Investment Theme: Product and Food Miles

In this section I will concentrate heavily on my upbringing in rural Queensland because the trends are perhaps even more marked, and thus serve as an excellent example, but these same trends are just as relevant in urban centres.

When I grew up in the 70’s and 80’s in northern Queensland, every Saturday morning the main street of my small home town of Innisfail swelled with people getting about their business – doing their shopping (the grocery stores closed from midday Saturday until 9am Monday), sporting groups running fundraisers, and people generally milling around and catching up with friends. If it was raining, as it often does in Innisfail, then there were even more people because the farmers could not work in the paddocks.

The specialist shops were busy with people spending their money, sometimes a bit more if the sugar price was high. Unless they needed something very specific and not available in town, nobody would have ever dreamed of driving the 85 kms to Cairns where they did not know many people, and people wanted to support the local businesses who were run by and employed people who they have known all of their lives. 

Recently my father relayed the story on how as a child in the early 1950s his family would only make that journey several times a year, and how special it was to him as a child as they would buy fish and chips and sit on the Cairns which was about as developed as what Kurrimine Beach is today.

There was obviously a strong social compact within the communities – the shop owners wanted to do the right thing by their customers, and they had a strong self-interest in doing so since everybody in town would soon know if an owner was not sticking to this social compact in all of its facets from the quality of goods or services that they provided to the way they treated their customers and staff.

Of course by the 70’s Innisfail businesses were offering goods that were produced outside of northern Queensland, unlike in my Great Grandparents’ and Grandparents’ time when, because of the remoteness and more difficult transportation, a higher proportion of goods sold would have been produced locally (including, to my recent surprise, pasta from a local factory to serve the very strong local Italian population.) However, given that tight social compact in the town the shop owners needed to have a great deal of surety in what they sold because their livelihood – and more importantly, their pride and reputation – depended on it. There were several fruit and veg shops run by Asian grocers, whose families migrated during the gold rush in the 1800’s, and they often bought from local farmers when they had surplus melons, cucumbers, pumpkins and so on.

Innisfail has a strong history of multi-ethnicity and multiculturalism, and there are proud monuments demonstrating the involvement of non-British migrants in the town’s development including the canecutter statue on the banks of the Johnson River a gift from the Italian Community, the wonderful Chinese Temple on Ernest St, and the nearby Paranella Park built by an early Spanish migrant. However, many felt pressure to conform – to be “Australian” – and faced additional obstacles to succeeding while the White Australia Policy remained in place (see here).

Nowadays Edith St is usually very quiet over the weekend. Cairns suburbs now extend a further 20 km or so south to Gordonvale, and especially young Innisfail families think nothing of jumping in the car and travelling the distance to the large shopping centres even if the drive time has increased (since the 70s in any case) due to traffic. There they buy the same goods that all Australians buy throughout the country, and in many cases what people throughout the world purchase. They do not know the shop owner, and, as suggested by my own experience with my sofa that I outlined an earlier post, the shop owners know they are selling the same standard of goods – if not the same goods – as any other retailer and product failure is thus not a major concern but is incorporated into pricing. As a consequence, product failure is undoubtedly very high for many categories of goods.

PU Leather in action! Note the sheet over the seat in the background necessary to keep the black flakes from sticking to body and clothing.

There are no fruit and veg shops remaining in town, though some farmers will occasionally sell product on the side of the road. With the fruit and veg shops having closed many years ago, believe it or not, even though Innisfail is the centre of the largest banana growing region in the country, all bananas sold in supermarkets at a minimum travelled 3,500 kms (a return trip to the Brisbane markets though I have been reliably informed that most go via Sydney) even though some would have been grown, processed and packed for sale as little as 5 kms from the supermarket!

As I explained in that earlier post, I cannot see a future for humanity where so much resource from all over the globe is consumed in the production of cheap goods which are used briefly and then require additional resources to deal with their disposal. I also stated that I did not believe for a moment that the true cost to humanity was incorporated into their pricing for if it were we would not be witnessing such incredible waste, and that this would need to occur, and when it did it would result in higher quality manufactured goods potentially much closer to the point of sale and access to suitable repair skills at a relative cost which makes repairs economically viable.

In October the incoming President of The European Union, Ursula von der Leyen, proposed the introduction of a carbon border tax as a part of a new Green deal to address the climate issues that our Globe confronts. The proposed tax would seek to prevent businesses from arbitraging between locations which have different levels of climate-related measures and taxes, thus ensuring that EU-produced goods manufactured with higher climate-related standards, and costs, are on a level playing field with goods manufactured elsewhere when sold within the EU.

This is a move in the direction to which I highlighted in my post and I consider it to be just the start of a long but very necessary process.

I can also see a great deal of potential for innovation in conjunction with this stepped up regulation to ensure significantly better utilisation of natural resources and to extend the working life of products. For example, for repairing of goods to be common-place once again there is going to need to be access to parts. However, this may not necessarily mean that each manufacturer has to guarantee to supply parts which would necessitate significant logistical spend and costs. 

With rapid advancement in 3D printing technology, it will likely be possible to obtain many parts on demand as and when they are required. I can easily imagine the widespread proliferation of 3D printing businesses – some printing plastics, some basic alloys, some high stress structural alloys – where anybody can email a CAD of the required part which will be printed almost immediately. Many families would have basic 3D printers at home and in the example of the cheap trampolines that I mentioned in my earlier post, where the caps securing the safety net seem to always be the first part to fail, would most likely be able to print the plastic caps themselves as these fail and require replacement.

In this case it may well be regulated that product sold or imported must include access (open or licensed depending on the level of good) to digitised and printable parts.

While this regulation will greatly extend product life and reduce product turnover, and other measures will likely reduce resource waste such as regulation and punitive costs for waste processing and disposal, I expect that resource recycling will continue to grow in importance. Much of this is in train now and is driven by the collapse of the “compact” of the last three decades where the developed world increasingly adopted a throw-away model with cheap product originating mostly from China and in return China took back the waste from those developed countries for processing.

With the increasing trade tensions over recent years, China has increasingly refused recyclables on the basis of contaminants and other factors. This has created a problem for backed-up recyclables in the developed world. With trade tensions very likely to persist for many years (as discussed in Theme 1), and with China wanting to prove its environmental credentials (processing recyclables is a high polluting endeavour) as a point of difference with particularly the Anglophone countries, thus underlining their inclination to lead humanity in this area of critical concern, it is unlikely that the previous compact will soon be reinstated.

Waste processing and resource recycling is likely to be an area of very significant investment going forward. 

As a consequence of our links to our temperate colonial history, Australia’s fruit and vegetable markets were especially susceptible to centralisation. For many years it simply was not possible to buy seasonal fruit grown locally throughout much of Australia because what was desired were mostly temperate varieties which could only be grown in a small proportion of the human-inhabited regions of Australia.

When I lived in Montpellier in southern France, which is at the most northern reaches of the Mediterranean Sea, I was shocked to realise that I was equidistant from the equator with the middle of Tasmania!

Plant breeding programs have succeeded in extending the range in which those temperate species are commercially produced, e.g. by reducing the chill hours required for pomes to set commercially viable crops. European friends are always astonished to learn that in Queensland our strawberry season is in winter whereas in their natural range it is in summer when the daylength, at their latitude, is very long so that the soft fruit ripens and sweetens very quickly. Until I visited Finland in 1996 I disliked strawberries for the only ones that I knew had a 0.1 mm rim thickness of redness and were entirely white inside and were tasteless. And all Australians know the story of our store-bought tomatoes. 

One of the greatest joys of spending time in Europe for my family is the access to quality produce. When living in Europe, and now when visiting on holiday, it is entirely appreciated by us that, unless we are in the biggest cities, we will only be able to eat the produce that is in season at the time in the region that we are visiting. It might be disappointing to miss the cherry season. But we known that when we visit a market or a fruit truck that what is available is in season in that region and it will be the best you can possibly get, quite likely the best you have ever had!  

Obviously crops produced within their natural range of conditions are easier to farm. Thus productivity is greater and the produce is more natural with less human intervention in the form of chemicals, energy used and water consumed.

Undoubtedly breeding has improved the productivity and marketability, if not necessarily organoleptic characters (below is a photograph of some particularly tasteless strawberries I bought this past winter), of temperate varieties produced in subtropical regions, but one has to wonder why so much effort has gone into it when there are other varieties which are more suitable for production in the region and in many cases are already present there plentifully to experienced observers.

Queensland strawberries bought from a supermarket in winter 2019. Apologies farmers – not all are this bad, but perhaps better to concentrate on growing other fruits?

By way of example, my Sri Lankan-born wife, on our first trips to Innisfail, pointed out that she knew the shady trees on the beach as “kortung” and that they contain a delicious nut reminiscent in taste of almonds, the passion fruit-like fruit that grows on vines which climb over our sugarcane crops and necessitates chemical spraying is edible, and the small fruit that grows on the thorny shrub which my father calls “devil’s fig” and grafts his eggplants onto is great in curries. The funniest incident was when driving to our fuel supplier of many years my wife screamed with excitement for me to stop so she could get out and pick some “jumbu” from the giant tree across the road. (These are the fruit red in colour and pear-like in shape commonly sold in markets and by the side of the road in Thailand in the fruit trays.) As she approached us munching on the biggest fruit of this type she has ever had, while Greg pumped our fuel he said, “you know we’ve looked at those big beautiful red fruit for years wondering whether we could eat them”.

The potential for alternate crops more suitable to being grown locally throughout Australia is enormous and the more multi-cultural and open-minded we become the greater the opportunity. Of course indigenous culture has much to add on this subject. 

I am not saying that apples should not be sold in northern Queensland and bananas should not be sold south of Coffes Harbour, and here I have to give a plug for the industry of my home town for I believe that while tree-ripened Cavendish bananas are better than commercially farmed bananas picked green and ripened artificially, the difference is quite marginal and it is no wonder that it is one of the most popular fruits throughout the world. 

I am simply saying that in a more environmentally aware (and health-conscious) society there will be far greater attraction to consuming locally produced food.

That opens up a great deal of potential for investment and prudent investors should be aware of this reality. And it would be a major departure from our centralised marketing and distribution system of food, and that has widespread consequences.


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© Copyright Brett Edgerton 2019

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