How innovation is driving the Australian horticulture sector
Horticulture is the third largest agricultural sub sector in Australia, responsible for 21 per cent of domestic agricultural produce, generating $9.2 billion in revenue annually.
There are 28,000 growers in the industry, 81 per cent of which are micro growers.
When Horticulture Innovation Australia commissioned UQ Business School to look into how innovative the industry is, it produced surprising results.
The findings show the vast majority (76 per cent) of respondents innovate at some level, with half of the growers indicating they have engaged in novel innovation (that is, innovations that have been applied for the first time within the industry).
According to Dr Sarel Gronum, an entrepreneurship and innovation expert at UQ Business School, most respondents indicated increased profitability as the main motive for innovating, and businesses that said they intended to grow were more likely to be innovative.
“Business model innovations are particularly important for grower performance, with large growers engaging in comparatively more novel innovations than smaller growers,” he explains.
The path to innovation
The research found there’s an opportunity for the horticulture industry to reinvigorate the grower population: more than 60 per cent of growers are 50 years and older.
“So it’s actually surprising to see such high levels of innovation compared to the overall Australian business population,” says Dr Gronum.
However, he says the propensity to innovate is influenced by the high education levels of growers. More than half have been educated to tertiary level, and many are hobby farmers and don’t derive the majority of their income from horticulture.
They are an extremely qualified group of business people, which is in line with the finding that higher education is normally associated with increased levels of innovation, especially more novel innovation.
One example of a truly innovative horticulture business is Cottrell Farms, an early adopter of new varieties and technologies.
“This does not mean we adopt everything new, but we are constantly evaluating new technologies and varieties to see if there is a fit for our business,” says Matthew Cottrell, general manager Nu Leaf I.P.
Cottrell says variety selection plays an important role in his business. “We have been able to position ourselves closer to the breeders and owners of certain new varieties by becoming directly involved in a company that commercialises new varieties. Nu Leaf I.P. was established in 2010 to manage the rights for many of The University of California’s plant varieties.”
This allows the business to be at the forefront of the horticulture sector, not just in Australia, but around the world.
While the high levels of innovation displayed by the horticulture sector are positive, there is a substantial opportunity for the industry to grow and develop. It will require an innovative mindset to do this. Most growers sell their produce locally to fewer than five buyers and do not export.
David Moore, general manager of research and development at Horticulture Innovation Australia, says the purpose of the research was to develop a benchmark in horticulture for more transformational investment.
“For us it confirmed some things we already knew,” he says, citing the results that show peak bodies are an excellent information source.
“It also identified that many growers are using plant varieties and they are using technologies like GPS. They're starting to look at how to add value in the overall supply chain, in addition to innovations around pest and soil management and fertiliser application,” he says.
Moore says the idea is to look back every five years and see how HIA is tracking in terms of strategic, long-term investment. At the moment, the business is focused on six different areas: pollination research; fruit fly research; Asian markets; how to become more export-orientated; green cities and urban greening; and health, nutrition and food safety. He expects further research will be undertaken in a number of years to review the initial research.
Consequences for growers
With recent free trade agreements with Korea, Japan and China, there’s an opportunity for local growers to invest in R&D to innovate to produce niche products for these markets.
“The middle classes that are developing across Asia are quality conscious, and that’s something Australian growers can capitalise on. We have a very strong international brand when it comes to food quality and sustainability,” Moore says.
However, growers said availability of international channels to market is a perceived obstacle to performance, notwithstanding local market protection mechanisms acting as a disincentive to pursuing export opportunities.
Local markets provide less profitable opportunities than international markets where growers can create niches for differentiated products. If they sell locally they are likely to be price takers, but by producing a niche product they can sell overseas at a premium price.
The research UQ Business School is doing is an important part of unlocking value for the horticulture sector.