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Close-up of a finger pressing a "Reset" button on a metallic surface. The image is shaped like an arrow pointing to the right, set against a textured blue background.
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OPINIONBusinessJanuary 29, 2025

Scrapping Callaghan Innovation is a necessary reset. But what comes next?

Close-up of a finger pressing a "Reset" button on a metallic surface. The image is shaped like an arrow pointing to the right, set against a textured blue background.
Image: The Spinoff

As New Zealand’s Crown-owned innovation agency is disestablished, it’s time to ask what the real constraints holding back New Zealand’s economic transformation are, writes Rowan Simpson.

In 2011 the physicist Sir Paul Callaghan, one of New Zealand’s most distinguished scientists and a passionate advocate for economic transformation, gave a landmark speech he called “Sustainable economic growth for New Zealand: An optimistic myth-busting approach”. Many of his observations have become often-repeated mantras of New Zealand’s technology sector, including “be the place where talent wants to live”, “we better be prepared to be good at some pretty weird stuff” (anticipating correctly that the most successful companies would operate in obscure and difficult-to-predict niches) and that “just 100 inspired entrepreneurs could turn this country around”. 

Tragically, Callaghan died of cancer just months later. However, his legacy lived on in a new Crown entity called Callaghan Innovation, established in 2013 with the vague responsibility for “making New Zealand business more innovative” through grants, technical services and business support. The intention was noble – to help transform New Zealand from a country dependent on primary industries to one driven by technology and innovation.

Fast forward to last week: prime minister Christopher Luxon’s state of the nation speech echoed many of those same ideas. At the end, he announced that Callaghan Innovation would be disestablished, with its “most important functions” reassigned elsewhere in the public sector.

Christopher Luxon delivering his state of the nation speech.

For those of us who have built and invested in successful technology companies in New Zealand, this decision is overdue. Despite good intentions, the agency became bogged down in administering grants and subsidies rather than driving real innovation. Under pressure to demonstrate value, it spread its resources thinly across a huge range of activities – from managing R&D tax credits to funding startup accelerator programmes. But there was never any clear evidence that any of these initiatives actually helped create more successful companies.

There’s no question that improving our productivity and growing the economy beyond agriculture and tourism is key to our future prosperity. We’ve understood this for a long time. However, the ambition to be more innovative has never been our problem. The challenge we’ve struggled with all these years is actually doing it in any measurable way. Perhaps we missed a trick? Rather than Callaghan Innovation we should have called it Callaghan Execution.

Having worked with and invested in companies like Trade Me, Xero, Vend and Timely over the past two decades, I’ve seen firsthand what drives growth. The key question is always: What’s the constraint? What’s actually holding us back? As we consider the legacy of Callaghan Innovation, and more importantly think about what will replace it, let’s ask the same question of our economy as a whole.

Here’s an obvious answer: our national obsession with investing in real estate, rather than investing in much more uncertain but ultimately more rewarding productive businesses. Spending more and more borrowed money to buy little bits of our country off each other is a zero-sum game. We might think it’s how we “get ahead”, but it’s actually dragging us down.

Luxon himself exemplifies this – he’s often described as a “businessman”, but his investments after achieving financial success were rental properties, sold for profit years later. What kind of business is that? What value does it create?

Here’s another: our expectation that the government will underwrite business risk, while private shareholders capture the rewards. Founders and executives at early-stage companies spend countless hours pursuing grants, subsidies, R&D credits and development loans – many of which end up written off rather than repaid. Venture funds and “angel investors” expect government co-investment without hard questions. The government venture fund has been tilting at windmills for more than 20 years, with little to show for hundreds of millions invested.

Ask not what you can do for your country, but what your country can do for you, I suppose?

Here’s a third: our dismal savings record, which leaves us constantly looking overseas for investment. In the same speech last week the prime minister announced the creation of Invest New Zealand to “roll out the welcome mat” for foreign investors. But lack of a welcome mat hasn’t constrained our best startups from attracting international investment – companies like Xero, Vend and Rocket Lab have all raised millions offshore. Many of the most promising companies in the next wave of startups are already backed by Australian-based venture capital funds – including Tracksuit, Halter and OpenStar.

The big difference between New Zealand and Australia in this respect is that in recent years large superannuation funds in Australia have become significant investors in their venture capital sector, helping them to scale. In New Zealand we’re at least a generation behind because we’ve been so tentative on compulsory superannuation. If we had to pick one policy prescription to help us close the gap with Australia, matching their settings on this would be a great first step. Is there any politician here brave enough to propose that?

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Toby Manhire
— Editor-at-large

I applaud the prime minister for turning our attention back to these fundamental questions about New Zealand’s economic future. But aspiration alone is insufficient. What are we actually going to do differently?

Rather than simply targeting “more startups, more IPOs, more inbound foreign investment” – which are inputs – we should understand and measure how startup companies contribute to the broader economy. This means tracking metrics like how much they pay their employees and how much of the capital they raise is spent locally. After all, we don’t tax capital gains in New Zealand, but we do tax operating expenses through PAYE and GST. The only companies that will drive our future prosperity are those that create high-paying local jobs and sustainable growth.

The end of Callaghan Innovation is a necessary reset. While it’s difficult news for those affected, hopefully many of them can find roles working directly for our fastest-growing companies, which are constantly seeking skilled workers, rather than supporting them indirectly. That’s one of our biggest constraints – we need more New Zealanders choosing to work on and invest directly in these businesses. Perhaps then we can move beyond talking about the theoretical benefits of innovation to actually delivering it.

Rowan Simpson is the author of How To Be Wrong: A crash course in startup success. Pre-sales are available now.

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A variety of Body Shop products, including peppermint foot lotion, fuzzy peach perfume and lip balms, are displayed. They are set against a backdrop featuring the illuminated sign of The Body Shop store.
A curated selection of the Spinoff’s Body Shop favourites (Image: Anna Rawhiti-Connell)

BusinessJanuary 23, 2025

The Body Shop is dead but our love for its lip balm will live on

A variety of Body Shop products, including peppermint foot lotion, fuzzy peach perfume and lip balms, are displayed. They are set against a backdrop featuring the illuminated sign of The Body Shop store.
A curated selection of the Spinoff’s Body Shop favourites (Image: Anna Rawhiti-Connell)

Body Shop NZ has been put into voluntary liquidation. We reach out into the Dewberry mists of time to farewell some of our cruelty-free favs.  

Before Mecca was the mecca, before Sephora sold retinol to tweens and before the internet made beauty content a lucrative career path, there was The Body Shop. Anita Roddick, businesswoman, human rights campaigner and environmentalist, opened her first Body Shop in Brighton in 1976. The first Body Shop store opened in New Zealand in 1989 on Lambton Quay in Wellington. 

Time marches on, and old favourites fall out of favour. As the Herald reported this week, Body Shop NZ has followed the same downward trajectory as its parent company internationally and has been put into voluntary liquidation. The stores remain open for now, but a spokesperson for the appointed voluntary administrators, Calibre Partners, told The Post, “We are working closely with the management team to develop a strategy to sell all stock and begin to wind down the business.”

At the height of its fruity power, with 28 stores open across the country, the unmistakable scents of Fuzzy Peach, White Musk and Dewberry stunk up malls, classrooms and changing rooms nationwide. The cruelty-free skincare, perfumes, soaps, body butter and cooling pink peppermint foot lotion became coveted products and popular default gifts for teenage birthdays, teachers and netball court MVPs. Opening a Body Shop lip balm pot and swiping it on with your pinky finger was as much of a status symbol in playgrounds and school corridors in the 90s and 2000s as Croc charms are now. To mark its sad demise, here are the Body Shop products that created the strongest memories for some Spinoff writers.  

A Christmas gift basket with various Body Shop lotions and soaps, and a separate bottle of peppermint cooling foot lotion against a green background with pink stars.
The coveted Body Shop gift baskets and the ubiqutitous peppermint foot lotion.

Cooling Peppermint foot rescue

How powerful and evil and absurd is the beauty industry that, at roughly 10 years old, I became obsessed with the state of my feet. So much so that I have very vivid memories of nicking my mum’s Body Shop pungent cooling peppermint foot rescue cream and slathering it on my trotters like a maniac, terrified that if left unrescued (?) and uncooled (?) my feet would wither (?) and I wouldn’t ever get a boyfriend (?). Also: why did we want our feet to smell like peppermint, famously the aspirational smell of the mouth? Is that actually how foot and mouth disease got started back in the day? Makes you think. / Alex Casey

Born Lippy lip balms 

In my high school in India, far from any Body Shop outlet, anyone venturing near a mall in a major city was expecting to bring some Body Shop products back with them. When I was about twelve, a friend who had been to Delhi gave me a tiny tub of grape-flavoured Born Lippy gloss. I applied it relentlessly, wandering around with a faintly purple-tinged mouth for months on end. I was fascinated by the fold out list of ingredients on the back, and there was something exotic about the French translation of the product name being emblazoned on the front. “They don’t test on animals,” I told my mum, having read all the fine print. My mother had probably heard this numerous times at this point and was completely uninterested, but she did at least let me buy another tub of clear grapefruit Born Lippy a few years later. At school dances, I carefully dabbed it over my cheap lipstick so I could have extra shiny lips for dancing to Justin Bieber music in the school hall with all the lights off. / Shanti Mathias

Stainless steel blackhead extractor

I know this is really far away tonally from the mouth-watering body smoothie buzz for which The Body Shop is known, but I have very vivid memories of wandering confidently into the St Luke’s body shop in Auckland as an 11 year-old and buying what was essentially a stainless steel surgical tool for doing open heart surgery on your face. Raised on the images of Clean and Clear and instilled with bigtime Pore Panic, I used this little tool, basically a thin knitting needle with a sharp eyelet at the end, to squeeze out each and every blackhead on my pre-pubescent nose, while silently crying through the pain. I was so obsessed with this frankly illegal bit of kit that I tried to take it on a family holiday with us, but it got confiscated at border security because they thought it was a weapon. Happy memories. / AC

Avocado (and other) body butter

The body butters were the go-to for young girls who hated makeup but wanted in on the fruity energy. I had the driest lips and skin known to man as a child (I still do, actually) and knew even at eight years old that nothing The Body Shop had would be of any use to me. And yet I desperately wanted the smelly body butters. In the end, I used two across my childhood: shea (didn’t know what it was but liked the picture) and avocado (cursed). Both smelled delicious and sat on top of my crusty skin rather than being absorbed by it. I didn’t care, the ritual of scooping out the green avocado butter that eerily had the same texture as a smooth guacamole was the most important part. When it very quickly ran out I returned to my Eurecin moisturiser but the scent lives on in my memories. / Madeleine Chapman

Colorful display of three "Born Lippy" lip balms in small tubs against a yellow background. Beside them, assorted fruits like kiwi, lemon, and watermelon are arranged near a red gift box with a handle, highlighted by sparkles and lines.
Mini fruit soaps and the beloved lip balm, Born Lippy.

Tea Tree Oil range

Ironically when I started using The Body Shop Tea Tree line I had not yet had my first pimple. Nevertheless, I still persisted in dousing my face in tea tree toner every morning (did not wash my face or moisturise, just toned??) and blotting my nose with the tea tree blotting paper. In later years I had hoped the pure tea tree oil would zap off blemishes – it did not, but it did burn and that felt like progress. I was also very impressed with the concept of tea tree foundation, although it did seem too good to be true. 10/10 marketing. / Sophie Dowson

The Body Shop gift basket

You could not swing a cat at a birthday party for high school or intermediate-aged young women and girls in the 90s without hitting a Body Shop gift basket. As you gathered around watching the birthday girl open presents, the cloying scent of The Body Shop’s Dewberry perfume spray trapped in your throat, there was always a moment where the size of The Body Shop gift basket was compared to others given or received that year. Shopping for them made you feel sophisticated and lavish as you gathered up as much of a matching set from one particular fruity scent line as possible — soap bars, bath oil beads, bath salts, mini fruit soaps, lip balms, shower gels, moisturisers and perfume sprays. You took your bundle to a special counter and watched as a clean-faced shop assistant artfully arranged it on top of the organic-looking shredded paper filler, expertly pulled a tight plastic wrapping over them and added a green ribbon bow with a flourish. Gathering and giving the complete set in Fuzzy Peach, Pink Grapefruit, Dewberry, or White Musk was a true marker of generous excess. /Anna Rawhiti-Connell

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Joel MacManus
— Wellington editor

Peach Body Butter 

Before the Sol de Janeiro Bum Bum Cream, there was the peach body butter from The Body Shop – a true icon of my teenage years. Back then, my mall hot spots were Jay Jays, Just Jeans, and of course, The Body Shop. Stepping into the store was like entering a sensory wonderland; each corner had its own distinct scent – not overpowering, just perfectly inviting. It begged you to twist open one of those iconic circular pottles of body butter. Each pottle featured a stunning, lifelike image of the fruit it embodied, making you feel like you were shopping in the produce section of an artisanal market. The peach scent was my absolute favourite, and even now, I know one whiff would instantly transport me back to those days. /Jin Fellet

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