9 April 1986 Inaugural lecture given by Professor Zwart

Price and income problems facing New Zealand primary producers will not be overcome by simply accepting the philosophy of more marketing and more processing, according to Professor A.C. (Tony) Zwart, of Lincoln College.

Professor Zwart, Professor of Marketing at the college, was giving his inaugural lecture.

Marketing was not an instant solution, but rather should be part of planning, he said.

Many people had the simplistic view that marketing was just another input in production.

And, like fertilizer, if applied in the right quantities, would cause things to grow and develop.

Professor Zwart said that along with this was the idea that more marketing implied further and more sophisticated processing of agricultural and horticultural products.

This was seen as a wav to increase returns to producers and stabilize markets for raw products.

Producers promoting more marketing and more processing had to become substantially involved themselves.

Professor Zwart said that calling for more marketing was synonymous with increased processing and product development.

But how the agricultural and horticultural producer would be affected also had to be considered.

Food was being marketed much more conveniently for the consumer, but the producer's share of the consumer
dollar had diminished over the years, and international markets had not stabilized.

Because agriculture and horticulture were highly competitive and often unstable there was a strong temptation
to take control.

This was particularly so when prices were falling and opportunities seemed be being missed.

"In recent times naive statements have been made about the need for the industry to get its marketing act together," he said.

"Such statements assume that control of the entire industry is possible and desirable."

Professor Zwart said planning was likely to be successful only when there were clear objectives and directions.

Difficulties were clear in political developments in the meat industry in recent years.

There was apparent agreement on the need for a marketing strategy from all elements in the meat industry.

But attempts to specify clearly the objectives of the strategy had consistently failed, he said.

Specified objectives had been too general to allow those in the industry to see any clear oath of individual action.

Professor Zwart said that planning was not usually difficult when there were mutually-agreed workable objectives.

This was seen in industries in which some marketing management, such as joint promotions, was successful.

All those in a marketing system might seem to benefit from rnaximizing the final sales value of a product, but often this was not so simple.

Marketing channels for agricultural and horticultural products in New Zealand covered a wide range of different structures, he said.

There were also different contractual arrangements between producers and processors or exporters.

The nature of the contracts was extremely important, and could have a major effect on risk-sharing and incentives within a marketing channel.

The nature of the contractual arrangement could be important in developing marketing opportunities.

Professor Zwart said in agriculture and horticulture there was no complete control over the level of production,
and this made sophisticated marketing more difficult,

And, by comparison with other industries, the costs of entry to agriculture and horticulture were relatively low.

"Potential profits are likely to induce a rapid movement in increased production," he said.

Increased prices and consumption resulting from a marketing program might bring about supply responses which did not benefit individual producers.

This was seen in the New Zealand pork industry, which had very good marketing.

Official figures showed slaughtering of pigs rose 10 per cent in the last 12 months, and consumption increased by eight per cent.

But pork prices in December were lower than at the beginning of the year, and some producers were being squeezed out, Professor Zwart said.

"The dynamic nature of these industries cannot be ignored when considering marketing plans."

Professor Zwart said marketing in itself was not ineffective, but was more complicated than it might seem.

Manufacturing was quite different, because output could be adjusted to meet the market, and increased returns did not lead to increased output.

There also always would be considerable variation in the quality of agricultural and horticultural products, he said.

This was because of the biological basis of such production, and because of genetic and climate-related factors.

Often the quality of the product was determined by the individual producers.

And the marketing channel between thousands of individual producers and the final consumer market was long.

Market signals could be distorted by the complexity of the marketing system.

"In the dairy industry the quality of the consumer product is largely determined beyond the farm gate," Professor Zwart said.

"In other industries there may be opportunities for alternatives to make use of a product not suitable for the market.

"A frequent misconception is that pooled marketing and more producer involvement in marketing allows producers closer contact with consumer markets.

"This may be true for an industry, but not for the individual producer whose market contact is the price received."

Professor Zwart said that identifying market segments was possible, but ensuring a suitable quality product was produced to meet the requirements was difficult.

There was the danger that with increased value added and sophisticated marketing the producer might just become a supplier to the food and fibre-processing sector.

Simply promoting more sophisticated marketing and product development was not sufficient for producers.

Professor Zwart said producers had to know the contribution they made to marketing.

As marketing and processing became more developed a typical agricultural or horticultural producer would be seen as an industrial marketer.

In industrial marketing products were not sold directly to consumers, but sold to others who used the product as an input.

The biggest difference was that the user of the product was assumed to know a lot technically about the product and how this could be used, he said.

Also, because such users knew their requirements, markets were highly competitive for a homogeneous product.

The relevant technical information should be available to the user for the benefit of the producer of the industrial product.

Professor Zwart said that when demand was likely to be competitive, the product should be offered to as many buyers as possible.

But individual producers must be flexible in meeting the requirements of the user.

Producers were responsible for any market research on future requirements.

In horticultural marketing there was a tendency for producers to get involved in new production on "very sketchy market information," or on an assurance that a marketing organisation would be responsible for marketing the product.

Professor Zwart said producers could become involved as a group to influence consumer demands in which they had input.

Producers could influence the purchases of a processing company, and, through hard market research, find consumer attitudes to New Zealand products on international markets.

This could guide producers and processors in making production decisions.

"There is still too little market research being carried out for New Zealand products on overseas markets," he said.

"There appears to be increased technological and processing research, but this is not being backed by appropriate consumer research.

"There are still many opportunities for improved promotional expenditure, but this could be primarily oriented towards promoting the input rather than any specific products."

Professor Zwart said the Woolmark was an obvious example.

Where specific opportunities were felt to be missed, producers should become involved with processors, or with
co-operative marketing.

But producers should not let processing or extensive marketing become cost-plus activities,

"Producers should not aim to bear the full marketing risk," he said,

One way was to create a marketing system with processors and marketers buying direct from producers, or at least bearing much of the market risk.

This could ensure that further processing was both competitive and efficient, Professor Zwart said.

Further information from Professor Tony Zwart, Professor of Marketinq, Lincoln College 8150, Canterbury, New Zealand; phone (03) 252-811, extension 680.