Creating value from indigenous resources through innovation and public private partnerships Learning from the New Zealand experience

Dr Max Kennedy - National Manager Biological Industries

Ian Ivey – Principal, Caribbean

We need a ‘destination’. Having an end goal drives innovation and value creation

1 2 3 4 5 6 7 8 9 10+

Horizon 1Operational

Horizon 2Strategic

Horizon 3Preferred Scenario

Where we got

to

Resources

Connections

Sustainability

Life and work

How we

started

Economic

Social

Environment

Years

Why is the NZ story relevant to the Caribbean?

• It was an English colony• It supplied cheap agricultural commodities to Europe• It subsidised commodities to encourage production• In 1984 the country faced serious economic challenges• All subsidies were removed• A go-forward plan was developed with long-term goals• Value adding and innovation were encouraged• NZ is small with just 4.4 m people and far from markets• Today the country is still a major agricultural producer –

but the value add is much higher• Biological exports account for 70% of NZ merchandise

exports• The country now ranks in place 17 on the GII • The NZD has strengthened in value against the USD

Innovation creates value and moves us up the value triangle

Factor X – e.g. bioactives, perceptions, egoistic satisfiers etc.

US$ 400 – 1,500/kg +

US$ 40 – 399/kg

US$ 10 – 39/kg

US$ 2 – 9/kg

Commodity raw materials

The New Zealand 2025 end-goal

This requires:• Real export growth of between 5.5%

and 7% per annum• The real value of exports to double

over the next 13 years (from $60 billionto around $120 billion)

The Goal: Increase the ratio of exports to GDP to 40% by 2025

Government’s Business Growth Agenda:

Turning R&D into value – the NZ modelAcross the value chain

Basic CommercialisationTech transfer

MBIE contestable fundingCore funding for Crown research institutes

Applied ExperimentalDevelopment

Product DevelopmentUntargeted Targeted

Marketing

Primary Growth Partnerships (industry/government)

MBIE partnerships (industry/government)

Performance-based Research Fund (universities)Centres of Research Excellence

Callaghan Innovation support for businesses

International collaborations

Marsden

Funding for infrastructure

Sustainable land management and climate change

Sustainable farming fund

Global Research Alliance

Being focused and working with business

New Zealand Nutraceuticals and Functional Foods

Size

New Zealand industry aggregate turnover $1Bn

Industry target is $5Bn by 2025 (11% growth rate pa)

Example of Products now at Large Scale

• Manuka Honey

• Green-lipped mussels

• Deer Velvet

• Dairy product derivatives

• Dairy-related bacteria

Collaborative Companies• Just the Berries• Manuka Health• Fonterra • Vitaco• Comvita• Alpha Laboratories• Nutrizeal• ANZCO• Seperex• Douglas Pharmaceuticals• Comvita• New Image• New Zealand Berryfruit Group

Specific MBIE R&D projects to add value to indigenous resources

anti-allergy ingredients from raw milk

berry fruit with validated health properties for gut health, exercise recovery and physical fitness

novel bioactive proteins in milk as ingredients in functional foods

gene specific foods

other activities include seafood extracts, green lipped mussel extracts, anti-inflammatory extracts, vitamin C.

Manuka honey - the rise of a ‘star’

Manuka - Leptospernum scoparium

• Manuka is indigenous to New Zealand• It was regarded as ‘useless bush’ until the 1980s• Wild stands survived in many areas, mainly remote

and marginal.• Manuka honey was just honey with a different taste• That changed in 1988 when Prof. Peter Molam at the

University of Waikato identified a unique factor (UMF)in manuka honey that was heat and digestion stable and lethal to bacteria.

• UMF levels varied in honey by regional biotype.• Molam developed a UMF 1 – 20 activity scale.• High active grades (15+) killed MRSA and other

antibiotic-resistant bacteria • In 2008/2009 methoglyoxal and a synergistic molecule

were identified as being key parts of the UMF.• Today it is the basis for a large hi-growth industry. • Manuka is being planted to meet growing demand.

The value increase

Double digit growth rates

USD 200/kg in Singapore

Products driving the value increase

The Comvita Story• Driven by a strong vision• 80% of sales are in export markets• Key alliances a feature

Examples of other key players

USD O – 20m in 5 years. 50 staff. Sales in 45 countries

• Living Nature founded in 1987 by Suzanne Hall

• T/O $ 20million - exports to 14 countries• 100% natural ingredients - certified

by BDIH Germany.

Dealing with the competition –Manuka challenges and initiatives

Challenges InitiativesRaw material supply limitations

False claims; product counterfeiting; other countries launch ‘active honey (e.g. Chile ‘Ulmo’ and Active Jelly Bush Honey from Australia)

A 7 year Primary Growth Partnership (PPP) with $1.7m funding to improve supply and yields of medical grade manuka honey –includes replanting 50,000 ha of erosion prone land. Cross-government input, Comvita, Massey University + 3 private companies.

Honey molecular ‘finger-printing’ – Auckland University and honey sector. Above PPP to improve ‘active factor’ yields.

‘Innovation’ PPPs – challenges and benefits, - the NZ experience

Challenges Benefits• Short-term dominates over long-term

• No requirement to maintain scientific capacity

• Governance cost is additional

• The larger the funding the greater the monitoring

• Highly competitive industry/topic areas generate competition between participants

• SMEs can access more knowledge• A platform of common issues (e.g. product

safety)• Can leverage funding from all sources• Unified R&D strategies• Industry takes lead role thus greater

commercialisation potential• Network building• Better overall stakeholder

engagement/collaboration/dialogue• Longer term funding = longer term projects• Greater industry appreciation of the value of R&D• Independent governance• One point of contact for government• Incubator/spin out function

What’s essential for a successful PPP from the NZ experience?

• Independent chair• High calibre General Manager• The best value propositions• Cash co-funding• Industries and/or topic areas that are conducive to joint

R&D programmes• Mutual benefits for all parties• Linking industry knowledge networks (‘smart money’)• Government an ‘official observer’ at governance level

What’s happening to our indigenous resources in the Caribbean?

• Let’s take Trinitario cocoa - ‘ best in the world’

• As a commodity it sells for USD 3 – 5.00 /kg

• It’s made into products by smart offshore players that then retail for 100s to 1000s of $/kg

USAUSD 305/kg

ItalyUSD 315/kg

USA USD 1,500/kg

Why is this happening?

1. We need to have long-term national goals and a ‘destination’

2. We need greater focus on defined priorities

3. We need to focus more on adding value

4. We need to improve collaboration

5. We need more well-based public private partnerships

6. We need an integrated system to ‘implement creativity’

What’s the solution? An integrated national innovation system!

Unless everyone is going in the same direction we will never

reach our ‘destination’

Thank you for listening!