The Mānuka Price Pincer Movement

A pincer movement describes separate bodies of troops converging on an enemy position from different directions at the same time. Bruce Roscoe identifies a pincer movement where the conflict between traditional retailing and online selling is reducing returns from the sale of mānuka products. Compounding this assault are a river of rising costs on home ground and the prospect that exporters will be asked to share the US 10% tariff burden.

By Bruce Roscoe

Picture a scene in an upmarket natural food and cosmetics shop that belongs to a large chain. Smartphone in hand, a customer surveys say two or three brands of mānuka honey, noting the grade and price. While still in the store, this customer accesses Amazon Japan via smartphone to find the same brands, purchases one at a price lower than in the store, and leaves.

Comvita mānuka products being discounted 40-50% on the Japanese Rakuten e-commerce platform.

Such online shopping conducted from within stores has become common. Those with a sense of shame may wait until they are on a train or at home to make their purchase, but the result is the same. The retailer, who has invested in staff, premises, interior furnishings, and office equipment, has provided the wholesaler of mānuka products with a showroom to the benefit of the wholesaler and an e-commerce platform.

The retailer, in response to provision of what amounts to a free billboard, revises the conditions for stocking. The wholesale price as a percentage of the recommended retail price is cut, say from 58% to 52%. When the store is due for refurbishment, when a new store in the chain is opened, or an unsuccessful one closed, the wholesaler is asked to contribute toward the cost.

Under such stringent terms, the wholesaler at best will break even but probably trade at a loss. The wholesaler agrees to the terms, viewing losses that may result as an advertising expense and the retail exposure as a torch that will light the way to webstores on e-commerce platforms and to the wholesaler's own webstore. The first stage of the price pincer movement has begun.

The wholesaler-turned-retailer learns that actual retail prices on major e-commerce platforms such as Amazon, Rakuten, Yahoo Shopping, and auPayMarket are all but illusory. Widespread use of coupons, loyalty points, specials, time sales, and discounted prices for regular purchases of the same item complicate the calculation of prices. It becomes clear that while a lower floor has been set for effective wholesale prices to traditional retail outlets, a lower floor has also been set for effective online retail prices in all their fluidity.   

To serve the sea of customers who turned to internet shopping during the pandemic, large-scale businesses made substantial investments in e-commerce. The difference between pre- and post-pandemic webstore level in function and presentation is stark. Specialist online content creative agencies are engaged. Products are sold through a highly skilful use of graphics. Few words are used. All is tailored to smartphone view. Such start-up costs are easily underestimated. As are operating costs.

The wholesaler as retailer must answer customer questions as shop staff do, ship product daily, and keep 7/11-type hours. Prices cannot undercut those recommended for retail sale. Yet the wholesaler must compete with dedicated online sellers who face no such pricing constraint. The presence of such sellers looms large in the mānuka trade. Examples are Hands Trading Ltd and the start-up Health Key Ltd, both of Osaka.

It was revealed during exposure of the packing in Japan of UMF-labelled product from bulk mānuka honey that Hands Trading annually imports some 30 tonnes of mānuka from New Zealand. That volume is sold online. The Health Key company, supplied with bulk mānuka from Unique Mānuka Factor Honey Association (UMFHA) licensee Streamland Honey Group Ltd, recently launched fully-fledged webstores on Amazon Japan and Rakuten for a suite of MGO-rated mānuka products, none of which are sold at retail outlets.

Comvita Ltd continues to perform as wholesaler to the high street and online retailer, but the conflict is betrayed by the first four mānuka products seen on the company's Rakuten store which show discounts of 40-50%.

The lower pricing floor has been set against rooftop start-up and operating costs on platforms where the prices of not a few, but a few hundred brands are visible to customers at a couple of keystrokes. The second arm of the pincer is within striking range.

If the pincer movement is to be defeated, product distinction must be compelling. The blunt-force advice offered in New Zealand Trade and Enterprise survey report "Mānuka Honey in Japan / Section 4 of Mānuka honey market landscape - 2022": "NZ entrants to Japan should consider what else they can offer beyond their NZ provenance story to entice first time buyers".

Carving Fees off the Mānuka Money Tree

Against the profit-sapping dichotomy of traditional retail vs. online sales, honey producers and packers are submerged in a river of rising costs – from regulatory compliance and industry association to under-the-sun price increases forced by inflation. Some small businesses, quintessentially New Zealand in nature but unable to survive such assault, are falling away.

On the compliance front, the Ministry for Primary Industries (MPI) has disclosed that revenue derived from services to the apiculture sector reached NZD679,808 for the current June year, an increase of 2.1x the NZD322,588 collected for the year ended June 2019. In that period, registered beehive numbers reduced 41.8% to 533,838.

The confusingly titled "export levy" features prominently in MPI's "cost recovery" expansion. MPI increased this levy 2.6x to NZD2,566.08 for the year to June 2025 from the NZD1005.70 charged three years earlier. (The "export levy" comprises an "export component" and a "domestic component" yet depending on which MPI document is referenced, "export levy" can mean one or both components.) The same amount is levied regardless of business scale.

In tandem with other cost pressures wilting the industry, MPI's clawing back of costs has occurred after honey exports peaked at 12,786 tonnes worth NZD505.5m (FOB basis; calendar year 2020).      

Effective April 2022, UMFHA raised the annual fee it charges licensees by 150% to NZD5,000. It further ratcheted up levies charged per kilogram of mānuka honey sold for each of the three UMF grade bands by 30%. Levies charged on products that use UMF mānuka as an ingredient were hiked 40% for the first grade band (UMF5+ to UMF10) and 30% each for the two higher grade bands. The year before, UMFHA saddled licensees with the substantial expense of rebranding (which requires design changes to product labels and website and hard-copy advertising graphics).

The Mānuka Charitable Trust (MCT), should it prevail in its renewal of the mānuka certification trademark campaign, proposes to charge levies under a near identical structure to that employed by UMFHA. As a result, users of both UMF and MCT trademarks would face a levy increase of 23.1% for each of the three UMF grade bands and an additional levy for mānuka that tests below the UMF grade of 5+. Use of the MCT trademark would also trigger an expensive rebranding (product labels, graphics, and more).

First item on the agenda of the united industry body proposed by UMFHA and Apiculture New Zealand was the introduction of a universal levy payable by beekeepers and packers alike. Though payment at first would be voluntary, from the outset the long-term goal was to lobby for legislation that would make it mandatory. Any revival of the stalled plans can be expected to refocus on instituting the levy. Meanwhile, the website of a collapsing Apiculture New Zealand is asking for donations.

Online trading, which allows delivery to the customer’s door, provides another avenue to sell mānuka honey alongside traditional retail. However, the competition between the two sales methods is contributing to lower prices.

Marketing costs, too, are airborne. In the mānuka giddy years the trade found the packers. Today, in the fifth year since mānuka exports peaked, the packers have to find the trade. That means getting on planes, pitching to prospective buyers, and fronting trade shows. It is unsurprising that Radio New Zealand's Lisa Owen, when seeking comment on the impact of US tariffs on the honey trade on 3 April, found James Annabell, Egmont Honey's chief executive officer, at Melbourne airport.   

Operating cost explosion has worsened in an inflationary environment. In the peak mānuka year, according to Statistics New Zealand, inflation was 1.7%. In the four preceding years (CY2016-CY2019), that rate averaged 1.4%. In the four years that followed, the rate climbed to an average 4.9%. Home-grown businesses have struggled, yet public organs and private enterprises alike appear unbridled in their attempt to carve fees off the shrinking mānuka bounty as though it were a money tree. 

Billy Mulcare, who operates the KĀRE honey business of Northland, in the September 2023 edition of this publication decried the ramping of MPI fees and asked, "Is it worth it?" She answered by retiring her MPI risk management plan registration and withdrawing from UMFHA. KĀRE Ltd had made a breakthrough in Japan through supply of UMF-branded mānuka to Nakato Ltd, a specialist importer and wholesaler of Western-style foods, and locally had found a niche in small-lot production runs of boutique and veterinarian-use products.

Tom Dunbar, who tended 500 hives for High Peak Station, Canterbury, told the March 2023 year UMFHA annual general meeting: "I am running a small, family business and was alarmed at the increase in the levy. Do you think there is a risk that small businesses will leave the UMFHA because of the higher fees and levies? Do you think the UMFHA will become fragmented and may not have the backing of the whole industry?” A UMFHA website search of brands returns no result for High Peak Station.

Too Many Bottles in Two Baskets

From a young age we hear the advice that it is unwise to keep all one's eggs in a single basket. The same guidance could apply to an over-dependence on a small number of export markets.

To lessen dependence on China, UMFHA identified the United States as an alternative basket for mānuka bottles. Large-scale honey packers responded by redirecting their export efforts across the breadth of the Pacific Ocean from one ‘basket’ case to another.

Yet China, where bad news domestically is inadmissible, and the US, where good news seems unheard, appear equally to symbolize polar extremes that leave traders unsure of where they stand except on unstable ground. 

That shifting ground absorbed 39.1% (NZD146.5m) of New Zealand's honey export value in CY2024, with a US weighting of 24.9% (NZD93.2m) and China weighting of 14.2% (NZD53.3m) (see Table 1). The US and China weightings in CY2023 were 19.1%(NZD77.1m) and 16.7%(NZD68.8m) for a combined 35.8% share. 

The US 10% tariff bill on New Zealand honey landed after 2 April will amount to around NZD10m as it will be charged on the FOB value and shipping and insurance costs. In the event that US importers ask NZ exporters to share the expense by cutting export prices 5%, returns will be pared by NZD5m. Some importers may press for a 10% price reduction. It is unlikely that so-called big-box retailers – retailers in name, virtual wholesalers in practice –will accept any price increases that would weaken sales. 

High-volume exporters to the US were already on katana-edge margins. Submarine pricing could easily result from importer pressure.