The growth of sales and reliance on the Chinese market for New Zealand food products has been well documented, but how exposed are our major industries to the market? It might surprise you that some industries are in a better position to manage the risks than others.
One way to manage market risks is to have a good structure on the ground in China. For smaller companies or industries it is very difficult to afford to put people in China, and that’s where it is important to work with good partners. For larger companies, having New Zealand and Chinese staff in China is important for better understanding of the market. It is a big commitment to do this but it shows that you are serious about doing business. By having people on the ground you are building first-hand market knowledge and the Chinese connections to assist you now and in the future.
The NZ Wine industry understands this and has their Asian representative, who covers more than just China, based in Shanghai full time even though its exports to China in 2019 were $33.3m, only about 1.8% of total wine exports of $1.84b.
Setting up an office in Hong Kong is like a Chinese company setting up one in Stewart Island or Tasmania and saying they have the NZ or Australian market covered. For some NZ companies their public relations statements on the importance of the Chinese market are not matched by their actions.
We also hear a lot about the need to “add value”, and to have any chance of doing this in any market we need to get closer to our consumers so we can understand them better. Sitting in New Zealand, sending emails, and reading market research reports is not going to cut it.
Let’s take a deeper look at a couple of important industries and products.
The NZ Dairy industry exports around 36% of its dairy production to the Chinese market. Synlait, Tatua, and Fonterra have offices there and people on the ground, and Westland did also before it was sold to a Chinese dairy company. All of these companies have a good mix of NZ and Chinese employees in China. Given the importance of the Chinese market to the NZ Dairy industry it is good to see they also have a strong commitment to the market, which helps to reduce much of the market risk.
Fonterra has a large investment in Beingmate and Chinese farms and they are doing some really interesting things in China. A good example is Fonterra’s cream and cream cheese mixture to put on top of tea drinks. It is a new category for dairy products but it is not my idea of a good cup of tea! They got involved with this new trend early, showing why it is important to have a good team on the ground to identify and develop new opportunities.
The structural strength of the dairy industry in China is, unfortunately, not copied by the meat industry. In 2019, according to Beef + Lamb New Zealand, the Chinese market accounted for around 39% ($2.734 billion) of total export sales ($6.945 billion). The Chinese market is also clearly very important to the meat industry.
However, for the past five years I have been the only Kiwi full time in China selling NZ meat (my focus is venison). I am not aware of anyone working for B+LNZ based in China. Silver Fern Farms does have a marketing office in China with a number of Chinese staff. This is a positive step forward for them and it would be good to see this continue to grow.
With the volume of meat sold into China I find it difficult to understand why companies do not see any value in having their own people in the market. Working with good Chinese partners is important but the larger the volume of product sold the bigger the risks and the more important it is to have your own marketing team. From a Chinese point of view the actions of the industry show they are happy merely to sell into China. This is a mistake long term and exposes the meat industry to many more risks of doing business in China.
In the past Zespri had some public issues concerning dual invoicing with their Chinese importers. They have made changes and now have more control of their products. They have also built a very strong team in China, which has put them into a good position. The Zespri brand is one of the leading fruit brands in China. They have developed this through spending time developing the right relationships, understanding the different markets, and building knowledge of Chinese consumers. You only have to look at the success of their new season of fruit arriving during the early stages of Covid-19. During very challenging times they did not have any major issues of getting fruit into the market. Having a strong team on the ground has reduced their risks significantly.
The importance of the Chinese market to NZ agriculture is not going to change in the short term. We can never eliminate all the risks with international trade but there are things we can do to reduce them. Having a good structure within the market will reduce some of the risks while developing a better understanding. This is what I would call a “win-win” for New Zealand.
- Hunter McGregor is a Chinese-speaking Kiwi based in Shanghai selling NZ meat into China.