A couple of days ago I did a presentation at the University of Western Sydney to a group of academics, farming advocates and farmers. The presentation addressed the challenges of agriculture in Australia close to the major cities, specifically Sydney. Peri-urban agriculture to invoke the jargon.
In preparing the presentation, it seemed sensible to define the genesis of the challenges faced by peri-urban agriculture to ensure that we were addressing the right problems, not the symptoms of the problem. I came to the conclusion that there are 6 forces at play here that need to be considered as we deliberate about any remedial action:
Retailer power. Australian food retailing is the most centralised in the world, effectively a duopoly. This scale of operations enables considerable efficiency, and coupled with an aggressive strategy to reduce transaction costs in the supply chain, small suppliers have been squeezed into the 25% not controlled by the majors, and alternative channels like food service.
Food security. This is not just some jingoistic response to Chinese ownership of land, although you are forgiven for thinking that, it is more about the capacity of Australia to feed itself in the face of a dying industry sector. When you look at the data, we export lots of “food”, but look closer and most of it is commodity grains and meat, the other side of the equation, processed food, we are a net importer, reflecting the decimation of the processing industry, and what is left is largely owned internationally.
Urbanisation. Our cities are sprawling, gobbling up land that has fed us for 200 years, and the pace in increasing. To my mind, it is at its roots, an economic argument between the immediate value of a series of short term transactions that turn land into housing estates, and the long term value of land as a productive asset that just keeps on producing. This equation, the data driven ROI calculations of the developers Vs the more qualitative long term value of land as a producer of food for decades and longer, usually falls on the side of the developers. We really need an analytical framework that does a better job of putting a quantitative floor underneath the long term value of being able to feed ourselves, and that value is reflected in the somehow. It is not just a matter of price, Value is a much wider, more encompassing term. Perhaps the current debate around Coal Seam gas ripping into agricultural land will drive some of this analysis.
Agricultural land as a social asset. This notion can be a bit controversial, but bear with me. Humans evolved over millions of years to live on, and “off” the land in small groups, not congregating in cities disconnected from agriculture and foraging. 200 years ago this changed pretty rapidly in the now developed world, and the trend is accelerating. In the developing world, 2/3rds of the world, the move has been explosive for the last 50 years. What anthropological impacts this is having we can only speculate, but my contention is that this disconnection is at the root of much of the social dislocation we are seeing around us. Assuming this notion has any validity, it gives a social perspective to the use of the land around us.
Emerging consumer concerns. Consumers are the beneficiary of the huge amounts of information now available to them, and they are using that information to make their own decisions in defiance of much marketing orthodoxy. They are informed, cynical, and self reliant, and we now see a strong undercurrent of individual decision making based on freshness, product provenance, sustainability of farming practices, taste, and an individual view of value. This is requiring a revolution in marketing thinking, and is being reflected in the growth of channels outside the retail duopoly, farmers markets, farm to home delivery, and resurgence of specialist fresh retailers. The 25% left over after the duopoly share is taken appears to be reversing, and rather than becoming 24%, is more likely to become 26%.
Information transparency. The explosion of our capacity to capture, organise, analyse, and transmit data is as significant a development as the printing press, and harnessing of steam in the impact on our lives. That capacity has turned supply chains where growers simply grow, and throw the produce over the fence, hoping someone buys it and pays them a fair price, to a demand chain where the drivers of demand, what consumers want, is now transparent. The whole chain can be now reconfigured to reflect that demand, and costs are only incurred where that add value is greater than the cost.
The strategies to be employed if you want to navigate through he shoals of the 6 forces outlined above can be broken into three:
- Increase the perceived “value” of products in consumers eyes.
- Engage consumers.
- Outflank the retail duopoly.
In other words, build a brand.
Easy to say, hard to do, and to be done, it needs to be commercially sustainable, not something that relies on public funding.
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I did not realise your duopoly had more share than ours, amazing.
Pity about the America’s cup, too many Aussies on the Yankee boat, makes up for a few Bledisloe cups!
thank you Allen – this is really clear and has certainly helped my understanding. Of course New Zealand is little different – retail duopoly dominating a higher percentage than in Aus, and exports of commodities