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Differentiate or die: how governments and private business make differentiation happen in honey market

11.11.2019

Global honey market is really tough.  Despite the global market volume growth from 1.3 mln. mt in 2001 to 1.9 mln. mt in 2017, the average market price is steadily decreasing, putting extra pressure on the producer and all the links in value chain as to cost optimization and value-chain streamlining.

Nevertheless, there are few good examples showing that extracting of product’s added value is possible even in the most aggressive and competitive market environment. Moreover, those examples are clearly confirmed by corresponding data: in the condition of overall market price declining, New Zealand and Brazil honey producers were able both to increase their export levels substantially and to raise the price for the product they offer to the market (New Zealand from 5,13 EUR in 2008 to 23,54 EUR in 2018, Brazil from 1,91 EUR in 2008 to 3,34 EUR in 2018).

Here are some interesting facts:

On a volume basis New Zealand accounts for just 1.5% of global honey trade. Nevertheless, New Zealand honey receives a price multiple that is seven to nine times higher than most other exporting countries. New Zealand export volumes are just 7% of China’s but achieve an average price that is 13 times higher. Most of the product sold by the other major exporters is significantly lower value than New Zealand honey, with an average export price of USD$3-4/kg, compared with New Zealand at USD$28/kg. This indicates New Zealand product is in a completely different category to that of nearly all other major exporters. Most of the competitive pressure is going from other competing health and wellness products, rather than other producers of honey.

Brazilian exports have started not so long ago, in 2003 with China’s honey embargo in the EU. Now Average honey exports are between 15 and 20 thousand tons yearly, contributing more than 60 mln. USD to Brazilian economy. And this is despite the fact that beekeeping in Brazil is very unprofessional from the productivity point of view – Brazilian honey productivity per hive is about 15 kg/colony/year. Comparing to Argentina with 35 kg/colony/year, Australia with 118 kg/hive/year in average and China 100 kg/hive/year, Brazilian beekeeping has much to grow.

What are the main elements of differentiation strategy, used by both the governments and private enterprises? We can specify some of them, namely:

  • Precisely defined USP (unique selling proposition) based on the naturally inherent features of the respective products (unique antimicrobial properties of Manuka in NZ; very natural honey from Africanized bees in Brazil);
  • The system of quality standards (here is where the governments come in) developed in both countries and making possible to measure the quality level of the product (analogue to gold or silver) – such as UMF (Unique Manuka Factor in NZ), and the system of Organic certification in Brazil;
  • Ability to “catch the trend” – both cases exploit the theme of global shift in dietary preferences, which makes healthy food free from any side “chemistry” trending and worth of buying;
  • Extensive marketing efforts, multiplied by well-organized distribution system. Thus, Comvita (the biggest NZ honey market operator) built its extensive distribution network and continues to expand its partnerships into North America. Direct sales into mainland China are through its joint venture which operates over 100 Comvita-branded stores throughout the country, digital channels and wholesale markets. In Australia and the UK, Comvita operates its own distribution businesses with a limited branded retail presence. Elsewhere, the company owns 45 retail stores in Hong Kong, Japan, Korea and New Zealand. Some of these stores are standalone, while others are stores-within-stores, inside department stores, and other high foot traffic areas. At the same time Comvita’s products are available through other retailers in wholesale channels in each market.
  • Use of digital platforms. Comvita has several of its own country-specific e-commerce sites, and sells its products on well-known global platforms, such as Amazon, Alibaba, JD.com and Rakuten in Japan.

Cases of both countries present good example of how cooperation between government and private business, multiplied by precise defined strategy aimed at product- and country-based differentiation brings its long-term results and provides for corresponding export expansion.