The NZ Government has been engaged in making the situation easier for a greater number of businesses to operate as the country has moved to alert level 2 of lockdown. Many businesses have opened and are operative while some still remain closed like travel businesses, places where people could gather like pubs and parties.
With the severity of the impact of COVID-19, it is believed that there have been not many businesses that were seen to perform well through these tough times. M?nuka honey companies have been one such group of companies that have been a bright spot in the economy recently.
The companies involved in the business of M?nuka honey are said to be taking advantage of the Government’s Wage Subsidy Scheme even though they are doing pretty well and exports for M?nuka honey are booming for NZ. It has been reported that the M?nuka honey companies have applied and received the Government's wage subsidy.
NZ Government acknowledges that there are businesses that shall find it difficult to operate even in the more relaxed environment of alert level 2 restrictions. The Government has also been investigating whether to continue with a broad-base Wage Subsidy Scheme as it is quite difficult to target specific industries.
Moreover, the Government has been unclear as to what sectors can avail the benefit from the Wage Subsidy Scheme, and it has been difficult to differentiate which sectors need it and which do not. For example, if the Government plans to continue benefits for only tourism sector under the scheme, it is difficult to ascertain if it will be able to provide the benefit to a service station operator located in the tourism destination, considering service station is not the part of the tourism industry although such service stations located in tourism destinations are suffering due to sharp decline in overall travel.
On the other hand, it has been reported that the companies owned by billionaires, elite schools as well as the likes of successful M?nuka honey companies had made use of the wage subsidy program, which was meant for businesses in the most adversely affected sectors that were struggling to survive in the current situation developed due to COVID-19.
Comvita Limited (NZX:CVT), a NZX-listed market leader in M?nuka honey, along with Fresh-Picked™ Olive Leaf Extract and Propolis updated the market about the strong demand in middle March which therefore continued for the entire month leading to a double digital growth yoy. Moreover, all major markets have reported good sales output, and the companies remained profitable while generating good cashflows and improving working capital.
With over 95% of the extraction completed, the Company further anticipated for an increase of 60% year on year in current year’s honey harvest while an improvement of over 150% in the quality of the crop.
Comvita CEO, David Banfield had commented:
“It’s encouraging to see good trading across all markets continue as consumers actively seek out Comvita products. In addition, we have delivered good working capital control which has enabled us to continue paying down debt supporting our decision to postpone the planned capital raise. Finally, with the honey harvest over 95% complete, we are pleased with both the volume and the quality of honey.”
A shift in the consumer preferences like increased use of healthier food products containing lower levels of fat, along with added vitamins and nutrients, over the years, has led to a positive effect on the demand for M?nuka honey.
NZ is home to M?nuka plants from which bees collect nectar for producing M?nuka honey and is said to become top global honey exporter by value on the back of plantation M?nuka. Moreover, approximately 95 per cent of New Zealand's M?nuka honey production is exported.
New Zealand honey is known for its superior quality and total New Zealand honey exports per year have been on top and one of the fastest-growing exports with a double-digit growth per annum over the past decade.
According to New Zealand Trade & Enterprise, the United States is a high-value market for New Zealand honey, with roughly 18 per cent of US adults aware of M?nuka honey, with Americans valuing M?nuka honey for its health properties. In 2017, the New Zealand honey exports to the US were worth US$49 million with growth being driven by value rather than volume. This was the second most valuable export market for New Zealand after China.
The existing Wage Subsidy Scheme was aimed at supporting employers who have been adversely affected by COVID-19 so that they can continue to pay their employees, but M?nuka honey companies look like sweetening the deal with increasing demand for M?nuka Honey and drawing benefits from the Wage Subsidy Scheme.
The Economic Response Package announced by the NZ Government on 15 April 2020 comprised of an estimated NZ$9 billion – NZ$12 billion in wage subsidies to help impacted businesses in keeping their staff in job, through support received directly from the Government. The Wage Subsidy Scheme further comprised of a NZ$126 million for COVID-19 leave and self-isolation support for people who were unable to work due to their sickness, self-isolating, or caring for dependent.
The NZ Government believes that the Wage Subsidy Scheme has been enormously successful, paying out more than NZ$10 billion to support New Zealand businesses and jobs. Further, the Finance Minister, rant Robertson says that:
“This Government is acutely aware of the impact the COVID-19 pandemic has had on our workers, which is why we moved so quickly to get money out the door to help employers keep their staff on the books during the lockdown.”
The Government has also announced an extension to the wage subsidy program on 14 May 2020 while presenting the Budget 2020. The extension of the scheme was aimed at assisting the eligible businesses that have suffered, or are expected to suffer, a revenue loss of no less than 50 per cent for the 30-day period prior to the application date against the closest comparable period in the past year.
Moreover, the government had announced to allow high-growth and new firms to be eligible for under the current Wage Subsidy Scheme to include pre-revenue R&D start-up firms that are recognised by Callaghan Innovation.