Euromonitor reports that the New Zealand economy will weaken in 2020. Growth will be negatively impacted by the effect of the economic and social measures taken in response to the COVID-19 outbreak will have on the economy. Exports will decelerate
and private consumption will lose momentum. Rates of economic growth will gradually moderate, reaching 2.5% in 2021 and averaging about 2% per year by 2027. In March 2020, the government unveiled a NZ$12.1 billion (US$7 billion) support package
for businesses and employees affected by the COVID-19 outbreak, roughly 4% of New Zealand’s Gross Domestic Product (GDP). Measures include wage subsidies, increased winter energy payments and tax reductions.
In 2020, the economy will decelerate. Real GDP increased by 2.8% in 2019 and growth of 2.3% is expected in 2020.
The real value of private final consumption rose by 3.0% in 2019 and it is expected to decelerate somewhat in 2020. High levels of household debt are deterrent for consumers. A strong labor market provides some support.
Unemployment was 4.1% in 2019 and it is expected to increase in 2020 as many businesses are affected by the trading conditions under the COVID-19 related lockdown. Wage was hiked by about 5% in 2018, with plans to increase it a further 20% by 2021.
Risks to global trade and growth from the global pandemic and rising protectionism have increased, and could have negative spillovers to the New Zealand economy, including through the impact on China and Australia, two key trading partners.
New Zealand’s population reached 4.9 million in 2020 (CIA World Factbook Est.).The country’s median age rose to 37.2 years in 2020, compared with 34.2 years in 2000. The ageing process has been accelerating but the
pace will slow in the future with the median age reaching 39.3 years in 2030. The number of those over 65 years represented 15.4% of total population in 2020 and it will rise to 20% by 2030. Net migration is an important contributor to
population growth. Currently, about one-quarter of all residents are born overseas. This is one of the highest figures of all industrialized countries. The government’s immigration program has several objectives which are designed
to produce tangible social and economic benefits.
The government expects its Free-Trade Agreement (FTA) with China will help to boost exports.China is cutting tariff barriers for New Zealand’s farm exports, which
make up roughly two-fifths of the total. New Zealand’s trade promotion agency forecasts that over the next two decades the FTA will boost exports to China by 20%-40% per year. Negotiations for a new FTA with India are also expected to
be concluded soon. New Zealand is a member of the new 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) which was formally created in March 2018. The U.S. was not included in that agreement.
USDA’s Foreign Agricultural Service (FAS) Office of Agricultural Affairs (OAA) in Wellington hereinafter referred to as “Post” reports that Although New Zealand is a relatively small country; it is still an important and growing market for U.S. agricultural products. It is among the top 10 U.S. export markets for grapes, oranges, pet food, and hops, and is the number two market for U.S. lactose. According to Trade Data Monitor, New Zealand imported a record US$535 million of food and agricultural products (including edible fishery) from the United States in 2018, representing approximately 10% of total food imports.
Advantages and Challenges for U.S. Food Exporters in New Zealand
Post adds that like all vital U.S. agricultural export markets, New Zealand comes with its own unique opportunities and challenges.
U.S. products are high quality and are increasing in their presence in the New Zealand market.
Low tariffs ranging between zero and 5% on U.S. products.
There are opportunities to market U.S. fresh products during New Zealand’s countercyclical seasons.
Some supermarkets make individual buying decisions, and this allows importers to approach them directly.
Ease of doing business and size of market make it a good fit for new-to-export and small-to-medium U.S. companies.
New Zealand practices a science-based approach to trade, thus, open to exploring innovative products.
Growing competition from Australia, European Union (EU) India, and China for consumer-oriented food products.
Strict phytosanitary/sanitary regulations regarding fresh produce and meats.
Consumer foods imported from Australia are duty free, while U.S. products are assessed tariffs between zero and 5%.
New Zealand’s retail market is highly consolidated, dominated by two supermarket chains.
Distance from United States results in high transportation costs.
2019 U.S. exports of agricultural products to New Zealand reached US$537.9 million, an increase of 13% over 2018 and a new record high. US$361.3 million or about 67% were of the consumer oriented variety. The U.S. exported US$320
million of processed food products to New Zealand in 2019, growth of 9% and close to 60% of the agricultural total. Top U.S. processed food exports included:
Processed/Prepared Dairy Products
Dog and Cat Food
Syrups and Sweeteners
Processed Vegetables and Pulses
“All of Food Export’s programs were a tremendous help getting us export ready, understanding the challenges that come with international business, and learning how to navigate them.”
According to Euromonitor, retail sales in the packaged food market in New Zealand reached nearly US$7.4 billion in 2019. That represents a growth rate of 16.3% or just over US$1 billion since 2015. By the year 2024 the retail
sales in the packaged food market in New Zealand is expected to reach US$9.2 billion, a growth rate of 19.7% and US$1.5 billion. High growth products in the forecast include:
Ice cream and frozen desserts
Processed meat and seafood
Euromonitor reports that increasing levels of price competition, particularly in produce categories placed increasing pressure on supermarkets’ margins in 2019. Despite this, increasing sales volumes driven by population growth
is expected to result in a value compound annual growth rate (CAGR) over the forecast period (to 2024) that is comparable to 2019 sales growth. New Zealanders are very sensitive to price, with discounting strategies a key sales driver in the
channel, and the difficult economic outlook over the forecast period is expected to see price sensitivity among consumers place increasing pressure on margins, however this will be offset by increasing sales volumes.
label products are expected to be a key feature of the channel moving forward, with both Foodstuffs and Progressive Enterprises having invested heavily in refreshing their private label ranges, enabling them to be repositioned to better compete with
mainstream brands while offering margin enhancement opportunities to the retailers.
Progressive Enterprises Ltd.’s Countdown brand was the leading brand within supermarkets in New Zealand, accounting for almost a third of all sales in 2019. The
company’s performance in 2019 was underpinned by selling larger volumes off foodstuffs at lower margins, contributing to an improved financial performance. The company has a mature e-commerce capability - with its status as a fully corporatized
organization offering significant operational leverage in getting this capability up and running - which accounted for 7% of the company’s sales in 2019. Additionally, the company is currently undergoing a refurbishment program for stores
around the country which is expected to continue over the forecast period.
Foodstuffs North Island and Foodstuffs South are two regional co-operatives which run the New World and Pak’N Save chains throughout New Zealand. Being
a co-operative means that stores are owner-operated rather than the corporate owned stores model operated by rival Progressive Enterprises, meaning that the operating model for both chains are considerably different - for example Foodstuffs outlets
have in-store butcheries, whereas meat products are prepared and packaged at a centralized facility for Progressive Enterprises before being distributed to the physical stores. While the combined value share of Foodstuffs’ was greater
than 50% over the course of the review period, the nature of the business as a co-operative meant that implementing an online shopping solution has proved to be quite difficult. In 2019 however the company announced that it would introduce online
shopping for its Pak’N Save brand, as well as enhance the online shopping experience of its New World brand.
Supermarkets in New Zealand is an effective duopoly between Progressive Enterprises and Foodstuffs, and while competition exists, the small size of the New Zealand market means that grocery costs are considerably higher than in Australia. In
2019, Costco announced that it would enter the New Zealand market during the forecast period. While the brand is a Warehouse Club and thus will not compete in supermarkets, its launch into New Zealand will have considerable repercussions for
supermarkets in New Zealand over the forecast period, with increased price competition expected to deliver greater value to consumers and see price levels become more comparable with those in Australia.
Best Product Prospects
Post reports that New Zealand is increasing its reliance on U.S. food and agricultural exports. The quality of the products, as well as the high level of trust between the competent authorities, is making it easier to process transactions. Consumer
Ready-Oriented products are growing in demand and many of these products are on shelves in small, independent stores and increasingly they are finding their way onto mainstream supermarket shelves. Several core categories are making significant
sales gains in the New Zealand retail market. Chilled foods, bakery biscuits, and non-alcoholic beverages have shown 20% increases in total sales. Core grocery products such as snack bars, sauces and muesli are also growing in sales valued
at US$216 million as mentioned above.
Food Service Sector
New Zealand’s tourism sector continues to grow and is fueling demand for food and agricultural products. The New Zealand economy grew by 2.8% in 2019, and this growth and discretionary spending is boosting the need for imported
products. The United States supplied US$261.3 million of consumer orientated products to New Zealand in 2019 and this number is set to grow annually. Expanding sectors such as tourism, food service and hospitality are driving demand for consumer
orientated products, particularly food preparations which are used to process meat-based foodstuffs, baked goods, sauces, wine and confectionery. It is expected that growth in these sectors will continue into the 2020s.
The growing number of visitors and continued rise in local discretionary incomes are likely to enable New Zealand’s foodservice industry to expand and fuel demand for fresh and processed food products such as food preparations, meat products, baked goods, sauces, wine, and confectionary. Due
to the limited production of high quality food inputs and ingredients, New Zealand food manufacturers are increasingly turning to international suppliers to address these shortfalls.
The New Zealand government forecasts visitor arrivals to New Zealand to grow 4% to 5% percent annually through to 2024. Australians
make up the largest group of international visitors with an estimated 1.5 million tourists visiting New Zealand year on year to July 2019. Visitor numbers to June 2019 saw visitors from the United States up 8.5%, visitors from Australia are
also up 4.1% and visitors from China down 8% percent. The expanding tourist base is fueling demand for a multitude of food and beverage products, this is adding to the growth in food imports from the United States (up 15.8% YTD June 2019). Source:
The majority of international visitors stay in hotels and motels, with Auckland, Wellington and Queenstown being the most popular destinations. Holiday parks and backpacking establishments
round out the top four commercial accommodations in New Zealand. The growing number of visitors and continued rise in local discretionary incomes are likely to enable New Zealand’s foodservice industry to expand and fuel demand for fresh
and processed food products such as food preparations, meat products, baked goods, sauces, wine, and confectionary. Due to the limited production of high quality food inputs and ingredients, New Zealand food manufacturers are increasingly turning
to international suppliers to address these shortfalls.
New Zealand’s food service industry is made up of predominately small-to-mid-range cafes and takeaway restaurants. The other categories are premium restaurants,
1 to 2 Michelin star restaurants, and diner style cafes. There are opportunities in all segments of the food service sector and it’s best to enter the New Zealand market via importers and distributors. In 2018 New Zealand’s
largest trading bank, ANZ, released a report on the hospitality industry citing one of the largest impacts to profitability (through price) is the government’s announcement to have the national minimum wage rate set at NZ$ 20 per hour (US$12.16)
by 2021. They forecast that the impact of a 27% wage increase would reduce the earnings before interest, tax, and debt to drop from 7.5% of revenue to .5% of revenue, this would impact the purchasing power of small and medium operators, though
the large corporate institutional will likely absorb it. Source: ANZ bank Restaurants, Cafes, Bars Market Update, April 2018.
Post reports that New Zealand is a prosperous country heavily reliant on trade. It is dependent on the primary sector with food and agricultural products accounting for approximately 41% of total exports. New Zealand exports
an estimated 80% to 90% of New Zealand’s primary production. According to the government sources, dairy remains New Zealand’s largest exported product valued at US$13 billion.
New Zealand’s food processing sector comprises an estimated 8% of the country’s food sector and is valued at more than US$23 billion. A
large percentage of New Zealand’s exports are produced using a variety of inputs not readily available in the country. This lack of capacity provides opportunities for exporters. The processed foods industry is broken down into the
following categories: 1) Core grocery products (i.e., fast moving consumer goods); 2) Infant/nutritional products; 3) Nutraceuticals: vitamins and other food based natural remedies; and 4) Snack food products.
Much of the country’s exported agricultural products derive from valued added products that require ingredients that are not readily available in New Zealand. For
instance, New Zealand’s dairy sector, which is the largest agricultural sector in the country, utilizes an array of inputs, including lactose and whey from the United States. Dairy is New Zealand’s top export earner, generating more
than $U.S. 9 billion in export sales. Fonterra Cooperative Ltd. dominates the dairy processing industry, which is New Zealand’s largest company and is responsible for an estimated 83% of domestic milk output. According to industry sources,
New Zealand exporters supply an estimated 3% of the world’s trade in dairy products New Zealand’s main dairy export markets are China, Australia, United States, United Arab Emirates, Malaysia, and Japan.
New Zealand’s food imports follow three main trends. Food preparations and lactose as food ingredients continue to be in strong demand as inputs for New Zealand’s sophisticated food manufacturing sector. In addition, consumer ready products, such as baked good and confectionary also
continue its upward trend. Products using natural or healthy ingredients are in particular demand as New Zealand consumers are becoming more discerning and want to consume products from other markets.
Best Product Prospects
New Zealand’s food processing sector comprises an estimated 8% of the country’s food sector and is valued at more than US$23 billion. A large percentage of New Zealand’s exports are produced using a variety of inputs not readily
available in the country. This lack of capacity provides opportunities for exporters. The processed foods industry is broken down into the following categories:
Core grocery products (i.e., fast moving consumer goods)
Nutraceuticals: vitamins and other food based natural remedies
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