Horticulture Innovation – Under the Spotlight

Greenlife Industry Australia (GIA) has an active and keen oversight of the investment of the nursery industry R&D and marketing levies to endeavour they are done effectively, efficiently, deliver practical and profitable outputs for industry and to keep Hort Innovation accountable as the investment manager for the levies.

The levy is paid by nursery industry businesses. Every time you buy a pot or container to grow a plant, then you are paying the levy. As with any investment, it should be reviewed and assessed to ensure it is providing a return to the bottom line, either reducing the supply cost of production through R&D or increasing the demand and sales side with marketing.

GIA management maintains a watching brief on Hort Innovation and below is an update on recent developments and activities.

Senate Estimates
Estimates of government expenditure are referred to Senate committees as part of the annual budget cycle. This opportunity to examine the operations of government plays a key role in the parliamentary scrutiny of the executive. Hort Innovation as a Research and Development Corporation (RDC) receive Government funding for R&D activities and are subject to questioning at Senate Estimates.

Selwyn Snell (Chair), Matt Brand (CEO) and Alison Anderson (General Manager R&D) appeared at Senate Estimates on 21 October to address a number of important operational and finance issues with respect to their expenditure of Government funds. Some of the key issues discussed were:

Corporate Cost Recoveries (CCRs) – Matt Brand indicated CCRs are a “work in progress” on how they are calculated, and he will be more “open and transparent” on them going forward. CCRs are the fees that Hort Innovation use to run the organisation and for the nursery industry in 2019/20 financial year were 23% of the levy and matching Government funds invested.

Employees – The employment of Hort Innovation is approximately 90 full time equivalents with 9 vacancies currently. It was indicated that staff turnover had been 27% in the last six months due to a number of factors including resignations and redundancies due to COVID-19.

Good Mood Food – Hort Innovation developed a television marketing program to encourage greater consumption of fruit, nut and vegetables during the COVID-19 pandemic. The campaign was funded by the “Centralised Strategic Reserve”, which is a Board reserve carried over from HAL to Hort Innovation. The campaign used $2.0m. of marketing and $1.0m. of reserves. It is unclear if nursery levies contributed to funding this campaign.

Hort Innovation Extraordinary General Meeting
An Extraordinary General Meeting (EGM) of Hort Innovation members was held virtually on Friday, 9 October 2020. At the meeting, members voted to change the company’s Constitution in respect to how Directors are appointed to the Hort Innovation Board, and how long they can serve.

Under the updated Constitution, all new Directors will be elected to the Hort Innovation Board by voting members going forward. This is a change from the previous Constitution, which saw the Board made up of a mix of Directors elected by voting members and appointed by sitting Directors. Under the new Constitution, the only time Directors can be appointed by the Board itself will be to cover casual vacancies of one year or less.

With the new Constitution in effect, Hort Innovation members will elect three new Directors to the Board at the company’s Annual General Meeting (AGM) in November this year. At this AGM, as in all years, the Directors will be chosen from a pool of qualified candidates determined by the Hort Innovation Director Nomination Committee. This committee is made up of a representative from the Department of Agriculture, Water and the Environment, a levy payer representative, an independent eminent member, and a current Director of the Hort Innovation Board.

R&D Projects
The nursery industry R&D portfolio currently includes around 15 active projects. The contracts for the two most significant biosecurity projects will finish in December this year. Therefore two requests for proposals (RFP) have been progressed recently:

  • NY20000: Resourcing, supporting, and assessing biosecurity in nursery production – to continue the work of NY15002 – Nursery Industry Biosecurity Resilience.
  • NY20001: National biosecurity and sustainable plant production program – to continue the work of NY15004 – National Nursery Industry Biosecurity Program.
A third RFP is being progressed to determine consumer usage and attitudes during the COVID-19 pandemic - NY20002: Nursery Fund - Consumer Usage & Attitudes Research.

Levy Payer Register
Three years ago levy legislation was amended to allow the establishment of Levy Payer Registers (LPR) for RDCs. Hort Innovation have signalled their intention to establish a levy payer register in accordance with the Primary Industries Levies and Charges Collection Act 1991, s27. This register would maintain a record of all businesses that pay agricultural levies and charges.

Hort Innovation have advised that “to have an LPR will assist in future advice from industry, driving awareness of investments and importantly provide the opportunity to segment the levy payers to assist in communication, especially in times of such as COVID-19.”

The Process to develop the LPR is detailed below:

Aug-Nov 2020 - Early consultation, starting with peak bodies, then wider industry bodies (NFF etc), DAWE
Oct-Dec 2020 – Collection agent consultation
Dec 2020 -Jan 2021 - Stage 1 of 2 to be completed. Then stage 2 which includes notifying DAWE of intention to establish a register will be considered post stage 1 feedback.
2021 and beyond – roll out of a levy payer register, to be designed based on findings of Aug-Dec consultation.

If you have any questions, comments or concerns on the establishment of the LPR, please send your inquiry to ceo@greenlifeindustry.com.au or contact Peter Vaughan directly on 0400 739 802.

Mushroom Marketing Levy Abolishment
A media release in relation to levy investment and Hort Innovation has recently been published by The Courier and The Weekly Times which advises:

Australia’s biggest horticultural company is campaigning to abolish a mushroom levy it says has wasted $18 million of growers’ money on “ineffective marketing and administration”.

Costa will conduct an anonymous postal ballot in November to gauge the industry’s support for the levy, which was controversially doubled in 2014, principally to fund market research activities, to $4.32/kg of mushroom spawn. It has since been reduced to $4/kg following a review by the Australian Mushroom Growers’ Association.

The listed horticultural company said the compulsory levy meant growers have spent far more than other levy-paying categories but received the least return on their investment.

“Growers should be able to directly invest the levy money they currently pay in their own marketing rather than have their money wasted through the ineffective mushroom levy. As a levy payer and the largest mushroom grower, Costa is not content to watch our industry be destroyed,” a Costa statement said.

Costa spokesman Michael Toby said the company didn’t support the status quo. “When the levy was introduced almost 20 years ago we had 116 mushroom growers and now we have about 50. One of the key reasons cited for a levy is to maintain critical mass and that clearly hasn’t happened,” Mr Toby said.

He said Costa was also concerned that Hort Innovation, the government body appointed to administer horticultural levies, wasted money on administrative costs.

In 2018-19, grower levies tallied $4.8 million and more than $850,000 was spent on “service delivery”.

The AGMA supported the doubling of the levy in 2014 and has backed its continuation.

“If the levy were removed, we could see a reduction in mushroom consumption, reduced funds available for marketing, promotion and R & D, and a loss of significant projects,” Chairman Geoff Martin said.

Chris McLoughlin, who sources mushrooms for his business Fable Food Co, which makes alternative meat products for Coles and Woolworths, said the levy was a highly controversial issue within the industry.

“Costa wants to get rid of it because they pay for half of it. My sense personally is they’re not wrong, proof is in the pudding and the results would indicate it hasn’t been highly beneficial. Broader trends should be underpinning demand such as the rise of vegetarianism and lower prices, so really the industry should be in a sweet spot,” he said.

Market research indicates mushroom consumption in Australia has remained flat for almost two decades.

The confidential ballot will be independently audited by Link Market Services, with results likely in December.