Hidden report slates Zespri kiwi margins

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Calls for greater transparency over the level of commission Zespri charges kiwifruit growers have been raised by renegade grower Turners and Growers Horticulture.

T&G Horticulture, which opposes Zespri's export monopoly, has sent all kiwifruit growers snippets of a report by investment advisory firm Grant Samuel that is critical of Zespri's grower charges.

The report, covering the 2004 to 2006 financial years, was prepared for New Zealand Kiwifruit Growers as Zespri prepared to hold its three-yearly review of its margins.

In one quote, Grant Samuel said "lack of transparency should be a source of concern". In the 2005-06 year it said promotional rebates, claims, discounts and promotion costs totalled $119 million or 13 per cent of net sales.

But there was no disclosure as to where the spending was made, in what locations or how much premium the Zespri brand was adding.

It said the 5.7 per cent of gross sales Zespri was charging for rebates, promotions and other items, plus 7 per cent of net sales, made for an importer margin of 12.3 per cent of gross sales.

This appeared high compared with other countries, and it was "doubtful" the importer margin was warranted in markets where it did not perform an importer's role.

T&G Horticulture managing director Jeff Wesley said his company had been trying to get the report released for some time but had been unsuccessful until it was anonymously handed to them three weeks ago.

He said Zespri and NZ Kiwifruit Growers should explain why they had been reluctant to release the report and respond to its concerns.

Zespri spokeswoman Carol Ward said the report was stopped after the draft stage, and had not been released because it contained inaccurate and historical information. But in the case of the 7 per cent importer margin, she said that was lowered to 6 per cent after the report.

Growers were charged total commissions of 7.9 per cent of net sales, which would drop to 7.4 per cent next year.

That excluded promotion and marketing, which last year was 6 per cent of net sales or $69m of $1.3 billion New Zealand-grown kiwifruit earned. Promotion enabled Zespri "to achieve the price premiums" that growers needed.

Ms Ward noted that Zespri's commissions had dropped 30 per cent from 10.7 per cent of net sales a decade ago – and though Zespri was not a non-profit organisation, it had returned 100 per cent of profits to shareholders last year. She did not accept that Zespri needed to be more transparent with growers.

"We'd put the challenge out to any grower that was concerned about the transparency to compare the level of information they get, for example, in our annual report, versus Turners and Growers and their annual report."

Kiwifruit Growers chief executive Mike Chapman said Zespri discussed commissions with growers but had to be mindful of foreign competitors with its details.

"The information that's treated with care is commercially sensitive information which might undermine our position to be a successful industry."

He said Zespri's margin was fair and consistent across the world.

But Mr Wesley said he agreed with the report's statement that "the monopoly rights of Zespri bring with them increased obligations for disclosure and transparency particularly with regard to expenditure charged to grower pools and Zespri's commission structure".

KIWIFRUIT RETURNS GROW

Kiwifruit exporter Zespri has announced a $48 million, or 47 cents a tray, increase in returns to growers.

The company expects that final payments will be $827m (or $8.06 a tray), compared with $779m ($7.59 a tray) last year.

Zespri's last forecast in August projected an increase of $22.3m or 8c a tray.

Green kiwifruit are now likely to earn 7c less a tray this year at $6.91 but gold kiwifruit has leapt in value by $2.29 to $11.99 a tray, which chief executive Lain Jager said reflected returns from good fruit quality, a positive exchange rate with the yen, and a new cultivar to which Zespri holds the rights.

Returns on organic green kiwifruit are still likely to be down 46c from last year at $8.81 a tray as recession-hit consumers opted for cheaper fruit.

Mr Jager said lower fuel costs and improved foreign exchange movements had helped offset a tough sales environment.

- © Fairfax NZ News