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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.