Adelaide Hills Apple Industry Value Chain Analysis, 2015€¦ · Adelaide Hills Apple Industry Value Chain Analysis, 2015 Adelaide Hills Apple Industry Value Chain Analysis, 2015

Adelaide Hills Apple Industry Value Chain Analysis, 2015


Dr Fiona Kerr

Prepared for the Regional Development Australia

Adelaide Hills, Fleurieu and Kangaroo Island

May 2015


“To use Industry Cluster development and Value Chain Analysis models to demonstrate both improved efficiencies and the potential for innovation within the horticultural industry of the Adelaide Hills and broader region commencing, in the first instance, with Lenswood Apples as a catalyst”

Foreword

The Adelaide Hills of South Australia not only have some of the most beautiful orchard properties anywhere in the world, but also boast some of the best farming practices in Australia.

However, with changes in legislation and regulations, as well as market pressures and the cost of living and production, the sector faces the challenges of remaining viable and innovating in order to increase the value they can create for both themselves and South Australia.

This value chain analysis was undertaken around the fruit industry within the Adelaide Hills and upper Fleurieu, particularly with the Lenswood Co-op, to better understand the dynamics of the industry within the region.

The analysis and subsequent recommendations will inform future directions for the local fruit industry and will also contribute to a broader industry cluster mapping exercise as part of the state’s Collaboration and Value Chain program.

It is envisioned that this project will be the catalyst for greater collaboration between businesses within this industry, increased innovation and better understanding of the competitive position of the local industry.

Ideally, the findings of this project should inform policy and regulatory decisions at the local and state level, as the analysis has shown that changes in these areas are vital to enabling innovation in the sector.

There is potential for innovation both in the region and also in terms of export and global competitiveness, and if the recommended steps are taken South Australia can be positioned as a leading innovator in farming and production.


Contents

Executive Summary ........................................................................................................ 1

Findings of the Apple Value Chain Analysis ....................................................................... 4

Contextual Challenges ................................................................................................. 4

Scale vs innovation ...................................................................................................... 5

Value Chain Map ......................................................................................................... 6

Adelaide Hills Region Apple and Pear Value Chain Map ................................................ 8

Key Questions ......................................................................................................... 9

Overview of the Apple and Pear Industry in the Adelaide Hills Region: ............................ 10

Domestic market ..................................................................................................... 10

Export market ......................................................................................................... 11

Findings and Recommendations by VC Stage ................................................................ 13

Stage 1: Variety development and new trees ............................................................. 13

Stage 2: Growing and Harvesting ............................................................................. 14

Stage 3: Storage, processing and packaging ............................................................. 20

Stage 4: Fresh fruit and secondary processing ........................................................... 23

Stage 5: Domestic retail channels/export .................................................................. 24

Support services across the chain ................................................................................ 26

Challenges ................................................................................................................. 28

Output from stakeholder interviews and discussions ......................................................... 30

At whole of industry level ............................................................................................ 30

Government............................................................................................................... 31

Planning ................................................................................................................. 31

Regulations ............................................................................................................ 32

Policy ..................................................................................................................... 33

Consultation (the lack of it) ...................................................................................... 34

Local Council .......................................................................................................... 35

Export and Domestic Markets ................................................................................... 36

R&D Support .......................................................................................................... 36


Infrastructure ............................................................................................................ 37

Water .................................................................................................................... 37

Packaging .............................................................................................................. 39

Transport ............................................................................................................... 40

Netting .................................................................................................................. 40

Storage ................................................................................................................. 41

Seasonal workers’ accommodation ........................................................................... 42

Co-operatives ............................................................................................................ 42

The role of the Co-operative .................................................................................... 42

Dynamics between co-ops ....................................................................................... 43

Regulatory issues ................................................................................................... 43

Financial Considerations ............................................................................................. 44

Wages ................................................................................................................... 44

Pricing and costs .................................................................................................... 45

Payment schedules ................................................................................................. 45

Pests ..................................................................................................................... 45

Customer Requirements ............................................................................................. 46

Product .................................................................................................................. 46

Quality ................................................................................................................... 47

Associated costs ..................................................................................................... 47

Timing ................................................................................................................... 48

Secondary Products ................................................................................................... 48

Cider ..................................................................................................................... 48

Fruit Pulp, Juice and Fruit Strap ............................................................................... 49

Capacity Raising ........................................................................................................ 49

Business skills and training ...................................................................................... 49

Influencing Capacity ............................................................................................... 50

Succession planning ................................................................................................ 50


Appendices ................................................................................................................... 51

Appendix 1: Adelaide Hills Apple Industry Growers List and Other Interviewees ............... 51

Appendix 2: Value Chain Analysis Map ......................................................................... 57

Appendix 3: Bubble Graph of Industry Trends and Issues by Priority .............................. 59

Appendix 4: Adelaide Hills Apple and Fruit Industry Snapshot 2015 ................................ 65


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Executive Summary

The Adelaide Hills has a long-established apple and pear growing industry which currently supports a range of businesses including local sale through farmer’s markets, domestic sales through major grocery retailer supply chains, export, and a number of value-added enterprises, utilizing lesser grade fruit.

The Adelaide Hills produces more than 85% of the state’s apples and pears, which are consistently of the highest market quality, with budding niche producers who are using

2nd and 3rd grade fruit in high end innovations such as boutique ciders, fruit leather and novel juices.

There was consistent evidence, from many of the growers and producers we visited, of innovative and sustainable practices throughout the Hills. Farmers have lived with land-locked, hilly orchards in a dry state since the late 1800’s, changing their cultivation techniques consistently to adopt new technologies, orchardist practices and chemical products. Many were very knowledgeable on water and chemical efficiency, crop layout and cycling and such things as the effect of different netting colours on crop health and yield. In 2011 SA produced 25,400 tonnes of apples and 6,000 tonnes of pears from approximately 131 apple and 94 pear orchards.

Cider makers were most inventive in how they produced their high quality cider, with some lovely old machinery cleverly brought into the 21st century. Fruitwise (the maker of fruit strap) had been successful in securing a grant to purchase a second fruit dehydrator, whilst Purefruits (fruit pulpers) has branched into production of juice, sparkling carbonated drink, cordials, purees and a new line of vegetable juice. Notably, all of these producers were fiercely supportive of local growers, only sourcing overseas pulp when they could not satisfy requirements locally.

In recent years(?) a number of external pressures have emerged (not just for this industry) that are forcing producers and supporting enterprises to explore ways to maintain and grow profitability and sustainability.

The most significant challenges are:

• The requirement for an overarching representative body to coordinate and represent the industry sector, inform regulatory and policy bodies and give the value chain actors a voice. This would assist with a number of specific issues including:

o Poor cohesion and collaboration of the industry stakeholders

o Lack of role clarity regarding co-operatives and growers associations


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o Lack of a shared view of what the industry value chain looks like and how it works, reinforcing a farm gate mentality and lack of support from lead actors

• Uncertainty about regulation – who is responsible for what

• Water security

• Biosecurity risks (pests, diseases and management thereof)

• Competition for resources/produce from other industry groups

• Labour access and affordability

• Succession planning (both skills and supportive regulations) and the industry’s future

At the level of value chain support, innovation and upgrading:

• Lack of coordination between policy and regulatory bodies, and between state, federal and local government

• No state ’30 year rural plan’ for South Australian Hills region

• Lack of an adequate, formal community engagement process to enable collaborative exploration of both problems and opportunities, and co-creation of solutions to various environmental and economic issues across the value chain

• Lack of ongoing stability for support bodies which are already established in the area, including the RDA (regional development association), local council and research bodies such as SARDI extension officers and advisors

This report provides some context around these issues.

Recommendations

The following recommendations are offered for the industry to consider in its quest to build resilience, sustainability, profitability, confidence and pride.

1. Identify a number of industry champions with complementary skills and strengths, who can take the lead on strategic issues. Strong, articulate representatives are essential to influence and build profile.

2. Develop a plan / strategy with prioritised concerns in agreed order of importance. The discussion process carried out for this report identified issues and priorities for the stakeholders interviewed, and negotiating actions will identify and prioritize the sticking points and urgencies for the industry.

3. Write a series of protocols or best practice guides for processes that are causing problems. Consult with all agencies that have responsibilities to ensure they agree with the protocols.

4. Create a comprehensive data base, and ensure that important forms, documents, and reports are easy to access – preferably via the Association website. Apple and Pear Australia has an information-rich website so there should be coordination between the two.

5. Take note of what has contributed to the success of other horticultural industries.


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6. Build relationships with key people in all relevant agencies that play a role in decision-making for the industry, including lead firms in the value chain (supermarkets), policy and regulatory bodies, local council and the Rural Land Management Advisory Group.

At state and local government level:

• Develop a 30 year regional plan which includes coordination of responsibilities between local councils and state bodies

• Implement a community engagement and decision making process which links in with both state and local government bodies (such as the NRM community board structure)

• Devolve a higher level of decision-making power to the Adelaide Hills Council in regard to such things as development plans and water allocation procedures.

• Engage the lead firms in the value chain to negotiate a fair and equitable process for the defrayment of costs and benefits across the chain, and the standardization of compliance requirements. Embed changes into regulation and policy

• Align export policies and procedures to better support the nature of the Adelaide Hills regional crop as a high quality export which is fully compliant with EU standards. Include high value activities such as on-shore packaging


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Findings of the Apple Value Chain Analysis

“… for the industry to remain viable into the future, consideration must be taken of economic, social and environmental factors, and the complex interaction between them … with vision and clear direction to ensure ongoing industry viability and sustainability in the short, medium and long terms”

Susie Green, APGA president

Contextual Challenges

The ongoing success of the Hills Region Apple chain is bounded by some contextual challenges which are threatening to reduce the viability of some of the value chain actors, as they are creating a network of forces which act to block both short term innovation and long term sustainability. Some of these high level, contextual challenges are as follows:

• The lack of an overarching 30 year agricultural plan for greater Adelaide;

• Water management decisions regarding water collection, management and valuation which are complex and, on occasion, politically motivated, resulting in consultative structures and processes being disrupted, restructured, and rendered less efficient;

• An industry structure that is predominantly small scale farmers, with a fragmented production base, a lack of clarity around support structures such as co-operatives and two overly-powerful, non-participative value chain lead firms (Coles and Woolworths);

• A lack of integration between layers of government and between policy and regulatory bodies;

• In turn a lack of integration, consultation and co-creation between these bodies and the community of farmers/orchardists and secondary product producers;

• Development plans which are constructed mainly for township and urban areas, and weighted towards wineries which creates blocks and extra costs for small, niche producers such as cider makers;

• A problematic labour hire situation which has removed flexibility to cater for seasonal requirements, local availability of labour (such as backpackers), or fair reward for picking rate and skill level of pickers, yet has increased administrative load and the informal need to police labour hire practices1;

1 There are increases in administration of wages, labour hire contracts, casual payment schedules,


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• An ageing farmer/orchardist profile in an industry where the majority of orchards are handed down over several generations, a practice which has been made more problematic through regulations regarding succession planning;

• The lack of recognition of the value of farming, which generates a significant proportion of the state’s GSP, greater than the contribution of mining2;

• Following on from this, the lack of career opportunities within small agricultural businesses, as well as restrictions on family members’ unpaid activities in their own business, creates a negative image for young people in regard to joining the industry;

• A lack of support for growing basic business skills in the industry, including training and inclusion in the planning and development decision making process.

Scale vs innovation

The Adelaide Hills produces 85% of the state’s apple and pear crops, predominantly on family owned orchards in a small scale industry. Yet scale is not the key to success in all markets, as Andrew Fearne pointed out in his 2006 report on South Australia’s sustainable food and wine value chains. He gave the Netherlands as an example of a country that has made a virtue of its small size, pointing out that it has:

“established a global reputation for being innovative, responsive, with fingers on every (market) pulse, collaborative arrangements with centres of applied research, and government agencies willing to provide support to lubricate the wheels. Moreover, while the fragmentation of regional, national and international markets is bad news for large commodity meat processors, fruit and vegetable packers and wine makers, who thrive on homogeneity of demand and economies of scale, for a state that is so heavily dependent upon small and medium-sized food and wine businesses this is a welcome trend”.

This summary shows a number of relevant touch points which are just as relevant to the Adelaide Hills’ small but efficient apple and pear industry. To remain viable, and especially if the sector is going to innovate in the face of such changes as increasing export and import pressure, there needs to be a similar sector profile to that of the Netherlands above, including collaboration with R&D centres and supportive government agencies.

There is much potential for niche products and high quality produce which are marketable as premium product, but these require supportive regulations (such as those suggested for the budding boutique cider industry), as well as basic infrastructure which assists storage, handling and transport. Even small industry players such as the Adelaide Hills Apple Growers can prove efficient and income producing when they are part of a larger plan such as a 30 year plan for greater Adelaide.

penalty rates and compliance issues. Growers also commented that they often had to police that the hire group was paying the right amount, whilst still paying them fees. 2 Australian Bureau of Statistics, Australian National Accounts: State Accounts, 2013-14 (Source: http://www.abs.gov.au/AUSSTATS/[email protected]/DetailsPage/5220.02013-14?OpenDocument)


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Value Chain Map

A major aspect of this project was to map the Apple and Pear Value Chain in the Adelaide Hills region, to gain a shared understanding of the current sector, and to illustrate the potential for both improved efficiencies and possible upgrading / innovation within the horticultural industry of the Adelaide Hills and broader region.

One of the most useful things to produce during a value chain analysis is an agreed picture on a single page of what the industry looks like, as most stakeholders rarely have a whole of industry picture in their heads, and thus they only see the industry from their own vantage point. Whilst such a value chain map is not highly detailed, its role is not to supply the level of depth of information required for government upgrading and support decisions (the body of the report contains this level of analysis gained through interviews, group discussion and research). However it is invaluable as a conversation starter, an exercise in alignment of industry stakeholders’ concepts of the industry value chain, and an ideal prompt for discussion of potential upgrading activities. The value chain map drafted during this analysis project is presented as Appendix 2.

The activity of creating the value chain analysis map offered a number of benefits:

• The Value chain map was easily shared, creating an aligned view of the sector

• Maps pictorially represent industry structures, promoting more strategic level conversations regarding barriers to entry, bottlenecks, value sharing and supply constraints to aid value chain analysis (VCA)

• The map was easy to analyse, assisting members to understand where they may be able to improve, and to prioritise where to concentrate both effort and remedial activity

• It was a conversation starter which allowed any actor to be part of the process and built trust in the process

Policy and regulatory changes which are required to intervene in, and upgrade, the value chain have also been identified and summarised in this value chain analysis mapping section. A deeper discussion of the policy and regulatory aspects appears in the stakeholders’ output section below which is divided up into themes, and listed by the priority they were given by the value chain actors.

At a strategic level, the act of chain mapping and the iterative conversations it created with actors has additional flow on strategic effects as it:

• Assists policy makers to better understand where value chains fit into national and global value networks and to develop targeted assistance and interventions

• Illustrates trading and market access issues, assisting in decisions regarding export policy and regulation, and the maintaining of unique home market advantages

• Shows leverage points for value chain upgrading, paving the way for agreements to be made on how to proceed (via VCA)


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VCA can contribute to improvement of:

Information: The flows of knowledge and resources across the chain to make all firms in the chain more productive

Equity: Strengthen the weakest link to address bottlenecks

Linkages: Improve links between firms across the chain

Pathways: Create new or alternative pathways across the value chain, such as promoting local firms to enter global value chains or linking to new chains

VCA allows organisations and policy makers to create agile rather than lean value chains, which compete better, both in present and future markets


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Adelaide Hills Region Apple and Pear Value Chain Map

This single page map is attached in A3 size as Appendix 2 for ease of reading.


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Key Questions

Several key questions drove consideration of the apple/pear value chain process

A) How does South Australia’s apple/pear industry generate value?

• How are apple/pear outputs currently used?

• How do production processes meet customer needs and desires?

• How can South Australia raise the quality of the apples/pears it produces?

• Where is South Australia positioned within the international apple/pear supply chain?

B) Where could further value be added along the existing chain?

• What opportunities exist to leverage greater value from existing resources?

• How feasible would it be to upgrade?

• How do businesses need to change? How willing are they to consider potential changes?

• How could the costs and risks of value chain upgrading best be defrayed and benefits shared?

C) What regulatory and government support is required to upgrade the chains?

• What changes may be required to State infrastructure and investment settings?

• What is the balance of responsibilities for funding between the state and federal governments?

• What resources are required at the departmental level to drive shifts across the sector?

The value chain map responds to these questions, through detailing the size and scope of the existing apple/pear sector in South Australia and internationally, visually mapping the current production process, competition, costs and ecosystem opportunities and showing the South Australian apple/pear overview. Opportunities for the future state of the value chain and/or recommendations are included in a discussion section on each of the areas outlined in the segment of the value chain map called processes and activities undertaken (in the blue background). These are good initiators for action and upgrade.


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Overview of the Apple and Pear Industry in the Adelaide Hills Region:

• Total fruit production in SA shows a gross value of production for apples of $46.7 million in 2012-13 and $9.2 million for pears.

• Fruit from the Adelaide Hills region makes up 90% of the state’s crop

• 80% of orchards are family owned and run small holdings (less than 20 hectares)

Domestic market

• The main avenue to market is local, through co-ops with some to farmers markets

• Annual production—a function of planted area and yield—is highly variable, based largely on weather conditions. In 2013-14, production was forecast to achieve its second highest yield on record (ABARES 2013).

Over the last 10 years the distribution between the two crops in SA was:

Gross production amounts ($ million)

Year Apples Pears

2002-03 50.8 6.4

2003-04 33.1 10.2

2004-05 61.2 10.3

2005-06 41.8 10.7

2006-07 64.5 13.1

2007-08 47.7 13.1

2008-09 63.4 11.7

2009-10 41.9 9.2

2010-11 36.5 11.9

2011-12 32.4 9

2012-13 46.7 9.2

Source: ABS, APAL website: http://apal.org.au/statistics/

• There was a decline in overall apple consumption per capita from 16.23 kg in 0203 down to 11.85 kg in 1314 per person per year.

• Fresh apple consumption remained relatively steady.

• Pear consumption per capita was 5.57 kg in 02-03 and 4.43 kg in 13-14 per person per year. (Peaks in 04-05 at 5.89 kg and 11-12 at 5.55 kg)

• In 2012-13 SA produced 5% of pears (Victoria 89%) in Australia and 10% of apples (Victoria 43%).

• South Australia’s apples make up 10% of Australia’s apple production, with 90% sourced from the Adelaide Hills


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• Coles and Woolworths are the dominant lead firms in the value chain. There is a lack of transparency regarding the share of fruit taken by the combined supermarkets, ranging from 55%3 to 80%4 of the fruit produced per year.

• Growers get around $1 per kilo for apples, with Coles seen as less committed to taking local produce

• Rent at the produce markets is very high, with costs of up to half a million dollars per month for a small stall which precludes small producers from selling in this market

Export market

Australia exports between 1-2% of its total marketable production5 of apples and pears

The vast majority of South Australian export apples and pears come from the Lenswood Co-op. SA exports $2.8 million fresh apples yearly, 90% of which are Pink Lady.

Apple Exports by State

State 2007/08 2008/09 2009/10 2010/11

Queensland 1,181 1,118.5 1,142.2 1,219.3

New South Wales 76.5 109.4 89.9 260.9

Western Australia 507.8 568.4 352.4 329.3

Victoria 344.5 252.6 756.8 392.5

Tasmania 1,153.8 2,182.5 2,326.7 247.4

South Australia 313.7 92.4 7.1 59.1

Total 3,577.3 4,323.7 4,675.1 2,508.5

Source: Global Trade Information Services; Australian Bureau of Statistics: http://www.export61.com.au/apple-pear-exports

Note: The apple industry was beset by the high Australian dollar, fierce competition from interstate and rising costs, bottoming out in the 2009/10 period. In 2012 Lenswood began exporting again, capitalising on a bumper season.

• For the apple crop to gain higher value chain entry, there needs to be intervention in the form of supportive policy and regulations by the SA Government. These should ensure promotion of EU quality standard produce, and agreements to brand and package on-shore.

• Attention should be paid to the increasingly sophisticated practice of food counterfeiting, which includes fake branding and labelling of Australian food produce such as cherries and Wagyu beef, and is extending to higher-end tagging such as fruit barcoding

• There should be closer policing of import QA practices.

3Estimated by Australian National Retailers Association, March, 2015 4 Master Grocers Australia, March 2015 5 Includes 80% of fruit picked as Class 1 fruit, excludes fruit for canning and juicing


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Australian export data for Apples and Pears are:

Apples

Financial Year

Apple export (proportion)

Apple import (proportion)

Apple export (tonnes)

Apple import (tonnes)

2002-2003 10.15% 0.01% 32,776.81 36.89

2003-2004 4.92% 0.00% 14,774.10 0.04

2004-2005 4.29% 0.02% 12,477.63 59.78

2005-2006 2.85% 0.01% 8,734.32 15.4

2006-2007 2.31% 0.02% 6,752.84 51.91

2007-2008 1.37% 0.00% 3,577.31 9.35

2008-2009 1.63% 0.01% 4,323.66 17.85

2009-2010 1.66% 0.00% 4,675.15 0.17

2010-2011 0.92% 0.26% 2,508.52 702.99

2011-2012 0.99% 0.11% 2,872.63 323.7

2012-2013 1.32% 0.15% 3,907.47 435.6

2013-2014 0.76% 0.14% 2,121.17 391.15

Source; Australian apple exports and imports 2002-2014. Source: GTIS, Department of Agriculture. Further information at: http://apal.org.au/statistics/#sthash.FRrPsurc.dpuf

Pears

Financial Year

Pear export (proportion)

Pear import (proportion)

Pear export (tonnes)

Per import (tonnes)

2002-2003 15.93% 0.94% 17,649.06 1,046.78

2003-2004 11.77% 1.86% 9,626.11 1,520.14

2004-2005 8.27% 3.15 9,935.54 3,787.99

2005-2006 8.28% 5.09% 7,937.14 4,877.35

2006-2007 4.17% 3.95% 4,444.08 4,210.65

2007-2008 4.92% 3.77% 4,541.29 3,473.61

2008-2009 6.04% 3.30% 6,150.63 3,359.80

2009-2010 6.80% 2.53% 5,937.45 2,211.22

2010-2011 4.80% 3.54% 4,826.26 3,561.23

2011-2012 1.89% 2.07% 2,361.90 2,582.33

2012-2013 6.28% 2.54% 6,598.00 2,671.00

2013-2014 6.66% 1.56% 6,975.00 1,636.00

Source: Australian pear exports and imports 2002-2014. Source: GTIS, Department of Agriculture. Further information at: http://apal.org.au/statistics/#sthash.FRrPsurc.dpuf


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Findings and Recommendations by VC Stage

Stage 1: Variety development and new trees

Australia is seen to pay the highest world price for trees but they have consistently been of very good quality. One breeder is seen as having increasingly inconsistent quality as they have shifted their focus from tree quality to profit in order to maximise royalties and minimise risk.

Trees are a large investment as they have a 5 to 7 year critical time path and a 15 year growth cycle. This requires a stable planning and regulatory environment for long term strategy, and long lead times for any changes, which is not currently a strength of the department.

Breeders agreed that one way to ensure quality is to breed and buy good tree stock and not oversupply the market. A good example of stock management is a new variety which is about to come on the market, where the tree supply has been tightly managed6 by both the breeder and the Lenswood co-operative. This was seen as a good example of the valuable role co-ops can play in the industry.

Stock improvement was formerly a recognised key support mechanism for the industry, with breeding programs publicly funded and margins calculated on the planting of new varieties to ensure orchard viability. Now breeding programs are privately funded, and to recoup their investment breeders have introduced an up-front cost for orchardists as a fee per tree which has to be paid pre-harvest.

Research and development was carried out at Lenswood Horticultural Research Establishment (HRE) in conjunction with SARDI’s Barbara Hall who was located at Urrbrae and consulted with growers on variety choice, multicrop viability and crop oversupply & undersupply. Lenswood HRE has closed and Barbara moved interstate, leaving a gap in local R&D and advisory resources.

Recommendations

• Ensure integrated planning and regulatory requirements regarding tree stock quarantine and import rules, variety and availability, with an emphasis on stable, consistent planning.

• As part of this integration, it would be advantageous to build in a community engagement process which allows for two-way information flow of problems and future potential changes.

• Variety stocking levels and breeding programs should be part of the high level plan which the recommended state body will oversee.

• There should be a strengthening of R&D and advisory capacity for the SA apple industry. This would ideally be at two levels, with advice from scientific experts in the relevant departments7, and a coordinated data bank held by the SA Apple and Pear Growers Association to allow access to research and advice by growers and other value chain stakeholders.

6 300,000 trees have been supplied to Australia and only six other countries are receiving the variety. Lenswood has the sole licence and will sell the trees through a business model which includes growing, packing and several other stages of levy in a flexible contract designed in league with the growers and breeders 7 These may include DEWNR (Department of Environment, Water and Natural Resources), PIRSA (Department of Primary Industries and Resources) and SARDI (SA Research & Development Institute)


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Stage 2: Growing and Harvesting

Picking and Loading

Administration and management of employment has increased considerably, with the differentiation between contract, casual and permanent status and the contract requirements of labour hire companies.

Penalty rates and schedules do not allow picking skill to be adequately rewarded or differentiated as everyone is paid the same rate. This makes new pickers costly and puts them under pressure. It is also unfair to those who pick fast and well. There was a lot of discussion on the merits of payment by hour, bin or quality; with examples as described in the interview notes below. There are seen to be advantages to lower initial picking rates, which increase over the first month.

The introduction of penalty rates is not suited to seasonal crop harvesting. It has meant that the hours are restricted (pickers not working on weekends or public holidays), or the costs are high with extra fees charged by the labour hire companies. This is an issue particularly for the bigger growers who struggle to get fruit harvested at optimum time because the pickers start too early and end too late. This affects storage time as ripeness at harvest ensures the longest storage time with quality retention.

The high level of regulation around use of labour has restricted the ability to get labour when it is needed. The rules around casual employment further restrict the ability to offer work to informal labourers such as backpackers who wish to work for short spells and move on. They are often skilled pickers, but are becoming scarce as they cannot get work even though the growers want to employ them.

Accommodation for transient workers is an issue. For those growers who wish to build accommodation the regulations around building and development make it difficult. There is also a lack of alignment between growers and regulators in regard to the standard of the accommodation, with one grower being told that the planned accommodation was ‘of too high a standard for pickers’. Permission was denied in this case as it was seen as potential tourist accommodation and thus requiring different licencing. The local council is also hampered by a lack of rural planning and title policy, and the current rules, which prohibit them from giving permission for such buildings.

Regarding accommodation for the transient workers employed by labour hire companies, the vast majority of these are foreign workers and many growers expressed concern about the standard of accommodation supplied by the contractor. Some said that they police this through direct conversation with the labour hire contractor, but they have little formal influence and this should be tackled with appropriate regulation

Recommendations

• Labour accommodation of adequate quality in seasonal crop areas must be recognised by decision-makers as a necessary part of the infrastructure for the industry.

• There should be more flexibility in terms of individual growers offering accommodation.

• Council should be delegated authority to handle accommodation requests and planning, as part of the 30 year greater Adelaide plan.

• Providing decent, non-crowded accommodation should be part of the labour hire companies’ contractual responsibilities, and this issue should be better recognised, coordinated and managed.


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Transport to storage

Please see stage 5

Business management

There has been a steady increase in the number and complexity of administrative requirements. These include multiple audit processes for supermarkets; a large rise in documentation in terms of compliance; service agreements; quality assurance; packaging; labour hire contracts and penalty rates; and red-tape concerning building and development regulations,. to the extent that some of the larger growers have had to hire a person just to cope with the paperwork.

Many of these areas are considered to be overregulated. Some have rules which greatly increase the administrative load for both the growers and the local council – such as the rule that new developments, buildings or other improvements which have not been anticipated by regulation or policy are automatically non-compliant.

The current system is seen to be the worst of both worlds as the regulatory processes are not of the ‘tick and flick’ variety, but neither are there good systems for dealing with local issues. There was often confusion regarding whether a blockage was at local council or state department level.

There is a lack of adequate coordination between these two bodies regarding regulatory and policy processes which directly affect growers and other value chain actors, with an inadequate level of decision-making power distributed to local council level. This increases both the complexity and cost of processes, and causes undue time delays. This issue is significant enough to warrant growers and some other value chain actors to hire people specifically skilled in contracts and regulatory processes.

Succession planning is not widely formalised, and is hampered by present regulations on handing down of property and of multiple dwellings on one land parcel.

Recommendations

• There is a need for capacity-building in order to ensure a viable and thriving sector, outlined more fully in the section on support services across the chain. Support and education is minimal in terms of business skills training and succession planning, and there is insufficient capacity for growers, co-ops and other value chain actors to influence, or advocate change, at local and state government level and in regard to the lead firms, specifically Coles and Woolworths.

• Revise regulations which block or overcomplicate succession of the farm from one generation to the next.

Land management

The region offers many advantages for growing a clean, green, high quality product. The climate is particularly suited to apples as the chill factor enhances flavour and ‘crunch value’, and the topography requires crops to be largely hand tended, enhancing quality further.

Various interviewees with technical knowledge on growing apples consider the farmers in the Adelaide Hills to have world-class knowledge and diverse skills in regard to land and water management, and crop quality and yield.


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Many interviewees described the area as in transition from farming to large-lot urban land use, and with this change comes the need to revisit many rules and regulations, including EPA watershed restrictions, policies on transfer of titles and a more nuanced ability to borrow against them, compounds for farming and different ways of dealing with rural housing on farms structured around payment for sets of services. The price of land in the Adelaide Hills region is high and acts as a blocker for new businesses to enter this sector.

Recommendations

• Consideration may be given to a state and/or local government section set up to rethink rural and urban land use, with an ideal opportunity to utilise consumer and planner groups which exist in the community (such as the Mount Lofty Ranges planners group). Such community engagement can inform, assist or actually shape state government policy reform

• A shift in emphasis from policy setting to planning strategy which leverages off local knowledge will result in different conversations and outcomes.

Planting and removal

As there is no option to have large machinery in the orchards due to the hilly terrain, trees are planted and tended in a different pattern which allows them to take advantage of natural light, winds and weather. This improves fruit quality and crunch value.

Planting and removal are problematic and administratively complex.

Growers must apply to the council to put in a new orchard or change the use of land (such as taking out vines or cherries and putting in apples) and the allocation of water is problematic (see below).

Recommendations

• Allow the Adelaide Hills Council more decision-making power in regard to such things as development plans, water allocation and regulation procedures, and industry restrictions.

• Support them to play an ongoing role in liaising with the lead firms in regard to upgrade activities and defrayment of costs and benefits (lower level recommendation).

Netting

Netting is a multifaceted issue for growers, local council and regulators. It is useful for combating pests such as flying foxes and birds and replaces loud guns or other audible bird scarers. It assists with chemical drift and lowers water evaporation by an average of 50%.

The colour of netting alters the light spectrum and has a large effect on quality, health, size and production levels of fruit, as well as the management of bugs and moulds, and some growth defects.

These factors, and the push for high quality export fruit by the government, supports subsidisation of netting as a cost-effective and mutually beneficial value chain upgrading intervention – as is the case in some other states, and New Zealand.

The New South Wales government subsidises 50% of net costs to combat flying foxes, a pest which is now threatening to become an issue in the Adelaide Hills (see pests below).


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Interstate growers do not require council permits to erect netting as they are deemed a temporary structure in states like Victoria. In SA netting is considered a shed (as their end poles are 5 metres high) and at one time this meant that an application for erection was charged by the metre8. After council lobbying this is not now the case, but the process remains long and complex, even when planners deem the nets as fitting the rules and the intent of the community.

The council officers have designed a generic process, but as yet have not gained permission to put this in place, leading to growers who can afford it using specialist contractors to handle the application process.

There was confusion in regard to the use of netting on tourist routes with some growers thinking it could not be used at all and others who said it was the colour that mattered.

Recommendations

• There is a need for education, consultation and communication regarding netting requirements and advantages, both for the growers and regulators/policy makers alike.

• The mid/long term benefits of subsidising netting should be considered in the changing ecosystem, both environmental and economic, and a $ amount should then be agreed to.

• Allow the local council to design and manage the process of netting application and installation, in line with the 30 year plan for greater Adelaide.

• It would be cost-effective for the government to run a formal education program on the use and effect of different netting colours on harvest management and maintenance. The current indecision around financial support for netting appears to be a blocker to such proactive education activities.

Pests

Major pests of orchards include lorikeets, insects, flying foxes and kangaroos (which break nets and ring-bark the trees).

Flying foxes and fruit fly require a coordinated effort across councils and even states. Flying foxes can migrate overnight from the eastern states, and one group exists in the Adelaide Botanic Park just near the zoo, on land that is under the jurisdiction of Department of Environment, Water and Natural Resources. The issue is complex as the species is also federally is listed as endangered and is therefore protected. This results in difficulties with regard to tackling the potential problem of colonies establishing themselves in South Australia, which would bring with it the issues which eastern states governments have regarding compensation of growers for both fruit loss and netting erection (see below for further detail).

Further complication arises due to the behaviour of the flying fox and the difficulty in controlling their populations and habitats. DEWNR in Queensland tried to "move on" colonies, with the result of those colonies splitting into multiple smaller colonies. An additional issues is their mobility, which would allow them to fly straight back to SA if the colony were resettled as far away as Queensland (they can get from Melbourne to Adelaide

8 One grower said that this is still currently the case in Waikerie, resulting in costs of up to $250,000 per application which the council then has to alter


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in 2 nights). Currently the pups do not cope well with this state’s extreme heat and they are not successfully breeding here. However, more are moving east from Melbourne, and when the pups fall out of the trees in the Botanic Gardens during summer there are many public and animal welfare supporters which rescue them. This is indeed a complex problem which requires cross-departmental and disciplinary collaboration.

Recommendations

• Pest control is a complex problem requiring an ongoing integrated approach between scientific experts who understand and can communicate the science behind the pests’ ecology and behaviours as well as how best to control their populations and habitats, and planners / regulators who are empowered to make changes accordingly.

• The government at state level can assist in an education campaign to make the public aware of the impact of such pests, and of their interference in the natural capacity for pests to survive and adapt to the SA environment.

Irrigation

Farmers/orchardists in the Adelaide Hills are generally very efficient water users, with growers managing flow and monitoring drops and increases.

Water issues include licence allocation and its historical basis, payment of metering, regulations and trading rules which do not differentiate terrains, set costs which reward inefficient growers, a lack of trust in the future allocation process and no shared understanding of the low-flow project

A major issue is the freeze on expansion which was put in place in 2005 when the water review began. The review has become prolonged to the extent that it is still ongoing, and the freeze on expansion has not been lifted for 10 years.

Water licences are thus one of the largest issues for growers. A water licence will only be issued to an existing orchard and thus any change or increase in planting is automatically non-compliant, making the process time-consuming and costly. The council cannot say yes to an application until they get approval for water supply from the regulators.

If a water licence is allocated, it is based on the historical water use of that land, and even with the most efficient forms of irrigation this creates difficulties when replacing a low irrigation crop with one which needs more water (apple trees need approximately four times more water than grapevines even with efficient irrigation). Thus the allocation is not based on the water requirements of the crop being planted and this limits expansion.

A number of growers’ water allocations are based on the retrospective amount used in 2001-2003, with no consideration by the allocator as to whether the orchard was in a setup mode or in full production (which makes a significant difference).

There appear to be two major themes concerning growers; the need to shift perception from water as free to something paid for, and the lack of true collaboration and information sharing in regard to making this shift. In regard to payment for water, the order of events was consistently described as:

• Being asked to have water meters to collect data (free of charge); • Having to pay for the meter ($30K);


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• Then paying for the yearly monitoring and upkeep ($9-10K); • Paying for the water.

A set amount is allocated which is not based on usage, but instead on an allocation of ~8.4 ML/ha of orchard grown during the period of 2001-2003. This is seen to reward less efficient growers and penalise efficient irrigators.

The policy allows extra water to be sold but in practice the land-locked topography prevents this.

There is also a lack of trust in the process, which leads to a concern that if growers trade water allocation one year, their amount will subsequently be cut

There is a set order of usage regulating ground and surface water which does not allow flexibility. In the Hills growers are often able to use all surface water due to the high rainfall but the rules prohibit such decision making. It is fixed due to the fact that legislation states that groundwater must be treated as a separate resource to surface water. One an allocation is assigned (along with the split between surface and ground water) and written on a water licence it is a legal allocation that is fixed. The only opportunity to change that split is when the Water Allocation Plan is reviewed, which is not for another 9 years. There is currently not the political will to change the legislation. The Barossa Valley are facing similar issues and some growers are mounting legal challenges around broadening the wording such that as long as you don't exceed your total allocation, how that is spread between ground water and surface water shouldn't matter.

Regarding the consultation and engagement process, there was seen to be a lack of information, discussion and research on the Hills aquifer system, borne out by such decisions as trading water which is landlocked, allocating standard amounts of water and then also allowing over-allocation as long as it is paid for.

The engagement process included an invitation to write to the department during the process with alternative views or questions, but some growers were still waiting for a response after four months.

There is a lack of shared understanding in regard to the low-flows project. Whilst the process is designed to maintain environmental flows to rivers and creeks in the catchment area, growers described the aim as filling up reservoirs, and thus they see it as a flawed process.

Recommendations

• If there is retrospectivity involved in water allocation, it should take into account both the stage of maturity (and hence water requirement) which the crop was at when allocation was decided on, and also the difference in irrigation requirements of the old and new crops.

• Set up a community engagement process which includes information distribution, discussion and decision-making such as the NRM community boards in the south east or the community consultative committees for the Murray Darling Basin water efficiency grants.

• There is an opportunity for the Apple and Pear Growers association and other interested parties in the Adelaide hills to work collectively with other regions such as the Barossa to mount a stronger case for changing the regulations governing water usage.


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Stage 3: Storage, processing and packaging

Co-operatives

The Hills sector has a strong co-operative system, strengthened over recent years with bigger growers consolidating with Lenswood Co-op to get efficiencies of scale, and to assist with upgrades9.

Some growers don't solely supply Lenswood, and also make opportunistic sales (particularly smaller growers who have fruit varieties other than those supplied to the large supermarkets). They also supply market or retail outlets on a small scale and/or sell through farmers markets. There were rare comments on equity challenges in terms of smaller growers squeezed in priority for packing.

At a strategic level co-operatives could play an even larger part in strengthening the brand of fresh fruit, and the perception of innovation in terms of other ways to use fruit such as Ashton Valley juices and the burgeoning businesses of fruit strap and cider.

The Hills produce great product and Lenswood is the only exporter of fresh fruit at present, with plans to target the Asian market with the new varieties being planted. A strong juice market pulls up the 2nd and 3rd grade fruit prices.

Role clarification

There was a lack of clarity and alignment in regard to the roles each co-operative could and should play, with many people wanting them to play a larger part.

Opinions varied about the role and value of co-operatives at present (often depending on the individual experience growers had with specific co-ops) but there was agreement on strengthening and widening the role of co-ops. When asked what people would like the role of co-ops to be, they envisage a body which is a voice for the large matters such as regulatory issues; policy improvement; rural and peri-urban planning; water regulation methodology; and the position of growers and producers in the export scene.

Coordination across growers and dynamics

Currently some of the dynamics appeared to be only loose connections between the co-ops, with little discussion or formal agreement on matters such as reciprocal storage, collective lobbying and other ways in which they could work together. There is great potential for the dynamics to improve, and with it the clarity and empowerment of the co-operative’s role in educating, aligning and strengthening the sector.

There were examples of the co-operative playing a very positive role in the sector such as installing specific packing equipment and managing the introduction of the Rockit apple, both of which are outlined in the discussion section below.

Regulatory issues

There are regulatory blockers to the efficient running and strengthening of co-ops, including the present structure which limits access to assets; the technical definition of a co-op; shareholder number requirements; and award definitions which increase co-op costs instead of supporting them to decrease costs for growers and producers (e.g. paying more for

9 Cam Stafford could have been a driving force behind this change.


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sorting and packing because a co-op is not defined as an orchard where fruit is picked on-site).

Recommendations

• Co-ops can present a very strong brand, perhaps the only one in the state for fresh fruit.

• Clarify the role of co-operatives in the region, ensuring alignment with other value chain stakeholders such as the Apple and Pear Growers Association and the potential state representative body.

• The discussion should clarify aspects such as advocacy and input on regulations and policy creation, rural and peri-urban planning requirements, water regulation, the position of growers in the export market, coordination between stakeholder bodies and opportunities / responsibilities for education and information supply.

• Explain to growers what the levy is used for as part of this clarification exercise, and whether the uses should change.

• Tighten the connections between co-operatives, and investigate the efficiency gains possible across the co-ops such as dividing up the different types of cold storage technologies to suit crop varieties, and coordinating storage overflow and technical plant facilities.

• Have a value chain stakeholder discussion between the co-ops and smaller growers on things such as scheduling, the management of boutique apple varieties, et cetera.

• There should be a discussion between the co-operatives and the regulatory body to work out solutions to problems with current regulations. These include structural and shareholder requirements which hamper operations, and awards which increase costs for the co-op and growers (instead of decreasing them) such as penalization for not picking on site.

Storage

The supermarkets’ QA compliance requires a ‘cool supply chain’ to ensure apples are kept cold right through to distribution, which requires high cost cold storage facilities and refrigerated trucks.

Coordinate who has what technology

Apples can successfully be stored for extended periods, allowing consumers to buy apples at any time of the year and for growers to get a regular income.

The quality of stored fruit depends on the controlled atmosphere, the methods and chemicals used to minimise degradation in storage, the type of apple and the quality of fruit when it goes into storage

Research and development have a large effect on outcome quality and the upgrading of the value chain on fruit quality, shrinkage, ethanol inhibition, techniques such as smart freshing.

Storage was seen as somewhat problematic in terms of co-op collaboration, due to a perceived lack of integration; affecting reciprocal storage of apples between co-ops and the need for a service to match storage methods across co-ops to different types of apple..


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Recommendations

• Attract R&D and justify it.

• Co-ops need a method of working together which combines cold storage methods best suited to each apple variety with logistical management of overflow between co-ops during good years. This would enhance the benefits the co-ops offer in the storage of fruit.

Packing

Packaging is an area that involves sizeable costs and set up for the growers and secondary producers, largely to comply with supermarket requirements.

Multiple packaging requirements push costs of presentation back to the suppliers, such as instructions to face up or turn fruit on soft cardboard trays, which are then put straight onto a shelf.

The CHEP crate system uses foldable black crates with a one-off cost for each, but a recycling system which allows producers to hold and cycle the crates on a weekly basis.

Recommendations

• Better agreement with supermarkets.

• Standardisation of some of the packaging and QA requirements.

• Lead companies to share costs of different packaging and presentation (face up).

• Labelling needs less onerous requirements (Ceravolo has a person full time).

• Market development, QA control, standardisation and consolidation needed – perhaps by the state body which then assists the co-ops to push lead firms, with government as part of it.


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Stage 4: Fresh fruit and secondary processing

Secondary products

The secondary producers in the Adelaide Hills pull the industry together by crossing multiple actor categories. They support local businesses and growers, and encourage good networks.

Fruitwise makes fruit strap, and has been sufficiently successful that they have just won a state government innovative manufacturing voucher to install a second dryer to increase production.

Purefruits (fruit pulpers) make a number of products including cordials, purees, sparkling carbonated drinks andvegetable juice. A lack of future supply could limit their production capacity.

Fruit pulp is currently imported to fill the 50% gap in requirements, but various stakeholders are worried about the validity of the QA certification this product is covered by.

The success of the boutique cider makers in the Hills has attracted the attention of the large producers and wineries who can afford to run at a loss until they dominate the market and render the small boutique producers unviable. They are now cornering the market by buying up fruit at inflated prices, which will wipe out the small cider makers, and also negatively affect the strap and puree fruit makers.

Current regulations act in favour of the large producers and winemakers, offering no support to the budding niche industry, and enforcing costs and time delays on the small producers which the larger actors do not attract.

Regulations make it problematic to gain liquor licences, produce more than one product, have tastings, et cetera, and they minimise innovation and value-adding in the value chain at local level.

Recommendations

• As part of the state government’s civic responsibility, there needs to be coordination between policy and regulatory bodies to support the nascent cider niche market which is establishing in the Hills region as a high value innovation in the value chain. The larger actors entering the value chain should be required to act in its best interests. Until there is agreement on sharing the profit and costs of the cider market which the small manufacturers have established, there should be restrictions placed on the large value chain actors.

• Allow local council to work with these businesses to work out simpler way for them to do things like tastings and production of other products – adding value to the product.


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Stage 5: Domestic retail channels/export

In terms of the government role in domestic markets, support was requested for local small businesses, as covered elsewhere, and a general improvement in logistics planning and infrastructure.

There is a lack of opportunity and mechanisms to identify and manage internal collaborative opportunities and competition, price setting and sustainable practices for the environment and the industry.

Supermarkets currently are not part of a whole of value chain discussion on the effects of sharing costs and benefits, standardizing QA and other requirements for packaging, labelling, presentation and storage. These activities greatly increase the cost of production and packing, but do not return any profit. Further, the lack of participative action lowers the capacity and will for innovation to occur along the value chain.

There is currently no mechanism for evenly distributing the costs and benefits of changes and innovations to any part of the value chain.

Recommendations

Supermarkets need to be brought into participative value chain process as the lead actors in the chain. Instilling a successful participative value chain approach will increase the sustainability and innovative capacity of the industry as a whole.

Transport

Roads are frequently not suitable for the large trucks needed to haul bulk produce to the supermarkets, and the local council is currently not empowered to manage such activities as route planning for trucks.

There is a lack of infrastructure orchestration and logistics planning across jurisdictions concerning such matters as tree cutting and road upgrading. There is little or no coordination between different bodies responsible for tree trimming, and it is often not done properly so trucks risk constant mirror breakage unless they drive in the middle of winding roads, which is dangerous.

Trucks now have to be refrigerated at high cost to the owners as part of the cool supply chain process, but as noted above supermarkets do not then comply with refrigerated storage.

Recommendations

• Investigate local topography and road capacity in order to better plan the optimum routes for trucks going through towns before entering the freeway.

• Clarify and coordinate jurisdictions around issues of who trims the trees (local council or the power company/utility), and who upgrades the roads for heavier traffic load..

• As part of the process of upgrading the value chain, there needs to be discussion with the supermarkets as the lead actors to share the costs as well as the benefits of the cool supply chain, and ensure it is practiced across the whole value chain.


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Export

Growers and producers regard export as an area with potential for improvement in many areas. Lenswood currently are the exporters for the regional crop, with 5% being sent overseas. It is acknowledged however that this is a complex area.

The fruit quality is high, adhering to European standards, which value chain actors considered is a huge selling point that is not being leveraged.

The other side of this is the high cost of growing such fruit (including hilly terrain, flat minimum wage, on costs such as electricity which can be ten times higher than the subsidised American growers’ costs). In order to recoup such costs, actors considered that the fruit should be pitched at the top end of the market.

There are insufficient contract regulations to support value-adding in terms of packaging and handling of high quality fruit, with most agreements allowing bulk export, and some allowing charge back of packaging costs if the importer says there was rot in the fruit (thereby cancelling out their packaging cost of importing the fruit, and allowing them to potentially re-brand the fruit).

There was concern expressed that there is insufficient rigour around imported fruit meeting RDA standards, with specific examples of non-compliance from China put forward by growers who have been on trade trips.

Recommendations

• Need an integrated plan with better understanding at all levels (growers, state body, co-ops, and government) of issues around exports, covering areas including export markets, contract regulations, and QA practices in import countries.

• Government bodies need to more proactively work with growers, and potentially the state body, to promote fresh, high quality product into the export value chain at a higher value level.

• Includes better agreements with importers, preventing them from charging the cost of packaging back on Australia if they make the excuse that they have to unpack goods upon arrival.

• There needs to be a study carried out on managing the costs of entering the export markets without critical mass and volumes, with appropriate support from the government to establish the regional sector presence in those markets.

• Maintain high quality standards and visibility of QA practices to ensure growers and other value chain actors can see that countries which wish to export fruit to Australia meet FTA standards.


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Support services across the chain

A major requirement in cross-chain support is that of capacity raising to ensure a viable and thriving sector. It includes offering opportunities and resources to improve business skills, define and meet training needs, and foster and support succession planning.

There is a need to strengthen the influencing capacity of growers and other value chain actors10. This will be assisted by government playing a stronger role in getting the lead companies to the table, but the growers and secondary producers also require skills and influencing capacity in regard to value chain actors and other stakeholders such as policy makers, regulators and local council.

A number of growers and producers had travelled overseas and read widely in regard to innovative agricultural practices (crop management, netting, organic farming) and secondary production.

Business skills identified as requiring strengthening by various value chain actors included logistics planning, managing internal competitive and collaborative opportunities, planning for business and environmental sustainability and adaptability, and business accounting.

There was not a clear understanding or awareness of assistance options available in terms of information or assistance from government and third parties. Bodies such as the RDA have staff churn due to contract employment which minimizes relationship building with people in the industry, and thus an understanding of how they may assist.

Succession planning was another key issue concerning ongoing capacity to run the farms, orchards and budding production companies. Many of the problems concerned regulatory stumbling blocks or penalty costs (such as change of ownership) and council regulations concerning multiple dwellings on the farm or orchard property11. This is a critical issue as over 85% are family businesses and the farmers are an ageing demographic as fewer members of the younger generation are taking on the family farm12.

APAL offer some support services including a national extension program called Future Orchards13, and a yearly visit by the CEO and Chair of APAL to meet with growers over two days, as well as regular correspondence.

There appeared to be more scope for bodies including the local council and the RDA to interact directly with the area’s value chain to assist with the implementation of a strategic level regional plan as well as ongoing operational assistance.

It should be noted that there is an organisation called the Horticulture Coalition of SA, which is formally only 2 years old and evolving all the time. The head of the Apple and Pear Growers Association of SA inc is the current chair of this group (as the apple and pear

10 This is a consistent theme in reviews such as Andrew Fearne’s 2009 review of sustainable food and wine value chains noting a need for basic business skills (particularly marketing) amongst primary producers in South Australia 11 Notably council staff consider that this should be changed as it is another example of the need to redo all rural policies to better balance the blurring of township, urban and peri-urban policy needs 12 See the industry sustainability plan for 2013 and beyond, prepared by Susie Green on behalf of the apple and pear growers Association of SA 13 A program to help growers improve their orchard practices with activities in the 8 main growing regions of Australia, including the Adelaide Hills. They hold 2-3 workshops/orchard walks here per year, where they bring in different national and international experts, and have 2 Focus Orchards – in Lenswood and Forest Range


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growers representative) and it represents 14 horticultural groups within SA. Its reason for existence is to act as a single voice for horticulture on the issues that are common to all value chain actors and other relevant stakeholders (eg water, biosecurity, labour). Over the past 12 months this organisation has significantly strengthened relationships with government and now has a seat on Primary Producers SA (the SA Farmers Federation replacement). There is also a nascent but promising trend for the Minister to receive requests from industry players to be funnelled through this group.

Recommendations

• Explore an integrated program which is aimed at increasing the influencing capacity of the growers and other value chain members such as co-op owners and producers, including the ability to influence:

o Government regulators and policymakers

o Local council

o Other supply chain actors, especially lead companies such as Coles and Woolworths

o Customers

• As the ability to influence is two-way, although industry members need to build their skills in influencing, collaborating and communicating relevant information and issues, it is just as important that government at all levels ensure mechanisms for access by value chain actors. This should be in various forms, including a voice mechanism which allows for the acceptance of relevant information which will help shape regulation and policy, and the distribution of information and knowledge.

• Regular visits by departmental staff (central or local) will improve not only community engagement and trust, but also understanding and policy design quality on behalf of government.

• As noted elsewhere, consideration should be given to coordinating and integrating a state body across the value chain and out into the support networks. There is a strong argument for leveraging the growing capacity and profile of the Horticulture Coalition to allow them to play a key role in some of the higher level negotiations noted throughout this report.

• Similarly, as noted elsewhere, ensure R&D support is available across the value chain.

• The role and presence of the RDA should be considered in the light of it being well suited to community co-design of support and upgrading activities. This would be further improved if local council also worked as part of this co-design process as all bodies would then be able to holistically manage the local implementation of the 30 year regional plan.

• Investigate ways to increase coordination between APAL, the growers association and the potential state based association.

• Provide training and development for business skills for chain actors, particularly the growers and secondary producers. Include succession planning.


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Challenges

Supermarket QA compliance requires a ‘cool supply chain’ to ensure apples are kept cold

right through to distribution, entailing high cost cold storage facilities and refrigerated trucks.

However, the cool supply chain is then compromised by the supermarkets by allowing the

fruit to sit at room temperature, where it loses quality, and while part of the risk is borne by

the retail outlet in terms of lower prices, some costs are passed back to the grower and the

brand can be adversely affected.

Getting competitive companies working collaboratively is also a challenge as there are still

some segments that are quite competitive or independent. Lenswood’s biggest ‘competition’

is Ceravolo who also have Ashton Valley Juice. A lot of Lenswood Juice goes interstate rather

than going to Ceravolo.

Variance in quality standards from major supermarkets and for export is a challenge

depending on who is being supplied. Growers spoke of fruit being rejected which was exactly

the same as other batches which were accepted, and when they sent the same batch back it

was accepted with no problems. Two possible explanations are that there could be different

quality checkers or the supermarket is using this system to manage supply.

Cost sharing down the chain is currently not something which the value chain actors discuss,

creating a lack of visibility and understanding along the chain, and little capacity to

investigate the advantages of better defrayment of both. A common pattern is that small

increases to growers make a significant difference to their viability, and savings are found

which make the redistribution of costs negligible to the larger players.

Regulations affect a host of value chain dynamics including the cost of production and

distribution, and the share of costs and returns along the chain. When designed in

collaboration with value chain actors they are an enabler of increasing capacity and adding

value, partly by dealing with resistance or unawareness of lead actors.

As examples, there is little general awareness of the management or value chain effects of

the duopoly of Coles and Woolworths; the introduction of Aldi and the sourcing of cheap, low

grade apples; the role played by fruit and veg stores and the potential rewards for growers

setting up direct supply relationships with these stores; whether the pricing research carried

out by Horticulture Australia is taken into consideration when discounting fruit14.

In the current duopoly the feedback depended on individual relationships. Coles was

perceived as difficult but improving in parts where they gain a better understanding of supply

chain. Woolworths was seen as better to deal with in various ways. There is a trend towards

direct supply relationships, and secured contracts were seen as potentially more favourable

for growers. Woolworths are good payers, and were often seen as “more reliable and

organised than Coles”, and there is a better information flow around such things as what is in

storage, and better management of volumes throughout the year.

14 They found that there is a threshold below which prices should not be cut as there is no benefit to either store or grower because the customers view the apples as low quality and don’t buy them.


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Coles and Woolworths don't allow the Lenswood stickers on individual apples, but Aussie

apple stickers are allowed, and there are some pre-packaged branded Lenswood products.

The large stores only like to run about 5 varieties at a time (citing shelf space as the major

issue) and this forces supply into only a few lines. Lenswood is pursuing export as a way of

bringing another player into the market.

The independent grocers are dealt with directly so there are not the same challenges as

above, but understanding how all of the actors fit and interact along the value chain would

greatly benefit the capability to increase value along the chain.

Recommendations

• The cool supply chain needs to be consistently implemented across all value chain actors, requiring supermarkets to cool-store apples and display them on cold racks as a minimum compliance.

• Quality standards should be discussed in terms of high level standardisation across buyers, and also more localised issues such as the current level of variance at the supermarket end concerning how the standards are used to reject or accept fruit.

• Investigate how best to set up the process of participative value chain discussion – considering the role of growers associations, co-ops, a new state body, council, and government bodies such as the RDA or regional NRM board / community council.


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Output from stakeholder interviews and discussions

At whole of industry level

There was an overarching theme which came through during many of the discussions with interviewees, whether they were growers, producers, local council members, or heads of co-ops and growers associations. It concerned the need to work together better at a whole of sector level. The Adelaide Hills apple industry is highly supportive of local businesses and keeps local families involved in the Hills, but there is not enough focus at times on the big picture of advocating for the industry and also enticing the next generation into the industry15. Advocates such as Suzie Green, the head of the Apple and Pear Growers Association are seen as invaluable, but they need to be plugged into a larger body such as a Hills Growers Alliance which would also support co-operatives and tackle the big issues such as the security of supply of oil, water and electricity, the potential for innovations such as a biodiesel plant16, or the harnessing of the plentiful supply of wind and salty water. There could be stronger, more coordinated promotion of the industry, with potential exploration of clustering. There could also be a research resource which monitors and advises on such things as global planting trends17 and potential market over-supply.

This high level view of the industry would inform and help to shape a ‘30 year plan for greater Adelaide’ envisioned by various value chain actors such as local council staff. This is needed to redesign and consolidate the present array of policies which cover townships, urban, peri-urban and rural areas which are merging together in interesting ways. It would create a framework around which to align policies and procedures; development plans and water regulation; secondary production and clarity of responsibility for infrastructure; and the role and responsibilities of large players such as supermarkets and co-operatives.

Individual trending issues by priority

The following are summaries of the trends which have emerged through discussion with actors all along the value chain, particularly the growers, cider makers, fruit juice and pulp producers, the local council, regulators and consumers.

15 Tony Ceravolo hosted a dinner for the younger members of the industry and there were many people who attended. He considers that one of the uses of the levy should be to excite the next generation about staying in the industry, as his own children have done with great success. 16 With backing a 1000 hectare algal pond could this produce a viable industry 17 As an example, Washington’s huge investment in red delicious along with their marketing capacity is a serious threat to Tasmania


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Government

Planning

Planning was the major theme with regard to government interaction, including aspects such as logistics for local production, plans for developments and requirements of local councils, the quality of planning regarding land and water use and other aspects such as succession planning and handover for individual growers and producers.

Red tape

There were many issues regarding the amount of red-tape involved in areas such as building and upgrading approvals, netting, changing or increasing crop plantings or trying to innovate by diversifying activity on the farm. A consistent theme throughout is the long and drawn-out process for approval which was described by one person as “the worst of both worlds - there is no tick and flick process but neither is there a good system for looking at local issues and weighing up planning requirements.”

Many growers commented on the need for a simple, streamlined process to plug into which allows for such things as improvements or upgrades as the default mode, whereas currently everything is seen as a change of plan and the process takes many weeks. Building approvals to erect sheds were a problem for many growers even if a new shed is going to be placed where there is currently an old shed.

Netting was another example of planning difficulty as erecting nets over fruit trees is seen as the same (in policy terms) as erecting buildings. Anything with end posts over 5 m in height is regarded as a structure and therefore needs permits and approvals. It was pointed out that interstate growers do not require council permits to erect netting, or they get assistance in some states, which also occurs in New Zealand.

The need for a high-level development strategy

Nearly all of the different stakeholders interviewed consider that one of the major problems with what is seen as a scattergun approach to planning is the lack of a high level, whole-of-government, 30 year plan for greater Adelaide which reflects an understanding of agriculture and acknowledges the level of income which is produced18 Interestingly, when interviewing the local council officers they also described many changes which they consider should be made to policies which cover rural, township and urban, and peri-urban areas (see below). The lack of an overarching plan means that areas which connect or overlap in the value chain network are treated individually, such as:

• Where domestic and exporting activities fit in the plan

• How infrastructure and council can co-create building and development regulations and rework compliance issues

• The lack of connectivity between state government, local council and community groups and residents

18 ABS statistics show 50% income from mining, 37% from farming and 13% of all else, yet stakeholders see the 13% as where the government concentrates its efforts compared to the 37% of farming


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• How policies on water, land use and transport can better support the industry (see below)

• The effect of investment, payment schedules, pricing and contract labour on viability

• The role and management of supermarkets as monopoly buyers

• The potential role of co-ops as a consultative and supportive body which could strengthen the agri-practices and innovative capacity of the sector if they were so positioned

• The lack of long term vision around sustainability in terms of succession planning and handover policies

• The importance of R&D support in maintaining and improving sustainable agricultural practices.

Regulations

Regulations was the next largest area of issue, with discussion on compliance requirements and their fit with practical farming; the level of over-regulation, rules which drive the system the wrong way, including water regulations and policies; and those which increase work for little benefit, such as automatic non-compliance. Regulations limit co-op structures and penalise them in regard to award wages because they do not pick on-site; they enforce the growers requirement to refrigerate produce for supermarkets, but not the supermarkets

themselves; and they present conflicting rules around such things as netting, storage, and domestic and export market practices.

Leverage point

A common theme across all stakeholders from growers to local council was a need to review and update regulations and industry restrictions in order to make them more practical and to allow growers and producers to innovate. Interestingly, when all findings were drawn up as a mind map the regulations bubble connected to more than any other bubble on the map which shows it to be a powerful leverage point. This means that effort focused in the area of improving regulation setting and design will have the greatest effect in supporting and improving sustainability and upgrade activity in the Apple value chain.

Over-regulation

Many growers described the steep rise in documentation and paperwork as a significant burden, so much so that Ceravelos needed to employ a person to look after it. Paperwork spans ongoing planning and development applications as anything not anticipated by regulation or policy is automatically non-compliant, and the daily upkeep of such things as labelling; packaging; supply chain information systems (the ‘Muddy Boots System’); crate bookings; contact and wages administration; transport; and supermarket QA paperwork. If any growers are also producing value-added products such as cider or food products there are many regulatory hurdles regarding food and liquor licences and even special licences for tastings at a local market which the larger manufacturers do not require (see below).


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Wages and Penalty rates

Changes to payment schedules, penalty rates, hours of work and other rules regarding labour have created many issues in terms of who can pick, when they can pick, how much they earn and where they are sourced from (as set out below in detail), as growers are increasingly restricted in hiring pickers when they need them during harvest and paying fair rates for high productivity.

Policy

“Policies should be there to maintain and improve farming”

(Adelaide Hills Council officer)

A number of the issues regarding policy directly relate to those of regulations, but specific areas for policy included the long lead times involved in planning and development activities. When combined with

the lack of integration with council regulations and development needs, there was a high level of frustration that the industry is not seen as a connected system. This was also fuelled by a perceived lack of understanding of the effects of policy decisions on both individuals and the sector, as policy design is not through a ‘talk and support’ method but instead a decide and sell approach. All of this becomes critical when combined with the long lead times which farmers face (commonly 5-7 years before productivity is achieved) which makes it imperative that they can make strategic business decisions. A good example is the review of water which started in 2005 and put all expansion on hold. The review is still not completed, leaving in limbo the farmers who are trying to invest in their business.

Growers and producers gave a range of examples of policy changes having a negative effect which could have been better managed – they included:

• The impact of life-stylers and hobby farmers on their ongoing business

• The mounting issues around wages which growers are battling with, but policy is very slow in dealing with

• The increase in electricity service charges (17%) when farmers invested in solar panels which made them worse off

• The confusion around netting (applications, costs, colours and location) which is often essential to crop quality

• The complicated situation regarding labour use, payment, accommodation and sourcing

• The need for differentiation from Australia-wide status regarding fruit fly

A consistently made point was the need to get growers together and listen to them in order to work together on issues and co-create the answers. There was a sense of having to scream about an issue in order to be heard, and it was then adversarial and reactive. Instead, because policy takes so long to enact or change, they want community engagement processes which allow them to flag issues coming up so they are not “behind the eight ball while policies catch up”. This point continues on directly in the next theme.


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Consultation (the lack of it)

The next largest trending issue in regard to government was the lack of consultation. There were a few examples of good quality community engagement such as the Murray Darling water allocation community groups and the Murray Darling Basin water efficiency grants (indeed, over the course of the interviews, many growers talked at length of their own water efficiency practices, and the

state of the art potential the area has with better information and education on both sides of the process). However, even in cases where there was agreement to a process or policy change by the community, there appeared to be a disconnect when this outcome went back into the ministerial realm to be formalised, resulting in long delays, and too often, in reworking of recommendations with no follow-up consultation.

Most of the discussion described the problem of lots of consultative process but very little true consultation. Most formal consultation was seen as a sell job for decisions which had already been made, and there was genuine frustration at the lack of a practical avenue by which to engage policymakers and regulators around the impact of changes to local operating logistics, land-use planning, water management, decisions on domestic and international business opportunities and expansion.

Areas for engagement

Another area of two-way engagement which was seen to have huge potential benefit was in regard to exploring collaborative opportunities and managing competition in both domestic and export markets. There were many areas in which two-way, ongoing discussion with regulators would result in a much more robust understanding of the potential support and upgrading which could be given. These areas include:

• Internal competition between small and large cider makers

• Competition with imports from countries with different attitudes to FTA requirements

• The need to better support secondary producers and products

• The possibilities for grower-to-consumer collaboration in terms of products packaging and delivery

• The need to protect new innovative producers’ supplies of resources such as 2nd and 3rd grade fruit which the large producers are buying up to corner the market

• The need for supportive regulations and resources around exporting as, whether the product is high quality fruit or a value-added product, SMEs need different types of assistance depending on what type of value chain they are entering

• Improving the co-op model to strengthen their role as capacity builders, integrators and risk managers

There were many other areas which appear under their own headings, but the major idea was the consistent lack of capability for government bodies to engage in true community engagement in a meaningful way that allows both parties to gain a greater understanding, and enables the sector to benefit. People are extremely keen once they trust the process, and there was much positive comment on the government funding the face-to-face consultation employed in this value chain analysis.


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Local Council

Though aspects of local council issues or assistance are dotted throughout the findings, it is worth bringing some of these aspects together to examine the potential increase in their role and involvement. The role of council was an interesting area of discussion and also misinformation, with little clarity around which regulations were enforced by which body (government

department or local council), and also a refreshingly high level of understanding from council officers regarding the problems which various rules posed to orchardists and producers.

In short, whilst the council can be a frustrating body to deal with when orchardists and producers wish to expand, improve or upgrade, due to our government structure they are often ‘piggy in the middle’ and are blamed for delays and rules which are not of their making. They also gain an accurate picture of things which impede progress from their embedded position in the community, but there is little interest and no avenue for this insight to be fed back and harnessed by government policy makers and regulators.

Council officers had many examples of policies and regulations which cause problems rather than support value adding activities. Many of the development plans are weighted towards wineries, resulting in various industry restrictions in the making and selling of cider. Farmers are over-regulated, with rules around everything from major transitional improvements such as solar power through to baking and selling apple pies. The non-compliance default position should be replaced by an impact based assessment, with standardised procedures to cover normal upgrading and maintenance. Even on a small but important scale, in today’s economic climate three incomes are needed to run a farm, with a third income from value-added produce, yet policies which cover rural areas place restrictions on baking pies on an orchard or making cider as only one agricultural product is allowed. Water regulations and policies were also seen as problematic, such as some water models and estimates considered to be inaccurate, and the large administrative burden produced by automatic non-compliance rules and the historical nature of water allocation.

As an example, if an Apple orchardist wants to plant apples on an existing vineyard they must apply to the council, but the council cannot say yes until they get approval for water from the regulating body, as such a change is considered non-compliant even though the irrigation and infrastructure is already there. The regulators will only give a water licence if an orchard is already there so there is a delay as it was a vineyard, and when permission does come through, the historical allocation of water means the farmer will only be allocated the amount of water which the vineyards required, a considerably lower amount than that needed by apple trees. The orchardist will blame council for both the hold-up and the meagre water allowance, and council has no influence on the regulator’s decision.

From their sandwiched vantage point, Council officers interviewed articulately describe the overarching problem of the lack of a 30 year plan for greater rural Adelaide, and above that a high level agri-plan at Federal government level which does not reflect the potential generation of high income from agriculture as shown by the 37% of income listed above. At the state level there is seen to be much potential for the better management of such issues as planning and regulations; water; netting; transport; the integration of neighbouring hobby farms; and the role of co-ops by allowing local council who are embedded in the community to play a larger role and to involve all local stakeholders in both discussion and decision-making.


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Export and Domestic Markets

A number of growers and producers regard export as an area with potential for improvement in many areas. Both exporting and importing were discussed in terms of a need for greater clarity and understanding of the complexity involved, as there is little evidence of an integrated plan to manage it. Aspects to manage include packaging agreement issues, managing the cost of entering markets

without critical mass and volumes, education of SMEs and also greater understanding by government officials of the regulations and policies of both import and export markets.

There was a consistent view of a need to increase value before a crop is exported, and that this requires not only a strong push by the government, but as part of that push, accompanying supportive regulations and resources. Examples were given of packaging agreement problems such as importers repackaging fruit and passing the costs back to Australia saying there was rot in some of the fruit, and US importers saying that they have different regulations for packaging and therefore do not want apples packaged but shipped in bulk. This makes it cheaper for them to buy and they add value by packaging in-country (see packaging below).

This raises the associated problem of shipping in bulk, which gives some flexibility to meet market demands, but makes packaging sheds here redundant and limits value adding by clever packaging and marketing of high quality fruit. It was seen as important to keep export quality high as the Adelaide Hills has little flat land and high water and electricity costs19, but growers produce a premium product which will attract high prices providing there is a clever and consistent marketing approach, and they wanted the government to strongly support the Apple industry’s entry into global value chains at a higher value level, and maintain QA standards of imported fruit as some growers described having witnessed illegal practices on education tours, leading to concern over the gaps and lack of transparency in global regulations.

Domestic markets

Much of the discussion around government’s role in domestic markets concerned support for local producers and farmers, and better logistics planning and infrastructure. These areas are covered under other headings, but included the need to manage internal competition as well as collaborative opportunities; to compare apples with apples in decisions on competitive imports (i.e. not just price); to factor in food safety and sustainability both for the environment and the industry; and to better orchestrate infrastructure and logistics planning for such things as road upgrading, tree cutting and route planning.

R&D Support

For many years the Lenswood horticultural research establishment worked in concert with SARDI’s agricultural branch dealing with apples and pears, located at Urrbrae. These bodies carried out local research on sustainable agri-practices which included not only crop maximisation and variety choice, but also water catchment and run-off, drip systems, land management, and technical and chemical improvements and innovations.

19 In the USA and Italy costs are approximately half, with some parts of the USA having electricity costs of 3 cents/kW compared to our 35 cents/kW


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They could also advise on best practice export methods, multi-crop viability (with Barbara Hall as a multi-crop specialist who spoke to Apple growers), potential oversupply and undersupply of crops in domestic and overseas markets, and which attributes marketers should promote to increase the consumption of certain fruits such as cherries or pears. Stock improvement was a key support mechanism for the industry, with breeding programs publicly funded and margins calculated on the planting of new varieties to ensure orchard viability20.

At its heyday there were 60 SARDI researchers based in Loxton, which has dropped to a couple of farmers and one scientist. Lenswood has now been closed and SARDI restructured into certain fruits in certain states21, and both research staff and growers have noted the dissipation of expertise and the dropping level of local knowledge.

Infrastructure

Water

Water was by far the largest point of discussion regarding infrastructure, covering water licence issues and the historical nature of allocation; payment of metering; regulations which don’t differentiate terrains; set costs which reward inefficient growers; water selling practices which do not suit Hills conditions; anxiety regarding the loss of water allocation if it is not all used; and a low level of understanding by regulators of run-off catchment.

A major issue for many growers was the severe impediment to expansion over the last 11 years due to the Water review which was started in 2005, is still ongoing, and which put all expansion on hold. Growers were frustrated that the government did not revoke the blanket no expansion rule once it was obvious that the review was going to be prolonged, and are dumbfounded that this has remained in place ten years on.

Water licences

This was a constant talking point with many complex aspects. As noted above, one of the main problems is the historical nature of water allocation. People have to apply to the council if they want to put in a new orchard or change the use of land such as taking out vines or cherries and putting in apples. A water licence will only be issued to an existing orchard and thus any change or increase in planting is automatically non-compliant, making the process time-consuming and costly. Furthermore, the council cannot say yes to an application until they get approval for water supply from the regulators.

If a water licence is allocated, it is based on the historical water use of that land, and even with the most efficient forms of irrigation this creates large difficulties when replacing a low irrigation crop with one which needs more water – such as replacing vines with apple trees which need approximately four times more water,even with efficient irrigation systems. A number of growers pointed out that when they were allocated water based on the retrospective amount used in 2001-2003, there was no consideration as to whether the orchard was in a setup mode or a full production, and this must be taken into account.

20 Breeding programs are now privately funded and the breeders want their money back, introducing an up-front cost for orchardists as the fee per tree which must be paid pre-harvest 21 Apples and stone fruit have now been centralised in Victoria, with this compartmentalisation being driven through the PISK agenda


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Water allocation and metering

Water has changed from a “natural resource” to something which is paid for and metered, with many rules and regulations surrounding how this is put into effect; and with too little consultation on the design of such rules for a number of growers and producers (see below). There is now a minimum charge on an allocated amount of water (100 megalitres), whether this amount is requested or not.

If more water is used the orchardist pays for the extra water or is fined, and if less is used there is an option to sell the water on in order to try and recoup the cost. This is problematic in a landlocked Hills situation - in short it does not work, and this is an ideal example of a lack of consultation, resulting in a one size fits all rule which fails to differentiate between terrains.

Another issue concerning the allocation of a set amount of water is that it does not reward those who use water efficiently, and instead encourages the whole amount to be used, reinforced by the difficulty in trading or selling allocated water, and the suspicion that if all of an individual allocation is not utilised there is a chance that the farmer/orchardist will be allocated less in the following year. There is also a suspicion that if a grower is in a position where they can sell part of their water allocation this will cause a downward correction in their following allocation so they prefer not to do it. On the other hand those who use all allocated water will ensure a full allocation going forward, so this is what is reinforced.

Regarding metering, there was as much disquiet around the method of introduction as the activity itself. Originally meters were to be installed in order to increase the amount of information around water flow and aquifer replenishment, and the meters were free. The land owners then had to pay the cost of installing water meters (an average of $30,000), and to this was added regular on costs of $9,000 - $10,000. Next came payment for the water itself.

Consultation and communication

Farmers/orchardists in the Adelaide Hills are generally very efficient water users, with many growers trying to get the flow correct and monitoring drops and increases. Additional information concerning the viability and health of water supply is of interest to all of them, and as with other successful community engagement processes around changing access to natural resources this group would have been interested in having information- and research-based discussions in order to judge the state of water availability. Instead the consultation meetings were not seen as consultative or informationbased. Some growers said that inadequate evidence was presented to prove the aquifer will be better if the growers are charged for water as catchment in the Hills aquifer system works differently to that in the Riverland which acts as one major source. It was also seen as nonsensical that growers could still have over-allocation as long as they pay for it. Part of the consultation process was a letter outlining water allocation with an invitation to write back with any disagreement. Some growers said that they did write back and four months later still had received no answer. They blamed the council, commenting that it needs a wake-up call, but when discussing water allocation with the council it was pointed out that they are dependent upon the regulators, as noted in the local council section above.

Ground and surface water

This was another area of contention as there is a set order of usage worked out for each grower which regulates ground and surface water but which does not take into account the complexity of environmental systems. The split between surface water and ground water


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allocation is fixed and does not allow for flexibility in use between the two resources for different seasonal conditions, which is especially frustrating in the Adelaide Hills as growers are often able to use surface water alone especially over winter and the regulations prohibit such judgement. This is seen as another example of a lack of consultation and rules which favour vineyards or flat land usage such as the Riverland.

Low flow system

Similar issues of a lack of consultation and information were obvious concerning the low-flow theory of water catchment which requires the landowners to direct water around their dams. This process is designed to maintain environmental flows to rivers and creeks in the catchment area which have dwindled with more efficient water harvesting, resulting in longer no-flow periods, which cause a decline in catchment health and the disappearance of fish, plants and animals which are dependent on it.

However many of the growers consider that this has been put in place to fill up reservoirs, and therefore they see it as a waste of time due to huge levels of soakage en-route, and a method which results in poor quality water from not allowing the first day of run-off to go into the dams, thereby depositing higher levels of mud and algae. An added issue for the growers is that their dams do not get cleaned by letting increased water flow into them, thereby lowering the quality of their own water and silting up the dam.

With such an emotive and complex area as water management and usage there needs to be a high level of consultation, information distribution and discussion. Examples of this being done very successfully included the Murray Darling Basin water efficiency grants and the community consultative committees which were part of the NRM22 board structure.

Packaging

The next largest priority regarding infrastructure concerned packaging, an area which involves sizeable costs and set up for the growers and secondary producers, largely to comply with supermarket requirements. Many of the packaging requirements are specified by Coles and Woolworths, and because they are different, this increases costs with each supermarket chain added to a grower’s supply chain. There were pros and cons

regarding each of the big supermarket, with Coles at one end of the win-lose spectrum, Woolworths in the middle and Foodland/IGA the most centered on a win-win outcome. Coles is inflexible regarding multiple packaging requirements, pushing maximum costs of presentation back to the suppliers, such as instructions to face up or turn fruit on soft cardboard trays which will then be put straight onto a shelf23. On a positive note, the CHEP crate system which Coles operates uses foldable black crates with a one-off cost for each, but a recycling system which allows producers to hold and cycle the crates on a weekly basis. Coles also have an order cycle with little flexibility, but that does mean that growers can plan supply needs in advance.

22 The natural resource management structure which divides the state into eight areas, and has a high level of consumer input and action regarding how to manage water as a resource. The Murray Darling NRM board has been particularly successful in involving local people in decision-making 23 This requirement caused a bottleneck at the end of the sorting and packaging process in the co-op we visited, with highly efficient automated sorting and packaging processes and technical plant, and then at the end three packers had to stop and hand-turn all apples the same way on cardboard trays for presentation purposes in the store


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Woolworths is slightly more flexible regarding scheduling and packaging, but this can mean rush jobs, and when they switched from requiring bags of 1.5kg to punnets of 1kg, the company wanted to pay the same packaging prices for a much more labour-intensive job. The co-op came to the aid of the growers and has installed a machine for putting fruit in punnets. Generally there was a more favourable reaction to Woolworths, but neither of the big two was seen as fair, making packaging and other QA requirements very involved, but through monopolisation, necessary to deal with for volume sales.

The independent grocers such as Foodland and IGA were seen as more flexible and supportive in terms of packaging and QA requirements, and are still happy to take fruit in cartons and stack the shelves at their own expense. It was also noted that Ceravolos local packaging including glass labelling and crates in order to support local business.

In regard to packaging for export, as noted above the current trading agreements allow bulk shipping, and though this may be flexible in terms of market demand, it minimises value adding steps such as branding and high-end packaging opportunities, and also the use of packaging sheds in Australia.

Transport

Transport of apples, pears and cherries in the Adelaide Hills has always been problematic due to winding narrow roads and hilly terrain, but problems are increasing as larger trucks are required to transport bulk produce to the major supermarket buyers. The roads must be upgraded to take semi-trailers, and it becomes an issue of local jurisdiction as well as a lack of integrated planning in order to analyse the optimum routes along which the trucks should pass before getting to the freeway. The drivers are a good source of

information about which roads to improve so that others do not have to be used. This would take into account the capacity of individual towns for hosting heavy traffic, and could inform road upgrading priorities.

Jurisdiction is also unclear regarding tree trimming, with no consistency between Council and electricity-utility trimmers. Though this may seem trivial, the inadequate trimming of trees along delivery routes results in constant mirror breakage and other damage to the truck, increasing delivery costs for the growers and decreasing safety as low trimming sometimes forces trucks into the middle of the road.

To comply with supermarket requirements and to maximise fruit quality trucks now have to be refrigerated while transporting fruit. The added cost would be better accepted by growers if the supermarkets were also required to refrigerate the produce after delivery, a practice rarely done in Australia. Growers requested the policy be made consistent along the value chain, with a minimum requirement of fruit displayed on cold racks.

Netting

Netting is a multifaceted issue for growers, local council and regulators. It is not only useful for combating pests such as flying foxes and birds, but also has a large effect on quality and production levels of fruit, the management of bugs and moulds, and even dwarfism depending on the colour of netting used which alters the


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light spectrum reaching the fruit24. The use of netting reduces the need for guns and noise, assists with chemical drift and lowers evaporation by an average of 50%. Thus there are many reasons why growers consider netting subsidies by the government to be a cost-effective, mutually beneficial intervention, reinforced by the push for high quality export fruit.

As noted above the erection of netting in SA creates consistent issues because, unlike other states such as Victoria which deems them a temporary structure, here they are considered a shed as their end poles are higher than 5 metres. At one time this meant that an application for erection was charged by the metre25 . Although this was changed through work by the council it is still a long and frustrating process, with growers describing their own experiences of planners eventually saying that the netting fits the rules and the intent of the community, but with the process still taking a long time. The council has tried to come up with a generic application process as they agree the current process is clumsy and laborious, but as yet they have not gained permission to put this in place. This means that those growers who can afford it use specialist contractors to handle the application as they understand their way through the ‘maze’.

Most growers were aware of subsidies and assistance for netting in other states such as the New South Wales government subsidising 50% of the costs to combat flying foxes, a pest which threatens to become an issue in the Adelaide Hills without coordinated effort between different councils (see pests below). There was also some confusion in regard to the use of netting on tourist routes with some growers thinking it could not be used at all and others who said the colour was what mattered. This showed a need for better education, consultation and communication around netting requirements and limitations.

Storage

Apples can successfully be stored for extended periods, allowing consumers to buy apples at any time of the year and for growers to get a regular income. However the quality of fruit when it comes out of storage depends on a number of factors, including the type of controlled atmosphere, the different methods and chemicals used to minimise degradation in storage, type of apple (as some store better than others) and the quality of fruit when it goes into storage as like

everything else, good growers understand that good fruit in equals good fruit out.

This area is improving continually, and it is one where research and development have a large effect on outcome quality and the upgrading of the value chain. For instance a better method is being sought to measure and control fruit quality both before and after storage; to decrease the amount of shrinkage which occurs during storage; and to find new ways to inhibit ethanol production in the apples during storage. The co-ops are trialling different techniques to maintain controlled atmosphere, with the Ashton co-op using a new process called smart freshing.

Storage was seen as somewhat problematic in terms of co-op collaboration, due to a perceived lack of integration on such things as reciprocal storage of apples between co-ops,

24 It would be cost effective for the government to run a formal education program on the use and effect of different netting colours on harvest management and maintenance. The current indecision around financial support for netting is a current deterrent for such proactive education activities. 25 One grower said that this is still currently the case in Waikerie, resulting in costs of up to $250,000 per application which must then be altered by the council.


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or offering a service of matching storage methods across co-ops to types of apple. Ideally growers considered that it would be beneficial to the industry if the co-ops had a method of working together which combined cold storage methods best suited to apple variety with logistical management of overflow between co-ops during good years. This would enhance the benefits the co-ops offer in the storage of fruit.

Seasonal workers’ accommodation

There is little decent accommodation in the Hills for pickers during harvest time, yet it is not seen to be recognised by decision makers as a necessary part of the infrastructure for the industry. A few growers said that they had wanted to invest in decent accommodation and were denied permission on the grounds they may use this for holiday rental, and that this

accommodation on the vineyard was too high quality for seasonal workers. The growers thought this was the Council’s lack of understanding, but when speaking to the Council, they also complained of the same issue as part of the lack of rural planning and title policy, which prohibits them from giving permission for such buildings (they would have been in favour).

In former times both growers and pickers saw this as an attractor or turn off when trying to attract good pickers, and there was flexibility in individual accommodation arrangements. This issue has changed in nature over time as contracts have created monopolies in labour hire companies, but has maintained its importance. The growers pointed out that decent accommodation is not a priority for most of the labour hire companies, and some of the growers had ensured that the labour hire company both paid and housed the pickers before using them. This issue needs to be better recognised and managed.

Co-operatives

The role of the Co-operative

There are a number of co-ops in the Adelaide Hills including Lenswood, Ashton and Balhannah (although the last is not technically a co-op any more). Growers consider them to be useful bodies and offered individual accounts of support and assistance. They are an essential infrastructure base.

The Lenswood co-op was seen to have strengthened recently with large grower collaborations, a manager who was a grower who knows the business, and professionals on the board. The story of the tightly managed Rockit apple breeding contract was an example of the benefits which a co-operative can bring to the industry.

Many interviewees were keen for co-operatives to play a larger role in education and/or information on a wide variety of topics such as risk management; domestic and export market requirements; variety suitability; crop management and critical time paths; and new discoveries or methodologies in areas such as chemical use and agricultural technology. When discussing this with the co-op staff they were also in favour of increasing capacity in these ways and some staff have been employed for these purposes.

Specific examples of assistance have been listed elsewhere, and these include the negotiation and management of the Rockit apple; assisting growers with new equipment when the supermarkets change packing requirements; and individual staff who are knowledgeable and helpful in general growing and land use matters.


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At the same time, there was a lack of understanding and alignment in regard to the roles the co-operatives could and should play. This ambiguity existed across all stakeholders including growers, producers, the growers association and the different co-ops themselves to an extent. Opinions varied about the role and value of co-operatives at present, and this partly depended on the individual experience growers had with specific co-ops. There was, however, agreement on strengthening and widening the co-ops’ role.

When asked what people would like the co-op’s role to be, the descriptions echo the need for a state body as described in this report. Answers included assisting the larger state body and inform debate on both small and large matters such as regulatory issues, policy improvement, rural and peri-urban planning, water regulation methodology, the position of growers and producers in the export scene, and coordination of bodies such as councils, regulators, farmers markets, transport stakeholders and labour hire companies in order to support the sector to thrive.

Regarding how to improve the role and perception of co-ops, some growers felt that the co-op is not collaborative enough with the smaller growers, for example those who wish to grow heritage or boutique apples, or who favour farmers markets. Instead the co-op is seen to prefer to deal with the large producers and value chain companies, and advocate for the top 5 apple varieties instead of pushing for public education. This was not true of all growers, but it was prevalent enough for the co-operatives to take note and look to improve this perception.

Dynamics between co-ops

This point came up consistently and was seen to impede the Adelaide Hills co-ops offering a united front for the Apple industry. Opinions included personality style differences in co-op leaders, loose connections between the co-ops, and no obvious discussion or formal agreement on matters such as reciprocal storage, collective lobbying and other ways in which co-ops

could work together. Some observed a lack of interest to do so from individual key players. However, when interviewing all co-op leaders, they each had an obvious, deep desire to improve the industry and to champion the orchardists and producers. There is great potential for the dynamics to improve, and with it the clarity and empowerment of the co-operative’s role in educating, aligning and strengthening the sector.

Regulatory issues

Some of the problems regarding the running and strengthening of co-ops include problematic regulations. These include the present co-op structure which limits access to assets, the technical definition of a co-op and shareholder number requirements in what is often a small organisation. There are also award issues which increase costs for the co-op instead of supporting it to decrease costs for growers and producers. These include the rule which defines an orchard as having

to pick fruit on site, and because a co-op does not do that they have to pay a higher award rate for the same tasks including sorting, packaging, labelling, et cetera.


44

Financial Considerations

Wages

One of the most common talking points amongst interviewees was wages, and the issues are many and varied. They include status such as contract, casual and permanent; penalty rates, payment by hour, bin or quality; the differences in other states; the lack of flexibility with the payment schedule to reward picking skill; the inability to get labour when it is needed and to use informal workers such as

backpackers; and accommodation for transient workers contract status.

Labour contracts and payment schedules have greatly diminished flexibility around who can pick and when. Hours are now restricted so that people do not pick after-hours, on week-ends or on public holidays unless they are paid over-time, making it both problematic and costly in an industry which has sporadic requirements for intensive activity during harvest. Penalty rates must be paid to the contract labour-hire companies, yet many growers commented on the lack of value both they and the immigrant workers got from these brokers, saying that they often need to police the higher group to ensure it is paying the right amount.

At the same time, the tightening of rules around casual employment means that the practice of employing people such as backpackers who only want to work for a few days, and are happy to negotiate direct payment, is now difficult, even though they would receive at least the minimum wage and superannuation26. This leaves growers in a “Catch-22” position.

There was a lot of discussion regarding payment regulations and rules, and in particular whether it is better to pay people to pick by the hour or by the bin, and how to pay for skill. Speed and quality are both important and good pickers are skilled in picking high quality fruit, fast. This takes experience, and rewarding such experience is now made difficult because of the high minimum wage rates in South Australia which result in growers having to pay the pickers the same whether they are experienced fast workers or new slow workers. This causes much consternation to both growers and pickers, and is seen as unfair and a detractor for taking on such work.

An alternative model was discussed which exists in Queensland – whether rate payment starts low with a new picker and ramps up over four weeks as they improve. This is seen to have a number of advantages including the lower rate pressure on new pickers as they gain experience, which improves learning; the feeling that this instills an attitude of the importance of picking fast and well as it is reinforced over the month; the fair rate of pay for those who are working at a higher level; and the fact the growers can afford to employ more new pickers as they cost less. There was also flexibility in the system as the grower can increase money if the new picker comes up to speed and picks more fruit of good quality.

Similar discussions occurred around the piece rate issue, with a number of growers considering people pick better by the hour rather than by the bin, while others gave an example of the piece rates in New Zealand working well as pickers wear a wristband which scans the boxes picked and rewards accordingly, with quality control ensured by orchard staff checking the box regularly and giving direct feedback.

Another topic related to wages was accommodation of the pickers, as noted above.

26 The payment of superannuation to backpackers and other casual visitors from overseas was a discussion point in itself


45

Pricing and costs

Pricing covered many areas including the high costs of compliance with supermarket requirements and QA costs, new trees and netting, as well as ongoing business costs such as storage, pallets and packaging, transport, electricity and water.

As noted above, compliance with supermarket requirements and QA costs can see growers (and to an extent co-ops) wearing the costs of presentation, refrigeration and packaging to an unfair extent, but there is currently little coordination across the value chain to debate and redistribute these outlays. Some growers commented that the Adelaide Hills industry complies with European QA standards so there should be some return for this effort, yet none is forthcoming.

In regard to trees it was noted that Australia appears to pay the highest price in the world for trees but up until now they have been of very good quality. However, there was some discussion on this becoming problematic, with one interstate nursery being seen as producing increasingly inconsistent quality as they have shifted their focus from tree quality to profit in order to maximise royalties and minimise risk27. Trees are a large investment as they have a 5 to 7 year critical time path and a 15 year growth cycle, and the growers described a need for more stability and consistency in planning and regulations including quarantine and import rules, variety and availability.

Netting, water and storage costs have been covered above, and the ongoing cost of electricity has also proved problematic for those who have invested in solar panels, only to see service charges rise by 17%. One of the suggestions around costs was to allow the write-off of large investments such as netting to be done over a shorter time period, over five years instead of 10 years.

Payment schedules

Various issues have been outlined in regard to the scheduling of costs and payments in the industry. This includes the increased costs of changes to harvest time rules and the use of casual labour, increasing electricity costs and the changes in water allocation costs and metering. On the other hand growers can be at a disadvantage in terms of money coming in rather than going out, with some examples of money not being paid to them for up to 300 days.

Ceravelos gave an example of supplying to a New South Wales supermarket chain, which they stopped because payment could take up to 2 years to receive. This is an area which is ripe for collaboration between representative co-ops and regulatory bodies in order to ensure the small family businesses receive a viable regular income.

Pests

A number of pests exist in the Adelaide Hills for the apple farmer, including lorikeets, insect pests, flying foxes and even kangaroos, which break nets and ring-bark the trees. Some of these can be dealt with in the immediate vicinity but others such as flying foxes and fruit fly require a coordinated effort across councils and even states (see pests above).

27 Please note that the nursery did not comment on these findings


46

Customer Requirements

Product

Customer requirements discussions occurred with both growers and supermarkets and at markets, and ranged over the varieties available, size and usage of fruit, the different market outlets and storage options available. The availability of different varieties was a hot topic among consumers who were aware that there are more than the four or five types of apple which are supplied by supermarkets. These more discerning customers went to farmers

markets and other outlets for a wider choice. They also noted the high quality available in the farmers markets of the non-standard and heritage fruit, and were happy to buy fruit of various sizes and colour variation as opposed to the standardised size and high colour of supermarket apples.

There was discussion of educating the public to a much greater extent on the use and value of boutique and heritage apples, with a number of growers noting that in other countries the co-operative does this, thereby ensuring that small boutique growers are married with consumers who want something different, and both maintain heritage stock of fruit which may otherwise die out.

Second grade and non-standard fruit are becoming more available in supermarkets as juicing apples or cooking apples, with stallholders recognising that most consumers are buying these to eat as they are well aware that it is a technical requirement which has categorised these apples as second grade.

The main varieties available are Granny Smith, Pink Lady, Jonathans, Sundowner, Golden Delicious and Royal Gala, with the volume being managed and the end price set by the co-op in consultation with growers and supermarkets. Growers considered that although this adds an extra layer of legal issue, 60% or more of their crop goes to the major buyers and so the co-op offers valuable assistance.

Storage of apples was an issue for consumers mostly in terms of some apples retaining a fresher and crisper taste after cold storage than others. For some people this factor was important enough for them to ensure that the apples they bought had not been in cold storage, whilst for others it did not matter (a couple of people commented that these were adults who bought the fruit for their children to eat rather than themselves).


47

Quality

The concept of quality has become entwined with supermarket requirements for standardised size, colour and variety, and as noted above second grade use apples will often be graded as such because of one of these technical criteria. Fruit from the Adelaide Hills is considered high quality, with consistently superior taste and crunch value. This is in no small part due to the natural

environment, but there is also a high level of awareness amidst growers of the positive impact of soil analysis and enrichment, efficient water use and appropriate planting per hectare, all of which positively impacts quality.

Some growers commented that because there is no choice in the hilly terrain to have large mechanical machines in the orchards, trees can be planted and tended in a different pattern which take advantage of natural light, winds et cetera. There was consensus that Riverland fruit should not be sold through the Hills co-op’s such as Lenswood as they do not have the same crunch value and will thus bring down the standard of fruit supplied from the Hills.

Another way to ensure quality is to breed and buy good tree stock and not oversupply the market. A new variety is about to come on the market soon has been tightly managed, with 300,000 trees supplied to Australia and only six other countries getting the variety. Lenswood has the sole licence and will sell the trees through a business model which includes growing, packing and several other stages of levy in a flexible contract designed in league with the growers and breeders. This is a good example of the valuable role co-ops can play in the industry.

The fruit which does not go into supermarkets or farmers markets makes its way to the secondary processors to be made into products such as juice, cider and fruit strap.

Associated costs

To grow and make those things which the consumers want there were a number of associated costs identified, including the cost of fruit to buyers and secondary producers; the cost of working for supermarkets as the major client; the costs of stock and resources such as water (which had been free); the cost shift focus from quality to profit by groups such as Flemings; and costs associated

with a lack of supportive regulations which place penalties on small boutique producers in fledgling industries and allow large producers to try and drive them from the market.

Some of these costs have been described above, such as compliance with supermarket requirements, stock and resources. The costs imposed by regulations include such imposts as the high level of process and public consultation for a cider maker to become a cellar door or to gain a food and liquor licence, and the requirement for special, expensive licences when offering tastings at the Central Market of a new product.

One area which requires more proactive support from policy and regulatory bodies is the area of government support for innovative, fledgling niche players, which is a vital part of the state growing innovative and medium enterprises. A good example is given under the Cider heading, where large players are using cost as a way to take over the market.

A positive note is the state government-run supportive voucher scheme to encourage innovative manufacturing by SMEs. The owner of FruitWise, a small fruit strap maker and fruit dehydrator, has just won a grant through this initiative to add a second dryer as her business is flourishing.


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Timing

Timing issues include the long lead time for supply of new varieties; timing for entry into new markets, the planning of storage; the time taken to wade through regulatory non-compliant application requirements and other administrative processes; and policy lag times which need to be taken into consideration when planning ahead. As can be expected growers, producers, and co-operatives

discussed the interconnection between breeding, growing, selling and storage as part of running the industry, but there was a level of frustration regarding external administrative and regulatory imposts which slowed progress down with little or no benefit, and sometimes with negative consequences.

Another issue for timing links to the consultation section above. In summary, a great many of the challenges, issues and requirements outlined in this report would be better managed, and sometimes even mitigated, if there were timely community engagement. Many of the value chain interviewees saw advantage in not only involving the community early when dealing with an identified problem, but also in having a more timely engagement process and informal capability which allows people in the industry to more easily engage policymakers, regulators and local council around ideas, potential issues or innovative new opportunities.

Secondary Products

Cider

There is a thriving cider making industry in the Adelaide Hills with many small makers such as the Hills Cider Co, Sidewood, Paracombe Premium Perry, Micro Cider Co, and Adams Orchard. These local cider makers have for years supported local businesses and growers, and many of them now have a widely recognised, premium product

made in a collaborative environment. They use second grade fruit and usually pay more than the fruit pulpers, sourcing from local growers. When interviewing, we noticed that there is a positive relationship between cider makers and growers, pulpers, and others in the value chain, so much so that this burgeoning micro industry is playing a part in connecting and building collaboration across the industry.

Some of the issues for these small companies have been listed in the report and concern licensing and tasting issues, as well as council requirements when establishing infrastructure such as a cellar door. These issues should be worked on, and some of them are being tackled currently by local council in order to make the processes less onerous.

On a more serious level, as noted in the ‘associated costs’ section above, boutique cider production is one of the areas which requires proactive support from policy and regulatory bodies as the success of these small artisan companies has also become a problem. These small companies have invested heavily and have put in the effort to build a market, and that market is now being recognised by wineries and large producers who see the opportunity for profit. The large producers are now beginning to corner the market by buying up fruit at inflated prices, which wipes out the small cider makers and the strap and puree fruit makers.

These large producers are able to pay high prices as a loss leader in order to eventually monopolise the market and the small cider makers are powerless to stop this. The value chain actors are neither formally empowered nor informally organised enough to intervene,


49

and instead this is clearly the responsibility of the state government.

Fruit Pulp, Juice and Fruit Strap

A number of fresh juices are made in the Adelaide Hills including those by Ashton Valley, Ashbourne Valley and Besa Juice. Ceravolos increased sales of Ashton Valley juices ten-fold over the last two years, and won the SARDI Award for Innovation at the 2014 South Australian Food Industry Awards. Australian Pure Fruits fruit pulpers make a range of drinks including sparkling and still juices, cordials, purees and a new line of vegetable juice. The fruit pulp is also supplied to companies such as Fruit Wise, where Bridget uses large dehydrators to make fruit strap in a number of flavours as well as muesli bars and muesli packets which

contain fruit strap offcuts. As noted above this business has been sufficiently successful to win a grant to install a second dehydrator. Each of these companies support local growers, and only use imported pulp if a local supplier does not exist. Many of these products began as innovations to use produce or to bolster business viability in times of low fruit prices, but they are now viable businesses in themselves. They would be further strengthened with better promotion of the industry to augment the work done by people like Susie Green (head of the apple and pear growers Association of South Australia), and local/state government support.

Capacity Raising

Capacity raising was touched on over many conversations as a basic underpinning of ensuring a viable and thriving sector. It covered business skills, training needs, succession planning, and the need to raise the influencing capacity of growers and other value chain actors.

Business skills and training

It was refreshing to find a number of growers and producers who had travelled overseas and read widely in regard to innovative agricultural practices, with some having a great deal of knowledge on such matters as crop management, netting, organic farming and cider production (it would be beneficial to improve the capability to share this knowledge). However, there are other business skills required, and importantly a voice mechanism is needed which would enable such knowledge to influence decision makers as well as assist fellow growers.

Business skills included logistics planning; the capability to maximise internal competitive and collaborative opportunities; understanding what is important for both business and environmental sustainability and adaptability; and a clear awareness of assistance options that are available.

Increasing business skills also entailed formal training in many of those things listed above, as well as the more specific skills of running a business: balancing the books; understanding how to gain access to regulations as well as to interpret them; collaboration skills; and the ability to ask for information or assistance from third parties.


50

Influencing Capacity

Influencing capacity was seen as almost as important as business skills and training and indeed they are intertwined. The areas of influence discussed by growers and other value chain members such as co-op owners and producers include the ability to influence both local and state government and

policy makers as well as the lead companies in the value chain. Educating customers was another thing seen as worthwhile in terms of managing expectations of fruit appearance versus quality.

As shown in the diagram, and as discussed in the consultation section above, the ability to influence is two-way. Industry members need to build their skills in influencing, collaborating and communicating relevant information and issues, and reciprocally, government at all levels must ensure mechanisms for access of both information and industry players into their zone, and for the flow of knowledge, experience and opportunities out of it.

Succession planning

Succession planning has been mentioned throughout the report, and it was a key point of discussion in regard to ongoing capacity to run the farms, orchards and even the fledgling production companies. Many of the issues concerned regulatory stumbling blocks or penalty costs,

including penalties for handing down orchards, the costs of changes in ownership when signing them over to the children and council regulations concerning multiple dwellings on the farm or orchard property. Notably council staff consider that this should be changed as it is another example of the need to redo all rural policies to better balance the blurring of township, urban and peri-urban policy needs. This is a critical area to get right, as the large majority of orchards are managed by family businesses which have been handed down over several generations, and the average age of orchardists is increasing, with fewer members of the younger generation taking on the family farm28.

28 See the industry sustainability plan for 2013 and beyond, prepared by Susie Green on behalf of the apple and pear growers Association of SA


51

Appendices

Appendix 1: Adelaide Hills Apple Industry Growers List and Other Interviewees

Notes: Bold indicates those who participated in interviews for the cluster mapping and value chain analysis.

Organisation Location Type Products (Where

Known)

Appelinna Hills Forest Range Grower + Packing & Storage

Apples

Bonvale Orchards Balhannah Grower Apples

Otherwood Orchards Lenswood Grower Apples

Cambridge Adelaide Hills Grower Apples

Checker MH & MM Kersbrook Grower Apples

Collins S & C Lenswood Grower Apples

D. J Lloyd Renmark Grower Apples

Edwards D Balhannah Grower Apples

Edwards R Oakbank Grower Apples

Green & Sons, WC Lenswood Grower Apples

Green & Sons, Al Lenswood Grower Apples

Green & Sons, CV Lenswood Grower Apples

Green GR Lenswood Grower Apples

Hill N Dale Orchards Balhannah Grower Apples

James Orchards Apples & Pears

Kersbrook Grower Apples, Pears, Vegetables

Mahnew Orchards Lenswood Grower Apples

Mason AG & HC Forest Range Grower Apples

Mason Sr & Sons Lenswood Grower Apples

Murdock Holdings, Wd & Jt

Lenswood Grower Apples


52


Known)

Nicol MK & IA Uraidla Grower Apples

Oakleigh Orchards Lenswood Grower Apples

Saverne Adelaide Hills Grower Apples

Valley Crest Lenswood Grower Apples

Forest Orchards Forest Range Grower + Packing

Apples Organic

Aberdeen Orchards Lenswood Grower Apples, Cherries

Hannaford Orchards (T/As Torrens Valley Orchards)

Lobethal/ Gumeracha

Grower Apples, Cherries

Harrisville Orchards Lenswood Grower Apples, Cherries

Hillview Fruits Nominees Pty Ltd (T/As Green & Sons, SE)

Lenswood/ Birdwood/ Renmark


Joyson Orchards Lenswood/ Kenton Valley


Granger, D & H Norton Summit Grower

Plummers Border Valley Orchards

Lenswood Grower Apples, Cherries

Raeburn Rural Holdings Lenswood Grower Apples, Cherries

Stafford Orchards Lenswood Grower Apples, Cherries

Af Parker & Sons Uraidla Grower Apples, Cherries & Strawberries

Smith Gully Orchards Montacute Grower Apples, Cherries, Figs, Lemons

Drury Orchards Inglewood Grower + Packing

Apples, Pears

Ashbourne Valley Orchards

Ashbourne Grower Apples, Pears, Quinces, Cherries, Peaches, Plums, Apple Juice

Filsells Apples Forest Range Grower+ Packing & Storage

Apples, Pears, Quinces, Persimmons, Cherries


53


Known)

Cobbledick Bros Uraidla Grower Apples, Vegetables

Pethick Orchards Ashbourne Grower Apples?

Dangerfield Lighting, Bf & R

Uraidla Grower Nectarines, Nuts, Kiwi Fruit, Rhubarb, Cherries, Apples

Gilmours Orchards Paracombe Grower + Packing

Pears

Chamberlain Orchards / Paracombe Premium Perry

Paracombe Grower + Packing / Processor

Apples, Pears, Cider Production, Ginger Beer

R Ceravolo & Co Pty Ltd / Ashton Valley Juice

Ashton

Grower + Packing & Storage / Processor

Apples, Pears, Cherries, Berries, Vegetables, Grapes, Ashton Valley Juices,

Kersbrook Co-Operative Society Ltd

Kersbrook Packing & Storage

Storage Only

Lenswood Co-Op Lenswood Packing & Storage

Apples, Pears, Cherries, Mandarins. Cold Storage, Packing & Grading, Grower Support Services, Marketing & Sales

Ashton Co-Operative Society Ltd / Thrifty Link Hardware / Hills Irrigation & Plumbing/ Lenswood Gas Centre

Ashton Storage, Supplier

Cold Storage, Grower Support Services, Smart Freshing, Dipping, Chemical & Rural Supplies, Irrigation Supplies, Gas Supplies

Sidewood Verdun Processor Cider, Wine

Adelaide Hills Cider Nth Adelaide Processor Cider

Houghton Cider Houghton Processor Cider

Kersbrook Hill Wines & Cider

Kersbrook Processor Cider, Wine

Oxenberry Grapple Ciders McLaren Vale Processor Grape And Apple (Adelaide Hills) Beverage


54


Known)

Australian Pure Fruits (South Australia ) Pty Ltd

Lobethal Processor Fruit Puree, Soft Drinks

Fruit Wise / Fruit Dehydrators Aust.

Lobethal Processor Fruit Straps

Stafford Orchards Lenswood Processor Juice

Bliss Trade Pty Ltd (Bessa Juice)

Lobethal Processor Juice

Mount Compass Fruit Juices / Mountain Fresh Fruit Juices

Mt Compass Processor Juice

Nippy's Regency Park Processor Juice

Balhannah Nurseries Charleston Supplier Root Stock

EE Muirs & Sons (Was Lenswood Rural)

Lenswood Supplier

Bio stimulants, Fertilizers, Pest Control, wax, chemicals and fertilisers, pests and disease management, bird netting, reflective matting, trellising, wires and equipment, irrigation, some advisory

Lobethal Freightliners Lobethal Supplier Wines, All Goods, Large Or Small

Adelaide Produce Markets (APM)

Pooraka Wholesale Fruit & Veg

Lenswood Produce Company

Adelaide Produce Market, Pooraka

Wholesaler Agent For Supermarkets - Foodland & Iga

The Fresh Fruit For You Produce Company


Wholesaler

Apples, Apricots, Asian Vegetables, Broccoli, Cabbage, Cauliflower, Cherries, Chinese Cabbage, Corn, Fennel, Grapes, Lettuce, Nectarines, Pears, Peaches, Plums, Sweet Corn, Truss Tomatoes


55


Known)

Flavell’s Fruit Sales


Wholesaler

Apples, Apricots, Cherries, Figs, Grapes, Mountain Fresh Juice, Nectarines, Nashi, Peaches, Pears, Plums, Quince

Parker & Sons


Wholesaler

Apples, Berries, Cherries, Figs, Nectarines, Peaches, Pears, Plums, Quince, Rhubarb, Strawberries

Ceravolo Orchards


Wholesaler

Apples, Blackberries, Blueberries, Brussel Sprouts, Cabbage, Cauliflower, Cherries, Chilli, Ashton Valley Juices, Grapefruit, Grapes, Herbs, Honey, Mandarin, Lemon, Lettuce, Orange, Parsnips, Pears, Pomegranate, Raspberries, Rhubarb, Strawberries, Swede, Turnips

Hillview Fresh


Wholesaler Apples, Cherries, Chestnuts, Pears, Plums, Quince


56

Other Interviews:

Name Organisation Comments

Susie Green

Apple & Pear Growers Association of SA

• strong co-operative system, strengthened over recent years with bigger players, three bigger growers consolidated with Lenswood Co-op, to get efficiencies of scale. All at stage when needed to upgrade

• Some challengers in equity, smaller growers can think they get squeezed in priority for packing.

• Lenswood Co-op presents a really strong brand perhaps only one in the state from fresh fruit.

• getting better at utilising all of product, ie. Ashton Valley fruit just expanded their juice plant, helped too with Cider boom

• 60% of fruit goes to first grade fresh fruit • Strong juice market pulls up the 2nd / 3rd grade fruit

prices

Hamish Gordon

PIRSA • Crop cover and protection - Losing about 30% potential crop to birds.

• Industry in the Hills is not going to get larger; water is a big factor in this.

• Need industry to work together collaborate to find solutions to how they manage their water resources collectively. Government should play a role in facilitating this.

Mike Fleur

Adelaide Hills Council

• Need to maintain farming • Process is complicated as classification is peri-urban

meaning pricing is set for residential not agriculture • whole of government problem, need to develop these

lands for agriculture • Education needed for new residents that it is a farming

area and to expect smells and noise • Anything unanticipated is non-compliant, need to

change the policy before it can be complying

Michael Rhettke,

SARDI • generally good long term view for the industry • Industry is isolated, culture in industry holds the

industry back in exporting, huge potential capacity and could make NZ look second rate.

• SARDI knowledge/expertise has become narrower but deeper more specialised.

Tamara Bjordal / Sally Smith

Adelaide Hills Tourism

Nature & Landscape and Food & Wine are key themes for the region with promotion of the region as the 'Land of Plentiful Pickings' with opportunities to purchase from the farm gate/farmers markets/roadside stalls or even 'pick your own'.

Appendix 2: Value Chain Analysis Map

Value Supply Chain Stages

Main Actors

Goods Produced and Services Provided

Processes and Activities Undertaken

Support services across the chain

Regional Advantages

Local Sector Challenges

75

Climate, knowledge and diverse skills which are world class in a number of orchardists and producers. Cooperatives set up. Family businesses in a long established industry. Staple fruit product with good storage

for year round income.tourism and niche markets. local clean, green product. cider, juice and other products

Topography, Pests, Over Regulation, lack of coordination across value chain and state infrastructure. No local resaerch around orchard management practices for sustainable local practices. Limited water

availability and mobility. Commodity product with price volatility. lack of government consultative process and limited lobbying power. limited specialist advice and access to research and education providers.

poor succession planning and ageing grower base with lack of incentives, support and incentives for next generation of newcomers to enter industry. price of land for new businesses to come into region. low level

succession planning and support. low level of development activities for growers as business owners.

Cre

ate

d b

y J

. M

ilba

nk a

nd

F.

Ke

rr

Customs, Researchers, Plant Breeders, Rural Supplies & Advice, Monitoring, State and Local Government, NRM, Regional Development, Diagnostic Services & Pathology, On farm storage, Machine & Equipment

Suppliers, Quality Assurance Programs, Promotion (Inc. Art Work & Graphic Design), Financial Services & Banks, Safety Gear, Pallet Suppliers, APAL (national apple and pear growers board), Energy & Fuel

suppliers.


Variety development &

new trees

Growing and

harvestingStorage, processing & packaging

Domestic retail Channels

ExportConsumers

R&D

Nurseries

Growers

labour hire co's

Storage, packaging facilities including

Cooperatives

Retailers / Supermarkets

Exporters

Harvesting

Fruit Picking

workers accomodation

Land Management Services

Water Management

Development Approvals

Cold Storage and Controlled Atmosphere

Grading and Sizing

Packaging (Pallets, boxes, Punnets, bags)

Domestic Retail (local & imported)

Fresh Apples

Fruit Juice

Export

Apple Plant Varieties

New Varieties

Research

Farm Practice Research

Domestic RetailTransport / Distribution

Marketing

Export

Distribution to Port

Shipping

Storage & Packing

Receipt of Apples

Cold Storage & Controlled Atmosphere

Grading and pre-sizing

Application of Apple Wax

Packaging

Harvesting

Picking & Loading

Business Management

Planting & Removal

Netting

Breeding

Import of new varieties

Nursery Propagation

Research

Scientific Research

Field Research

Pest & Disease Management

Storage & Packing

Dried Fruit / Pulp

Breeding of new varieties

Application of Fertilizers

Transport to Storage

Market Development

Quality Control

Returned Goods

Sales

Marketing

Sales

Labelling

Soil monitoring & Irrigation

Maintenance of machinery and Storage rooms

Fresh Fruit

Secondary Processing

Distributors, Markets

Processors

Secondary Products

Deserts / Bakery Products

Juice / Cordial

Cider

Tinned Fruit

Fruit pulp / concentrate

Processing

Secondary Products

Packaging

Climatic & Agronomic research

Control of pests & diseases

Labelling

Market Development

Quality Conttol

Land Management

Regulatory Adherence

Cool Supply chain

Transport / Distribution

Farmers Markets

Import of fruit pulp and

concentrate


59

Appendix 3: Bubble Graph of Industry Trends and Issues by Priority


60


61


62


63


64

PIRSA

SARDI

Apple & Pear Growers Associa�on of SA

APAL and HIA

FoodSA

RDA AH F & KI

TAFESA & other RTOs

Universi�es

R&D, Government, Training, Industry Associa�ons

Organisa�on Type Products

Appelinna Hills Grower + Packing &

Storage Apples

Bonvale Orchards Grower Apples

Otherwood Orchards Grower Apples

Cambridge Grower Apples

Checker MH & MM Grower Apples

Collins S & C Grower Apples

D. J Lloyd Grower Apples

Edwards D Grower Apples

Edwards R Grower Apples

Green & Sons, WC Grower Apples

Green & Sons, Al Grower Apples

Green & Sons, CV Grower Apples

Green GR Grower Apples

Hill N Dale Orchards Grower Apples

James Orchards Apples &

Pears Grower

Apples, Pears,

Vegetables

Mahnew Orchards Grower Apples

Mason AG & HC Grower Apples

Mason Sr & Sons Grower Apples

Murdock Holdings, Wd & Jt Grower Apples

Nicol MK & IA Grower Apples

Oakleigh Orchards Grower Apples

Saverne Grower Apples

Valley Crest Grower Apples

Forest Orchards Grower + Packing Apples Organic

Aberdeen Orchards Grower Apples, Cherries

Hannahford Orchards (T/As

Torrens Valley Orchards) Grower Apples, Cherries

Harrisville Orchards Grower Apples, Cherries

Hillview Fruits Nominees Pty

Ltd (T/As Green & Sons, SE) Grower Apples, Cherries

Joyson Orchards Grower Apples, Cherries

Granger, D & H Grower


Plummers Border Valley

Orchards Grower Apples, Cherries

Raeburn Rural Holdings Grower Apples, Cherries

Stafford Orchards Grower Apples, Cherries

Af Parker & Sons Grower Apples, Cherries & Strawberries

Smith Gully Orchards Grower Apples, Cherries, Figs, Lemons

Drury Orchards Grower + Packing Apples, Pears

Ashbourne Valley Orchards Grower Apples, Pears, Quinces, Cherries,

Peaches, Plums, Apple Juice

Filsells Apples Grower+ Packing &

Storage

Apples, Pears, Quinces, Persimmons,

Cherries

Cobbledick Bros Grower Apples, Vegetables

Pethick Orchards Grower Apples?

Dangerfield Ligh�ng, Bf & R Grower Nectarines, Nuts, Kiwi Fruit, Rhubarb,

Cherries, Apples

Gilmours Orchards Grower + Packing Pears

Chamberlain Orchards /

Paracombe Premium Perry

Grower + Packing /

Processor

Apples, Pears, Cider Produc�on,

Ginger Beer

R Ceravolo & Co Pty Ltd /

Ashton Valley Juice

Grower + Packing &

Storage / Processor

Apples, Pears, Cherries, Berries, Vegeta-

bles, Grapes, Juices,

Kersbrook Co-Opera�ve

Society Ltd Packing & Storage Storage Only

Lenswood Co-Op Packing & Storage Cold Storage, Packing & Grading, Grow-

er Support Services, Marke�ng & Sales


Sidewood Processor Cider, Wine

Adelaide Hills Cider Processor Cider

Houghton Cider Processor Cider

Kersbrook Hill Wines & Cider Processor Cider, Wine

Oxenberry Grapple Ciders Processor Grape And Apple (Adelaide Hills)

Beverage

Australian Pure Fruits (South

Australia ) Pty Ltd Processor Fruit Puree, So< Drinks

Fruit Wise / Fruit

Dehydrators Aust. Processor Fruit Straps, Fruit Cereals

Bliss Trade Pty Ltd

(Bessa Juice) Processor Juice

Mount Compass Fruit

Juices / Mountain Fresh Fruit

Juices

Processor Juice

Balhannah Nurseries Supplier Root Stock,

EE Muirs & Sons

(Was Lenswood Rural) Supplier

Rural Supplies, Pest Control, wax,

chemicals and fer�lisers, ne=ng,

irriga�on, some advisory etc.

Lobethal Freightliners Supplier Wines, All Goods, Large Or Small

Ashton Co-Opera�ve Society

Ltd / Thri<y Link Hardware /

Hills Irriga�on & Plumbing /

Lenswood Gas Centre

Storage, Supplier

Cold Storage, Grower Support Ser-

vices, Smart Freshing, Dipping, Chemi-

cal & Rural Supplies, Irriga�on Sup-

plies, Gas Supplies

Documents

Adelaide Hills Apple Industry Value Chain Analysis, 2015€¦ · Adelaide Hills Apple Industry Value Chain Analysis, 2015 Adelaide Hills Apple Industry Value Chain Analysis, 2015