Zespri case study

Kiwifruit production in countries such as Italy and chili surpassed the New Zealand production which results in drastic decrease in prices of Kiwifruit. Industry got collapsed with many growers went bankrupt. New Zealand Kiwifruit Growers Incorporated (NZKGI) was formed to give growers greater industry decision making, concentrate on retail marketing strategies. Kiwifruit is a small part of retailers overall business. As a result ,suppliers were price takers. After some deliberation, members of the industry decided to work together for the common good and to have smart marketer representing them. A new customer- oriented strategy was developed that called for more innovation and product differentiation including the creation of unique brand to signal that New Zealands Kiwifruit offering was different from other producers. The Zespri brand was introduced in 1997. The Zespri international limited was set up as a wholly owned subsidiary of NZKMB to focus on delivering and marketing the KIWI.Few issues observed in the case include difference between earnings of Green growers and Gold growers. In 2009 Gold kiwi accounted for 22% of trays sold but the average return for green grower was $29600 per hectare and average production cost for green grower was $22000 per hectare.While Gold growers average production cost is $30000 per hectare but Gold growers earned significantly more: $83000 per hectare. The difference in earnings was huge which gives incentive to the gold growers. This may result in growers interest towards gold kiwi from green kiwi as there is not much difference in the production cost of both kiwis. To slove this problem government can apply rotational scheme (every grower get the chance to grow gold kiwi after every regular period of time) for all growers or may introduce some incentives or subsidies to the green grower so that balance can be maintained.Another issue I can identified is that Kiwifruit was a very small niche product in the global fruit spectrum accounted for less than one quarter of 1% of total world fruit production. Also kiwifruit production was small and fragmented in most countries, making it difficult to fund the lengthy and costly process of new cultivar development. Markets for new products had to be large enough to pay back development costs. For this new market has to be find out such as emerging economies like India, Indonesia where per capita consumption of kiwifruit is very low around one gram and four gram respectively where buying power is increasing because of increase in income level.

Zespri has established itself as a brand representing the New Zealand kiwifruit. Zespri business model worked on horizontal and vertical differentiation model. They have looked at growth in terms of expansion plus producing new varieties of Kiwifruit. Zespri focused on single product. Zespri as a group has shared the responsibilities and risk of the individual growers through risk diversification among all growers. Zespri follows clustering model by keeping the growers in close proximity so that they can share ideas, knowledge and tactics. As the sole exporter through through the single desk strategy Zespri creates the monopoly which helps in achieving economies of scale as well as spreading fixed and sunk costs.