annual-review-2008-09 (1).pdf

FOCUSING ON GROWTHOWTHFOCUSING ON GROFOCCCUSISIS NG ON GGRO

ZESPRI ANNUAL REVIEW

2008/09

®

Contents

Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

The Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Chairman and Chief Executive Officer’s Review. . . . . . . .3

The ZESPRI® Brand Story. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Focusing on New Cultivars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

ZESPRI® GREEN Kiwifruit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

ZESPRI® GOLD Kiwifruit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

ZESPRI® ORGANIC Kiwifruit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Focusing on The Health Benefits of ZESPRI® Kiwifruit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

The Taste ZESPRI® Programme – Great-Tasting Kiwifruit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16

Sustainability – The ZESPRI Way for Life . . . . . . . . . . . . . . . 17

Focusing on Improved Operational Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18

Office Directory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

Notice of Annual General Meeting . . . . . . . . . . . . . . . . . . . . . .20

Financial Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

ZESPRI’s focus is on growth.Growing healthier, more vibrant ZESPRI® Kiwifruit.

As the market leader in kiwifruit, managing 30 percent of globally traded volume, ZESPRI carries a significant responsibility. We take this responsibility very seriously by focusing on:

growing consistently great-tasting, healthy kiwifruit

growing the number of people around the world who regularly enjoy kiwifruit

growing returns for kiwifruit growers

Our shareholders are either New Zealand growers, or have been so in the past, and have an active voice in the strategic direction of the industry. In addition to our 2,700 New Zealand growers, we have partnered with over 1,300 growers around the world to leverage our strong customer relationships and the ZESPRI® Brand. We sell over 390,000 tonnes of premium quality kiwifruit to over 60 countries every year. With 250 employees across offices in Asia, Europe and North America, our head office is at the centre of New Zealand’s kiwifruit region, Mount Maunganui. We work with growers and post-harvest operators to source top quality ZESPRI® Kiwifruit and supply this kiwifruit through our distribution partners to wholesale markets and retail customers.

The Financial Statements for the year ended 31 March 2009 are included in the 2008/09 Annual Report. A copy of the 2008/09 Annual Report can be obtained from www.zespri.com.

2008/09

Highlights Global ZESPRI® Kiwifruit sales increased 25 percent from $1.16 billion to $1.45 billion

Global ZESPRI® Kiwifruit volumes sold increased 11 percent from 98.0 million trays to 108.7 million trays, with more than 100 million trays exported from New Zealand for the first time

New Zealand Orchard Gate Returns per hectare increased 25 percent for ZESPRI® GREEN Kiwifruit, 14 percent for ZESPRI® GREEN ORGANIC Kiwifruit and 32 percent for ZESPRI® GOLD Kiwifruit

ZESPRI net profit after tax increased 21 percent from $19.7 million to $23.9 million

Payments to the New Zealand industry (fruit and service payments and loyalty premium) increased by 20 percent to $795.5 million (and by 12 percent to $7.76 per tray)

Over the past five years China, South East Asia and North America (our main growth markets for New Zealand-sourced fruit) have achieved year-on-year growth of 27 percent (4 million trays to 13.7 million trays) and currently account for 14 percent of the total New Zealand crop sold (6 percent in 2003/04)

222 hectares of ZESPRI® GOLD Kiwifruit licences were successfully tendered to New Zealand growers during the year, completing the 600-hectare three-year placement programme

Over the past 10 years, New Zealand volumes sold have almost doubled from 51.8 million to 100 million trays, and fruit and service payments (including loyalty premium) have grown from $413.0 million to $795.5 million

ZESPRI ANNUAL REVIEW 2008/09 | 1

A glance behind

In the 1999 season, ZESPRI sold 47.9 million trays of ZESPRI® GREEN Kiwifruit and 300,000 trays of ZESPRI® GOLD Kiwifruit from New Zealand. In 2008/09, ZESPRI sold 72.7 million trays of ZESPRI® GREEN Kiwifruit, and 21.9 million trays of ZESPRI® GOLD Kiwifruit from New Zealand. That represents a compound annual growth rate of 8 percent.

A note on the business model

ZESPRI’s core business is marketing, distribution management, innovation and supply chain management for kiwifruit only.

New Zealand kiwifruit growers have created a unique company. What ZESPRI doesn’t do as a fruit business is also remarkable:

ZESPRI does not deal with any other fruit but kiwifruit

ZESPRI does not grow, pack, transport or distribute kiwifruit

What does the future look like?

The future is about growth. Assuming we maintain historical growth rates we can expect volumes to almost double again in the next 10 years. As we grow ZESPRI® GOLD and introduce new products, we anticipate less than half of this volume will be the existing GREEN variety. There will be challenges, with Chile forecasting an increase in production of their low-cost commodity green offering by up to 100 percent in the next five years. That means that the key to our continued success lies in our rate of innovation and our ability to differentiate our premium offering. We do expect steady growth of demand for ZESPRI® GREEN.

ZESPRI® GREEN Kiwifruit is the foundation of the New Zealand kiwifruit industry. Building value in the ZESPRI® GREEN Kiwifruit business will be achieved through growing market demand, maintaining a strong focus on quality and product differentiation supported through the ZESPRI® Brand, and the moderating effect of new cultivars on the rate of growth of ZESPRI® GREEN Kiwifruit supply.

Where will the growth come from?

The integrated marketing structure creates a strong platform for future growth. Specific opportunities which will enhance such growth include:

In mature markets, the growth will come from increasing consumer pull through our marketing of superior-quality kiwifruit. The health and taste platforms are critical for the differentiation of our premium offering and for growth of the category

Further development of established markets such as France, Italy and the United States will focus on building our retail penetration to extend market share. ZESPRI will support growth in both mature and developing markets by increasing investment in in-market personnel

Development of distribution in emerging markets such as China, the Middle East, and South East Asia will deliver high growth from a relatively modest base

The Family Kiwi™ Brand will be used to develop emerging markets

There is significant further growth potential for ZESPRI® GOLD as new cultivars allow us to extend the sales window both early and late

New cultivars which are significantly better than, or different from, existing offerings will be commercialised

On the supply side, we anticipate that growers will continue to innovate to drive yields and deliver the optimum size and taste profile, while leading post-harvest operators are focusing on both inventory management and lean manufacturing methodologies to reduce costs

Twelve-month supply will be increasingly important as it strengthens our distribution and supports consumer awareness of the ZESPRI® Brand

The FutureFOCUSING ON

2 | ZESPRI ANNUAL REVIEW 2008/09

2008/09 has seen a focus on growth – growing volumes, growing markets, growing the number of consumers who regularly enjoy ZESPRI® Kiwifruit and growing returns for our growers and shareholders. This strong focus has delivered more fruit shipped than ever before, more fruit sold than ever before, and improved returns for ZESPRI growers.

Chairman and Chief Executive Officer’s Review

FOCUSING ON

Growth Financial Review

Kiwifruit volumes from New Zealand increased by over 8 percent in 2008/09, resulting in 100 million trays sold.

A combination of volume growth, optimised profile and firm pricing saw strong growth in revenue and returns for all three ZESPRI categories – ZESPRI® GREEN, ZESPRI® GOLD and ZESPRI® ORGANIC – in almost all markets around the globe. The strongest year-on-year performances came from Taiwan, Korea, China/Hong Kong, South East Asia and North America. These countries are important future growth markets for ZESPRI. Europe celebrated record sales of 60 million trays of kiwifruit from New Zealand and other supply sources. Europe increased demand for New Zealand-grown ZESPRI® GREEN and ZESPRI® GOLD with 11 percent and 18 percent respective increases over the previous year.

However, volumes of our GREEN fruit sold in Japan were down by 600,000 trays, or around 6 percent. This was a reflection of a competitive fruit market, declining fruit consumption and a difficult economic environment due to the global financial crisis. While we have enjoyed strong growth for GOLD in Japan in recent years, we are struggling to grow the demand of GREEN in the face of challenging market conditions and trends.

The overall increase in volume and sales had a positive effect on ZESPRI Corporate performance with net profit after tax increasing to $23.9 million, compared with $19.7 million in the previous year.

During the year, ZESPRI successfully released the third tranche of ZESPRI® GOLD licences. The third tranche was the final stage in the current GOLD placement programme, which has released a total of 600 New Zealand hectares for new GOLD plantings over the last three years. Income from the new GOLD licences in 2008/09 provided funding for a special dividend of 7.41 cents per share paid in March 2009. Continued strong growth in GOLD, combined with early and late market opportunities created by new GOLD varieties, is likely to create demand for increased New Zealand GOLD plantings. We expect to have a clearer view of the size and phasing of potential future GOLD plantings in the first half of 2010.

NZD (m)

Global Kiwifruit Sales – marketed by ZESPRI

New Zealand-grown kiwifruit ■Non-New Zealand-grown kiwifruit ■

2008/09**

2007/08**

2006/07**

2005/06*

2004/05*

2003/04*

2002/03*

2001/02*

1,299.8

1,082.2

1,045.0

945.2

997.3

902.9

844.6

794.7

151.6

81.6

80.4

45.9

24.9

8.2

16.2

5.7

* Reported under New Zealand Financial Reporting Standards (NZ FRS) / ** Reported under New Zealand International Financial Reporting Standards (NZ IFRS)

Note: excludes other revenue


Despite the global downturn impacting markets in late 2008/09, the ZESPRI® Brand held its premium position in all markets. A combination of improved pricing and optimised size delivered a $50.0 million increase in sales revenue over the previous year.

On the cost side, bunker fuel prices hit record highs of US$798 per tonne, which increased the cost of freight by $26.9 million. Unfortunately, the bulk of our shipping occurred during the peak in oil prices, resulting in an average per tonne rate of US$667 for the season (compared with US$389 per tonne the prior year), causing a significant increase in our freight costs. Other costs per tray equivalent remained stable over the year, or decreased, as we maintained focus on managing costs across the business.

The significant increase in crop volumes and the ability to maintain price premiums resulted in total fruit and service payments rising 20 percent. Payments were up $127.7 million to $779.0 million (excluding loyalty payments) over the previous year.

In addition, the rapid weakening of the New Zealand Dollar saw a considerable upside in 2008/09, delivering an advantage of $52.8 million to growers or $0.51 per tray over the prior year.

Orchard Gate Returns (OGR) increased by $96.6 million to $439.9 million, a 28 percent increase over the previous period. Supply chain costs increased in the 2008/09 year, due to increased labour, transport and energy costs.

The spread of OGR earnings across growers is notable and an issue for GREEN in particular, with some growers operating below break-even and others making a satisfactory return on investment. For GREEN, the most significant drivers of value at orchard level remain Class 1 yield and size profile. While ZESPRI’s focus must remain firmly on market growth and innovation, we are collaborating with growers on several initiatives, including our Focus Orchard Network for sharing best practice, to help growers make their orchards as profitable as possible.

Net profit as a % of revenue ●Net profit after tax ■

ZGL

NPA

T N

ZD (m

)

ZGL

NPA

T as

% R

even

ue

Profitability

ZESPRI Group Limited

7.2

14.4

22.926.5 26.4

22.119.7

23.9

2008/09**

2007/08**

2006/07**

2005/06*

2004/05*

2003/04*

2002/03*

2001/02*

0.9

1.7

2.5 2.6 2.6

1.91.7 1.6

* Reported under NZ FRS / ** Reported under NZ IFRS

Dividend ●Equity ■

ZGL

Eq

uity

NZD

(m)

ZGL

Div

iden

d N

ZD

Equity and Dividend Returned

ZESPRI Group Limited

22.3

35.2

53.9

77.072.8

67.8 68.374.0

2008/09**

2007/08**

2006/07**

2005/06*

2004/05*

2003/04*

2002/03*

2001/02*

0.07 0.200.50

0.50

1.551

0.820.811 0.981

* Reported under NZ FRS / ** Reported under NZ IFRS1 Includes special dividends. 2008/09 = 7.41 cents per share, 2007/08 = 12.67 cents per share, 2005/06 = 45.00 cents per share.

NZD

(m)

■ GREEN■ GREEN ORGANIC■ GOLD■ OTHER

Total Fruit and Service Payments

New Zealand-grown (excluding Loyalty Premium)

2008/09**2007/08**2006/07**2005/06*2004/05*2003/04*

24.0 15.9 14.7 11.2 11.1 12.2

94.7

141.1 136.0160.4 174.5

218.2

25.8 23.9 21.5 21.5 23.6 27.1

440.5 430.1396.9

440.8 442.1

521.5

* Reported under NZ FRS / ** Reported under NZ IFRS


ZESPRI shipped more than 100 million trays of kiwifruit in the 2008/09 season, marking a record for the New Zealand kiwifruit industry. The milestone can be attributed to the dedication, expertise and commitment of the approximately 25,000 people involved in the industry.

A ZESPRI celebration in November acknowledged the collaborative effort of everyone involved – our people, our growers, our suppliers, Kiwifruit New Zealand, New Zealand Kiwifruit Growers Incorporated, the Port of Tauranga and our shipping partners.

100 million trays of ZESPRI® Kiwifruit would fill 360 Olympic-sized swimming pools

If the fruit were placed end to end, 100 million trays of ZESPRI® Kiwifruit would wrap around the world five times

The 100 million trays shipped in 2008/09 amounted to an increase of 96 percent on the volume shipped 10 years ago

The ZESPRI Board has announced an intention to declare a final dividend of 56.00 cents per share. This is in addition to the 35.00 cents per share interim dividend paid in December 2008 and the 7.41 cents per share special dividend paid in March 2009, and will bring the total dividend payment for the year to 98.41 cents per share. This represents 100 percent of available profits for distribution.

ZESPRI is committed to maximising the returns back to our growers and shareholders. This is achieved via fruit and service payments, shareholder dividends and significant investment in research and development to underpin our future competitive advantage. This is a key benefit of our integrated industry structure.

Growing the Category – New Cultivars

ZESPRI and Plant & Food Research, our research partner, manage the world’s largest and most robust kiwifruit breeding programme. This programme is focused on delivering the next generation of ZESPRI® Kiwifruit to meet the needs of consumers and increase kiwifruit’s share of the consumer fruit bowl.

ZESPRI is positioned well to retain its market leadership position and deliver sustainable returns to growers, by offering new products which are genuinely different from, or better than current varieties (refer to our new cultivars strategy on page 9).

Our rate of innovation, relative to our competitors, is a critical factor in our success. It’s about choosing cultivars that will genuinely grow the category and differentiate ZESPRI in the market, and it’s about providing wealth-creation opportunities for ZESPRI growers. Our strategy is not about putting just any available cultivar into the market.

ZESPRI’s experience in commercialising new cultivars has been honed through the success of ZESPRI® GOLD, which is the gold market leader and now has global revenues exceeding $468

million. Current plantings coming into production and strong market demand mean the ZESPRI® GOLD business will continue to grow strongly over the next five years.

The four potential cultivars now undergoing field testing will be rigorously trialled at every stage of the supply chain. The investment and challenges required in commercialising new cultivars mean that we need full research confidence to pick the future winners of the kiwifruit category. The marketing programme to launch the new cultivars will draw on the past decade’s experience with ZESPRI® GOLD, leveraging the sales, distribution and marketing horsepower of the ZESPRI® Brand, to ensure successful commercialisation.

Non-New Zealand Supply

The year-round supply programme supports ZESPRI’s brand and distribution strength by partnering with growers around the world to supply premium-quality kiwifruit to consumers outside of the New Zealand supply window. Our programme supports New Zealand growers by securing year round shelf space and is core to our business. Despite disappointing performance of growing ZESPRI® GOLD in both California and Chile, the 12-month programme is expanding in Italy, France, Korea and Japan.

The establishment of GOLD orchards in locations other than New Zealand is a challenge for our offshore growers, matching the supply of premium-quality fruit with unique growing conditions and weather events. We have learned that success in this business is about fewer and larger supply locations supported by appropriate resources on the ground. Consequently, we have made significant investments in local staff, and technical and scientific assistance, to help improve growers’ understanding of specific environmental factors that impact on orchard productivity.

In 2008/09, ZESPRI sold 8.7 million trays of fruit grown in markets other than New Zealand – Italy, France, South Korea, North America, Chile and Japan – generating $151.6 million in revenue. This is an increase of 86 percent on the previous year and represents over 10 percent of ZESPRI’s total sales.

100 Million Trays


Aragorn

Following six years of exploring the GOLD processing business and recent unsatisfactory returns, the ZESPRI Board has approved a recommendation from management to implement a new business model for Aragorn.

This new business model for processing GOLD Kiwifruit will be characterised by reduced inventory risk and working in partnership with companies who have a core business in processing horticultural products.

Brand

ZESPRI’s success is a direct result of the strength of the ZESPRI® Brand which stands for vitality, premium quality and great taste. Throughout 2008/09 we continued to invest heavily in the brand – implementing a new brand architecture to position ZESPRI® Kiwifruit as a premium product, with Family Kiwi™ as a value offering in some countries to support market development.

Our critical mass enables us to deliver advertising and promotions which leverage the ZESPRI® Brand, while delivering compelling messages to the local markets.

In Taiwan, the ‘Vitality’ campaign to communicate the health benefits of ZESPRI® Kiwifruit was perfectly timed to match a bicycle usage craze. This helped drive a 20 percent increase in brand awareness amongst the target audience. We had a great year in North America. North American ZESPRI marketing programmes targeted influential groups such as media, dieticians and mothers’ groups and broadened ZESPRI’s reach, contributing to a 25 percent increase in ZESPRI® GREEN sales over 2007/08.

Health

Demonstrating the health benefits of our kiwifruit to consumers is vital for growing our markets. Eighty percent of our sales come from 30 percent of our consumers who eat kiwifruit primarily because they like the taste and because of its health benefits. Scientific research to quantify the health benefits of ZESPRI® Kiwifruit is a fundamental part of our strategy and, over the past year, has delivered strong results. Studies have demonstrated that eating ZESPRI® Kiwifruit enhances the body’s natural immunity; helping to strengthen your defences for natural protection. We will continue to develop quality research to understand more of the benefits of eating ZESPRI® Kiwifruit. This supports our key growth strategy to increase the number of consumers who eat kiwifruit at least once per week.

New Markets

Growth in the kiwifruit category also comes from establishing new markets. We are experiencing extraordinary levels of growth in China (including Hong Kong) in particular – sales volume this year grew 28 percent over 2007/08. In recognition of this, and its future potential, ZESPRI set up a new Chinese company in 2008/09. Ten full-time employees across Shanghai, Beijing and Guangzhou will focus on growing kiwifruit’s share of the consumer fruit bowl and ZESPRI’s share of the Chinese market. Supporting rapid growth in a diverse and complex market such as China is challenging. Resourcing this growth appropriately will be important both to maximise the opportunity and to manage the associated risks.

South East Asia is another area where we see potential for considerable and rapid growth. In the past year alone, GREEN and GOLD volumes have grown by 27 percent and 54 percent respectively (albeit off a small base). To capitalise on this potential, we have moved one of our high-performing market managers who delivered considerable growth in Korea, to the region. His focus will be on growing the markets in the Philippines, Thailand, Malaysia, Vietnam, Indonesia and Singapore.

There are also considerable opportunities for sales expansion through the Middle East and into India, as distribution relationships continue to strengthen and logistics infrastructure is enhanced.

International Trade Deals

The signing of a free trade agreement between New Zealand, Australia and the South East Asian nations will support the competitiveness of our offerings, underpin growth in these markets and also deliver increases in net returns for growers.

The New Zealand Government’s announcement in March 2009, that negotiations towards a free trade agreement with the Republic of Korea had commenced was very good news for the New Zealand kiwifruit industry. We believe that such an agreement could ultimately save New Zealand growers $33.0 million each year in tariff reductions, as Korea’s current tariff on New Zealand kiwifruit is the highest in the world at 45 percent.

In addition, the New Zealand-China free trade agreement, signed in April 2008 will see tariffs for New Zealand kiwifruit progressively reduce from 20 percent to zero by 2016.

■ GREEN■ GREEN ORGANIC■ GOLD■ OTHER

Tray

eq

uiva

lent

s (m

)

Total Volume SoldNew Zealand-grown

2008/092007/082006/072005/062004/052003/04

4.1 3.2 3.0 2.3 2.4 2.58.6

14.7 14.1 16.7 19.3 21.9

2.3 2.7 2.7 2.3 2.8 2.9

49.6

59.162.5

58.8

67.972.7


ZESPRI People

The year has seen us continue a strong focus on developing our people. To ensure we are always acting in the best interests of our growers and stakeholders, we are focused on implementing a strong performance and results-based culture. Our 250 people work hard every day to deliver a first class operation on every level.

Benefits of a Consolidated Industry

Over the last 10 years fruit and service payments (including loyalty premium) to New Zealand growers have increased 93 percent from $413.0 million to $795.5 million representing a compound annual growth rate of 8 percent annually. Despite the global kiwifruit category representing less than 0.5 percent of the consumer fruit bowl, the New Zealand kiwifruit industry represents over 60 percent of New Zealand fresh fruit exports and delivers economic value to New Zealand of over $1.5 billion. By comparison, while apples represent over 12 percent of the consumer fruit bowl, New Zealand apple export earnings from 2000 to 2008 fell 26 percent from $484.8 million to $359.6 million.

The single biggest driver of this differential performance is industry structure. We recognise that, as an industry, we must continue to earn the privilege of our integrated structure through ongoing delivery of value to growers and the broader New Zealand economy.

Looking forward, we are positive about our ability to continue to grow strongly. This growth will come from increased consumer penetration, strong growth in developing and emerging markets, new cultivars and growth in new market segments. Importantly, we have a key challenge in converting sales revenues to grower incomes through efficient supply chain practices and ongoing improvements in orchard productivity.

The integrated structure underpins our future growth strategy and is clearly in the best interests of New Zealand kiwifruit growers, the kiwifruit category globally and the broader New Zealand economy.

Governance

The 2008/09 year has seen a number of changes at executive level within ZESPRI, including our own appointments as Chairman and Chief Executive Officer.

At the 2009 Annual General Meeting, to be held on Wednesday 22 July 2009, Directors Keith Thorpe, Tony de Farias and Graham Cathie will retire by rotation. Tony de Farias is seeking re-election, while Graham Cathie and Keith Thorpe have advised they will stand down following this year’s AGM. Graham has been a Director for the past eight years, and Keith for six years. On behalf of the Board, we would like to thank them for their contribution to our company.

Outlook

The changing global economy dominated much of the business news in 2008 and 2009.

Our focus on growing our markets, growing the number of consumers who regularly enjoy ZESPRI® Kiwifruit and growing our brand has generated positive returns this year for the New Zealand kiwifruit industry. ZESPRI’s strong result in 2008/09 positions the industry well for the uncertain economic times ahead.

The 2009/10 season will be challenging in the current global economic environment, but we will continue to focus on the fundamentals of good business practice, to maximise the returns for our growers and shareholders. Thank you for your ongoing support.

John Loughlin Lain JagerChairman Chief Executive Officer


ZESPRI is the leading marketer of kiwifruit worldwide, with over 30 percent share of the market. We remain number one year on year because of our commitment to delivering top quality, great-tasting fruit to our customers and the strong relationships we have developed with our growers, supply chain partners and customers.

The ZESPRI® Kiwifruit label is a symbol of quality that tells you that the kiwifruit in your hand is something special – with a unique colour and delicious taste, it is safe to eat and is an extremely healthy choice.

The ZESPRI® Brand means vitality, freshness, energy and health, and ZESPRI® Kiwifruit provide all of these things and more. It is about a great eating experience, something we are continuing to enhance through the Taste ZESPRI® Programme and backed by our health science and market research initiatives. We have made significant investments in these areas in order to differentiate ourselves from our competitors and direct our marketing strategies.

We have an unrivalled focus on quality, customer relationships and innovation. This is underpinned by cost-effective global sourcing of superior fruit.

Our teams around the world build strong, mutually beneficial relationships with distributors, wholesalers and retail customers, and have grown trust in the strength of the ZESPRI® Brand. This, along with our commercial business approach, is key for giving ZESPRI more power in our markets.

ZESPRI is committed to matching consumer demand with the offerings from our growers. Our ability to measure what consumers

in various markets want gives us a strong understanding of our customers’ needs. Transferring this knowledge to our growers has meant our products meet these needs, resulting in better returns for our growers – a win-win situation for all.

We are acutely aware of our competitors; the way they work, their product offerings, their capabilities and their plans for the future. It is important to keep the ZESPRI® Brand strong in order to stand out from competitors – particularly Chile, our only significant Southern Hemisphere competitor.

ZESPRI’s premium positioning is based on the year-round, superior and consistent quality of our fruit, the power of our brand and our strong promotional campaigns. These have driven consumer demand and preference for ZESPRI® Kiwifruit, giving us a foundation on which to build and maintain customer relationships.

ZESPRI’s ongoing commitment to assessing and adapting our products to meet changes in the market and our ability to differentiate ourselves strengthen the ZESPRI® Brand. This, along with our ongoing investment in all areas of our business, strong partner relationships and constant stimulation of the kiwifruit category, allows us to retain our leadership position. Above all, ZESPRI’s focus is to satisfy our consumers by offering them the world’s most delicious and nutritious, and safest kiwifruit.

THE ZESPRI®

Brand Story


Finding the next generation of great-tasting, Finding the next generation of great-tasting, commercially sustainable kiwifruit that generates commercially sustainable kiwifruit that generates a buzz with consumers around the world, is a a buzz with consumers around the world, is a significant focus for ZESPRI. significant focus for ZESPRI.

ZESPRI’s strategy is to identify, through rigorous, long-term ZESPRI’s strategy is to identify, through rigorous, long-term research and trial, new kiwifruit cultivars which will encourage research and trial, new kiwifruit cultivars which will encourage new consumers to buy, and keep buying, ZESPRInew consumers to buy, and keep buying, ZESPRI® Kiwifruit. Our Kiwifruit. Our goal is to increase kiwifruit’s share of the consumer fruit bowl.goal is to increase kiwifruit’s share of the consumer fruit bowl.

Working with Plant & Food Research (formerly HortResearch), Working with Plant & Food Research (formerly HortResearch), we run the largest kiwifruit breeding programme in the world, we run the largest kiwifruit breeding programme in the world, with 50,000 seedlings currently under evaluation and 90,000 with 50,000 seedlings currently under evaluation and 90,000 expected within the next two years. This world leading expected within the next two years. This world leading programme is a result of more than $8.0 million invested programme is a result of more than $8.0 million invested annually on innovation, including new cultivar development.annually on innovation, including new cultivar development.

Forty seven new cultivar candidates are currently being Forty seven new cultivar candidates are currently being evaluated in small trials around New Zealand. Of these, four evaluated in small trials around New Zealand. Of these, four cultivars were tested in key markets to understand consumers’ cultivars were tested in key markets to understand consumers’ views of how they looked and tasted. They have been fast-views of how they looked and tasted. They have been fast-tracked and planted in pre-commercial block field trials, with tracked and planted in pre-commercial block field trials, with 30 hectares in total. We have:30 hectares in total. We have:

An early GOLDAn early GOLD

Two long-life GOLD Two long-life GOLD

A new earlier, sweeter GREENA new earlier, sweeter GREEN

The testing programme will continue this year with these four The testing programme will continue this year with these four varieties, including agronomic assessments to understand how varieties, including agronomic assessments to understand how productive the new cultivars will be on orchard and to determine productive the new cultivars will be on orchard and to determine how the fruit perform through the global supply chain. The how the fruit perform through the global supply chain. The consumer research will continue also with further testing in key consumer research will continue also with further testing in key strategic markets.strategic markets.

We make no apologies for the 8 to 10-year detailed process We make no apologies for the 8 to 10-year detailed process which sits behind our breeding programme. Through experience, which sits behind our breeding programme. Through experience, we have learned that new cultivars must stand up to evaluation at we have learned that new cultivars must stand up to evaluation at all stages of the supply chain; from orchard to storage to shipping all stages of the supply chain; from orchard to storage to shipping to retailers, and through to the consumer. to retailers, and through to the consumer.

The cultivar which makes it through our breeding programme The cultivar which makes it through our breeding programme will be the very best in every sense. Not only must it withstand will be the very best in every sense. Not only must it withstand the rigours of picking, packing and transport, it must also help to the rigours of picking, packing and transport, it must also help to increase the overall ZESPRIincrease the overall ZESPRI® Brand and kiwifruit category sales Brand and kiwifruit category sales through consumer preference. through consumer preference.

When we have a winner, as was the case with Hort16A (ZESPRIWhen we have a winner, as was the case with Hort16A (ZESPRI® GOLD), we will leverage the sales, distribution and marketing GOLD), we will leverage the sales, distribution and marketing horsepower of the ZESPRIhorsepower of the ZESPRI® System to ensure successful System to ensure successful commercialisation. The fruit itself must gain a strong sales base commercialisation. The fruit itself must gain a strong sales base to justify the significant investment we will make, and be sure of to justify the significant investment we will make, and be sure of delivering strong returns to ZESPRI growers.delivering strong returns to ZESPRI growers.

The kiwifruit category represents less than 0.5 percent of global The kiwifruit category represents less than 0.5 percent of global fruit consumption, and we know that most retailers will only offer fruit consumption, and we know that most retailers will only offer a few kiwifruit facings in store. It is essential that best quality fruit a few kiwifruit facings in store. It is essential that best quality fruit is available for those facings.is available for those facings.

ZESPRI’s experience in commercialising new cultivars has been ZESPRI’s experience in commercialising new cultivars has been honed through the success of ZESPRIhoned through the success of ZESPRI® GOLD. We have seen an GOLD. We have seen an increase in both pricing and sales of ZESPRIincrease in both pricing and sales of ZESPRI® GOLD, to the extent GOLD, to the extent that per hectare returns to growers now outstrip all other kiwifruit that per hectare returns to growers now outstrip all other kiwifruit varieties. varieties.

ZESPRI does not use any genetic modification to develop ZESPRI does not use any genetic modification to develop cultivars, only cross-breeding and natural breeding techniques cultivars, only cross-breeding and natural breeding techniques are used. Natural processes like these lengthen the development are used. Natural processes like these lengthen the development times, but we think that is a small price to pay for naturally times, but we think that is a small price to pay for naturally developed, high-quality new cultivars.developed, high-quality new cultivars.

FOCUSING ON

New Cultivars


ZESPRI® Kiwifruit is the biggest kiwifruit brand in the world and ZESPRI® GREEN Kiwifruit is the largest category in our portfolio.

It is the foundation of our industry and the volume driver for our business. ZESPRI® GREEN is the global category benchmark, providing consumers with a vibrant, branded offering that delivers safe, great-tasting, high quality kiwifruit.

ZESPRI® GREEN is one of the most nutrient-dense fruits available. Two ZESPRI® GREEN Kiwifruit contain more vitamin C than an orange, more potassium than a banana, more fibre than a bowl of bran, and are high in trace minerals and vitamins.

Underpinning our premium pricing and the ZESPRI® Brand is the consistently high quality of ZESPRI® GREEN Kiwifruit. We are continually looking at how we can enhance our value proposition, grow the kiwifruit category and further differentiate ourselves from the competition.

2008/09 Market Performance

2008/09 was a record season for Class 1 ZESPRI® GREEN with in-market sales of 72.7 million trays, an increase of almost 5.0 million trays on 2007/08. This impressive volume performance was achieved whilst maintaining ZESPRI® GREEN in-market price premiums.

Overall, the entire New Zealand industry worked well together and helped make it possible for our in-market teams to achieve record ZESPRI® GREEN volumes, sales and market returns.

Growers and suppliers alike responded well to the strong market signals for the supply of early, high quality fruit. Delivering early fruit in 2008/09 was pivotal in securing valuable shelf space at the start of the season. This enabled ZESPRI to further build on customer relationships and leverage our significant promotional campaigns.

Europe is the core region for ZESPRI® GREEN Kiwifruit, with more than 44 million trays sold in 2008/09, accounting for approximately 60 percent of the crop. In Europe, ZESPRI® GREEN has, on average, a two point Brix advantage over competitor fruit meaning our fruit is noticeably sweeter tasting. Japan continues to be our premium revenue-generating market. We achieved significant growth in China as marketing investment was increased and new distribution opportunities secured. Our strong performance in North America was driven by the earlier supply of fruit and our developing retail programmes.

Average Orchard Gate Returns per hectare for growers increased 25 percent to $30,067, up from $24,051 in 2007/08.

w

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2007/08

2006/07

2005/06

ZESPRI® GREEN Kiwifruit


62.558.8

67.972.7

ZESPRI®


Priority Issues and Future Focus

Strengthen the ZESPRI® Brand

Invest in health science

Continue to develop established and emerging markets

Continue product differentiation

Increase orchard performance to enhance the quality of the crop and grower returns

Improve our current ZESPRI® GREEN Kiwifruit offering and create new superior GREEN varieties by cultivar development

In a year such as 2009, it is crucial that we get off to the best possible start. The industry has stepped up to this challenge, with the first ever week 14 vessel leaving for Europe loaded with ZESPRI® GREEN.

Although we are getting to market more quickly than we have in the past, there are a number of factors that will make this one of the most challenging seasons on record:

The world is in the grip of the worst global recession in 80 years

A significant overhang of Northern Hemisphere green kiwifruit is spilling into our selling season

Chilean green volumes are expected to be up 28 percent to 199,000 tonnes

ZESPRI is well placed for a strong performance in 2009/10. Our customer relationships, established over many years, are enabling us to secure forward sales, shelf space and promotional campaigns. As purchase decisions become more considered in the current economic climate, the quality of ZESPRI® GREEN Kiwifruit and the assurance our brand provides will set us apart.

We will continue to make significant investments in advertising and promotion to drive consumer awareness and preference. In Japan, we are featuring a new ZESPRI® GREEN television commercial, while in Europe we will continue building on the very effective ‘Green Groove’ campaign.

Continuing to develop existing markets and establishing new markets are key strategies for growing our sales volumes. Emerging markets in China and South East Asia will be critical, in the context of the increasing GREEN volumes in the coming years, to drive value and volume growth both now and in the future.

It is increasingly important to continue to differentiate ZESPRI® GREEN from the competition. Several programmes are underway to achieve this:

The Taste ZESPRI® Programme (see page 16)

Developing New Cultivars (see page 9)

Building on the scientific research to support the healthbenefits of ZESPRI® GREEN Kiwifruit (see page 16)

The success of the New Zealand kiwifruit industry has been built on ZESPRI® GREEN, however, we can’t stand still. We will need to continue to evolve at an even faster pace to ensure we stay ahead of the competition.

Key Highlights 2008/09 Orchard Gate Return per hectare increased 25 percent on 2007/08 to $30,067 in 2008/09.

Teamwork, collaboration and achieving an early start were fundamental in the successful ZESPRI® GREEN 2008/09 season. We had a bumper crop of top quality fruit that was sent to the markets early. Our in-market teams sold far more than they did in any other season, at increased returns.

Average Class 1 gross yield per hectare from ZESPRI® GREEN orchards increased 6 percent on 2007/08 to 8,175 tray equivalents per hectare. Initiatives such as the Focus Orchard Network are helping to lift the overall quality of the crop. With commitment from growers and industry partners, we will continue to make improvements in the quality, yield and taste of ZESPRI® GREEN.


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ZESPRI® GOLD Kiwifruit


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After only 10 years in the industry, After only 10 years in the industry, ZESPRIZESPRI® GOLD Kiwifruit has GOLD Kiwifruit has rapidly expanded the kiwifruit rapidly expanded the kiwifruit category and continues to deliver category and continues to deliver strong returns for growers.strong returns for growers.

It is New Zealand’s second-largest horticultural export earner after ZESPRI® GREEN – an impressive feat for an innovative cultivar that is relatively young. It is a strong player in the global fruit market with huge growth potential.

ZESPRI holds the intellectual property and marketing rights for ZESPRI® GOLD, with over 4,000 hectares planted under licence around the world. Our ability to work with our industry partners to manage quality through the supply chain is critical, and a key factor in ZESPRI® GOLD’s success.

ZESPRI® GOLD Kiwifruit enjoyed an exceptionally good season in 2008/09 with strong sales. Improved fruit handling and enhanced supply chain processes reduced fruit loss and contributed to delivering another outstanding result to growers.

In 2008, the third tranche of new ZESPRI® GOLD licences was tendered to New Zealand growers. The increased plantings will provide greater volumes to enable us to meet expanding customer demand.

Our strong customer relationships, the superior taste profile, longer storage life and strength of the ZESPRI® Brand place ZESPRI® GOLD far ahead of any competitive yellow variety.


2008/09 saw a 13 percent increase in sales volume of ZESPRI® GOLD over 2007/08, with over 21.9 million trays sold globally.

Europe showed a 17 percent increase in volumes sold, with an additional 900,000 trays compared with the previous season. Germany, The Netherlands and Spain were the main recipients of ZESPRI® GOLD Kiwifruit in this region.

China (including Hong Kong) showed a 45 percent increase in sales and, combined with the other key Asian markets of Japan, South Korea and Taiwan, received over 14 million trays, an increase of 16 percent.

Average Orchard Gate Returns improved significantly for our growers, to $60,885 per hectare in 2008/09 compared with $46,067 in 2007/08 – a 32 percent increase.

ZESPRI’s strategy is to manage the supply of GOLD to meet ever-increasing market demand. The new GOLD licences granted this year secure future supply and allow us to grow steadily in all key regions.

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We have a strong understanding of our competitors and have armed ourselves to maintain our first mover advantage. Our key strategies to retain our position as the GOLD category leader are:

Continue improving taste

Invest in new cultivars

Build on our health science platform

Develop emerging markets

Grow consumer demand

Strengthen both pre and post-harvest supply chain efficiencies

We expect solid sales for ZESPRI® GOLD in 2009/10, with strong growth predicted in South East Asia and China.

Future opportunities for further GOLD licences will be reviewed on an annual basis.


Understand growth opportunities, market by market, and develop initiatives to tap into these

Defend our position – surpassing the competition

Extend the window of supply of ZESPRI® GOLD Kiwifruit

Improve productivity

We will continue to improve overall productivity, increase yields of Class 1 ZESPRI® GOLD Kiwifruit, and refine post-harvest supply chain efficiencies to enhance overall quality. ZESPRI will continue investing in the extension of the GOLD supply window through our new cultivar research programme and coolstore projects.

Due to robust market and consumer research, ZESPRI has a deep understanding of consumer preferences. Our aim is to increase depth and frequency of purchase.

Key Highlights 2008/09 A much softer fruit than its GREEN cousin, ZESPRI® GOLD is more prone to damage. In previous years ZESPRI has experienced up to 13 percent fruit loss due to damage during packing or shipping. The significant reduction in fruit loss (to less than 8 percent) was the main highlight of the season, a result of focus throughout the supply chain from orchard to packhouse to market.

The record volumes and sales in the Asian markets were another highlight, with volume increases of 27 percent in East Asia (including China) and 7 percent in Japan.

The year also saw the successful tender of the third tranche of ZESPRI® GOLD licences.

Other highlights included:

Introduction of In-Transit Colour Assessment, a quality control system which controls the temperature of the container during shipping to ensure the fruit is perfectly ripe by the time it reaches the markets

Market testing of new GOLD cultivars and fast-tracking of field trials of potential new varieties to extend the ZESPRI® GOLD window (see page 9)

Extensive market research into what consumers want from their ZESPRI® Kiwifruit

Advancements in the Taste ZESPRI® Programme (see page 16)


ZESPRI® ORGANIC is an important extension of the ZESPRI® Kiwifruit product range and accounts for three percent of ZESPRI’s business. Organic fruit is a premium niche with relatively limited growth potential in developed markets. As such, it is vulnerable to oversupply. The United Kingdom is the largest organic fruit market in Europe with organics representing six percent of total fruit sales, compared to four percent in Germany, one percent in France and one percent in Italy.

Demand for organic fruit has been growing across the key markets of Europe, the United States, China, Hong Kong, Taiwan and South East Asia. However demand has slowed as a result of the global economic downturn, and declined in Japan. As economies recover, growth rates for organics are expected to improve. Emerging markets like China and South East Asia offer viable opportunities, but the benefits of organics needs to be communicated to consumers in these markets in order to grow demand.

Grown to the most stringent standards, ZESPRI® ORGANIC Kiwifruit undergo a rigorous organic certification system to meet market-specific needs. BioGro New Zealand (New Zealand’s leading independent and internationally-recognised certification agency) audits and checks all of our organic fruit. We also comply with other international certification bodies, including International Federation of Organic Agriculture Movements (IFOAM), Japan Agricultural Standard (JAS), Korean Standard (KOSOFO), New Zealand Food Safety Authority (NZFSA) and United States Department of Agriculture (USDA).


A total of 2.9 million trays of ZESPRI® GREEN ORGANIC were sold in the 2008/09 season, along with 317,000 trays of ZESPRI® GOLD ORGANIC.

Performance in Europe and North America was particularly strong. Changes in the economic climate shaped sales in Japan which put consumers, and therefore pricing, under pressure. Korea posed a great challenge for ZESPRI® ORGANIC during the season, due to the impact of the revised pest quarantine regime which limited supply to our customers.

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ZESPRI® GREEN ORGANIC Kiwifruit


2.7

2.3

2.82.9

ZESPRI® GREEN and GOLD ORGANIC Kiwifruit offer a natural choice to suit consumers’ lifestyles, as an alternative to conventional kiwifruit. ZESPRI® ORGANIC Kiwifruit was designed for those who want to enjoy pure, organically-grown fruit.

Kiwifruit

ZESPRI®



Build sales in existing markets

Understand emerging markets and work to grow these

Strengthen customer relationships

Educate customers about environmental and health benefits (the ‘naturally produced/food safety’ platform)

Develop new cultivars to expand the category

Pilot sustainability initiatives to improve the ‘natural’ offering

Key Highlights 2008/09 Average Orchard Gate Returns increased in the 2008/09 season to $39,441 per hectare, compared with $34,744 the previous season. This was due to strong in-market pricing and performance.

ZESPRI engaged key customers, mainly from Japan, with visits to New Zealand to see organic orchard management in action. Product checks are integral to these customers, where sales of organics are driven by product integrity and food safety. Through these relationships, ZESPRI has also been particularly successful in securing space in key retail catalogues in Japan via the Japanese Consumer Cooperative Union. Mail order accounts for 30 percent of their business and this is a real success for ZESPRI.

Several European customers also visited our organic orchards and this led to the recent filming of a documentary on ZESPRI® ORGANIC Kiwifruit with German television company Galileo. This documentary will be aired on German television mid-2009 to an audience of one to two million German viewers.

The economic downturn has slowed market demand for ZESPRI® ORGANIC. We expect the impact in 2009/10 to be harder on our premium-priced ORGANIC kiwifruit than on our conventional GREEN and GOLD products.

Our key focus for the coming season will be on supporting and developing relationships with motivated ZESPRI® ORGANIC customers to build sales in existing markets. Organics is a category with a high dependence on relatively few large customers. This poses some risk to the category but also provides opportunities to closely manage the relationships.

The supply of ZESPRI® ORGANIC Kiwifruit is increasing through orchard conversions and yield improvements. We expect the category to benefit from initiatives to increase depth and frequency of purchase for ZESPRI® Kiwifruit in existing markets.

At the same time, we will endeavour to build ZESPRI® ORGANIC in new markets, such as China, South East Asia and the Middle East. As consumer incomes rise in these regions and the benefits of organics become more widely accepted, we see a good opportunity for long-term growth.

Access constraints in some markets, such as Korea, will need to be addressed in order to maximise our performance. We are working on initiatives to improve pest management and increase consumer education.

Our aim is to create broader consumer appeal and build on the ‘naturally produced/food safety’ platform for ZESPRI® ORGANIC – the key consumer purchase driver for organic foods. Increasing awareness of the environmental and health benefits of ZESPRI® ORGANIC will also be important. Sustainability initiatives, such as compostable fruit labels and packaging, are underway to strengthen our natural offering.

The investment in health science is beneficial for organics – it is a natural fit as it addresses the health benefits of kiwifruit, which are enhanced by the lack of chemical pesticides or fertilisers. The ZESPRI New Cultivar Breeding programme could open additional market opportunities for ZESPRI® ORGANIC, with the development of new cultivars which may be well suited to organic production.

With a significant number of orchards converting to organics, yields rising and global demand slowing, we expect to have increasing price pressure in 2009/10. In the present climate, it is important to gain category share by supporting promotional initiatives with existing customers rather than by relying on net category growth. The strength of our relationships with our key customers will allow us to remain a strong player in organics.


ZESPRI has invested heavily in scientific research to investigate the benefits of eating kiwifruit on health and wellbeing. Having established a strategic partnership with the Riddet Institute, an amalgam of world-class research providers, we are spearheading innovative research to validate the health benefits of ZESPRI® Kiwifruit.

Research has shown that consumers rate health as an important factor when purchasing fruit, kiwifruit in particular. ZESPRI’s research is focused on the impact of ZESPRI® Kiwifruit on overall wellness and health, providing natural protection from within – messages that resonate with consumers around the world.

One of the most exciting studies initiated in 2008 was the Kiwi Women’s Iron Study. This involved a group of iron-deficient young women who consumed an iron-enhanced breakfast cereal either alone or with two ZESPRI® GOLD Kiwifruit each morning. The final results will be published late 2009, but initial findings indicate GOLD Kiwifruit significantly increased the uptake of iron in these women. This research is important because iron deficiency is the most common micronutrient disorder in the world today1 – reducing physical productivity and negatively impacting cognitive development in children.

Other studies underway include investigating the true energy value of kiwifruit and the impact of eating kiwifruit on immune responses. Our continued investment in health science will grow the kiwifruit category and help increase ZESPRI’s share of the global fruit bowl.

THE TASTE ZESPRI® PROGRAMME

Great-Tasting KiwifruitThe Taste ZESPRI® Programme seeks to continually improve the taste of our fruit – both GREEN and GOLD – to provide consumers with the best possible taste experience. Over the past year, our growers have improved the overall taste of the crop by increasing the amount of dry matter.

Market research shows repeat purchase of ZESPRI® Kiwifruit is influenced mainly by taste and consistency, rather than by price. We have invested heavily in understanding how we can positively influence taste via growing techniques.

To deliver a consistent supply of high taste ZESPRI® Kiwifruit to market, a range of smart on-orchard production techniques and robust post-harvest technologies are being explored and validated scientifically. Some examples are: root pruning; multiple trunk girdling to increase dry matter; and improving inventory management through optimising harvest and handling to ensure that great-tasting fruit is available to markets over an extended period.

We have significant consumer research underway to determine what constitutes a great kiwifruit eating experience, how consumers define this and how they prioritise the sensory attributes. We are also developing sensory tools to benchmark and evaluate kiwifruit globally which is becoming increasingly important as we expand our 12-month global supply.

FOCUSING ON

The Health Benefi ts of ZESPRI® Kiwifruit

ZESPRI® GREEN KiwifruitGUIDELINE DAILY AMOUNT (GDA)*Each 100g serving of ZESPRI® GREEN (about 1 kiwifruit) contains:

4%

Calories72

8%

Sugar7g

<1%

Fat0.4g

<1%

Sat.Fats0.01g

<1%

Salt0.212g

14%

Fibre3.4g

3%

Calories54.9

12%

Sugar11.1g

<1%

Fat0.6g

<1%

Sat.Fats0.15g

<1%

Salt0.0075g

6%

Fibre1.4

ZESPRI® GOLD KiwifruitGUIDELINE DAILY AMOUNT (GDA)*Each 100g serving of ZESPRI® GOLD contains:

1: www.fao.org/docrep/x0245e/x0245e01.htm*GUI*GUIGUIUIU*GUI*GUIGUIDELIDELIDELILDELIDELIDELIDELIDEL NE DNE DNE DNE DNE DNE DNE DN AILYAILYAILYLYAILYAILYAILYAILYAILY AMOAMOAMOAMOMAMOAMOAMO AMOUNTUNTUNTNTNNTUNTUNTUNTUNTNTTUNTUNT — % of% of% of% of% of% of% of% of anann an an an adadaduladuladuladuladult’st’st’st s guguideline daily amount (GDA), baseddd on dda d a d ilailyilaily i ti tint int kakekkake f 2of 2f 2f 2of 20000000000000 llcalocalo iries. www.zespri-europe.com


The kiwifruit industry has grown in harmony with nature The kiwifruit industry has grown in harmony with nature for over 100 years, enabling us to deliver premium-quality, for over 100 years, enabling us to deliver premium-quality, healthy kiwifruit to consumers around the world. Our healthy kiwifruit to consumers around the world. Our strong heritage in environmental innovation has gained strong heritage in environmental innovation has gained momentum recently with several key initiatives. momentum recently with several key initiatives.

The Carbon Footprint Study was a highlight in 2008/09. The Carbon Footprint Study was a highlight in 2008/09. This comprehensive study, conducted in conjunction with This comprehensive study, conducted in conjunction with the New Zealand Ministry of Agriculture, used best practice the New Zealand Ministry of Agriculture, used best practice methodology to determine the total carbon footprint of methodology to determine the total carbon footprint of growing, packing and delivering our kiwifruit to consumers. growing, packing and delivering our kiwifruit to consumers.

The outcomes from this study allow ZESPRI to take an The outcomes from this study allow ZESPRI to take an objective view of all practices to determine where savings objective view of all practices to determine where savings and improvements can be made. Working with our and improvements can be made. Working with our growers and supply chain partners, we are developing growers and supply chain partners, we are developing a range of initiatives to reduce our carbon footprint. a range of initiatives to reduce our carbon footprint.

By understanding our position and engaging with By understanding our position and engaging with stakeholders, we can drive actions to make a difference stakeholders, we can drive actions to make a difference – clearly addressing the increase in consumer concerns – clearly addressing the increase in consumer concerns about the impact of their purchases on the environment. about the impact of their purchases on the environment.

Some initiatives underway include:

On OrchardClimate change adaptation – adjusting on-orchard practices to accommodate the changing environment. For example, one grower has converted a natural gully into two lakes which now serve as an efficient irrigation system for his orchard.

Focus Orchard Network – sharing best practice between orchards to increase yield, optimise efficiencies and reduce waste.

Packhouse and CoolstoreWaste utilisation – turning kiwifruit waste into bio-plastics which can be used for packaging.

Coolstore energy efficiency – working with the post-harvest sector to initiate energy-efficiency projects.

TransportUsing reefer vessels and optimising packing – allowing a greater quantity of fruit to be shipped at one time.

Slow-steaming ships – reducing a ship’s speed by 2km/h to lower diesel use by 17 percent.

The potential future use of SkySails – harnessing the wind’s energy by flying a sail 100–300m off the front of cargo ships, reducing carbon emissions and lowering operating costs.

SustainabilityThe ZESPRI Way for LifeThe ZESPRI Way for Life


FOCUSING ON

Improved Operational PerformanceThe successes of 2008/09 were a direct result of all parts of our business and wider industry working effectively towards a common goal. Some of the operational improvements of which we are particularly proud are in shipping, technical operations and our global supply business.

Early ships secured valuable retail space

We achieved an early start to sales in Europe in the 2008/09 Season, loading two ships in week 15 (13 April) – one to Zeebrugge in Belgium and the other to Tarragona in Spain. Early ships were also sent to North America and Japan. The Japan arrival ensured our fruit was in stock for the all-important Golden Week (a festival where fruit is often given as gifts).

Our strong relationships with shipping partners enabled us to respond to changing market conditions, altering schedules and load quantities as required. We loaded more on-deck containers per ship heading to Europe, and better utilisation of the total vessel capacity means we required the equivalent of three fewer ships for the 2008/09 crop volumes – good for trading and cost efficiencies as well as for the environment.

The steep rise in oil prices in 2008/09 led to some container lines slowing the speed of their ships to save costs. This extended transit times and caused delays in our shipping schedules. In 2009/10, we expect bunker fuel costs to be approximately 50 percent lower than those incurred in the 2008/09 season.


Improved quality control to deliver more great-tasting fruitZESPRI made significant advancements in the technical arena in 2008/09, so we can continue providing our customers with the best quality, best tasting kiwifruit. We achieved the following:

Improved the Export Consignment Product Inspection (ECPI) to create a more robust system with near real time feedback systems

Developed a Container Conditioning and In-Transit Colouring Assessment for ZESPRI® GOLD which enabled an earlier start to the season, better fruit colour and a better quality product arriving at the market

Redesigned the quality/auditing system in Italy and introduced a new storage regime for ZESPRI® GOLD

Implemented the International Tray and phased out the Single Layer Tray in the Asian markets to improve freight efficiencies and lower costs

Initiated a number of energy efficiency projects with the post-harvest sector, partially funded by the Energy Efficiency and Conservation Authority (EECA); this included benchmarking allowing each coolstore to compare itself to its counterparts and make improvements

Initiatives for 2009/10 include:

Review of the Intercheck System – performance assessment of the post-harvest sector

Further implementation of decision support tools for storage prediction

Enhancing the ZESPRI® GREEN container management programme to ensure fruit arrives on time in a ready-to-eat state

Growing and selling more fruit from outside New Zealand

ZESPRI’s 12-Month Global Supply strategy was established to ensure key retailers’ shelves in our main markets are regularly stocked with ZESPRI-branded, top quality fruit to support the sale of New Zealand fruit. To achieve this, we grow fruit in both the Northern and Southern Hemispheres under the ZESPRI® Brand.

In the 2008/09 season, fruit grown outside New Zealand delivered increasing returns. Class 1 ZESPRI® GOLD Kiwifruit yields across our key growing regions has improved and the European supply of ZESPRI® GREEN Kiwifruit increased significantly with over 4 million trays of Class 1 fruit sourced.

We adapted our organisational structure and resources to meet the evolving needs of the year-round supply business. Initiatives included:

Global technical support team to establish a consolidated view of international best practice

Centralised research and development programme to prioritise offshore issues and allocate project funding accordingly

Robust quality assurance programmes to ensure fruit grown outside New Zealand consistently meets ZESPRI’s quality standards

For the coming season the global supply base will face challenges of localised environmental factors. In Italy, the early part of the growing season has been extremely wet and cold in some regions, affecting vine health of all kiwifruit varieties. ZESPRI continues to invest in research and technical support to understand Hort16A (ZESPRI® GOLD) responses to local growing conditions.


New ZealandZESPRI Group LimitedZESPRI International LimitedPO Box 4043Mount Maunganui South400 Maunganui RoadMount Maunganui 3149New ZealandTelephone: +64 7 572 7600Facsimile: +64 7 572 7646

Aragorn LimitedPO Box 4043Mount Maunganui South400 Maunganui RoadMount Maunganui 3149New ZealandTelephone: +64 7 572 7600Facsimile: +64 7 572 7646

ZESPRI Innovation Company LimitedPO Box 4043Mount Maunganui South400 Maunganui RoadMount Maunganui 3149New ZealandTelephone: +64 7 572 7600Facsimile: +64 7 572 7646Email: [email protected]

AustraliaZESPRI International (Australia)Pty LimitedLevel 121 McLachlan StreetFortitude ValleyQLD 4006Australia

BelgiumZESPRI International (Europe) N.V.Antwerp TowerDe Keyserlei 5 bus 45B-2018 AntwerpenBelgiumTelephone: +32 3 201 0801Facsimile: +32 3 201 0888www.zespri-europe.com

ZESPRI Service Centre N.V.Antwerp TowerDe Keyserlei 5 bus 43B-2018 AntwerpenBelgiumTelephone: +32 3 201 0877Facsimile: +32 3 201 0888www.zespri-europe.com

ChinaZESPRI Management Consulting (Shanghai) Co. LimitedSuite 1703No. 1065, Zhao-Jia-Bang RoadShanghaiPROC 200030Telephone: +86 21 3368 7528Facsimile: +86 21 3368 7533www.zespri.com.cn

FranceZESPRI International France S.A.R.L.Ccfim Cap Janet Hangar 1713344 Marseille Cedex 15FranceTelephone: +33 4 91 659 140Facsimile: +33 4 91 609 144www.zespri-europe.com

ZESPRI Fresh Produce France S.A.R.L.42 Rue de Tauzia33800 BordeauxFrance

GermanyZESPRI International Germany GmbHPostweg 14DE-46499 HamminkelnGermanyTelephone: +49 285 296 0440Facsimile: +49 285 296 0439www.zespri-europe.com

ItalyZESPRI International Italy S.r.l.Via Cesare Lombroso 5420137 MilanItalyTelephone: +39 02 5410 7492Facsimile: +39 02 5410 4627www.zespri-europe.com

ZESPRI Fresh Produce Italy S.r.l.Via Ercolani 2840026 Imola (BO)ItalyTelephone: +39 054 223 523Facsimile: +39 054 261 2909

JapanZESPRI International (Japan) K.K.3rd Floor, Sanbancho Yayoikan6-2 SanbanchoChiyoda-kuTokyo 102-0075JapanTelephone: +81 3 3288 9341Facsimile: +81 3 3288 9353www.zespri-jp.com

KoreaZESPRI International (Korea) Co. Limited8th Floor, Maru Building942-20, Daechi-DongGangnam-GuSeoulKorea 135-280Telephone: +82 2 547 5935Facsimile: +82 2 547 5938www.zespri.co.kr

North AmericaNew Zealand Kiwi Holdings Limited3607 Country Club DriveRedwood CityCA 94061United States of AmericaTelephone: +1 650 368 2870Facsimile: +1 650 745 1419www.zesprikiwi.com

ZESPRI Fresh ProduceNorth America Inc1420 5th Avenue, Suite 4100SeattleWA 98101-2338United States of AmericaTelephone: +1 206 223 7000Facsimile: +1 206 223 7107

SpainZESPRI International Iberica SLMercamadridZona Comercial Local 14-A28053 MadridSpainTelephone: +34 91 507 9368Facsimile: +34 91 507 9259www.zespri-europe.com

SwedenZESPRI International Nordic ABTallkrogsplan 93122 60 EnskedeStockholmSwedenTelephone: +46 733 584 343Facsimile: +46 8 30 82 08www.zespri-europe.com

TaiwanZESPRI International (Asia) LimitedSuite 1701, 17th FloorInternational Trade Building333 Keelung RoadSection 1Taipei 110TaiwanTelephone: +886 2 2757 7266Facsimile: +886 2 2345 9633www.zespri.com.tw

United KingdomZESPRI International (United Kingdom) LimitedWeltech Centre TrustRidgeway Unit 29-AHertfordshire AL7 2AAUnited KingdomTelephone: +44 1707 871 536Facsimile: +44 1707 321 211www.zespri-europe.com

[email protected]

Notice of Annual General MeetingThe Annual General Meeting of shareholders of ZESPRI Group Limited will take place at 1.00pm on Wednesday 22 July 2009 at Baycourt Theatre, Durham Street, Tauranga.

Financial CalendarFinancial year-end: 31 March 2009Annual Report issued: 23 June 2009Deadline for receipt of proxies for Annual General Meeting: 1.00pm, 20 July 2009Annual General Meeting: 22 July 2009Indicative dates for dividend payments: December (interim) August (final)

ZESPRI

Office Directory


www.zespri.com

Documents

annual-review-2008-09 (1).pdf