Jim Prevor’s Perishable Pundit, March 27, 2007
A Canadian woman, who spent a lot of time living in the United States, moves to New Zealand to run Enza, which is still wrestling with the environment created by the end of New Zealand’s single-desk sales system. Who is this woman and what is she going to do in New Zealand? We asked Pundit Investigator and Special Projects Editor Mira Slott to find out. She spoke with Dawn Gray, just as she was beginning her new job in New Zealand.
Auckland, New Zealand
Q: On a personal note, what is your background and what brings you to your new position at Enza?
A: I’ve been involved in the fresh fruit and vegetable business a little over 30 years. I’m Canadian, but I’ve lived in the States almost 20 years. My first foray in produce was at Sunkist Growers in Canada and the U.S., where I stayed for 14 years, primarily concentrating on the domestic side of the business.
Throughout my career, I’ve had tremendous opportunities and been coached by some phenomenal people. That’s why I’m so passionate about the industry today. At Sunkist I was surrounded by many influential people, so it’s difficult to single out a few. Sticking with management, definitely Russ Hanlin, David Bernstein and Mark Tompkins.
I then worked at Frieda’s back in 1990, and while I wasn’t there for a long time, it provided an opportunity to view strategic marketing done by the best in the business. Frieda, Jackie and Karen Caplan at Frieda’s were truly inspirational to me. The quality of experience speaks more than the quantity of experience, and we remain business contacts and personal friends.
Interestingly, Frieda’s did a bunch of work in New Zealand, and was the first to import kiwifruit to the United States. It’s serendipity that all these years later, I find myself in New Zealand as General Manager of Enza. And my last job before joining Enza was at BC Hothouse, where Frieda’s had a working relationship that carried over the years.
That’s what is great about this business. If there are six degrees of separation between people in general, then in the produce industry it is about 2 degrees.
Up to this point in my career at Sunkist and Frieda’s, I had a lot of exposure in the North American marketplace. Then I had the chance to really get to know the international business through Robert Autenrieth when I joined his family fresh fruit export company, The Autenrieth Co., started by his father in Los Angeles, California. The primary focus was the Pacific Rim and some business in Europe and New Zealand. Particularly because it was a smaller company, it was very hands on. I went out to the field and the pack house, was involved in the sales and transportation side, and really got to appreciate the complexity of the business as well. Robert and I are in touch probably on a weekly basis.
I then had the opportunity to go back to the Pacific Northwest, where I worked for Vanguard International. My areas of focus were on fruit and vegetable import and export trading with Korea, Japan and within the North American marketplace.
After that, in 2001, I romanced back to my citrus roots, becoming president of the Central California Orange Growers Cooperative. We represented roughly 28 percent of citrus production in California.
And then I was recruited back up to Vancouver to BC Hothouse Dave Smith, a gentlemen I’d known 20 years when he was president and CEO of BC Hothouse. Vancouver was where my family lives, and I was excited to get into the greenhouse side of the business. It was at a time when the industry was going through turmoil, starting to deregulate, and facing all the challenges that go along with that. I worked at BC Hothouse four years before joining Enza.
While it may not be easy, there is always great opportunity to succeed when the industry goes though tumultuous change. We won’t stop this cycle in an industry dealing in perishable products, where everything doesn’t come in nice neat bundles. Mother Nature has a way of wreaking havoc. I joke occasionally that there’s another woman that causes more excitement than me!
Q: How are you capitalizing on this spirited energy in your new position at Enza?
A: There are two key components to this business. It all starts on the production side, what the grower puts in the ground and nurtures, to what the consumer eats and values.
The grower is a unique human being, part scientist, artist and gambler.
Now it is so challenging. We are all consumers with so many choices available to us. This battle goes on every day, first for shelf space at retail, and then for share of stomach. As we as an industry have evolved, we are all looking to manage costs going up, and margins going down. How can we take costs out of the business? The retailer is doing the same thing.
What we’ve lost as an industry is natural merchandising, by virtually wiping out the seasonality of produce. I’m not suggesting we go back because that doesn’t make sense, but there was a time when it was New Zealand apple season. That doesn’t happen anymore, which presents a much greater battle for us to win share of product.
Q: What is your plan of attack?
A: If we put Enza’s proprietary variety Jazz apples on shelves the retailer needs to know we‘ll have them available 12 months a year. We’ll produce some in New Zealand, some in France, some in Chile, and some Washington in the States, so we can cover the customer base 12 months a year and keep the customer coming back.
Q: Will anyone but Enza be allowed to market the Jazz variety?
A: Enza owns the global rights to the root stocks and varietal name of Jazz. Enza has select grower partners and distributors that produce and market Jazz only for Enza.
These are the questions everyone in this business is asking every day… What can we do to get sustainability and returns for our growers so we can offer something to our consumer that has value? Look at pharmaceutical companies. They spend a lot of money on research and development, and every once and a while they get a Viagra, and sometimes we get a Viagra equivalent. The problem is that margins don’t support the research we’re doing, but this has to be our focus, and our future. We have to get invested in new varieties, always trialing new varieties with apples and kiwifruit.
This is the way we can help Enza, whether through vertical integration or with our partner growers, that we can make sure these returns are something they can live with and be economically viable.
Jazz is a variety exclusive to Enza. I have enormous respect for the production side, because it’s not like consumer goods, where the market is short in the product development cycle. They’ve been working on Jazz, trial after trial for 10 years, and it is just becoming commercially produced now. Production is coming on stream as we look to grow through our own groves or joint ventures and financially mutual beneficial programs with producers. Production is now coming out, ramping up to the point where we can do more promotional activity and expand our reach in the marketplace. Jazz has been in the marketplace a couple of years, but you will see Jazz in a bigger way going forward.
Q: Could you discuss Enza branding strategies in the context of deregulation in New Zealand?
A: Branding is important. Enza is a very well known brand that goes back to pre-deregulation days in New Zealand, but we have to maximize grower concerns and consumer satisfaction. Consumers walk away with their feet if there is no value. If the grower doesn’t get value they don’t produce.
Marketing of apples and pears in New Zealand was done by a single desk agency until 2001. The concept was every single producer of apples and pears would have to sell products through the Enza marketing board, which in turn would provide better pricing, cost control, and contribution to overhead. I wasn’t here when the country opted to deregulate. In May 2001, the Minister of Agriculture announced the de-regulation of the New Zealand pipfruit industry and legislation to effect these changes was enacted in September of that year. Enza lost its single desk export powers and had to compete from that time forward with other exporters for pipfruit supply. Pipfruit is essentially a synonym for apples and pears, pip being the little seeds in the fruit.
Q: What impact has de-regulation had? What steps has Enza taken to cope with the change?
A: I’ve seen de-regulation in other commodities and it was fairly chaotic. There is always a hangover from deregulation. I saw it in South Africa, I saw it in Canada, and I’m seeing it here. While it’s an unintentional outcome, in single desk environments there seems to be a perception of complacency and arrogance. I think the word perception is important to include, because in my experience I know how hard people worked in that system. We have lots of pressure regardless because we’re dealing with perishable product. When you move from a single desk to 100 exporters in the following year, it rarely means more money for the producer.
Q: Did this lead to the 2003 merger with Turners and Growers?
A: Prior to deregulation, Enza was the apple and pear marketing board. Turners and Growers bought the Enza brand and the physical aspects like cold storage facilities and the packing house, and is now continuing down the track of vertical integration. Those kinds of assets don’t make a business.What Turners and Growers said was, here is an opportunity; a like-mindedness in having to reach economies of scale. Turners and Growers is also active in the domestic market in New Zealand producing a wide range of produce items, but in regards to the international aspects, apple and pear production is mostly exported.
We are in the midst of moving into vertical integration, bringing with it value from producers. We believe there needs to be more structure than a free for all. Here is the statistic that says it all: prior to deregulation, there were about 1600 growers in New Zealand. There are now about 400.
Consolidation was inevitable. Growers are working on pretty thin margins and can’t as individual companies do what is necessary to stay competitive. How will I do R&D and find the next great thing? That is hard to do. Again, I wasn’t here at the time, but if you are marginalized in any way, if you have any chinks in your armor when thrown into deregulation, you can’t survive. Either you leverage economies of volume or ultimately become a niche player, but there is no room for confusion of identity.
Q: Isn’t this a familiar theme in many markets?
A: This phenomenon is not unique to the apple and pear business; it is indicative of the pressure everyone in the supply chain is facing, from the producer to the retailer. As much as we get fearful on the production side, retailers are trying to manage their costs too. The retailer is the conduit to the consumer. There has to be a mutual value through the supply chain.
I think you’re going to see more change. We talk and talk and talk in this business about consolidation on the buy side. Consolidation is happening in different ways. The Enza way is pushing vertical integration through joint ventures and outright purchases.
Q: Is Enza actually acquiring farms and growing apples?
A: Our supply base now and looking into the future, is a blend of the more traditional relationships between grower and marketer, relationships with joint venture partners, in terms of producing, and third, as sole owner and producer. We are taking the best of what exists in the supply base.
Q: And how will you maximize this dynamic new structure?
A: My biggest challenge? We know and the community of producers know that ultimately having 90 exporters in a country the size of New Zealand is not going to be good long term. We are losing quality positioning statements. New Zealand has such a great position in the world for clean, sustainable, quality product. If we are not consistent, it can mess it up for everyone. At the end of the day that’s what counts, because if the consumer has a bad experience they’ll walk away and it will be hard to bring them back.
It isn’t that people are deliberately not paying attention; it’s just that the consumer expects that high level of quality all the time. This is not just a problem we confront.
We all like to think we’re unique. I’ve been fortunate to work with different products and countries, and I could close my eyes in these meetings and hear the same conversation again and again.
Q: How has competition changed in the context of a global world?
A: Enza currently has about a 40 percent production share, and our goal is to get it up to 50 to 60 percent by providing the best net grower return. There isn’t a magic bullet. You do it through better management, cost containment, leveraging groups of companies, addressing all the spokes in the wheel. We continue to look at new varieties. If we don’t stay innovative, we’re not doing our job. People talk about consolidation on the buy side, we can wince about it but it is reality. My attitude is big retailers need big suppliers.
In this environment it is critical to stay flexible, be able to source globally and adapt to change. I started working with Sunkist in Canada; the attraction to the people attracted me to this business. The thing is, there really are only a half a dozen true brands in the produce industry.
I remember writing a speech around 1994 called sourcing the globe when asked to be a speaker at a big Sunkist packing house. We had this whole internal discussion of who are we and what do we want to be. It’s hard to be a niche player in this business. It doesn’t mean that much anymore. None of us have the ability to do major pull through promotions any more.
Q: So we circle back to the challenges of differentiation?
A: If you go back 10 to 15 years ago, in the produce department you had maybe 80 SKUs, the standards, apples, oranges, a few items we’d call specialty. Now it’s not uncommon to see 300 or 400 SKUs in the produce department and in some chains 600 or 700 choices. Everyone in the supply chain is looking to differentiate, through quality, varieties, and service systems, and retailers are trying to do the same thing.
Ask consumers why they shop Store A or Store B, invariably perishables and the produce department are right up there as the number 1, 2 and 3 reasons why someone picks one retailer over another. Center aisles don’t look that different. This is where the retailer can stand out as unique.
The biggest buzz word is category management, and it is still a relatively new concept for fresh fruits and vegetables. We discussed it at BC Hothouse on colored bell peppers, and the importance of understanding the meaning behind all the data. Does the consumer have a significant preference for red peppers compared to yellow or orange, or is that because we produce more red or the retailer had more red available on the shelves or on promotion?
We are doing a lot more to understand the consumer, but we know, first we have to win the real-estate battle to get on the shelves. Share of consumer stomach is next.
Food is a very emotional experience for people. Beyond sustaining nutritional level, fruits give joy, romance, health, the planet’s health, so much is tied into how we look at food now. It’s the difference between health and wellness.
Q: Is Enza delving into the value-added product arena?
A: We have a sister company Enza Foods, under the Turners and Growers umbrella, and that’s where trialing of value added products occurs beyond standard apple juice processing. Look at what happened to the lettuce category with value added. The key is that the product has to have a value proposition because processing is expensive, and comes with huge overhead. Like everyone else, we’re looking for adding value to products. I don’t know that much about this side of the business yet since I haven’t been here long enough. I’ll be spending the next three weeks in production areas. I need to meet the growers and see what happens on the ground as I explore all the opportunities ahead.
Q: It’s notable in this industry to see a woman in such a strong leadership role. Have you found gender to be an issue in your varied tenure?
A: I gave a speech once on leadership and women succeeding in predominantly male businesses. I started out by saying, ‘you may not like what I have to say. There is no forum in the produce industry to push personal agenda; if that’s a problem you shouldn’t work in this industry.’ There is the sensitivity of purchase decisions where a woman’s perspective is helpful as roughly 60 percent of produce purchases are made by women. Being a woman in a leadership role does bring a curiosity factor; i.e. who is this broad?! The fact is, it’s an asset if you make it an asset and a barrier if you make it a barrier.
I feel strongly about my leadership role and gender is not the issue. I don’t like stereotypes or broad-based gender definitions, but if I had to give generalizations, our style tends to be more relationship oriented and less hierarchal, which is a benefit to this industry. At the same time, being a single woman in many ways becomes necessary to meet the challenges and demands of an international career. That said my role as a woman is not a forum for me in my job. There are lots of places you can go for that. The office and the business environment is not that place.
Q: With all the insight you bring to your new position at Enza, where will you begin in realizing your overall vision?
A: It is important to look at where your organization’s strengths are. At the macro level, we are in an area of the world that hand produces exceptionally high quality apples and pears, and we get good yield. This is a huge strength.
Then you dwindle down to the micro level. What does Enza have? We have economies of scale, and the ability to support our grower and marketing efforts. We can do R&D, as exemplified by Jazz apples and other varieties coming down the line that don’t have names yet. Kiwi grapes are growing in popularity, but we’re not producing any now. We’re trialing an early variety of green kiwi and red kiwi fruit, but this is in the development process and could take years before it comes to market.
The key for us is that we have great distributor relationships around the world. We need to continue to promote the brand whether Enza or Jazz as a variety and create an emotional connection between the consumer and the grower. We know the apple holds that crunch and tastes goods, but we can’t just ship it off to different people and say good luck. We need to manage the process and shepherd that apple through the supply chain until it reaches the consumer.
Product quality means it can’t just look good, it has to taste good and offer the consumer value. The ease of global movement has more impact then controlled atmosphere technology. There is always demand for good tasting apples. The reality is there’s an expectation of good tasting product available on the shelf all the time.
The industry lost site of this for a time. The apple industry was one classic example. The tomato industry another, of breeding in shelf life and breeding out flavor. The impetus to change has been the recognition that the whole experience has to end in the consumer’s mouth, whether it’s at a restaurant or the consumer’s own kitchen. If you turn the consumer off by giving them a bad apple, there are 200 other things they could buy instead.
Q: Temptations go beyond the produce department to the junk food aisles. Does Enza have any marketing programs designed specifically to increase children’s produce consumption?
A: There are so many things we’d love to do but we have to keep our eye on net returns and margins. We know it is critical to market to children, but we don’t have specific programs for children right now. We are aware of so many opportunities. We do marketing and merchandising through distributors, through Oppenheimer for the North American market, and we work with World Wide Fruit in the UK. And Enza has an office in Belgium.
Every global market presents some unique challenges and opportunities. Does one stand out as more difficult than other? In the end, the game is the same. Getting the right product delivered in the right package at the right time to maximize quality, taste and value.
Our biggest growth opportunity is coming on stream with these new varieties. We’re looking at the grower community for like-minded growers to partner with or to acquire for ultimate vertical integration. That’s how to grow crop share. We’re moving toward more vertical integration, absolutely, but it’s a matter of balance; of having control while nurturing the creative genius of our grower community.
Q: You’ve certainly gained a wealth of knowledge and experience through your varied career. What would you say have been your most valuable lessons?
A: Relationships I’ve developed through the years are key. At BC Hothouse for almost four years, I had a professional relationship with Turners and Growers; in fact that relationship existed on and off in my career as I sold product to the company as an exporter.
In this industry, one tends to make lifelong friends. I remember one time we had a coaching seminar at BC Hothouse, where the facilitator told everyone to bring the one item to this session that means the most to you. I wondered around my house trying to come up with an item that had such significance to me, and I came upon my address book with business connections and friends from all around the world. I would bring this because it was the contents of this item I knew I could not let fade away.
I realized the value of my address book, which symbolized what an exciting and challenging adventure and learning opportunity the people and the industry have afforded me and that will continue at Enza. I hope in turn Enza can benefit from my skill set. Enza went through the deregulation process, and there have been a couple of people in this role I embark on with a myriad of stories. Looking in the rear view mirror is not productive, you must always move forward.
It’s that balance of finding the passion that exists in those that spent their life in this industry with the hard economics of this business. If passion was enough the whole industry would be millionaires.
Amid all the turmoil, and all the challenges, Dawn Gray paints a three tier picture for how production interests can survive and thrive in an era of buyer consolidation.
First, she reminds us that “… big retailers need big suppliers…” — which is another way of saying that suppliers can’t be intimidated in dealing with large buyers. They have something important and valuable to bring to the table and need to speak up for their needs.
Second, she points to grower consolidation and vertical integration as tools for capturing margin and reducing costs — thus keeping profits available for producers.
Third, she identifies proprietary produce, such as Enza’s Jazz variety, and brand as a tool to make a producer important to a buyer.
Dawn is a long way from home, but she is fighting the same battles that have defined the industry for decades — yet now she has a focus on a strategy that just might pan out.
Too often Americans don’t pay enough attention to what is going on outside the U.S. borders.
New Zealand is a relatively small country, but perhaps that very fact is allowing for a focus on a strategy to make an important industry survive and prosper.
Best of luck to Dawn Gray in her new position and many thanks to both Dawn and Enza for sharing some strategies for success with the industry at large.