Jim Sutton speech to Champions of Cheese

Speech Notes 2 April 2004

Champions of Cheese, Auckland

Ladies and Gentlemen: I am delighted to be here tonight. This is a wonderful way to celebrate innovation and excellence in cheese-making.

But before we go much further, I have a confession to make: My favourite cheese is gorgonzola, perhaps not the most social of cheese tastes. I know my staff sometimes have strong words to say when they open the office fridge and get a whiff of my lunch. And I certainly do not recommend carrying a chunk of it in your bag when going on a small Air NZ flight to Timaru.

Ladies and Gentlemen: Cheese is a major contributor to the New Zealand export economy, contributing between 3.5 and 4.5% of New Zealand's total export returns each year. For the calendar year 2003, export sales were just under a billion New Zealand dollars, double that of 10 years ago.

New Zealand ranks as fifth largest cheese exporter in the world, behind France, the Netherlands, Germany and Denmark.

Although France and the Netherlands export higher dollar values of cheese, this product is a more significant contributor in percentage terms to our national accounts than it is to any other nation in the world.

Japan, the United States and Australia are our three largest markets.

Cheddar is still our largest exported variety, by volume and value, accounting for over 40 percent by volume and value. And there still seem to be significant premiums to be obtained in the bulk cheese trade.

But New Zealand is also becoming increasingly noted on the world stage as a niche, premium producer, and this is laying a foundation for future diversification and growth.

New Zealand specialty cheeses are starting to find their way onto the global market through sales to airlines. Some speciality producers are also selling in markets such the United States and Japan in a small way.

Specialty cheese is an area of the market where smaller scale enterprises can compete effectively internationally. The scale economies necessary for competitiveness in the international market for commodity products are not such a key factor in this area of the market.

New Zealand's advantages in terms of its clean, green image and natural farming systems are also well-suited to the production of specialty cheeses.

One of the keys to future prosperity for the sector is market access.

Whatever our products, be they bulk cheddar or high-value, niche speciality cheeses, if they are blocked from reaching customers in other markets, that has a direct impact on the growth and profitability of the sector.

It won't come as any surprise to this audience if I say that, across the board, dairy products are among the most globally highly-protected products, and dairy trade is among the most distorted of all trade in the world, a veritable labyrinth of high barriers and complex import rules.

But the Government is working on that.

We are trying to break down barriers, especially through the WTO Doha Round of trade negotiations, and also regionally and bilaterally. We're also trying to see off the export subsidies that depress world prices and undermine your competitive position. And we're trying to reduce the production-distorting structures and farmer subsidies that are at the root cause of the current problems.

It's an uphill battle, but we will keep fighting for your interests.

Over the next three years, cheese prices are expected to remain strong thanks to steady growth in both European and US cheese consumption and demand for processed foods.

Growth in cheese consumption is also forecast in non-OECD countries that have not traditionally eaten dairy products. This is something I have seen for myself in China. Here is a country where dairy products are not traditional. But certain regional Chinese governments are introducing school milk programmes, where children drink Chinese milk when it is available, and a flavoured yoghurt drink made from New Zealand milk powder at other times.

It is evident that with increasing levels of development, rising incomes and lifestyle changes in those countries, dairy products move onto the menu. The potential for our cheeses in China is huge, I venture to suggest.

That's good news for the New Zealand dairy industry ? and it makes it even more important for the Government to try to reduce barriers into those markets through the WTO and elsewhere. We are in serious dialogue for bilateral trade agreements with a number of important or potentially important markets ? especially China and Thailand.

A key part of raising the profile of our cheeses is through marketing and branding ? I know I'm preaching to the converted on this point. A lot of value can be tied up in the "name" of a product and this is why the issue of "geographical indications", or GIs, has become increasingly important in trade discussions.

The EU is pushing their agenda on GIs on a number of fronts, in the WTO and through bilateral agreements. Essentially they are seeking to export their regulatory approach to the rest of the world.

One of the EU's stated ambitions in this round of multilateral negotiations is to "clawback" the use of some terms commonly used by our dairy industry. We don't produce parmigiano reggiano, but we do produce parmesan. The Europeans would want us to drop parmesan - a generic term - for another like "hard grating cheese of New Zealand". As you know recognition for the former is higher than for the latter. Feta and Mozzarella are two other EU targets, though there is some internal dissent within the EU about this, especially with feta.

We are continuing to resist the EU's ambitions along with the US, Australia Canada, and others. At the end of the day we'll have to find a solution. The key will be ensure continued and improved access for our cheeses to overseas markets, and to provide consumers with a product they know, recognise and seek out.

Growth can also come here at home. New Zealanders are quick to adopt new food flavours and styles but at only 10 kilos per head, New Zealanders' consumption of cheese still has a long way to go to match France's 22kgs each year.

Ladies and Gentlemen: The revamped New Zealand Champions of Cheese Awards promise to raise levels of aspirations of product excellence even higher, and to further build the reputation of NZ cheese both with the New Zealand consumer and also with those international guests who attend the awards.

This will encourage further varied consumption in NZ and exports too.

Last year, the awards turned "ten" and entries grew to 432 from an original 102, thus illustrating the increasing diversity of New Zealand cheese-making. I'm told that a couple of weeks ago, before entries closed, applications were running at 460. Although feta, brie and camembert cheeses feature significantly this year, there has been big growth in other areas, including sheep and goat cheeses.

Some observers believe the cheese industry is where the wine industry was 15 years ago. We all know how successful the wine industry has been at promoting itself both in New Zealand and overseas, with an accompanying rise in sales.

Your industry now an Association (the New Zealand Specialist Cheesemakers Association) through which you can devise an overall strategy for raising the profile of cheese.

We're all looking forward to seeing your next steps. I wish you good luck and every success in the future.

ENDS

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