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16 Menzies Tues 1400 1530 TRENT DE PAOLI
Thanks for the opportunity to present to you today. And thank you to ABARES for the
opportunity to be here and I guess share my wisdom and experience in regards to consumers,
particularly in our business. And hopefully give you some of that message on the way. So I've
only got 15 minutes with you today, so we'll jump into it.
So every generation had something it must defend. Mine is food. It's a strong statement and I
think it's pretty compelling. By 2050, we've got approximately nine billion people to feed. This
child defines the future of food. His habits and preferences will define what we seek to support
as Australian's primary production. What does this mean for Australian horticulture? It means
opportunity.
The agri-food space has never been so dynamic and fast-paced with change and it can be difficult
to keep up with consumer trends as Wendy mentioned before and constantly stay ahead of the
pack. As a primary producer and evaluating company, I would like to spend a short time sharing
with you my views of the future and give you some thoughts on what I feel will be important
considerations going forward.
I'd like to give you a quick overview of the business first and then jump into-- really reflect on, I
guess, the strategic development that I invest into fairly heavily and what drives that and some
experience along the way. So the vision of my business is we continually invest, develop,
improve, and change our business to exceed the expectations of our customers and community.
And that's done through technology, innovation, and listening. And the big one there is listening.
That's the one I really want you to take home.
Some fast facts on the business. So we're the largest chilli production company in Australia. We
serve and provide about 80% of Australia's chillis 52 weeks of the year, serving over 22 million
people. We've been value adding with a value adding operation for over 18 years. We're
privately owned and we're vertically integrated.
We farm in three geographic areas in Queensland, Bundaberg, Bowen, and [INAUDIBLE].
We're very much a technology-driven business from paddock to plate. We've got 130 employees,
approximately 37 different product lines, depending on how you look at it and we export to over
10 countries around the world. We've got some world first branded products which I should
touch on today. And I'd like to walk you through some risk adverse modelling, particularly with
the business.
So this is our facility here in Bundaberg. A picture says 1,000 words. This is our processing
facility here. This is the main access road into Bundaberg. This is our farming operation, our
vertical integration surrounding all farms within about a kilometre of the facility.
Bundaberg, for those of you who don't know, is on the southern end of the Great Barrier Reef. So
I try and spend as much time fishing as I can, but that doesn't tend to happen these days.
Beautiful part of the world, as we all have our own preferences.
This particular slide here, I'd just like to walk you through from a couple of angles. I guess sales
channels, risk management, and, I guess, revolution and evolution in terms of innovation. I've
tried to capture it in one slide. So essentially, the business started out with fresh chilli. And I
think of a particular reference, if you look at the x and y axis there being revenue and time,
relative particularly to risk management, we started with fresh chilli. Then we got into fruit in the
value added game and looked at fruit and vegetable purees.
From there, I developed AvoFresh, a branded retail consumer product. And the fourth charter is
new frontiers. In that new frontiers is an exponential curve. We're constantly pushing the barriers
into new white space. But what that does, is it risk manages our business. So we've got three to
four plus income streams there. So if any one particular area is being affected, we've got other
fallback positions, whether it's relative to weather, cash flow, et cetera.
In terms of revolution and evolution, my personal charter is I like to change the business every
five years. So I like to take a leap of faith into the unknown, still in agribusiness. But every five
years, I like to really mix things up. So the revolution is every five years and within that we have
evolution on a lateral sense.
So these are some of the products. Most of you, particularly Australian people here, would have
seen these in the supermarkets, some of their varieties. So we supply to Coles and Woolworths
nationally on a 52 week basis and other major retailers. We grow them, we pack them.
We've got some PVR on some lines and we put a lot of money into R&D. I've got an agronomist
full time, that's all he does is research and development on agronomy. That's his sole charter. We
plan every two weeks of the year. So it's a very intensive business.
Our value added side of the business are our aseptic purees. So these are shelf-stable purees that
are servicing industrial companies throughout Australia and we export these to 10 countries
around the world, with 30 different products. And what I really particularly like about this
business is it allows us to value add to the way streams and provide economic returns to other
growers. The capsicans that are thrown out, the basil, the sweet potato that I turn into baby food,
those sort of parameters. So it's certainly win-win for Australian horticulture.
A recent one is AvoFresh, which I took to market four years ago. We've got seven skews as a
branded product and the product is doing extremely well.
Consumers are the most important element in any business. Without them, we simply don't have
a business. This is I prefer to call the demand chain. I think in the past, many businesses
primarily focused on the supply chain. The future success of our primary production must begin
with the end in mind, the consumer, the ultimate destination.
Recurring consumer purchase is critical and is driven by quality, taste and value as we mentioned
before. These three values are the foremost priorities by Australian supermarkets. So Coles and
Woolworths will say to you they're the top three values in terms of fresh produce. I'd also
encourage them to seek sustainability in that mix.
Today's consumers have a plethora of options when choosing food products for themselves
and/or buying on behalf of their families. Access to information 24/7 and influenced by multiple
communication platforms, the market is tighter than ever to capture their attention. It also gives
rise to many opportunities, I think, for those businesses who choose to be different. Successful
companies in the future are going to find white space.
Push or pull marketing strategies can be supported by meeting a consumer need or changing a
pattern. In the case of AvoFresh for me, which is the product there, I certainly focused on
consumer pull by meeting the needs of convenience and reliability. Simply, I made avocado
convenient and reliable.
Push marketing strategies are typically very expensive and often take deep pockets and a long
term view on return on investment. A great example would be probably Apple, the iPod. That
was a push. We didn't wake up one day and say, geez, I needed an Apple iPod. But now we can't
live without them.
So to be ultimately successful in exceeding consumer demands, market research is absolutely
critical. We're all consumers and it's easy to become emotionally attached to products, and right
so. I know I do. But the purpose of market research is to get the delivery right and the
communication on package critical. I strongly encourage anyone developing a new product to
conduct preliminary research to ensure you meet consumer demand. You can burn money very
quickly if you don't get it right.
Qualitative research was done on AvoFresh when I first started and led me to quickly understand
the opportunity available. From there, focused quantitative assessment was completed with focus
groups to ensure it met expectation. In terms of communication to consumers through on-pack
advertising, media campaigns, social media strategy, I found there is no handbook. I again
encourage consumer research to understand the hot buttons of what's important to the consumer
to ensure reliable product delivery.
From a value added stance, I think companies have packaging as their real estate. I feel that fresh
produce certainly has a great platform to utilise the real estate on fruit and vegetables as well and
capture more of the stomach fill. For example, particularly in the US they're doing this well, with
collectible Disney stickers on pieces of fruit, or laser etching on vegetables. Those are some of
things to come in the future.
Small business will leverage this space-- sorry, smart business will leverage this space while
embracing future technology such as Google Glass. As this technology becomes adopted,
stickers on fruit can immediately link to recipes, grower location, grower information, what is
best eaten with, promotional buys, et. cetera. Successful brands of the future should consider
having an emotionally driven story by a sense of purpose that really resonates with consumers. I
believe really successful brands of the future will be driven more by the why than the what.
Millennials, very interesting demographic, millennials are best described as being street smart,
mature, resilient, fast learners who know how to survive urban life. They are fully informed of
current issues and are highly tech savvy, but are also in search for a meaningful experience and
motivated by deeper concerns than just money. Millennials are purpose-driven, with 51%
actively seeking out brains that do good and act responsibly.
So in Australia we've got about 20 and 1/2% of the population in the age group, being born
between 1980 and 2000. And here's the best part. They will be the richest generation to walk on
the earth, with trillions of dollars passed down to them from the baby boom generation. This
makes millennials a significant consumer horsepower that's happening now, giving us rise to
new opportunities.
There's over six meal occasions a day. The typical meal occasions of three square meals a day
are certainly gone. People are grazing. I'm sure everyone in this room can vouch for it. We're
snacking and we want small bites, smaller calories per occasion and we want more functionality.
Consumers want to eat less but want it to mean more, providing more opportunities, I think, in
our business to leverage that pattern.
Food consumption has moved past the essential status of survival and it's fashion and I think we
need to capitalise on that as an industry. Mr. Brian Silverman from the PMA in North America
put this quote together and I think it's very touching. While we've always had an emotional
relationship with food, what's different is we talk about it more and the discussion is much
louder.
Food is fashion. You wear your diet like you wear your clothes. I think that's pretty bold and I
think that's very accurate. I particularly love this quote, especially for me in horticulture. As our
consumers get healthier, we get wealthier. That's got to be a win win.
So, in terms of the value chain, it's part of my Nuffield scholarship to look at value adding, and
what I really wanted to capture here was about the value chain to consumers. And particularly in
my business, I try and move as far to the right as I can. Primary producers globally generally
have a high risk, low return while the point of sale had a low risk, high return. I try and move our
business every day as closer to the consumer as I can to have more control and have more profit.
The other interesting point here is cash flow. There's the last person to get paid. So in terms of
value streaming in the demand chain, I try to position myself close to the consumer as much as I
can.
Changing consumers are changing our business. One of Charles Darwin's quotes, I'm sure many
of you have seen this before, it's not the strongest of the species that survives, nor the most
intelligent. It's the one that's most adaptable to change. I think it's a pretty powerful statement.
The world is a rapidly changing place as Wendy mentioned before. And consumer behaviours
are being more influence by travel, multiculturalism, food programmes on television, and
generally, I think a thirst for something that's continuously different.
In the case of my business I found that the palate of consumers is advancing and the desire for
unique foods is rising. The chilli category for example, 10 years ago didn't exist. Now it's a
major category and we've got significant numbers, year on year growth. Consumers are looking
for something different.
There will be more changes in the next 10 years than we've possibly seen in the last 100 years
when it comes to consumers. Predictable patterns, I think, are going to be something of the past
and the curve of change is going to move from a constant access to an exponential one. As
agribusinesses, we need to welcome and change, not only survive but to prosper and welcome
the new habits of consumers constantly. And I think product [INAUDIBLE] are possibly going
to be much shorter, driving more frequent innovation to stay ahead of the pack.
I read a book recently titled, Uncommon Sense, Common Nonsense and it's a great book. I
highly recommend it. And one of the key takeouts I'd like to share with you was a great example
of a diagram here of the strategy I think winning businesses will take in the future and should
engage in relative to focus on continual change and meeting the demands of consumers. I
personally believe greater economic returns will reward those who have the courage to be
different.
The balance of power is moving back to the grower. Hence it's moving away from retailers.
Demand from emerging countries is giving rise to options for growers and value adders and there
will be a distinct opportunity for Australian producers who do it well relative to the consumer
demand.
Changing world order. Relative to change, part of my Nuffield scholarship just really blew my
mind in terms of how intrinsically connected we are from a global perspective in little old
Australia. Global changes in food policy, the World Trade Organisation is losing power to free
trade agreements, which are being developed with sporadic protectionism. Changing currency
values, rising new economies, urbanisation, nutritious food demand, US Farm Bill, alliances
through bilateral deals, climate change, the list goes on. And 20 billion people, not to forget to
feed by 2050.
Virtually everything is connected. And we must welcome change at a global level as it will
ultimately affect our businesses in a matter of time. While we act local, we must think global in
everything that we do, particularly on a focus towards consumer demands. Even if you are in an
export business, you will feel the influence.
So economic sustainability. I'd like to just touch on three main areas. One of my charters is I
personally believe is what is a niche today will be a commodity tomorrow. It's just a matter of
time. Economic strength. Of being a price maker, not a price taker is the ability innovate and
continue to innovate by providing unique selling proposition or being first in market, no matter
where you sit in the demand chain. In value adding forces, value into a product and gives the
ability to capture high, valuable meaning, consumer needs for convenience. That's a space that I
like to play in.
So in wrapping up, consumer awareness, attitudes, and behaviours are driven by many drivers
such as quality, taste, value, organic, Halal, kosher, ethical food, so sustainable food miles,
functionality, additive free, clean labels, nutrient dense, country of origin, the list goes on.
Wendy has touched on them a lot today. There are old tales of delivering a compelling consumer
product proposition.
Each hierarchy of needs is different, but in my experience, there is one common theme. Seek
first to understand the demand chain, then the rest will be understood. We're all connected on a
global level and we need to continually change our business strategies to be successful in
meeting the changing demand of our consumers. Thank you.