Case Study - Kangaroo Island Pure Grain
Case Study - Kangaroo Island Pure Grain (pdf, 155kb)
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KI canola goes global
A group of Kangaroo Island farmers have created a unique new business by selling their canola to one of the biggest markets in the world.
The island – known internationally for its natural beauty, tourism and fine food – is now having a big impact in the kitchens of discerning Japanese consumers.
Kangaroo Island Pure Grain Pty Ltd – representing most of the island’s growers – produces naturally farmed pure grain, all traceable to individual farms, machine-cleaned and guaranteed true to specification. In the highly competitive – and food-safety conscious - Japanese market, this canola is fast becoming a product of choice.
The group’s strategic approach to doing business in Japan, and growing new markets, highlights how innovative thinking can get results.
Why Kangaroo Island?
The island – long recognised as one of the most pristine environments in the world – now boasts an enviable reputation as an exporter of high quality, Genetically Modified (GM) free canola to one of the biggest marketplaces in the world.
According to local farmers, one of the reasons Kangaroo Island grain grows so well is the unpolluted soils and the temperate frost-free maritime "soft" climate, which is a point of difference to most of South Australia's other grain growing regions.
Kangaroo Island came to the attention of Japanese businesses in 2003 when Hirata Industries Chief Executive Mr Shigemi Hirata, based in Fukuoka, Japan, began searching for new supplies of GM free canola.
Through leveraging relationships with Austrade, Primary Industries and Resources SA and leading farmers on the island, Mr Hirata visited Kangaroo Island and liked what he saw. His interest, and the follow-up negotiations, have been critical in exporting Kangaroo Island’s unique canola seed and other grains to the world.
The KI Pure Grain story
KI Pure Grain – the brainchild of several farmers on the island – was formed to represent the growers, and now includes 98 per cent of the island’s grain producers.
The business’ beginnings are an excellent example of how knowing the right people, at the right time – and having a good understanding of your customers – can make a big difference.
After Mr Hirata’s initial interest in 2003, then Austrade Trade Commissioner Chris Wood, based in Fukuoka, Japan and Austrade State Manager for SA Chris Rees, began the process of making sure the growers could meet the demands of their potential new client.
“Mr Hirata had never imported canola directly from a producer, having always relied on traders. As no farmers on Kangaroo Island had ever exported directly either, it was a new business model for both parties,” Mr Rees said.
Several visits, and lots of negotiation later, the first load of 2000 tonnes of canola was shipped to Japan in 2005. This has increased to 6000 tonnes this year – with other grains also being sold into Japan and other markets.
Growers such as Neil Pontifex and Derek Johnson were among a group of farmers who could see the potential new opportunities, but they could also see they needed expert help to make their foray into Japan a long-term success.
Having initially formed the Kangaroo Island Canola Company to represent growers, they were frustrated at not being in control of the freight, storage, handling and marketing of their product. They now have 72 growers, working together under the KI Pure Grain banner, to market their seed and grain overseas to premium international and domestic markets.
Duncan MacGillivray was appointed as Chief Executive in early 2009 to establish the business, which involved contracting the Kangaroo Island grain growers, negotiating the purchase of storage and handling facilities and negotiating transport contracts with the road transport and sea freight companies.
The benefits of clean
Among the first lessons the farmers learnt was that they needed to have transparent growing, producing, storage, handling, freight and marketing procedures if they were to meet the high food safety standards of the Japanese consumers.
The importance of GM free products, a clean production and transport process, and minimal chemicals was clearly detailed over several meetings and focus groups with Japanese consumers, in particular a group of mothers in Toyko.
Several KI farmers travelled to Japan to meet with Hirata Industries to learn more about their customers. Hirata Industries is a specialist GM free canola seed crusher. Together with Austrade, it has helped introduce other products to the major Japanese retail co-operatives such as PAL Systems and Kanematsu. The Kangaroo Island canola is listed on a “catalogue” of goods made available to around 1 million homes in Toyko alone, and is popular for cooking Tempura style recipes.
Mr Pontifex said knowing and understanding the end-consumer had helped the farmers understand the importance of ensuring their product was perfect.
“We sat with a group of mothers and listened to what they want, and it is all about minimal chemicals, GM free, food safety – and they are prepared to pay a premium for it,” Mr Pontifex said.
Key relationships
Once the relationship between Hirata and the island’s farmers began, it was then critical to develop it to its full potential. KI Pure Grain set about working with Austrade and importantly the sea ferry operator Sealink, as well as the two main Kangaroo Island road transport operators – Ugly Dog Transport and Kangaroo Island Freight Services – to produce the logistics and marketing organisation that ensures all grain grown on Kangaroo Island and marketed through KI Pure Grain is naturally farmed pure grain, segregated, traceable and delivered safe.
Critically, the group purchased the island’s ABB Grain facilities and negotiated a freight deal with Sealink ferries to ensure the canola could meet shipment timelines.
KI Pure Grain also had very strong relationships with Austrade, through Mr Wood, based in Sapporo, and Mr Rees, now based in Osaka.
Mr Wood said that attention to detail was of paramount importance in dealing with Japanese, particularly in translating hundreds of documents, ensuring that critical information about Kangaroo Island’s GM free status was passed on to key buyers in Japan.
“Traceability is absolutely critical, and there were so many questions which had to be answered on GM free status and our ability to be able to deliver consistently,” Mr Wood said.
“Now we have very stringent structures in place, high transparency of the whole production chain and a good opportunity to grow the KI brand within this premium market.” Mr Wood said.
“Austrade has been invaluable and we are now developing additional business in Japan with other grains and have always looked at the positive advantages by working with our agencies overseas,” Mr MacGillivray said.
Taking KI to the world
By marketing their seed and grain under the new, regional brand, KI Pure Grain, the group is now potentially reshaping the future of the island, and taking more of their products to the world.
The company is currently handling about 30,000 tonnes of grain, and is budgeted to build to 80,000 to 90,000 tonnes by 2015.
KI Pure Grain CE Duncan MacGillivray said the aim was to grow not only the GM free canola market, but also develop the market for other “branded” Kangaroo Island grains, such as wheat, barley, oats and lentils.
“The isolation of KI has actually become a positive, because it quite clearly defines this region and gives the island its own identity and security,” he said.
The island is now working on developing other uniquely “pure” Kangaroo Island products including premium honey under the “Island Beehive” brand.
Planning to grow
According to Neil Pontifex, the opportunities are endless for growers on Kangaroo Island.
“The beauty of this island is that once we get the markets established, we have a great deal of land that can be used to grow grain, and that will increase our production enormously,” he said.
"Everybody is very supportive. Rather than sell a commodity, we will continue to develop the KI Pure Grain brand “products” into new markets, and we are well on the way.”
Mr Wood said there was huge demand in the Japanese market for quality boutique food products and this presented an opportunity for other Kangaroo Island products.
“It is important to get this branding position right and that could potentially open the doors for other island products,” Mr Wood said.
The business is expanding into South-East Asia and the subcontinent, building on GM free canola sales, as well other products such as low-protein noodle wheat and biscuit wheat and Shochu Barley.
For further information
Duncan MacGillivray
Chief Executive
Kangaroo Island Pure Grain
p +61 418 802 673
e duncan@kipuregrain.com
Duncan MacGillivray with the first shipment being loaded up of 1,000m/t ASW bound for Thailand. Photographer: Terry Grenville, Stock Journal
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