We sit down with of Sanford Managing Director Eric Barratt who oversees the single largest investment in New Zealand aquaculture.
Q) After a few tough years, there’s a buoyant mood returning to the sector. Do you think this optimism is justified?
A) There has certainly been some optimism returning to the Greenshell mussel industry and salmon prices have improved over the last
few years. There can be no question that the recent consolidation in the mussel industry has assisted in bringing much needed price improvements and stability to the market place. Increasing interest from buyers prepared to carry the product, new markets for retail packaged mussels and other marketing initiatives have all contributed to the positive change. The reduction in farmed salmon production in Chile has opened new opportunities as New Zealand’s farm practices of low stocking densities, no chemicals or vaccines, plus quality sustainable food ingredients are being recognised as unique in the world. Markets for freshly harvested products are expanding and our salmon products are finding a regular place on the menus of large grill chains in the United States. Being able to meet their quality, consistency and tight supply deadlines has increased exposure of New Zealand farmed salmon to a new range of consumers.
Q) The government is in the midst of an Aquaculture law reform – how will the new bill influence private investors’ view of the sector?
A) The Bill will go some way towards encouraging investment from the private sector although I do not think it will provide the right environment to encourage investment from outside the sector. It is more likely that increased investment will come from those already in or knowledgeable about the sector. The Bill does not go far enough in creating security of tenure and clarity around consent renewals. Investment in aquaculture is about a lot more than just water or land space – it’s about the technology around animal husbandry and breeding, harvesting and processing technology and about establishing, building and maintaining customers and markets and that is even before considering the market access impediments of which there are still many.
Q) Collectively the Aquaculture sector has set itself a billion-dollar target by 2025 – do you think it is a realistic target?
A) The billion-dollar target is a realistic one and simple population dynamics will see it reached. If you take increasing per head consumption of seafood and couple that with population growth and wild seafood catches remaining static there is a huge demand gap that can only be filled with aquaculture product.
Q) What do you see as the most critical points to realising our billion-dollar goal?
A) New Zealand has an excellent reputation for quality and purity but we cannot take it for granted. Food safety (and increasingly food security) are key issues for consumers around the world. The damage that a severe case of shellfish poisoning can do internationally to New Zealand’s reputation is immeasurable. We have systems to enable any customer to access on demand pathogen test results for any of our shellfish products for any day’s production. This should be a minimum requirement for all shellfish producers from New Zealand.
Q) You chaired the industry’s first movements into a collaborative marketing initiative last year under the Pure New Zealand Greenshell brand into China – how has the venture gone so far?
A) The venture has gone really well and we have achieved a lot in 12 months. We have Pure New Zealand Greenshell branded product actively being sold and promoted in Shanghai and Beijing and we have really only begun to scratch the surface.
Q) Is China the great new hope for Aquaculture as it has been billed for other sectors?
A) China is going to be a significant driver for growth in all aspects of the seafood industry. The new generation of middle and upper income earners have just started to appreciate the different taste of seafood grown or harvested from the clean blue oceans from places like New Zealand. The fact that almost all seafood moves to zero tariffs under the New Zealand China FTA from 1 January 2012 will only assist that growth.
Q) Your approach into China has been hailed by NZTE – what are the key elements to the strategy?
A) The key element of the strategy was to find a region where no one had a particularly strong position and yet one we all recognised had significant potential. The FTA coming into existence, product oversupply at the time, low pricing in other markets and a desperate need to find something to unlock the potential were all factors. The outcome has been much better communication and coordination within the industry that is now starting to unlock better value for the industry, for farmers, harvesters, processors and marketers. Many will say not before time.
Q) How important is Research and Development for the sector?
A) The sector’s future lies in Research and Development. Nothing is impossible and never say never. Research and Development that leads to new technology has been a plank that Sanford has built its aquaculture business on. Recent successes include automated mussel opening machines in our Coromandel and Havelock mussel plants and our commitment to the Primary Growth Partnership mussel hatchery project. There are others that we are working on.
Q) How important is the development of markets for the sector?
A) The industry already sends its products to over 60 markets around the world. We need to find ways to develop them that maximises returns. Firstly, we need the barriers to entry to be as low as possible. The China Free Trade agreement will see seafood tariffs become zero from the 1 January 2012. We should not underestimate this. Prices for even our most expensive seafood items, like lobster, toothfish and salmon, are now equivalent in China to most other markets. Secondly, we need to find a way to create demand and pull through for our products. Our clean green image can get us so far but we need to adapt to new technologies and new generations to keep us in front of the consumers. Thirdly we need to find the most efficient route to market. We need to work in a way that gets us as close to the final user of our product
as we can, within the least amount of time and at the least cost. Traceability will be an essential element to the development of markets.
Q) Sanford was already the largest mussel producer in the country before you acquired Pacifica, the country’s second largest producer, last year. What is it about mussels that make them such an attractive investment for Sanford?
A) Sanford is all about sustainable seafood. We initially set a target for aquaculture to be 15% of our business – once we achieved that we were ready to take the next step. The opportunity to achieve synergies with our existing business was too good to miss. We were also aware that the whole industry would benefit from an even stronger leader in the mussel business. We think that has already been evidenced with the
stability and additional customers coming into the market at a time of the year when there is pressure on mussel prices. We have invested over $150m into the sector in the last two years – our commitment
to providing a return to shareholders on that investment will ensure the whole industry will benefit.
Q) Sustainability is a word that appears quite regularly on the Sanford website – why is environmental sustainability important for Sanford?
A) Sustainable Seafood was adopted by Sanford in 1998 as a by-line to our logo to reflect our desire to become more focused on environmental, social and economic sustainability. We have published a Sustainable Development Report for going on 10 years. By setting and reporting on specific targets we make ourselves accountable for all our activities. Environmental sustainably is an important part of our sustainability drive and is an important part of backing up the company and the products we produce.