NZ Honey Industry "In Deep Crisis for Survival", Comvita Tells Shareholder Meeting

By Bruce Roscoe

The New Zealand honey industry is in "deep crisis for survival", stabilisation will take "several years", the United States has overtaken China as the largest – but also "cheapest" – New Zealand market for mānuka honey, and Comvita Ltd is renegotiating its banking covenants and preparing to sell land, among other assets.

With a share price of NZD1.18 (31 October close), signalling a 62% decline on the year-ago price, Comvita has attempted to put industry context around their performance in a recent address to shareholders.

This bleak state and outlook were delivered to Comvita investors at the company's 30 October annual shareholder meeting held in Pāpāmoa and online. (Apiarist's Advocate has obtained the addresses to the meeting by incoming chair Bridget Coates and acting － and returning - chief executive officer Brett Hewlett.)

On the home front, "Current prices and volumes deployed by too many manuka honey producers, exporters and labels (we cannot refer to these as brands) just cannot be sustained", Hewlett's address said.

The "poor quality" sold by many brands was a concern. In a shock revelation, the address recounted that a recent UMF Honey Association survey showed an "alarming number" of cases of non-compliance to agreed standards for UMF honey.

Hewlett's address reported on the first leg of his "listen, learn and understand" tour. He has visited China, Hong Kong, Singapore and the US since the beginning of September. He was scheduled to visit China again, followed by visits to Korea and Japan after the meeting. In between the overseas tours he "spent time out in the field with beekeepers and landowners".

Comvita acting-CEO Brett Hewlett is mid-way through a "listen, learn and understand" tour of key markets for the mānuka honey seller and, so far, his report is bleak.

Comvita was witnessing a "slowing of demand" across all markets. "Luxury or premium brands have been most materially impacted as consumers are tending to trade down, looking for bargains or more frugal offerings."

Chinese consumers were gravitating toward domestic brands or opting for more "personalized and culturally relevant products". They were also travelling again and now spent about 40% of their luxury budget outside of China.

Pressure on margins in the US was "intense" and US consumers had "become confused by the mixed and often conflicting messages on the value proposition for mānuka honey".

Coates' address noted that competitors were willing to "dump product at low margins" in both the US and China.

Comvita's response to the market malaise is the "reshaping" of all product ranges and complete "rethinking" of channels to market. Reflecting a belief that the market for "health and wellness" products has potential to outgrow that for mānuka honey, the company is focusing on products in that category that use mānuka as an ingredient, Hewlett's address explained.

Comvita board chair Bridget Coates’ address to shareholders said they are up against competitors who "dump product at low margins" in both the US and China.

Comvita now had "more than 6000 hectares of mānuka forests under direct control". This asset in future would supply 40% of total volume requirement, up from the 30% share expected to be held by Comvita-owned apiaries by March end 2025. The company would turn to the "spot market" for the remainder. 

Investment in plant modernisation (manufacturing, laboratory, and IT) was a "sunk cost" that allowed a threefold expansion in "current throughput", which implies a current plant operating rate of 33%. Comvita is renegotiating its banking covenants and striving to complete the sale of "non-strategic" land and other assets by March 2025, the addresses noted.

Comvita shares closed at NZD1.18 on 31 October, down 62% on the year-ago price. They are trading at a 43% discount to the company's net asset value as stated at 30 June.