Turners & Growers has come a long way since Enza, with which it merged in 2003, had a monopsony on New Zealand apple exports. Deregulation of the topfruit industry in 2001 left Enza – and subsequently T&G – to compete with a vast number of exporters and, under pressure to boost its share price and placate owner Guinness Peat Group (GPG), it was compelled to enter new areas of the horticultural business, including kiwifruit. To ensure its New Zealand kiwifruit exports had a chance to grow, however, the group needed to achieve one of three potential outcomes: full deregulation of the kiwifruit export trade; an unlikely compromise giving T&G and single-desk marketer Zespri a duopoly; or collaborative agreements with Zespri that would enable it to start building overseas markets. None of these options has proven possible over the past 12 months.
Many believe former T&G chairman Tony Gibbs’ departure in April was prompted by the outcome of last year’s high-profile legal tussle, in which the group was unable to convince New Zealand’s high court that regulations on which Zespri’s single-desk status is founded were illegal. Since then, the company’s determined PR campaign has failed to sway politicians or growers in its favour, leaving it with few remaining options – notwithstanding subsequent appeals, including one scheduled for November.
Last month, the high court in Auckland began to hear T&G’s claims against Zespri under the Commerce Act. Crucially, the matters up for debate were about commercial practice rather than the regulations that underpin Zespri’s existence. The hearing, expected to last five weeks, was due to look at whether T&G had suffered losses as a result of Zespri’s loyalty agreement with growers, its service-level agreements on T&G’s permitted exports to Australia and its policy of testing kiwifruit cultivars owned by third parties using the same system as its own new varieties. At worst it seems for Zespri, it may receive a fine and a rap across the knuckles, and may be told to amend some commercial practices.
Deregulation of New Zealand’s kiwifruit export system appears a long way off, however. Last month, prime minister John Key reinforced his commitment to supporting Zespri as long as growers did. That view was echoed by opposition leader Phil Goff, arguably dismissing the notion that Zespri is an outdated state-run enterprise whose existence could cause New Zealand problems with trade partners and the WTO.
The future for T&G is still unclear. Will managing director Jeff Wesley and new chairman Rob Campbell have the appetite and legal budget to continue pursuing Zespri? Given GPG’s 66 per cent share in the group is now officially up for sale, speculation over a potential buyer is likely to mount. My view is that T&G could very well go the same way as Scales Corporation – owner of New Zealand’s largest topfruit exporter, Mr Apple – which is due to be taken over by a Kiwi consortium including Direct Capital, the NZ Superannuation Fund and Accident Compensation Corporation (ACC).
Interestingly, Campbell is also a director of ACC, while GPG non-executive director Gavin Walker is a director of the Guardians of New Zealand Superannuation Fund. Meanwhile, Goldman Sachs, the banking group that oversaw the sale of Scales Corporation, is currently handling a strategic review of T&G. The sovereign investors involved in the Scales takeover have already expressed an interest in New Zealand’s agricultural sector and, with the NZ dollar remaining strong against other currencies, it appears highly likely that T&G will end up in the hands of a domestic buyer.
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