue undermining industry performance in the domestic market. Consistently delivering a quality product requires effective management of the fruit from the orchard through the supply chain to the point of sale. If product quality and consistency can be improved then the benefits from other investments in promotion of apples and pears to consumers, development of new varieties and improving productivity through planting of high density orchards will be enhanced. This objective outlines an integrated set of initiatives to enhance apple and pear products and their presentation to the consumer. Objective Stimulate domestic demand by five per cent through product quality and innovation
Key Performance Indicators Per capita domestic consumption of apples and pears Share of fruit category retail sales Consumer attitudes towards Australian fruit Strategies 1.1 Improve consistency of product quality to match consumer expectations 1.2 Enhance orchard productivity and management 1.3 Co-ordinate industry product promotion and marketing programs 1.4 Facilitate variety transition to match changing markets 1.5 Enhance industry value within the community
Strategies 1.1.
Improve consistency of product quality to match consumer expectations
Delivering on the promise of product quality from the consumer perspective is pivotal to the future viability of the industry as it responds to increasing competition. Persistent quality issues undermine the value of marketing and promotion efforts and the positioning of the product with consumers. There are a variety of areas from on-farm management through to retail practices that can influence product quality and where perceived or actual product quality issues arise, blame shifting occurs between groups. Working collaboratively with retailers and the supply chain to actively identify and resolve quality issues will improve consumer satisfaction and support industry marketing and promotion efforts.
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Strategies Improve consistency of product quality to match consumer expectations
Indicative Target and timing
1.1.1 Work collaboratively with retailers and the supply chain to identify and prioritise quality issues and implement improvement programs.
Quality improvement program in place by June 2011.
1.1.2 Establish a baseline of consumer perceptions of the eating quality of Australian apples and pears and monitor changes.
Linked with industry consumer market research and monitoring from December 2010
1.2.
Enhance orchard productivity and management
Orchard productivity and management is central to consistently delivering high quality fruit and reducing costs of production. The apple and pear industries have recognised that moving to high density orchard systems can potentially generate significant benefits and help close the productivity gap with overseas competitors. The industry also acknowledges that productivity improvements and improved farming practices can also address many environmental issues The industry has in place an integrated apple and pear productivity research and development program to drive industry-wide improvement, including the newly established PIPS program – productivity, irrigation, pests and soils. Improvements to soil condition, water usage and pest management will not only address environmental imperatives but will also reduce production costs and increase productivity and hence profitability. An important element within this plan is the improve the uptake of advanced farming practices that move the industry forward in meeting environmental, as well as commercial challenges. The Future Orchards 2012 program was established to provide the skills and information necessary to allow growers to become world competitive. Importantly, world class orchard productivity and management is a platform for consistently producing the high quality fruit demanded by consumers. To gain a competitive edge, the industry must adopt new technologies and knowledge gained from research and development. Adequate resources must therefore be provided to educate growers and supply chain participants with regard to the results of specific research programs and how these can be adopted to improve productivity Continued research into biosecurity issues will improve orchard productivity and management by minimising the impact of endemic pests and diseases and assist the industry to respond effectively to exotic pests and diseases incursions should that occur. There will be a much greater risk of incursion with the commencement of imports.
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Strategy Enhance orchard productivity and management 1.2.1 Evaluate next steps for Future Orchards 2012 and re-focus the program to accelerate adoption of high density orchard systems and broaden its scope to link information from the supply chain including consumers. 1.2.2 Invest in national research and development that is regionally relevant and aimed at: ¾
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improving the productivity of orchard production and the consistent supply of quality fruit to the supply chain; minimising the impact of the industry on the environment.
Indicative Target and timing Review completed by August 2010 40 per cent of apple plantings are high density orchards by 2015 Evidence of new tools and systems being used by Australian growers. Evidence of supply chain and consumer satisfaction with apple and pear eating quality.
1.2.3 Maintain research in biosecurity issues to minimise the impact of pest and disease incursions
Reduced number and impact of pest and disease incursions
1.2.4 Ensure the early adoption of new technology:
Evidence of improved marketable yields such as higher pack-out rates
(i) Ensure adequate resources are applied to the extension of research and development programs (ii) Educate suppliers with regard to benefits of adopting new technology/knowledge
1.3.
Coordinate industry product promotion and marketing programs
Stimulating consumer demand for Australian apples and pears will facilitate volume and margin growth in the domestic market. Apples and pears are staple foods and each has attributes that can be leveraged with consumers to stimulate demand. However, over many years, the brand image for both apples and pears has lost impetus with consumers. Per capita domestic consumption is in apparent decline and inconsistent product quality is exacerbating the trend. The challenge is to re-engage consumers and deliver on the product promise of consistent and superior eating quality. The majority of fresh apple and pear sales to consumers are through the major supermarket chains and independent retailers. Thus, the purchasing and promotion decisions made by the key retailers have a major influence over the supply chain. The large retail businesses hold extensive information on consumer purchasing trends that is of value to the supply chain at all levels. At the same time, retailers seek continuity of supply, consistent quality, competitive pricing and supply of varieties that are sought after by consumers. Strategic engagement between the industry and major retailers and supply chain businesses can facilitate flows of strategically useful information to enhance the quality of decision-making by all participants.
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Strategy Co-ordinate industry product promotion and marketing programs 1.3.1 Establish and manage productive working relationships at the strategic level between major retailers and the apple and pear industry. 1.3.2 Invest in marketing and promotional programs that re-position Australian apples and pears with consumers and stimulate demand.
1.3.3 Research and monitor changes in consumer attitudes towards Australian apples and pears.
1.4.
Indicative Target and timing Evidence of at least two industry/retailer joint initiatives by June 2012. Improve the purchase frequency and the purchase volume of apples and pears in line with the approved Domestic Marketing Plan.
Annual evidence of improving consumer perceptions and satisfaction with Australian apples and pears.
Facilitate variety transition
The apple industry in Australia and overseas has benefited over time from introducing new varieties that meet the changing tastes and expectations of consumers. However, introducing new varieties is a costly and risky endeavour for all. Over time, varieties that were once popular can lose consumer loyalty, leading to sales decline and oversupply until orchards are replaced with new varieties that are more sought after by consumers. Maintaining an investment in variety development programs to introduce new or improved cultivars is fundamental to achieving such goals. These programs will also enable the development of varieties that match the eating and environmental attributes that consumers and society require. The choice of which variety to grow and when to replace an orchard is entirely for individual businesses. However, access to timely and quality information on consumer and production trends for different varieties can assist with informed business decision-making and thus facilitate structural change.
Strategy Facilitate variety transition
Indicative Target and timing
1.4.1 Maintain investment in a variety development program
Evidence of new or improved cultivars
1.4.2 Establish an industry knowledge base on annual production and the sales and pricing trends of each apple variety and provide access to growers.
Knowledge base designed by June 2011. Annual reporting in place from June 2012. Growers are aware of key trends in varieties.
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1.5.
Enhance industry value within the community
The apple and pear industry image in the community is a vital part of the foundation for the industry. Community perceptions towards the industry not only influence attitudes regarding purchase of products, but can also influence the policy and decisions of government and major retailers. Changes in government or major retailer policy can and do have significant impacts on industry competitiveness. Similarly, government policy towards industries is increasingly influenced by community perceptions in areas such as environmentally sound production practices. One strategy is to actively engage with governments and the community to convey what the industry is doing and achieving. Communication and education is an integral part of strategies to engage consumers and build broad support and value for the apple and pear industry. The attributes around the Australian industry ‘brand’ will become more important with the advent of fresh apple imports. There is ample evidence that the community and the Australian Government are concerned about the environmental practices of industries. Issues such as climate change, chemical residues and efficient water use are good examples. Governments and influential businesses such as major supermarket chains are sensitive to community and consumer concerns relating to industry practices that impact on the environment. Raising awareness about what the industry is doing and achieving in regard to soil and water management, reduction in chemical usage and overall environmental impact (including the industry’s carbon footprint), to achieve sustainable and responsible production enhances a positive industry image with decisionmakers and consumers, which can be of long term benefit for the industry. Government decisions on public policy and regulation can greatly influence the competitiveness of an industry or its rate of structural adjustment. For example, de-regulation can open up new competition and regulation can add imposts that are not applied to competitors. It is in the industry’s interest to build productive relationships with governments and provide objective evidence to inform the development or review of policy and regulations that impact on the industry.
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Strategy Enhance industry value within the community
Indicative Target and timing
1.5.1 Advance environmental sustainability and promote what the industry is doing and achieving (i) Complete an audit of the current and emerging key climate change, climate variability and other environmental issues related to apple and pear production and document existing industry performance relative to competitors
Audit completed June 2011
(ii) Formulate plans, targets and objective monitoring systems for issues that will provide competitive advantage including residues, water efficiency and other environmental impacts (including carbon footprint).
Plans and monitoring systems in place June 2012
(iii) Undertake environmental initiatives (on basis of audit and subsequent action plans)
From June 2011
Plans aim for nil residues and 20 per cent improvement in water efficiency by 2015.
1.5.2 Influence Government policy and regulation that impacts on industry competitiveness (i) Prepare and release public reports that present quantitative evidence of industry performance on environmental issues.
Annual from June 2011
(ii) Build relationships with other industries to research, monitor and contribute to across industry policy and regulatory issues (e.g. water, labour policy, retail pricing etc)
Collaborative initiatives in place with other industries by 2011.
(iii) Research and monitor the costs to the industry of regulations and contribute to regulatory reform processes.
From 2011
Key assumptions •
Specific product quality issues can be identified and dealt with by businesses in the industry.
•
Industry marketing and promotion campaigns can influence consumer perceptions.
•
Increased demand and consumption will improve industry profitability.
•
The community will place increasing emphasis on environmentally sustainable production for agricultural industries including apples and pears.
•
Community perceptions about industry and production practices will increasingly influence government and major retailer policies.
•
A positive industry image in the community will generate long term value for industry members.
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Significant risks •
Imports of fresh apples capture significant market share by combining lower price with comparable or superior product quality.
•
Consumers do not respond to industry marketing and communications activities
•
Inability to coordinate marketing and promotions efforts with the supply chain.
•
New variety development programs do not deliver commercially available consumer preferred varieties
•
Increased biosecurity threats with commencement of apple imports
•
Inability to influence issues that extend beyond the apple and pear industry and require collaboration with other industries and/or the supply chain.
•
Positive industry initiatives for sustainable production do not influence community perceptions.
2. Expand apple and pear export markets to 10 per cent of marketable product exported by 2015 Repositioning the industry means moving beyond the domestic market as well as meeting competitors who come to supply apples to Australia. Export markets provide an important alternative to supplying domestic consumers, and they also provide an avenue to compete more effectively with potential importers. Exports will become more critical to the industry as domestic competition from other fruits, both local and imported, continue to challenge the apple and pear industry market share. A strategy of sustaining and growing selected export markets for Australian apples and pears is consistent with the imperative to increase overall competitiveness. It will involve not only building new approaches to compete successfully, but building a greater export culture within the Australian industry.
Objective Expand apple and pear export markets to 10 per cent of marketable product exported by 2015 Key Performance Indicators Export volume and value Co-investment by exporters and industry Exporter satisfaction Strategies 2.1 Define and understand overseas markets that offer profitable export opportunities 2.2 Develop collaborative approaches to profitably enter and expand selected export markets 2.3 Resolve technical market access issues in target markets 2.4 Monitor export market competitor activities
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Strategies 2.1
Define and understand opportunities
overseas
markets
that
offer
profitable
export
Australia is not the lowest cost producer of apples and pears and instead seeks access to export markets that will value products differentiated on quality and provide niche opportunities such as counter seasonal supply. Action
Indicative Target and timing
2.1.1 Engage with Australian apple and pear exporters to prioritise target markets, design and conduct in-market research
Top 10 Australian apple and pear exporters engaged by August 2010. Research completed by December 2010.
2.1.2 Provide information and tools to enable growers to understand potential export opportunities and identify pathways to participate.
2.2
Based on above research, from December 2010 Information and tools used and valued by exporters.
Develop collaborative approaches to enter and expand selected export markets
Australia is a small player in the global apple and pear industries. Achieving scale and competing with large overseas competitors will require collaboration within and between Australian supply chains. Action
Indicative Target and timing
2.2.1 Engage with exporters to prepare marketing plans for apples and for pears for each target market.
Plans for top three markets for both apples and for pears in place by June 2011.
2.2.2 Work with major Australian fruit exporters to develop and implement collaborative market initiatives for each of pears and apples.
Collaborative export market initiative in one target market for each of apples and pears by December 2011
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2.3
Resolve technical market access issues in target markets
Securing commercially viable access to export markets is a major issue for agricultural industries including apples and pears. While access may be technically possible, the conditions applied can make it non-viable or uncompetitive for Australian exporters. Further, opportunities to influence market access arrangement periodically arise through negotiation of trade agreements, changes in importing country disease and pest status or new research or technologies that provide evidence that access and/or conditions should be varied.
Action
Indicative Target and timing
2.3.1 Define technical and commercial market access issues in key export markets
Technical and commercial market issues identified and action plans prepared from June 2011.
2.3.2 Support and participate in negotiations and invest in research as required to improve market access for Australian apples and pears to target markets
Ongoing - Market access issues progressively resolved to exporter satisfaction
2.4
Monitor export market competitor activities
Understanding and monitoring overseas competitor strategies, priorities and tactics is an important mechanism to keep abreast of risks and opportunities.
Action
Indicative Target and timing
2.4.1 Conduct in-market research and establish systems to understand and monitor key existing and potential overseas competitors for the domestic or targeted export markets for apple and pears
In-market research conducted and monitoring systems in place by June 2011 Information used and valued by exporters.
Key assumptions •
Australia can differentiate its apple and pear products in the global market rather than pursuing a lowest cost approach.
•
Commercially viable market access is available in selected markets
•
Australia retains its relatively disease and pest free status
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Significant risks •
The exchange rate remains high or appreciates further relative to the US dollar which continues to render Australian exports uncompetitive and unprofitable.
•
Wage rates remain high and continue to add to the high cost of Australian apple production relative to those of competing countries, especially China, New Zealand, USA, South Africa and Chile.
•
Developing an effective Australian export culture to ensure collaborative export development initiatives are achieved.
•
The Australian government establishes regulatory measures which impose additional costs on Australian producers relative to competitors
•
Bio-security issues in Australia impact on market access
•
Lower cost competitors match quality attributes of Australian offering.
3 Enabling Objective: Ensure industry has the resources and capability to be profitable and sustainable Industry bodies will need to streamline and refocus their activities, structures and relationships to deliver services that better assist apple and pear businesses achieve the primary objectives of stimulating domestic and export demand during the next five years. Specifically, the industry must have the capacity, structure and resources required to achieve sustained profitability. All parties must be prepared to innovate, change and grow. Substantial funds including grower levy funds and matching government contributions are invested in industry services every year. Developing coordinated approaches to transform the industry involves ‘enabling’ activities such as the design and management of programs, gathering, analysing and distributing information to inform better decision-making and effective communications and engagement with different groups. Strategic investment in leadership and people development in all parts of the industry will help to build a depth of talent and capability to respond effectively to current and emerging industry challenges. Enabling Objective Ensure industry has the resources and capability to be profitable and sustainable Key Performance Indicators Participation in leadership and people development programs and initiatives Evidence of increasing levels of grower / levy payer satisfaction with industry services Evidence of return on investment from industry services Strategy 3.1 Match service delivery to changing grower and industry requirements through evolving national industry association structure and streamlining activities and programs 3.2 Improve the quality and flows of information for decision-making across the supply chain 3.3 Invest in leadership and skills development 3.4 Invest in intra-industry and inter-industry relationships
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Strategies 3.1
Match service delivery to changing grower and industry requirements through evolving national industry association structure and streamlining activities and programs
The pace of industry structural change is likely to accelerate with the advent of fresh apple imports. Industry dynamics include trends towards fewer, larger and more integrated businesses producing a larger proportion of the national crop and paying a larger proportion of the marketing and R&D levy. The pear industry is already undergoing a similar structural change. The continued development of small niche producer/suppliers targeting specific markets with differentiated or value added product can also be expected over the Plan period. Innovation with industry association structures and streamlined services is a vital part of the overall transformation of the industry to a modern, globally connected and sustainable industry.
Action
Indicative Target and timing
3.1.1 Conduct annual independent research to monitor grower needs and satisfaction with industry services.
Biennial commencing in June 2010.
3.1.2 Review industry organisational structures and ensure alignment to achieve effective implementation of the strategic plan to the satisfaction of investors.
Review conducted by June 2011
3.2 Improve the quality and flows of information for decision-making across the supply chain Growing competition from domestic and overseas sources is driving structural change. More than ever, businesses in the industry across the supply chain need timely access to quality information for decision making. Further, the industry leadership and decision-making process for allocation of research and development and marketing levy funds need reliable information on the industry characteristics and farm financial performance.
Action
Indicative Target and timing
3.2.1 Conduct an independent national survey of orchard businesses to establish a reliable baseline data on physical characteristics and farm financial performance to assist investment decisions in R&D, marketing and policy.
Completed in December 2011
3.2.2 Produce an implementation plan to deliver the outcomes of the industry development needs analysis
June 2010
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Annual reviews thereafter
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3.3 Invest in leadership and people development Investing in leadership development and continuous improvement of skills across the industry can enhance industry capacity to succeed against increasing competition. Many of the challenges faced by the apple and pear industry are faced by other horticultural industries, presenting an opportunity to adopt collaborative approaches to invest in leadership and people development.
Action
Indicative Target and timing
3.3.1 Prepare development plans to deliver: (i) greater leadership capacity
Plan developed June 2011
(ii) improved skill development across the supply chain 3.3.2 Implement the leadership and skill development plans and promote participation across the supply chain
Ongoing to 2015
3.4 Invest in intra-industry and inter-industry relationships The apple and pear industry is one of the largest horticultural industries and is in a position to provide leadership on a range of commercial, technical, environmental and policy matters. At the same time, the horticultural industry itself is a dynamic and growing one and this provides the apple and pear industry opportunities to learn new ways of addressing industry challenges. Relative to many other Australian agricultural sectors the apple and pear industries are small and collaboration is critical to maximise the value of research dollars and gain efficiencies in knowledge transfer and uptake. Building and strengthening relationships within and along the apple and pear supply chain, across levels of government and with private and public and domestic and international research providers will also play an important role in the long term viability of the industry.
Action
Indicative Target and timing
3.4 Review intra-industry and inter-industry relationships and develop a plan to maximise value from collaborative effort in research, extension, policy development, market intelligence and communications
Plan developed June 2011
Key assumptions •
Industry members value and are willing to participate in leadership and skill development initiatives.
•
Information is best delivered to meet defined industry needs for different groups
•
Providing timely, quality information will enhance decision-making across the industry and facilitate change.
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Significant risks •
Changing levy payer needs and expectations.
•
Information dissemination or technology is supply driven.
•
Quality information is unavailable, untimely or not tailored to the needs of different groups of users.
Implementation of the Strategy This Plan provides the framework for the apple and pear industry to meet the challenges created by slowing consumer demand, the threat of imports, low productivity, climate change and environmental issues. The next step requires that specific investment, operating and communications plans be developed to move the industry forward to meet the objectives and targets outlined in the Industry Strategic Plan. These plans include:
Plan
Responsibility
Timing
R&D Sub Committee of IAC
June 2010
Industry Communications Plan
APAL / IAC
June 2010
APAL Annual Operating Plan
APAL
June 2010
Domestic Plan
Domestic Market Committee of IAC
Sub
August 2010
Export Market Committee of IAC
Sub
June 2011
Research and Investment Plan
Development
Marketing
Operating
Export Marketing Operating Plan
Communicating the messages of this plan and the responsibilities and actions required, not only of the industry organisations but also of growers and other industry participants, will be a key first step in the successful delivery and achievement of the strategic plan. Together these plans will provide both the direction and actions required to accelerate change and reposition the industry, However, successful implementation is dependent upon the willingness of industry participants to seize opportunities and take initiatives by adopting favourable research outcomes, up-grading farm-management and business skills and adding value along the supply chain. Success also depends upon co-operation and collaboration across and along the apple and pear industry as well as co-ordination with other industries to address common critical issues. The successful implementation of this strategy will require the application of all the resources available to the industry. To achieve this, some resources (both human and financial) will need to be reallocated from existing investments and refocussed towards key initiatives.
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Apple and Pear Australia Limited (APAL) has a central role in facilitating the implementation of this strategic plan. This significant task is essentially one of repositioning the industry over the term of this plan, with substantial groundwork to be completed in the first two years. Creating the momentum for change will require harnessing the collective efforts of many players and creating a strong sense of urgency and focus to drive implementation. APAL recognises the scale of the challenge to the industry and will work with influential industry participants to coordinate efforts to create tangible change to the benefit of growers and the wider industry. Growers will be kept informed of milestones and achievements in meeting the plan on a regular basis over the life of the plan. It is their engagement with the objectives of this plan and their adoption of new technology, innovation, and farm practises that will, however, underpin the success of the plan.
Measuring Success Monitoring the progress and success of the strategic plan is a component of the implementation approach. The key performance indicators and progress indicators identified in the strategy section provide the framework for measuring the performance of the industry against the strategy over time. Three review processes are recommended to support assessing progress and refining the approach over the five years:
-
Six monthly Internal Review: These reviews would be undertaken internally by APAL management and provided to the APAL Board and IAC on a six monthly basis. The outcomes of this review will be published within the annual report.
-
Independent mid-term review: The complex, uncertain and rapidly changing nature of the operating environment for the industry means that it is difficult to plan for a full five year period. The industry should commission a professional, independent review of progress against the strategy during 2012. The review will measure progress in greater detail than annual reviews and with a level of objectivity that cannot be achieved internally. Recommendations from the independent mid-term review will be considered by the APAL Board and IAC.
- Final review within new strategy development: As part of the development of a subsequent strategy the independent review process should be repeated and the findings considered in the formulation of the subsequent industry plan. The Final review will act as a starting point for the APAL Board and IAC in formulating a way forward for 2015-2020.
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Estimated Implementation Activity Timeline Strategy
Action
Responsibility
Timing Jun 2010
1.1
1.2
1.3
1.4
1.1 1 Product Quality Program Design
Jun 2011
Dec 2011
2012
2013
2014
2015
IAC/APAL
1.1.2 Consumer quality perception monitoring system
IAC/APAL
1.2.1 Future Orchards Next Steps
IAC/APAL
1.2.2 Productivity R&D
IAC/APAL
1.2.3 Maintain Biosecurity research
IAC/APAL
1.2.4 Grower adoption of new technology
IAC/APAL
1.3.1 Retailer relationships
IAC/APAL
1.3.2 Marketing and Promotional Programs
IAC/APAL
1.3.3 Consumer attitude research
IAC/APAL
1.4.1 Maintain breeding program
IAC/APAL/Growers/Researchers
1.4.2 Industry Knowledge Base
IAC/APAL/Growers/Supply Chain
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Dec 2010
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Strategy
Action
Responsibility
Timing Jun 2010
1.1.1
Audit of environmental issues and performance
IAC/APAL
Formulate action plans
IAC/APAL
1.1.2
2.1 2.2
Jun 2011
Dec 2011
2012
2013
2014
2015
Advance environmental sustainability
Undertake environmental initiatives
1.5
Dec 2010
Influence government policy and regulation
IAC/APAL/Growers/Supply Chain
APAL/Growers/Supply Chain
Public Reporting on Industry Environmental Performance
APAL/Growers/Supply Chain
Research, monitor and contribute to policy issues
APAL/Growers/Supply Chain
Contribute to regulatory reform process
APAL/Growers/Supply Chain
2.1.1 Prioritise Export Markets
IAC/ APAL /Exporters
2.1.2 Grower – exporter information
IAC/APAL
2.2.1 Export Marketing Plan
IAC/APAL/Exporters
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Strategy
Action
Responsibility
Timing Jun 2010
2.2.2 Collaborative Market Initiatives
IAC/APAL/Exporters
2.3.1 Market Access Action Plans
IAC/APAL/Exporters
2.3
2.3.2 Market Access Negotiations and Initiatives
IAC/APAL/Exporters
2.4
Monitor international competitors
IAC/APAL/Exporters
3.1.1 Monitor Levy Payer Needs
APAL/IAC/Research company
3.1.2 Review industry organisational structures
APAL
3.2.1Farm survey
APAL/IAC
3.2.2 Implement IDNA
APAL/IAC
3.3.1 Development Plans for leadership capacity and industry skill upgrades
APAL/IAC
3.3.2 Leadership capacity and industry skill Initiatives
APAL/IAC
Review existing relationships and develop plan to move forward
APAL/IAC
Annual Review
APAL/IAC
Mid-term Evaluation
IAC/APAL
Final Evaluation
IAC/APAL
3.1
3.2
3.3
3.4
Measuring Success
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Dec 2010
Jun 2011
Dec 2011
2012
2013
2014
2015
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