It is well known that New Zealanders were the first to commercialise the kiwifruit globally. Less well known is the role of intellectual property in this New Zealand success story. Get ready for a tasty illustration of - intellectual property, food research, commercialisation and ISO 9001 compliance - working in unity to maintain New Zealand's leadership in the global $US2.5 billion kiwifruit market.
On reading the May 2006 Fast Company story titled Haute Fruiture I was inspired to explore the kiwifruit story from an IP and commercialisation perspective.
In 1904 a handful of Chinese Gooseberry seeds were brought to New Zealand. Then in 1924 an enterprising New Zealand horticulturalist, Hayward Wright, cultivated the kiwifruit variety which came to be known as the ‘Hayward’. It was first exported in 1952, to England. Wright's creation was at a time when either no one thought to use intellectual property to protect the new variety of fruit or to brand it, or maybe there were too few IP rights at law. Wright obtained no legal monopoly.
The kiwifruit today is commonly known as simply the kiwi and it comes in a number of varieties and is grown in numerous countries. In revenue terms it is New Zealand's number one horticultural export, ahead of apples, wine and fresh and frozen vegetables. Innovation and intellectual property are at the heart of how New Zealand's $NZ1 billion kiwi market has been maintained against competition.
It seems likely that by the 1990s competition from growers in other countries was affecting sales. Growers exist in Italy, Spain, Chile, South Africa and France. So a new generation of enterprising New Zealanders went back to the drawing board.
Research and development for a new kiwi
Research involving a New Zealand government body, HortResearch, began with the first research vine grown in 1992. In time, from this breeding programme, a new cultivar was developed, named 'Hort16A'. During development, it was evaluated for taste, colour, size, storage and shelf-life.
Marketing and sales of Zespri Gold
In 1997 Zespri International was born. The group of Zespri companies provided the necessary business or corporate structure for the next stage of commercialisation.
Sometime in the 1990s the new cultivar, Hort16A, was legally protected with a plant breeder's registration. In December 1996 Zespri registered its Zespri trade mark in New Zealand. The new kiwi was released to the market in 1998 under the brand name Zespri Gold. The new kiwi was yellow-fleshed and is said to have a sweeter, more tropical flavour than the old green-fleshed Hayward.
Zespri Gold's sales have grown and grown. The Zespri group ships 2 billion kiwifruits worldwide to about 70 countries.
Zespri International is a marketing arm owned by some 2,700 growers in New Zealand. It seems the Zespri group of companies employ nearly 200 people and has several offices in Europe, Asia and North America. For the 2004-05 year the Zespri Group Ltd reported a net profit of $NZ25.5 million on over a billion New Zealand dollars of sales revenue.
Business process and operational efficiency
The Zespri group's operations are ISO 9001 certified. At our firm we recognise the absolute necessity for all our clients to define and improve their business processes.
Zespri describes its integrated production and delivery system in these terms:
End to end integration of the supply chain from orchard to international customer
Defined product specifications and consistent delivery against these specifications
Production systems meeting or exceeding customer and consumer requirements
Control of single export exit and market entry points from New Zealand
Strong global brand management support
Generic and targeted advertising and public relations in selected countries
Customer support services including promotions, technical information and product selection
In–market infrastructure to manage inventory and product flows
Access to industry expertise at each point in the supply chain from orchard to customer
Intellectual property ownership and licensing revenues
Zespri earns intellectual property licensing fees from New Zealand and overseas growers. Zespri's intellectual property armour includes not only plant breeder's rights registrations for the Hort16A variety, but also numerous registered trade marks, including in Australia and other countries for the Zespri name, logo and other signs.
For example, the accompanying Zespri logo is trade mark registration 735176 on the Australian trade mark register. It was filed on 26 May 1997 under the name of the owner, Zespri Group Ltd. It's a registration in four classes of the register - 29, 30, 31 and 32 - so it covers a wide variety of goods including preserved fruit and fruit drinks. An Australian plant breeder's rights registration for Hort16A was filed for in 1998 and registered in 2001.
The Zespri Group Ltd 2004-05 annual return, at page 57, provides more glimpses into the group approach to intellectual property acquisition and licensing. It also brings the story full circle as Hort16A (marketed as Zespri Gold) was bought from the government.
ZESPRI Group Limited purchased Hort16A plant variety rights (PVR) from The Horticulture and Food Research Institute of New Zealand Limited (HortResearch), effective 1 April 2004. The purchase of the PVR gives the Company the worldwide, exclusive intellectual property rights on all Hort16A kiwifruit. As part of the agreement the Company will continue to pay a royalty to HortResearch, based on the net return attributable to growers.
The Company now holds the exclusive right to propagate and distribute plant material, and market and sell fruit of the variety of kiwifruit known as Hort16A until 14 November 2018.
Development costs include the cost of developing packaging, fruit handling methods, and trademarks for the new variety Hort16A (ZESPRI™ GOLD Kiwifruit). The cost of graftwood provided to offshore growers of Hort16A (ZESPRI™ GOLD Kiwifruit) pursuant to the relevant Hort16A (ZESPRI™ GOLD Kiwifruit) production agreements has been capitalised. In addition the legal cost of developing contracts to secure offshore supply of the new variety Hort16A (ZESPRI™ GOLD Kiwifruit) has been capitalised as well as the initial cost of plant variety rights in the overseas jurisdictions in which ZESPRI Group conducts business.
Continuing research and innovation
Zespri's research and development arm, Zespri Innovation Company Limited, works on improvement of the existing product lines and the introduction of viable new cultivars. Its family of products comprise Zespri Gold, Zespri Green and Zespri Green Organic.
Judging from media comments and one of the trade marks Zespri already has on the Australian trade mark register, we may see future colours of kiwi, such as Zespri Red.
Putting the kiwi success story into the bigger picture, New Zealand’s overall horticultural exports have grown from NZ$100 million in 1980 to NZ$2 billion in 2003 according to HortResearch.
In coming weeks I will write more on intellectual property you can eat.
An IP footnote. The Zespri Gold story illustrates many things at the heart of what is needed for successful commercialisation. One of those points is that unlike Hayward Wright, the contemporary New Zealanders consulted with intellectual property lawyers when they needed to - very early in the research and development. Patents and trade marks were wrapped like fortress walls around Zespri Gold all well in advance of, and in preparation for future licensing contracts. Too often inventors and others wait too long, eg until they can almost smell the money. Don't misunderstand, it is not about getting a patent or trade mark registration really early. Rather, it is about working with a legally informed strategy from the outset. So get some clues, call an IP lawyer early in the game.