News

Collaborative entrepreneurship for exporting

vegetablesWA through funding from the Department of Primary Industries and Regional Development’s (DPIRD) Tomato Potato Psyllid Recovery Fund commissioned McKinna et al to investigate collaborative models for export. The findings of this report were recently reported on during DPIRD’s Western Australian Horticulture Update on 16 August 2018.
The aim of this report is to stimulate Western Australian horticultural businesses (particularly vegetable growers), to explore entrepreneurial, collaborative business models as a means of improving their competitiveness for exporting.

A catalyst for this project has been the recent outbreak of Tomato Potato Psyllid (TPP) in Western Australia, which has had serious ramifications throughout the State’s vegetable industry and closed off domestic markets.
“Australian vegetable exports have experienced a resurgence, particularly in the Asian and Middle Eastern region, largely driven by growing middle-class affluence, which has resulted in the growth of modern trade outlets (supermarkets and high-end foodservice outlets) and the related demand for premium quality, safe food from a trusted provenance. The situation has also been helped by the favourable Australian exchange rate, the signing of free trade agreements and improved market access, particularly to the northern Asian markets. Australia is well-placed to take advantage of these growth opportunities, by virtue of its reputation for food quality and product integrity, the favourable location relative to the Asian and Middle Eastern markets and improving freight connectivity.

Australian exports to these markets have enjoyed a sustained period of double-digit growth, particularly in value terms. This has been due to the standout growth of higher value green vegetables.
The vegetable industry Export Market Development Strategy (Hort Innovation & AUSVEG, 2017) and its updated market mapping reporting, (authored by McKINNA et al), has called out the need for collaborative export models as a pivotal platform for the sustained growth of Australian vegetable exports. The research conducted in the process of developing the export strategy identified the fact that many vegetable growing businesses did not have the confidence to enter into exporting, and in reality, are not ‘export ready’. This is because they lack the scale, continuity of supply, personnel resources and expertise required to be successful and sustainable exporters.

The key outtake from this report is that most small horticultural businesses are not resourced to take advantage of the export opportunity in their own right and would benefit greatly from adopting collaborative export models, which provide a number advantages such as:
• Allowing smaller businesses to be participate in more export markets
• Providing access to markets and customers
• Improving returns to growers through closed-loop supply chains
• Improving market power
• More efficient freight and logistics
• Quality and compliance systems/processes
• Supporting skilled professional management
• Providing the critical mass required for brand-based marketing
• Access to better market intelligence
• Mitigating risks associated with exporting.

Collaborative export models can be applied to situations such as:
1. Regional collaborations with a single category
2. Regional collaborations with complementary categories
3. Multi-region/single category models.

Collaborative export models can range from informal communication, cooperation or structured coordination through to a formal collaborative businesses. Much careful thought needs to be given as to the structure of the collaborative entities and business model which need to be appropriate to the scale and sophistication of the participating businesses.
The centrepiece of the report is the profiling of four successful horticultural collaborative entrepreneurship models for exporting that provide a framework to highlight the learnings:
1. Summer Citrus (South Africa)
2. Avoco (New Zealand)
3. G’s Growers (United Kingdom)
4. Avalon Growers (United Kingdom)

Although the four case studies presented are very different in terms of their business models and management, they share six common success factors:
1. Being customer and market-led
2. A compelling value proposition for all parties involved
3. Having the appropriate business model for their size and needs
4. A balance of shared risks and rewards
5. Open and transparent communication right along the supply chain
6. Brand-based marketing programs.

This report summarises the high-level reasons why collaborative models have failed in the past in Australia and how these pitfalls can be prevented. There are a number of common reasons why agricultural collaborations fail the key ones being:
1. The absence of an export market for the product that delivers better than average returns.
2. The inability to deliver a sustainable value proposition that appeals to the market.
3. A business model that is inequitable in sharing reward and risk between all parties.
4. Lack of professional management expertise.
5. Unresolved conflict between interests of the collaborative entity and member businesses.
6. Lack of solidarity, loyalty and commitment to supply.

The report explains possible solutions to these problems, drawing heavily on the learnings from the case studies.

A full copy of this report is available to Western Australian industry stakeholders by contacting claire.mcclelland@vegetableswa.com.au