NOURIFARM DIRECT PLATFORM
The Nourifarm Direct Platform revolutionises the way Australian producers are able to do business in China. It streamlines the entire journey from farm-gate to Chinese wholesaler. In doing so, it has produced a system that eliminates much of the double handling and the multi-layered distribution system present in China.
The two major structural changes the Platform delivers for Australian producers are:
- One party owning and accountable for the produce from farm-gate to Chinese wholesaler
- A flattened Chinese distribution and logistics network developed in conjunction with Australia Post
The result is a system that is highly cost-effective, efficient and delivers farmers a better sell price for their produce.
In essence, the Nourifarm Direct Platform is ‘a one-stop-shop’ for Australian produce. The Platform assumes ownership and control of the produce along every step of the journey. It buys the produce from the farmer, and then engages the required contractors to value-add to deliver the best return in the Chinese market.
The Platform was born out of the many difficulties faced by Australian businesses exporting into China. WinWorld Australia Pty Ltd, the Platform developer and manager, has been experiencing the problems on a daily basis as an exporter and promoter of client’s products to China. WinWorld set about addressing these issues in order to make doing in business in China easier, the outcome is the Nourifarm Direct Platform.
The Platform Benefits all Parties
The result is a platform that delivers benefits for all key players involved in the growing, processing, retailing and buying of the produce.
Benefits to the Farmer
The majority of Australian farms are price takers as opposed to price-setters. The prices received for their produce is generally determined by the manufacturers or processes who value-add the raw product to ready it for domestic or export markets. This leaves farmers vulnerable to declining terms of trade; however, they receive little benefit in upswings in the terms of trade.
The Nourifarm Direct Platform is able to offer farmers prices that are more reflective of the premium nature of the Australian produce. This is due to the integrated produce management and distribution system.
Multiple Ownership Changes
The current process involves multiple changes of ownership from farm-gate to the Chinese retailer. There could be as many as five to six changes of ownership before it reaches the retailer level. Each transient owner of the produce is seeking to make a profit for their part in the journey, this leads to multiple parties each adding the value of their work plus a profit margin. The end result is a highly inflated price to the consumer.
The Nourifarm Direct platform takes ownership of the product at the farm-gate and maintains ownership until it reaches the Chinese wholesaler. This simple structure greatly reduces the costs involved.
The multi-layered distribution system present in China has a knock-on problem with logistical issues. Each tier of distributor is responsible for organising the logistics function in their part of the process. To keep costs down it is common practice to utilise back-loads to transport goods. This means there is little or no control over what other products are also on the truck as the produce makes the journey through China. Produce could be contaminated or crushed by load sharing goods.
The multiple logistics companies used not only adds to the costs but also makes it very difficult to assign blame if the produce is damaged. Each distributor and logistics company generally blame the other.
The Nourifarm Direct platform will manage the entire distribution system to the level of Chinese wholesaler. WinWorld has signed an MOU with Australia Post to jointly develop a robust and reliable distribution network for the Nourifarm Direct Platform in China.
Commodity Based Products
The current method of operating for import – export companies selling in to China is to supply the cheapest products to the market. This is because it is quick and easy to sell and therefore there is little risk in trading in these goods.
The few premium products that do enter the Chinese market attract heavy costs as each layer of distributor and the importer takes a larger premium on the sale to cover the greater risk and time spent holding the produce. This inflates the retail price quite substantially for the end customer.
The push for lower priced products leads to suppliers dealing in bulk quantities to make it viable. However, this leads to produce being marketed as a straight commodity and not a premium product which most of Australian produce is.
The Nourifarm Direct Platform is ideal for marketing premium produce. The minimal change of ownership structure and control over the distribution and logistics network allow the platform to enable premium and packaged goods ready for retail distribution to find an overseas market.
The aim is to deliver higher prices to the farmer and maintain more of the value-add in Australia leading to greater profits for the country.
The current system provides very little market feedback to the farmer. What feedback is received is slow in arriving.
The Platform is able to provide farmers with accurate and timely market feedback on their produce. This is due to the closer relationship the Platform manager has with the retail outlet and the comparative speed the produce moves through the Platform to the retailer.
The farmer will know quite quickly which products are popular and which products should be considered for the future.
Australian Farm Ownership Dilemmas
The average age of the Australian farmer is set to hit 60 in the next five years. The declining profits make the business unattractive to the younger generation and the narrow margins make attracting an investor difficult. However, without investment the farm may not be able to invest in new technology required to maintain or increase operational efficiencies and remain competitive. The underlying asset of the farm declines. Under these conditions it will be difficult to negotiate an exit strategy for the farmer when retirement arrives.
One of the main goals of the Nourifarm Direct Platform is to increase the profitability of Australian farms. This increases the attractiveness of the farm to investors, and if desired, Nourifarm can introduce investors seeking to invest in Australian farms.
The Benefits to the Contractors
One of the main fundamental principles of the Platform is the utilisation of contractors. The platform is essentially a ‘conveyor belt’ on an assembly line with various contractors engaged as required to value-add to the produce as it travels from farm-gate to Chinese wholesaler. The types of contractors the platform is in discussions with are:
- Food Processors
- Packaging Companies
- Farm management Companies
- Farming Education providers
- Technology implementation & support companies
- Product development companies
- Finance Providers
- Logistic solutions providers
- Professional services providers
Platform manager, WinWorld Australia, has signed an MOU with Pactum Dairy Group – processors of UHT milk.
Contractors to the Platform will benefit by concentrating on their core strengths. Many processors purchase the produce outright, perform the value-add service, then sell the produce to the next party in the chain. Working in with the platform allows the contractor to perform their function without the cost or risk of accepting ownership. This frees up capital to be spent in other areas of the business. The platform will also provide a regular workload to partner contractors.
The Benefits for the Customers
The platform is only viable if it is sustainable and relevant to the market place. The Platform delivers advantages to the end customers that ensure the Platform as a relevant distribution and marketing platform.
The Platform provides the end customer with:
- A wider range of produce and access to premium products that to date have been restricted
- An efficient distribution system that delivers cheaper retail prices
- Transparency in tracing the origin of the produce
In essence the platform will fill a niche which is under-serviced in China and deliver products to the niche market with competitively priced produce.