Craigmore builds orchard portfolio
Craigmore Sustainbles, previously known for building livestock farming businesses and converting marginal hill country to plantation forestry, has recently been focused on building a $250 million portfolio of orchards
Article published in The Orchardist, NZ Horticulture Magazine, February 2019
Craigmore Sustainables is a nine-year old New Zealand owned and controlled group that uses local and targeted offshore capital to build and manage local long-term food and fibre businesses. All investors must accept Craigmore’s three core principles:
- That the investments are long-term (more than 10 years)
- Craigmore’s sustainability values, including community empowerment and improving environmental outcomes
- Most importantly, that all investors are “passive” i.e. all businesses are controlled by not only New Zealanders but people who live in local communities
Craigmore’s current mission is to continue to build one of New Zealand’s most sustainable and diverse horticultural food and fibre businesses in some of the country’s less developed regions – such as Northland and Poverty Bay/East Coast.
Craigmore chief executive Che Charteris, who is based in Whakatane and of Ngati Tahu-Ngati Whaoa descent, says New Zealand’s horticulture sector is a world leader in many areas, with exports growing at 7 percent per annum for the past 20 years, bringing with it increased regional development and employment.
“Horticulture is also part of our country’s solution to some of the challenges facing the wider primary sector: soil erosion, water quality, climate change and economic resilience through greater diversification. “However, there are two very real barriers to growth of our permanent cropping sector: capital and people. The sheer volume of capital required to develop an orchard is a real barrier to increased growth in the sector, even before considering the associated infrastructure such as packhouses and employee accommodation.
“It is unclear where the $5 billion to $10 billion needed to grow the sector is going to come from,” says Che. “Added to this are seasonal labour shortages and the absence of a deep pool of professional managers to build and operate large horticultural businesses – which is a real issue for New Zealand’s ‘Queen Street’ investors.”
In its own way, Craigmore Sustainables is addressing both issues. Craigmore launched its Permanent Crop Partnership in early 2016 to attract $250 million for sustainable horticulture developments and over the same period has been building a horticultural labour business.
Having almost reached its fundraising target Craigmore is embarking on its strategy to build the best New Zealand orchards across a range of top-selling fruits including kiwifruit, apples, wine grapes, plus emerging crops such as cherries, citrus and avocado. “The opportunity is huge given the expertise New Zealand has in growing and exporting fresh and healthy superfoods to the world,” he says.
“New Zealand horticulture is highly competitive in many crops and we also have the logistical capabilities to ensure high quality fruit arrives in demanding export markets in the very best condition.”
Craigmore Sustainables has been focused on pairing up investors with New Zealand family-farming equity partners since late 2009. That was the vision of its founders Forbes Elworthy, from a prominent South Canterbury farming family, and his brother-in-law Mark Cox.
Craigmore is now on track to managing $1 billion of investments with a large portfolio of farming, horticulture and forestry properties – and has grown from three employees in 2009 to 30 today, plus all employees on-farm, orchard or forest.
Its investors are mostly European; German, Swiss, British, Finnish as well as New Zealand. However, a huge point of difference is that these capital providers defer all management and control to Craigmore Sustainables, which is a New Zealand business. It is Craigmore Sustainables, not the underlying investors, which appoints and employs the local management team and the governance board for every business this capital helps to build or grow.
As such these investors are a very particular subset of the capital markets, those seeking to back an organisation that delivers both a financial return, better outcomes for people and the planet and are willing to be passive.
This is a non-negotiable bottom line for Craigmore as part of its sustainability philosophy, which includes local decision making and empowering communities. It has taken nearly a decade of searching globally to build a pool of capital providers that are aligned with long-term sustainability values and the necessity of local decision making. “The biggest hurdle is to gain the trust of our capital providers to give Craigmore almost all decision-making rights,” says Che.
“One of our strengths is that we are a local company comprising New Zealand farmers, orchardists and foresters that can make positive impacts on the full range of different classes of New Zealand rural and arable land, whether ﬂat and fertile or steep and erodible. We have all had dirt under our fingernails doing the jobs that we expect others to do. “Local decision-making is fundamental to that because these assets have long-term community and environmental impacts. So, the people making the decisions need to be living in those communities, where they feel and see the impacts of their decisions and are accessible to the community in making them. “Our bottom line with investors is that they have no operating control and must adhere to our sustainability values. It is a big call and makes finding investors very difficult, but it’s a fundamental part of our structure as a company.”
Ultimately, Craigmore regards it as a privilege and a serious responsibility to be kaitiaki and be entrusted to manage land, soils, water and other natural resources for the long-term. And that plays out in across its properties, all managed to increasingly focus on reducing nutrient loss, increasing soil carbon, minimising pesticide use and maximising year-round local employment. And, reducing use of plastics is a strong focus.
“Reducing plastics in the primary sector is a huge challenge, but it’s where we need to go,” says Che. “For instance, we will be looking at plastic residues in soil under our orchards to create a baseline.” Examples of Craigmore’s sustainability focus include the ‘drive organic kiwifruit project’ it started in 2016, with a further three properties in the Bay of Plenty in the process of being converted. Craigmore tried a similar push in organic dairy farming but could not find a supplier in Canterbury or North Otago to commit to purchase the product. It also was the leading planter of marginal hill country into timber and carbon forests in the early days of the Emission Trading Scheme, including three projects with different Maori landowners – on the East Coast to convert large parts of their whenua into a more sustainable long-term land use. In fact, many of Craigmore’s investments are made as co-investments with existing processors and exporters in order to grow existing kiwi food and fibre businesses.
Under its latest permanent crop focus, Craigmore has already allocated capital to new developments in the Hawke’s Bay, Poverty Bay, Bay of Plenty and Northland regions – which include 100ha of greenfield kiwifruit plantings and 400ha of apples and wine grapes. These “pasture to horticulture” projects align with Craigmore’s “right land, right use” philosophy and bring significant local benefits. Che says there are vast areas of New Zealand that are most sustainably used for grass-based livestock farming, but there some areas that should be changed from pasture to horticultural or forestry.
“We will be creating some significant gains to regional communities with these developments, which can be expected to increase long-term local employment and exports per hectare by at least a factor of 10, significantly reduce greenhouse gas emissions and nutrient leaching, and enhance biodiversity. “This partnership demonstrates what is possible with capital and patience. It has taken several years to raise funds and set up our teams and now we can make material differences to the regions by injecting expertise and capital. Most of our capital is sourced from Europe and all investors have done so on the basis that they trust our small but skilled New Zealand team to build and operate a modern food and fibre business we can all be proud of. “
Addressing the Employment Barrier
Social and community sustainability is another platform for Craigmore, not only through delegating as much of the decision-making to locally-based managers as possible but building permanent local workforces.
“One of the key challenges for sustainable horticulture is workforce conditions with the on-off seasonal nature of the work. We are very focused on finding smarter ways of working so we can provide more full-time work, year-round employment opportunities to sustain and build a stronger workforce.”
This focus on operations sets Craigmore strategy apart from other asset managers, every investment is treated as a living, breathing business that impacts real people, rather than a financial product. By spending the last decade attracting investors with aligned values and who are willing to give up control to New Zealanders, building its own internal capability and actively addressing regional labour issues, Craigmore Sustainables believes it can help break down some of the traditional bottlenecks inhibiting growth of our permanent crop sectors.
Ultimately, at a time of growing consumer demands for sustainable products and wider societal standards for managing farmland, Craigmore Sustainables’ mission is to support New Zealand’s reputation as a premium food and fibre supplier in a way that spreads the benefits across the regions of Aotearoa.