Zespri Builds On Success To Meet Challenges Ahead

Media Release 14 August 2003

Zespri Builds On Success To Meet Challenges Ahead

ZESPRI, the world’s largest marketer of kiwifruit, aims to seek and seize new opportunities to leverage its exclusive range of branded products and unique intellectual property, Chairman Craig Greenlees says.

“We’re on track to fulfil the promise of becoming a year-round marketer and supplier of a differentiated range of kiwifruit products by extending the ZESPRI™ System to enable a continuous cycle of profitability,” he told shareholders at the company’s Annual Meeting in Tauranga today (Thursday) which celebrated the achievement of a fifth consecutive record result.

The grower owned company reported $860 million in net sales revenue for 2002-2003 to deliver 100 per cent growth in net profit after tax and intends to pay a fully imputed dividend of 20 cents per share – an after tax return on the original $1.20 share price of 16.7 per cent.

However, Mr Greenlees warned growers that the marketplace would become increasingly challenging and that now was the time to consolidate and further strengthen the competitive advantages that could be secured from ZESPRI’s integrated production and marketing structure with its single point of exit and entry.

“The Board and executive are committed to devising and implementing the appropriate business strategies that will build on the gains we have made over the past five years so that ZESPRI, which is recognised by customers as having a world-class system that they can have confidence in, continues to be the kiwifruit marketer of choice.”

He reminded growers of the value of the system that enables product to be delivered to customer specifications and then positioned, promoted, packaged and priced at the premium end of a crowded and demanding global fresh fruit market.

“None of this happens by chance,” he said. “ZESPRI is the integrated marketer. It has influence. It has and holds the relationship with customers and has the ability to send back to you the market signals that enable you to take action and produce the range of kiwifruit products to customer specifications.

“No one else has commercialised two of the world’s most successful fruits – first ZESPRI™ GREEN Kiwifruit and now ZESPRI™ GOLD Kiwifruit,” he said. “Those people who think you can prosper through fragmenting and dividing little pieces of the cake up along the supply chain are not facing up to the realities of the global marketplace where customers can - and do - demand that suppliers continuously lift the bar to be a full category manager.”

Chief Executive, Tim Goodacre, who joined the company in January, said that robust grower, supplier and customer relationships were at the heart of the ZESPRI™ System and gave the company the ability to invest in the marketplace to a level which “would be difficult to achieve if we were simply a fruit trader” .

“It is relationships that enable integration and it is integration and our commitment to the market in the medium and long term that enables us to continue to invest in innovation, promotions and resources that make ZESPRI the world-wide category leader, able to weather seasonal fluctuations and build a sustainable future.

“We want to maintain this system. It is a winner, but we also have to be realists and use these good times to prepare ourselves for future challenges,” Mr Goodacre said.

While sales to date for the current season were tracking well and the first monthly forecast of supplier returns was due to be published at the end of August, he said ZESPRI had to be alert to the markets’ dynamics.

“The markets are selling strongly at this point and net sales revenue in local trading currencies is expected to increase as a result of higher volumes, combined with strong pricing in Europe, and improved pricing for ZESPRI™ GOLD Kiwifruit in Japan,” he said.

The strengthening of the New Zealand Dollar would have some adverse impact on end of season results, but ZESPRI’S currency hedging policies were expected to mitigate some of the effects.

But, if the New Zealand Dollar remains strong, as is expected, the CEO said, returns in future years would be affected more markedly – “and that’s why we have to work now to devise the strategies, structures and competencies to continue to build the business”.

Mr Goodacre said ZESPRI was very solid but had to continue to become more efficient, effective and competitive right across the supply and marketing chain.

“We must be smart, strategic price setters and have the agility to position our products as must stock, value-adding items if we are to counter the market might of retailers and retain our competitive attraction. As an industry, we must also look dispassionately at all our business costs so that we dedicate resources to the areas where value is created.

Mr Goodacre said the business would continue to evolve, but always would work in the best interests of growers and shareholders.

“We want to continue to build strong business relationships – and make them more efficient and effective – so that we can be the marketer of choice for growers and suppliers in New Zealand and the marketer of choice all year round for customers, growers and suppliers wherever we operate.”

ENDS