exporter magazine nov/dec 2012

ASIA’S TRADE CORRIDORS ★ EXPORTING YOUR BRAND ★ NYNE’S PROGRESS REPORT ★ BRAZILIAN PROSPECTS

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For theHomelandKea’s bold new plan to connect more Kiwis

THE MAGAZINE BEHIND NZ’S EXPORT DRIVE

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EASIYO’S FAST BOAT TO CHINATARGETING THE WORLD’S BIGGEST MARKETPAGE 10

SOURCING LOGISTICS SOLUTIONSTHE LABYRINTHINE WORLD OF F&LPAGE 22

UNRAVELLING THE COMPLEXITIESTHE NO-NONSENSE GUIDE TO NZ’S FTAsPAGE 28

EXPORTER 1

NEXT ISSUE: Mar/Apr 2013

FEATURES

22 SOURCING LOGISTICS SOLUTIONS Yoke Har Lee-Woolf explores the labyrinthine world of

freight and logistics and discovers there are big efficiencies for the taking.

28 NZ’S FTAS: UNRAVELLING THE COMPLEXITIES

Unsure about how to tap into the benefits of New Zealand’s Free Trade Agreements? Cameron Gordon presents a no-nonsense, how-to guide to help you get started.

30 EXPORTING YOUR BRAND Charlotte Henley walks you through the basics of brand

protection when entering overseas markets.

32 SOME CONSISTENCY PLEASE Is New Zealand dropping the ball with its Double Tax

Agreement network to help exporters and investors overseas? Greg James poses the question and offers some home truths.

46 FAIRS & EVENTS

49 VIEWPOINT

MARKET INTELLIGENCE

34 ASIA’S TRADE CORRIDORS New Zealand’s trade commissioner to Thailand, Karen

Campbell, stresses the importance of adopting a pan-Asia view when focusing on south-east Asia.

37 BRAZILIAN PROSPECTS Brazil may still be a tough nut to crack for many Kiwi

export companies, but as Tim King reports from São Paulo, the opportunities are definitely there.

40 THE PHILIPPINES: BEYOND THE STATISTICS

The Philippines is a market that holds great promise for New Zealand’s food and beverage exporters – but it also comes with unique challenges.

42 FROM THE BEACHHEADS In-market advisors answer questions about doing business

in two of the world’s economic powerhouses: the US and China.

44 IN THE ZONE Look beyond Shanghai, Beijing and Guangdong; China’s

island province of Hainan has export opportunities aplenty. Expat Kiwi businessman Michael Holt offers a unique trade perspective.

PROFILES

10 ON A FAST BOAT TO CHINA EasiYo turns 20 in November, and the Kiwi company is celebrating

by taking on the world’s biggest marketplace.

12 WEAVING IDEAS FROM WASTE STREAMS The Formary creates fabrics from food crop waste fibre and is

winning praise all over the world. Exporter asks MD Bernadette Casey how this all came about.

14 EXPORT QUALITY FASHION With the 2012 DHL Express Fashion Export Scholarship winner

announced in November, we ask for a progress report from last year’s winner, NYNE.

16COVER STORY

For the homelandTHERE’S BEEN A CHANGING OF THE GUARD AT KEA: A NEW BOARD, NEW CHAIRMAN AND A BOLDER PLAN TO CONNECT MORE EXPAT KIWIS THAN EVER BEFORE. SIR STEPHEN TINDALL’S ORIGINAL BIG IDEA IS SET TO GET EVEN BIGGER. KEA’S GLOBAL CEO SUE WATSON TALKS TO EDITOR GLENN BAKER ABOUT THE TASK THAT LIES AHEAD.

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2 EXPORTER

EDITORGlenn Baker

[email protected]

ADVERTISING MANAGERLeanne Moss

[email protected]

ADVERTISING ASSISTANTRachel Witberg

[email protected]

DESIGN AND PRODUCTIONHartman Reid

[email protected]

JOINT PUBLISHERSCathy Parker. [email protected] Carter. [email protected]

SUBSCRIPTIONS AND CIRCULATION ENQUIRIES

Sarah Holyoake [email protected]

PROOF READINGGeorge Ward

CONTRIBUTORS THIS ISSUECatherine Beard, Gary Cross,

Doris Evans, Cameron Gordon, Charlotte Henley, Michael Holt, Greg James,

Tim King, Yoke Har Lee-Woolf, Shane Newman, Greg Reynolds,

Rom Rudski, Darryl Smith, John Walley.

Adrenalin Publishing Ltd.

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PO Box 65 092, Mairangi Bay, Auckland 0754.

Ph: 09 478 4771 Fax: 09 478 4779

SUBSCRIPTIONSExporter is a five issue magazine.

Subscription in New Zealand is $41 (incl GST). Please call us for overseas rates.

Copyright: Exporter is copyright and may not be reproduced in whole or in part without the written permission of the publisher. Neither editorial opinions expressed nor facts stated in advertisements are necessarily agreed to by the editor or publisher of Exporter and, whilst all efforts are made to ensure accuracy, no responsibility will be taken by the publishers for inaccurate information, or for any consequences of reliance on this information.

Printing: GEONDistribution: Gordon and GotchISSN 2230-6528 (Print)ISSN 2253-2730 (Online)

ISSUE 26

www.exportermagazine.co.nz

Editor’s Letter

Success in shipping is all about attitude. That’s the energy part – the sheer enthusiasm which inspires

the way we go about things. But we have the critical mass too – the modern tonnage, high-tech

technology, trade lane coverage and service network needed for rapid delivery.

Wherever you are, we’re good to go.

For hands on help call our local experts: Outbound: 0503 222 444 Inbound: 0508 333 666

Mass, velocity and energyequals Hamburg Süd.

www.hamburgsud-line.com

No matter what.

Early Christmas cheerIt’s hard to believe that another year has almost rolled by, and

it has certainly been an eventful 12 months. It has been another tough year for our exporters too – but then, you need a rather long memory to recall when all our ducks were last in a row on the trade front.

To wrap up the year we have an interesting interview with Kea’s CEO Sue Watson. With a new board, new chairman and a passionate, fired-up Kea team, I think you can safely assume that there’ll be a lot more positive connections made out in the big, wide world of exporting over the next few months and years. I hope you get inspired enough to sign up for Kea yourself!

As this is our last issue for 2012 I’d like to take the opportunity to thank all our contributors to the magazine, and our advertisers whom, without their support, this publication would simply not exist.

Seeing it’s almost Christmas, NewZealandShowcase.com has generously donated three boxes of delicious chocolates from acclaimed chocolatiers Bennetts of Mangawhai, and you could win one for a client of yours. Called ‘Our Taste of New Zealand’, the box lids feature a collage of iconic New Zealand images. New Zealand Showcase – who specialise in New Zealand-made gifts for business gifting – will gift wrap the choccies and send them directly to the client of your choice, complete with handwritten card.

To go in the draw to win one of these superb gifts for one of your customers simply email me at my address below, with “Chocolates for Christmas” in the subject line, before November 30th.

Meantime, have a great Christmas, a relaxing holiday, and we’ll see you again in 2013.

Glenn H. [email protected]

Success in shipping is all about attitude. That’s the energy part – the sheer enthusiasm which inspires

the way we go about things. But we have the critical mass too – the modern tonnage, high-tech

technology, trade lane coverage and service network needed for rapid delivery.

Wherever you are, we’re good to go.

For hands on help call our local experts: Outbound: 0503 222 444 Inbound: 0508 333 666

Mass, velocity and energyequals Hamburg Süd.

www.hamburgsud-line.com

No matter what.

4 EXPORTER

MAKING NEWS

Im-Able scores flying startTwo of New Zealand’s top

business awards this year went to businesses that make climbing robots to inspect industrial structures and a games device to help people recover from strokes.

Christchurch business Invert Robotics and Lower Hutt-based Im-Able Ltd beat more than 750 businesses to take the top prizes in the 2012 ANZ Flying Start Business Plan Competition.

Invert Robotics, which builds remotely-operated climbing robots that inspect industrial equipment in the dairy industry, won the Supreme Award for best overall business plan. The prize package is worth $56,000.

The ANZ Export Assistance Prize went

to Im-Able Ltd, whose computerised training games and other systems help stroke victims regain their independence by speeding up the recovery of arm movements, balance and cognition. The firm won $10,000 to explore exporting opportunities in their choice of 27 other Asia-Pacific countries in which ANZ operates. This prize was awarded to the entrant that showed the most exporting potential and 16 regional winners each received a $1,000 prize.

“What users like about our products is that they feel empowered to help themselves accelerate recovery. They particularly like using the game format because it takes the

boredom out of normal exercise programmes,” says Im-Able chief executive Sunil Vather.

“The export assistance prize and the support of ANZ is timely for us because we are planning to engage

into Asia. China and India are estimated to have five million new stroke survivors every year and we are confident that we can launch our unique products into these growing markets.”

Eventfinda up and running in US

After 200,000 events published and $10 million in tickets sold, Eventfinda has taken its Kiwi sense of fun to the US to expand its event discovery, marketing and ticketing platform, which is already in three countries. “We realised that while we are very good at what we do there are other opportunities for growth,” says Michael Turner, Eventfinda’s founder. “The US has been on our list for some time.” Eventfinda started out as a New Zealand tech company, with eventfinda.co.nz becoming the 20th most visited website in New Zealand. Eventfinda Pro, which allows event promoters, venues and artists to list their own events for free, is so successful that 100 percent of the event content in New Zealand is user-generated. Adding ticketing became the

next step as events grew larger in size and the demand for ticketing increased. “What’s interesting is that we are taking a Kiwi-style way of fun and business to other places. While there are some things that are different based upon cities, having fun and getting people into events is not one of them,” says Turner. The company team has tripled since January 2012 with more cities lined up for expansion. “We have aggressive growth plans in place and have set-up anchors in several large cities, including San Francisco,” says Turner. “We’re excited. We know how to do this, and now it’s about having the right partners for exponential growth – or as some call it, exponential ‘fun’.”

Im-Able’s Sunil Vather gets the big cheque from Fred Ohlsson, ANZ’s MD, Business Banking.

EXPORTER 5

MAKING NEWS

World first for export school

New Zealand has scored a major victory at the 38th IATTO Global Forum held this year in Tallinn, Estonia, where it was announced that it will be the first country in the world to roll out the new Global Trade Professional designation.

“This is an indication of the value other countries place on the innovation taking place at the New Zealand School of Export” says Rom Rudzki, the School’s founder. “My hope is that the School, which is a charitable trust, will now be attractive for a major business patron to come forward, someone who wishes to give something back to ensuring the success of this country’s exporters.

“The past five years have been a very hard road with staff taking pay cuts and

even working for no pay at all in order to realise the dream of a world-beating programme. This success is due to their commitment and belief in creating a path for our exporters to achieve global success.”

The School was founded in 2007 and since that time has delivered the Diploma of International Trade as the approved route to achieving professional status. The status also requires a minimum of two years full-time work in export, as well as agreement to abide by the Code of Conduct and a commitment to a personal programme of ongoing professional development through attending events, seminars, trade shows or other events as appropriate to the

exporter’s industry.Exporters wishing to take the

Diploma and the GTP – both of which are only delivered through distance education – can receive 50 percent of their fees through the NZTE Management Capability Development Voucher Scheme. depending on their eligibility.

“There has never been a better time for companies to raise their game,” says Rudzki. “We have shown as a school that we started from nothing, and yet now have a track record of success with graduates from all sized companies. The NZTE matched funding makes this the perfect time for exporters to raise their game to world-class standard.” www.export.ac.nz

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The New Zealand Export Credit Office (NZECO) provides financial guarantee products for New Zealand exporters that compliment the private sector. Our products help these exporters manage risk and capitalise on trade opportunities around the globe. NZECO is currently located in the Treasury and obligations to third parties are guaranteed by the New Zealand Government.

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Declined trade credit insurance?

Contact us for a discussion on how we can support your export trade:

www.nzeco.govt.nz | 04-917-6060

6 EXPORTER

MAKING NEWS

Schnaps maker woos Chinese paletteWellington-based premium schnaps

maker Zumwohl recently scooped two medals and a trophy at the inaugural China Spirits Awards in Hong Kong, judged by leading China-based spirits buyers including importers, distributors, wholesalers and bar/restaurant group owners. They awarded Zumwohl Natural a gold medal together with a trophy for best schnaps/brandy/aperitif and Zumwohl Kirsch a silver medal.

Aotearoa Distillers director, Ulf Fuhrer, says winning the awards is particularly significant as leverage for potential sales into China. Zumwohl

currently exports to Australia and has set its sights on entering the Chinese market as well as the United States. Chinese drinkers have traditionally favoured brandy but are becoming more mature in their tastes, according to China Spirits Awards organisers.

With this latest accolade, Zumwohl can now lay claim to the distinction of being the world’s most awarded schnaps, Fuhrer says. The German-born Kiwi founded the company in 2008 after struggling to find top quality German-style schnaps to drink in New Zealand.

Maori cuisine cluster takes the initiativeThe fledgling Indigenous

NZ Cuisine Cluster is a group of Maori food and beverage businesses that have joined forces to market their products overseas – Australia, China and Hong Kong are in the group’s sights initially.

“The cluster came about through the Poutama Trust’s strategic focus on Maori food production with particular emphasis on the added value, innovation and international aspects of food production,” says Richard Jones, CEO of the Trust. “The overarching goal of the cluster is to be a vertically integrated food innovator with a strong international/export focus.”

It’s too early to make a call on the success of recent marketing initiatives by the cluster – but the responses have been very positive. To date initiatives have included showcasing the cluster products to New

Zealand’s F&B industry including chefs, hotels, restaurants and wholesalers; undertaking research at the NZ Fine Foods Show, a market visit to Hong Kong to meet with distributors, retailers, wholesalers and supermarkets; attendance at the Melbourne Fine Food show; as well as meetings with Australian retailers and wholesalers.

In late September the cluster also hosted a Hong Kong business delegation at the Awataha Marae on Auckland’s North Shore.

“In terms of collaborative strategy working the cluster has the opportunity to spin off sub-clusters in beverages, seafood and honey with the latter expressing a willingness to cooperate even though some of them are competitors,” says Jones. “The collaborative strategy is working through the willingness of cluster

members to carry out joint promotional activities and to share ideas and experiences with each other.”

Jones says the immediate focus is on undertaking a capability and capacity audit of each cluster member to better assess what stage each business is at. “Some are still in the start up phase and trying to establish a presence in the domestic market. Others are close

to being export ready and some are already exporting. By undertaking the audit we’ll be better placed in determining and allocating resources to help the cluster develop.

“Within two years it is expected that the cluster will have consistent sales into Hong Kong and Australia, as well as other parts of Asia.”

The cluster hosting the Hong Kong delegation at the Awataha Marae.

EXPORTER 7

MAKING NEWS

The Catapult Programme is a government initiative that will see budding Kiwi entrepreneurs given the opportunity to fast-track their ideas into US markets.

The programme will identify promising entrepreneurs to the United States at an early stage in their career and see them experience the Kiwi Landing Pad in San Francisco. By doing so, they’ll be able to better understand the skills and capability they’ll need to build a sustainable and competitive business.

“We have plenty of ideas in New Zealand, but we haven’t been very good at turning them into viable products and businesses. The Catapult Programme will go a long way towards helping ensure that entrepreneurs are able to develop their ideas and products to reach their full international potential,” says Murray Bain, acting deputy chief executive, science and innovation, at the Ministry of Business, Innovation and Employment.

Through the programme, ten

participants will be funded by the Ministry to spend four weeks at the Kiwi Landing Pad to accelerate the design and development of their products and business models.

The Landing Pad offers an environment where entrepreneurs can tap into resources like mentoring, potential investors and networks that have already been established by pioneering Kiwi companies.

New Zealand Post’s global logistics strength lies in its flexibility and willingness to find a solution that fits a business – not the other way round. They’ve built a global network of relationships with companies who are key players in their markets to meet the needs of Kiwi businesses.

Experienced exporters and importers know that getting goods to where and when they are needed

is critical. New Zealand Post can deliver what your business needs to practically anywhere, and in whatever quantity is required. If you want flexibility and only need part of a container, that’s all you pay for. If speed is critical for your consignment, that is what New Zealand Post will deliver. If you want your goods sent directly to the consumer, they can arrange that service as well. Whether

you need a simple air or sea freight shipment or a complete supply chain solution, New Zealand Post can take care of it.

Or if you are uncertain about what you need, New Zealand Post can advise and help you every step of the way.

For more information visit www.nzpost.co.nz/global or call 0800 501 501.

Smoother landings with catapult funding

NZ Post flexes global logistics muscle

www.thetaurangabusinesscase.co.nz

Choose the ultimate business location and enjoy more cost-effective exporting

8 EXPORTER

MAKING NEWS

Park’s CEO takes on new challenge

After nine years at the helm of the agri-focused Waikato Innovation Park, CEO Derek Fairweather is leaving to head up Dairy SolutioNZ.

Dairy SolutioNZ was Fairweather’s brainchild established six years ago,

born out of the desire to take the world’s best farming technologies and practices – many from New Zealand – to regions experiencing food crises.

Dairy SolutioNZ was formerly a wholly owned subsidiary of the Park. However, the business has been spun out as a stand-alone entity. Waikato Innovation Park retains 25 percent ownership, while Fairweather also has a 25 percent investment. Fifty percent ownership of Dairy SolutioNZ is being held in trust, awaiting a major investor whom Fairweather is tasked with courting and securing.

Chairman of Waikato Innovation Park, Michael Spaans, says there’s no one better suited than Derek Fairweather for the challenging role. “In Derek’s nine years as CEO, he has led a team who has established Australasia’s only technology park solely focused on

growing agri-technology businesses. He built up the Park from nothing but a bare paddock.

“During Derek’s tenure, the Park has expanded three times, plus we’ve built New Zealand’s only independent product development spray dryer.”

Dairy SolutioNZ staff has become experts at designing and adapting new farming and dairy supply models with the purpose of satisfying food product demand for consumers in countries such as the US, Colombia, and the Ukraine. The team is working closely with Governments and major land owners around the world, proposing solutions for large farming operations that provide high volume, high quality, reliable meat and milk products delivered through modern, highly productive farming and dairy systems.

Export potential for innovative building panels A new concept in modular

building panels has passed the ultimate survival test in Canterbury’s earthquakes and is poised to shake up the residential and commercial construction markets. Called iPanels, the product has international patents pending and is described by its inventors as the first significant advance in building technology since hollow concrete blocks.

Retired master builder Reginald Richards and son Brendan, the directors of iPanels NZ, devised the concrete and glass fibre panel design, convinced there was an easier and simpler building method than tilt-slabs, blocks or bricks. They erected a prototype iPanels building on their rural Canterbury property just 15

kilometres from the epicentre of the violent 7.2 magnitude earthquake that struck in September 2010.

“It suffered no damage at all and gave us the confidence to continue development and obtain building consents to construct the first iPanels house in nearby West Melton,” Reginald says.

Made from pre-cast reinforced concrete, iPanels look similar to tilt-slabs but are half the thickness. Each panel is embedded with a glass fibre composite channel around its perimeter.

The channels bolt together to create a resilient i-beam framework when connected, with the bonus of a readymade wall cavity for wiring, plumbing and insulation.

“The concept combines

the compressive strength of concrete with high tensile Gracolite, a tough glass fibre composite that is fire-resistant and impervious to rot and moisture,” says Reginald. “It saves a lot of weight without compromising strength or stability, as well as being simple and quick to assemble, with no special skills or heavy lifting gear

needed.“In overseas markets

such as the Pacific Islands, Australia, South East Asia and South Africa, the prospects are also positive and we are following several business leads.”

A video of the building assembly method can be seen at www.ipanels.co.nz

MAKING NEWS

‘Oscars’ for automation companyAuckland-based Liquid Automation

is riding on the crest of a wave after recently winning two industry ‘Oscars’ for the technically-advanced 220ft Vertigo sailing yacht.

Liquid Automation, which special-ises in automated entertainment, lighting and security systems, won a Global CEDIA (Custom Electronic Design Installation Association) award for best technical design, and an Australasian AVIA (Audio Visual Industry Awards) for best application of AV in a Commercial or Govern-ment Installation, over $500k. The company is the first Australasian business ever to win a Global CEDIA award.

“As a New Zealand business it means a great deal to be recognised for our work on an international stage, especially as we were up against some pretty stiff global competition,” says Liquid Automation

director Stephan Goodhue. “This yacht is our largest marine system to date and features many of our new custom innovations. The end result is a very happy client and a system we’re truly proud of.”

The Vertigo project involved the design and installation of an intuitive custom designed user interface to control onboard entertainment, security, lighting, emergency and real-time navigation systems. Other notable highlights include an intuitive user interface, fibre-optic distribution of HD Video, AMX touchpanels fronting a fully-integrated Crestron control system and a sound system providing a HiFi music experience, yet capable of nightclub SPL levels.

Other recent Liquid Automation projects include the Sky City Casino refurbishment and the Kim Dotcom mansion in Coatesville.

Businesses expect NZD to stay elevatedNew Zealand businesses believe the

Kiwi dollar will remain higher for longer, with the NZD/USD expected to peak at 85.6 cents around the middle of next year, according to the latest ASB Institutional Kiwi Dollar Barometer.

ASB chief economist Nick Tuffley says the quarterly barometer found that of those businesses surveyed, importers had higher expectations of the NZD/USD relative to exporters: “Import businesses anticipate the NZ dollar will peak at 87.4 cents against the US dollar by March 2013, before easing slightly to 85 cents in September 2013. Exporters on the other hand were more tempered in their predictions, and saw the potential for some easing in the near term, before reaching a peak of 85.4 cents by June 2013.”

The Kiwi Dollar Barometer also found that while businesses generally

expect the NZD/USD to remain elevated over the coming year, their expectations of the average level of currency over a longer horizon is much lower.

“The general consensus for the NZ versus US dollar average over the next 10 years is significantly lower at 63.2 cents,” Tuffley says. “The NZ dollar has averaged 69 cents over the past 10 years, and ASB Economics expect the average for the currency over the next 10 years will be at least 70 cents. A key driver behind our expectation is long-term strength in export commodity prices triggered by the rise in Asia’s middle class, which is expected to hold the NZ dollar structurally higher.”

Tuffley says New Zealand businesses were planning to protect themselves against currency volatility, with more than three quarters surveyed planning

to hedge their foreign exchange exposure over the next three months. “Our survey found that importers tend to hedge for longer durations relative to exporters. This may be due to differences in business cycle lengths for exporters, as many kiwi exporters operate in seasonal industries that offer cashflow certainty over a shorter business cycle. The average hedging duration across all businesses surveyed was up to six months.”

EXPORTER 9

> EXPORTER PROFILE

First, the stats: EasiYo turns over $40 million, exports 80 percent of production to more than 20 countries, manufactures 1.3 million yogurt satchets a month, and has sold more than two million yogurt makers-each one Kiwi-made. Oh, and it buys 1,800 metric tons of special-grade milk powder, the key ingredient, from Westland Dairy every year.

EasiYo is a lean, mean export machine – light years from its humble beginnings in the 80s, and poised to take itself into the export stratosphere once Asian sales get underway in earnest.

What do I base this on? Well, as I discover from my chat with EasiYo CEO Paul O’Brien, the Chinese are desperate to get their hands on their famous yogurt

mixes and makers. There is already a local copy of the EasyYo maker available on the market. Not that O’Brien is worried – apparently the fake has a funny smell.

What’s even more remarkable, and somewhat annoying, are the hundreds of websites that have sprung up in China marketing EasiYo products – these are products that originated from New Zealand supermarkets or special shipments ordered through individuals living here.

“Google ‘EasiYo’ when you’re in China and there’s around 500 sites, says O’Brien. “It’s annoying, but it’s also a real compliment for the brand I suppose.”

EasiYo is a remarkable export success

story in so many ways. The North-Shore based manufacturer has already conquered the UK market – although O’Brien confesses that this particular market is not so profitable these days with the British pound and Euro not performing as well as they used to. Italy was the company’s fastest-growing market until recent times, when it was overtaken by Asia. I’m told it only took 21 months for the Italians to buy up three million of EasiYo’s products.

But that’s all yesterday’s news. Today, with global sales up 30 percent, the export compass is set on China and South-East Asia, and to convince his board that it was a good idea to target those markets, O’Brien compiled his

On a fast boat to China EasiYo turns 20 in November, and the Kiwi-owned company is celebrating by taking on the world’s biggest marketplace.

By Glenn Baker

10 EXPORTER

EXPORTER 11

“18 good reasons why EasiYo should sell to Asia.” The list includes: payment up front; premium pricing (“because it’s New Zealand dairy”); FOB terms; transactions in NZD; the close proximity of the markets; the NZ-China FTA (no duty); NZ Trade & Enterprise support – that’s just seven. Then there’s the clincher – “locally-made Asian yogurt is awful. It’s runny and sweet. The Chinese dairy industry just doesn’t cut it,” says O’Brien.

Another of his 18 reasons is the fact that drinking-yogurt is taking off in Asia – there’s an understanding of probiotics and EasiYo just happens to have drinking-yogurt mixes in its product stable.

There’s no competition from chilled yogurt either, says O’Brien, as it’s way more expensive, too heavy to export and has a restricted shelflife. And high on his list is the fact that New Zealand dairy products have excellent credibility in the China market. Witness the response to the food scares they’ve had there (with the resulting run on infant formulas from New Zealand’s supermarkets).

Distributors don’t want Chinese packaging either, says O’Brien. “They say, ‘Paul, no Chinese, because then it looks like it’s made in China’.” They want the packaging exactly as it is in New Zealand, he says, a sticker can carry all the necessary distributor and nutritional information in Chinese.

And one final incentive from O’Brien’s list – the Chinese are very brand conscious; they like to show off brands. He calls it ‘conspicuous consumption’. EasiYo is one of many good Kiwi brands.

Chinese matrixO’Brien says they are in talks already

with supermarkets and distributors in China, but they’re not offering exclusivity. “We want layers of preferred distributors.”

Speaking of distributors – they are pretty much forming a queue. There

“ The timing couldn’t be better – China’s burgeoning middle-classes are hungry for protein, particularly for their children.”

are 15 to 20 at least who’re showing strong interest, claims O’Brien, so he is tackling the huge China market in a carefully-managed programme, which he plans to launch early next year. He explains his ‘Chinese Matrix’ to me, which divides the market into provinces and market sectors – mother and baby stores, supermarkets, health food stores, pharmacies, TV-shopping, online, and so on. Distributors are offered preferred supplier status in sectors in which they have the strongest capability. If they perform well over the initial 12 months, then they can be offered other sectors or provinces in the matrix. He says the various distributors will be closely monitored and audited by someone on the ground in China. If terms are broken, supplies will be stopped. Sounds like a cunning plan.

The timing couldn’t be better – China’s burgeoning middle-classes are hungry for protein, particularly for their children, and, as O’Brien points out, China is not good at producing food and beverage. He has plenty of stories of dodgy factories and processes in China that would make your hair curl – one involving boiling old leather shoes to extract gelatine to put in yogurt. Enough said.

To better research the China market,

EasiYo offered a ten-week internship to a Univeristy of Auckland masters student in international business. “The internship will include four weeks in Shanghai, where her family lives near by, conducting research on the application of marketing Easiyo in China,” says O’Brien.

Cult(ure) statusThere is no doubt that EasiYo is

a product well suited to China. It is unique, and it gets around the somewhat crude, unreliable ‘cold chain’ that exists in that country. Its reputation precedes it – O’Brien says the brand has achieved almost cult status through social media and blogging. “On Taobao, the big online shopping site, word has got out about ‘EasiYo from New Zealand’ through blogs.” It seems that all New Zealand dairy products, EasiYo included, are still riding the coat-tails of the infant formula melamine scare.

He’s passionate about the potential of Asia – not just for EasiYo, but for other New Zealand companies too. “NZ Inc has got to sell its food to China and Asia, because it’s all premium. They want to buy it.”

Glenn Baker is editor of Exporter.

12 EXPORTER

> EXPORTER PROFILE

If you’re wondering what the future of exporting really looks like – then look no further than The Formary, a Wellington company that is literally transforming waste through excellent design, and earning valuable export revenue in the process.

The company’s first big achievement was to convert Starbucks coffee sacks, of which some 300,000 are produced each year, into high-quality upholstery

Wellington-based company The Formary creates fabrics from food crop waste fibre and is winning praise all over the world. Exporter asked

managing director Bernadette Casey how this all came about.

By Glenn Baker

Weaving ideas from waste streams

fabric. You’d think that would be a hard act to follow – but recently The Formary came up with another winner in the form of a new fabric made from a blend of waste rice straw and New Zealand wool – and the Chinese love the idea.

But how did this highly innovative business get its first big break?

MD Bernadette Casey says it’s all thanks to a marine biologist; a book

he was writing on global warming; a request to her for a chapter on sustainable textiles; and then the sudden realisation about the vast amounts of waste fibre generated by this planet’s food producers every year.

Now the whole focus of Casey and her team at The Formary is to produce ideas to transform industrial and agricultural waste into beautiful fabrics.

EXPORTER 13

There’s definitely a serious side to this business concept. With the world’s population expected to balloon by another two billion in the next 40 years, it’s anticipated that farmers will need to grow around 50 percent more food to meet the demand.

“Our concept of creating fabrics as a by product of food crops reduces reliance on crops grown for their fibre alone, freeing up precious arable land for food production,” says Casey. “This increases the value of the crop as well as the productivity of the land.”

The company’s crowning achievement to date, and it is still a very young business, was its project for Starbucks, transforming their used coffee sacks into a high-performing upholstery fabric for the chairs in the iconic cafés all around the world. The fabric, called Wojo, has earned The Formary a Sustainable Development Award from the Prince Charles Campaign for Wool. Wojo was also named one of the world’s top ten eco-products by Grand Designs’ Kevin McCloud.

“Starbucks was a wonderful first client for us,” says Casey. “Working with them has helped establish The Formary

as a highly innovative and competent organisation with global capability.

Successfully delivering on projects with global giants like Starbucks helps opens doors to other multinationals.”

With Starbucks cafes throughout China, I wondered if this is how the latest project involving rice straw fabric came about. But Casey assures me that it was the result of one of her company’s advisors travelling to China and witnessing first-hand the issues around disposal of the waste straw generated from harvesting rice.

“Much of the straw is burnt, which affects air quality and creates commercial disruption. Airports are closed for days on end due to ash and poor visibility.

“We partnered with the Massey University Textile Department to develop a fabric utilising rice straw

blended with wool and we’re currently working with a Chinese state-owned rice company developing the manufacturing capability in China.

“The market potential has been extremely positive with approaches from distributors requesting exclusive market rights before we have our first commercial sample off the looms!”

Solution findersCasey says they’ve endeavoured to

attract the very best team possible to The Formary. “Today we have a diverse and hugely talented team based throughout New Zealand and overseas.

“Ideas can come from anyone in our team and from anywhere, but they are always in response to a problem,” she says. “With Starbucks it was a solution to the issue they had of sacks shedding fibres which was preventing their use in the designs of their cafés. In China they had to address a major waste stream.

“Our products have a positive impact on a global scale and we were pretty chuffed to be selected by German film-maker Sarah Grohnert for the Fast Forward documentary series about innovative companies that are reshaping the world through invention. The winning documentary will be premiered at the Sundance Film Festival.”

Of course there have been challenges to overcome in growing the business.

“A costly lesson for us relates to

supply partners. It’s vital that you work with supply partners that share similar business ethos and values. The behaviour of our first supply chain partner posed a considerable risk to our company,” recalls Casey.

“The establishment of a new and ethical supply chain was both costly and time consuming and delayed getting our product to market.”

Casey says working with large multinationals presents its own challenges, and describes them as ‘slow moving giants’.

“There are multiple gatekeepers and you generally need to engage with several departments within these corporations to ensure project support.”

Despite the challenges, success has come relatively quickly, and Casey is grateful for the support they’ve had from the Wellington City Council’s international team – saying it was vital for the rice straw project. “They facilitated high level meetings with the Chinese Ministry of Agriculture in Beijing. The Council’s economic development team identified the gap when NZTE moved their focus away from SMEs and they have been hugely instrumental and supportive in our engagement with China.”


“Ideas can come from anyone in our team and from anywhere, but they are always in response to a problem.”

Founders of The Formary: Sally Shanks (left) and Bernadette Casey.

14 EXPORTER

> EXPORTER PROFILE

My chat with NYNE’s Miranda and Jacob Scott-Simmonds and Tina Patrick got off to a slightly embarrassing start. The parking meter outside their Hamilton store The White Room was cash only. This ‘cashless jafa’ had to ‘borrow’ from their petty-cash tin to feed the meter.

Thankfully, my embarrassment was quickly forgotten as we got talking about the impact of winning the DHL Express Fashion Export Scholarship last year for top emerging fashion exporter: ten grand’s worth of international freight credit – that’s extremely handy for a fashion

exporter – plus plenty of brand exposure and export mentoring to go with it.

“It’s a well established award, and carries a lot of weight,” says Jacob.

“Entering such an award also forces you to take a long hard look at your business; its successes and weaknesses,” adds Miranda. “It makes you consider the things you maybe should be doing, and reinforces the good things you are doing.

“Also, the credibility the award provides when approaching international stockists and agencies is priceless.”

It has been a long, eventful road for the three designers to reach today’s level of success and they admit the business came about rather organically. Tina and Jacob go way back to intermediate and high school in Hamilton. Jacob had met Miranda at Wintec while both were studying mediart and graphic design, and in 2004, now a couple and both looking for jobs, they decided to launch their own venture in Hamilton. They rang Tina that night, and she agreed to come on board. In September that year Tripod Creative was incorporated as an umbrella company for fashion

(L-R) Miranda and Jacob Scott-Simmonds and Tina Patrick.

With the 2012 DHL Express Fashion Export Scholarship winner announced on November 13, it’s timely to check in with last year’s winner, NYNE. Glenn Baker

sat down with the three Hamilton-based designers for a progress report.

By Glenn Baker

Export quality fashion

EXPORTER 15

brand NYNE and to offer a graphic design service.

“We spent the first six months figuring out whether the dynamic would work, while designing our first collection, attending small business courses and deciding on the basics of what we wanted to do,” recalls Miranda.

The key to getting the business off the ground was surrounding themselves with good people, says Jacob – adding that his parents, both business owners, played a big part. “We could ask them the hard questions and get straight answers.” They’re also proud of the fact that, apart from some initial investment, the business has been largely self-funded.

In 2005, ten North Island retailers placed indent orders – today NYNE is stocked in 30 boutiques around New Zealand, including their own Hamilton store, where the label shares rack space with those of their favourite antipodean designers. Since 2010, the NYNE brand has also had a strong and popular presence across the Tasman. It should also be mentioned that all elements of their collections are sourced and manufactured in New Zealand.

With more than 13 years combined experience in workrooms and retail, the three partners bring a variety of skills to the label and the business. Jacob is the primary graphic designer – although he says all three designers collaborate creatively. “We each look after our own areas of the business, but if someone needs help with anything, we all jump on board.”

A full-time production manager also helps to keep the business running smoothly.

Export crossroadJacob says once they’d established

a solid national wholesale base for NYNE and opened The White Room, they were at a bit of a crossroad. “The choice was open more stores or get into export. Given the struggling retail market after 2008, we decided to crack into Aussie and found an agent/distributor who understood our brand and could represent it over there.

“We had tried to break into Australia two years prior to that, but quickly learnt that we needed

someone on the ground there, chasing money and ensuring things get done. There’s a lot of value in engaging the right person who is immersed in the market.”

It’s important to have someone who has strong relationships with retailers, adds Miranda, which translates into more ordering of your brand. Her advice is to find a good agent who understands your brand and your market “Someone who has reputable contacts in the industry and whose commission is based on sales. Negotiate terms so that if you don’t get paid, they don’t get paid.”

Jacob says their export strategy is to first nail Australia – get all the systems and processes working properly – and then apply those to other markets. This is where the mentoring provided through the DHL Scholarship award has also been useful in providing some clear direction.

Two years after the first pallets were shipped to Australia, exports now make up around a third of NYNE’s business. Despite the retail downturn there, Australia is still growing as more retailers come to trust the brand, and there are further pockets of opportunities being explored.

Asia is the next target, which means challenges in terms of hemisphere, seasons and sizes – and export sales through online marketing is another opportunity they hope to kick off in early 2013, ever-mindful, of course, of their loyalty to retailers.

The three directors are mindful of margins and price-points, so any discounting is limited to workroom

sales at the Hamilton store twice a year, events which they describe as ‘huge’.

There have been lessons on the export front – initially a crash course in logistics and paperwork. “Learning about the little things that can hold a box up for a week – not delivered within the standard three days,” says Miranda. But thankfully they got up to speed in a relatively short time.

It has to be said that one aspect of NYNE’s export strategy that’s set in concrete, is their commitment to keeping all manufacturing in New Zealand. They’re not about to get involved in any price wars with cheap Asian clothing manufacturers, and they see the standard of workmanship in their clothing as a distinct market advantage – no matter where that market is. Besides, local manufacturing equals far less production headaches, say the directors.

Success factorsWhy has NYNE succeeded where

other fashion design businesses have struggled, and in a depressed market? The three directors put it down to preparation, professionalism and the ability to deliver ‘the whole package’ right from day one. The directors’ skills mix has been a real strength – Jacob with his graphic design abilities, Tina with her extensive sales background, Miranda with her accounts experience. Then there are the strong relationships with buyers; proven business systems; the consistent delivery of collections every season, on time; and the fact that they’re “pretty good at doing what we’ll say we’ll do”.

Going forward, Miranda, Jacob and Tina are wary of the fluctuating markets. Rather than go in all guns blazing, they prefer to pace themselves, exercise caution and make smart choices. So don’t expect to see more stores like The White Room popping up just yet – the retail market needs to recover first. The focus remains squarely on maintaining a consistent quality product – just as they have done for the past 16 seasons.


“ The choice was open more stores or get into export. Given the struggling retail market after 2008, we decided to crack into Aussie and found an agent/distributor who understood our brand and could represent it over there.”

> COVER STORY

There’s been a changing of the guard at Kea: a new board, new chairman and a bolder plan to connect more expat Kiwis than ever before. Sir Stephen

Tindall’s original big idea is set to get even bigger.

By Glenn Baker

For the homeland

EXPORTER 17

On September 20th, 2012, something rather significant took place on the 9th floor of the Ernst & Young building in Auckland’s downtown Britomart. A group of elite Kiwi business people, some of whom had flown great distances to be there, gathered to welcome the new Kea board members and farewell the retiring members, including the organisation’s co-founders, chairman Sir Stephen Tindall and Professor David Teece.

Anyone involved in exporting needs no reminding of the work that Kea does to link up and motivate expat Kiwis and ‘friends of New Zealand’ to increase their contribution to New Zealand and assist this country’s export drive. It’s not so much an organisation, more a giant network, that’s fuelled by the passion all expats have for their homeland.

There was a palpable sense of occasion in that room as Sir Stephen handed over the mantle of responsibility to incoming New-York based chairman Phil Veal – reminding us that Kea was one of just a few positive outcomes from The Knowledge Wave conference held 11 years ago. He admitted that it had been a difficult journey at times, but expressed his confidence in the “young team” now carrying the torch.

It was a memorable speech, and had been preceded by a fitting tribute to Sir Stephen by Phil Veal and Kea’s global chief executive Dr Sue Watson.

In her talk, Watson outlined an ambitious game plan for the year ahead, which was well received by those gathered. I decided it warranted a follow up visit to Kea’s central city office a couple of weeks later for further

explanation and to get the message out far and wide.

The first thing I noticed when stepping into the Kea boardroom for my chat with Watson is the sea of Post-it notes plastered around the walls. It was a design process to develop their 1,000-strong leaders network, she explains. “We captured feedback from potential members of that network all around the world; and from Kiwis here wanting to use the network.”

“We had a strategic plan already, but with this feedback we could go to the next level and build on the basis of user insight, not just what we think is a good idea.”

The Kea board is very much a ‘roll your sleeves up’ working variety, explains Watson, with every member expected to front up on the ‘three Cs’ – connections, capital or capability – to help Kea succeed. Certain board members will also be called upon to assist with the process of facilitating investment back into New Zealand by ex-pats. Kea research in 2011 revealed that some 15 percent of the 15,000 expats surveyed are interested in investing here. Kea is looking at the role it can play in leveraging that opportunity for New Zealand.

“Every board member helps in the best way they can,” says Watson. “For example, Nicky Bell (Saatchi & Saatchi CEO) has great insight into brand establishment, how we tell the Kea story and how we communicate our value proposition to private-sector stakeholders, sponsors and partners.”

Making a differenceSue Watson is 18 months into her job

as global CEO, and describes it as her third career.

Her first career was as an educator and academic. She was an educational sociologist, and it was during her time at the Ivy League University of Pennsylvania that she witnessed the intersection between education and business. Back in New Zealand she saw the opportunity to export educational expertise to the US school market and teamed up with Neale Pitches, ex-CEO of Learning Media (a crown

entity turned highly successful private enterprise and exporter of educational products) to form South Pacific Press.

That was career number two, highly entrepreneurial – an educational publishing company exporting worldwide and specialising in printed and digital literacy resources under the brand name CSI. After ten years it’s still going strong and is another great New Zealand ‘weightless export’ story.

That business taught Watson a lesson in relation to the strong Kiwi dollar against the US. “One of the answers we demonstrated was that you don’t compete on price. In the particular industry we were involved in you compete on excellence – be the best

“ Kea’s a great opportunity to use my business skills and acumen. And I love being in such a purposeful organisation – doing something that makes a significant contribution to the country.”

in market – and on results. Deliver a product that’s highly valued and buyers will invest in it.”

Four years ago she sold out to Pitches, took a sabbatical, did some consulting work, and then – itching to be fully engaged again – stumbled across the Kea job while job-hunting online one day and successfully applied. “So this is my third not-for-profit career. Kea’s a great opportunity to use my business skills and acumen. And I love being in such a purposeful organisation – doing something that makes a significant contribution to the country.”

It’s the enormous opportunity represented by New Zealand’s expat community that gets Watson out of bed in the morning. “There are a million expats living offshore and we export some of our brightest and best people. That represents a threat to New Zealand, but also an opportunity. At a meta-level, all of us at Kea are hugely motivated by that fact.

“What we all love is that this is a mission-based organisation. It’s about a higher purpose. We’re not here to make money or sell stuff; it may sound corny, but we’re here to make a significant difference; an impact for New Zealand.”

That Kea has already made an impact through its 32,000 members is beyond question – but now Watson and her team want to make that step change to the next level. “It’s like a successful little business, bubbling along. We could continue like that, or really amp it up. We know it works; we have many stories of where Kea has added value – let’s amplify that by many thousands – that’s what we’ve all agreed on.” And by ‘all’, she’s referring to a whole new team. “Only one person has been here longer than me.”

Kea now has a commercial director, Tim Huston, an expert in commercialising digital properties, whose role is to help build the organisation’s revenue streams. “Fifty percent of our revenue has to

come from the market and that keeps us honest – if we’re not delivering value, then we won’t survive and nor should we,” says Watson.

Kea doesn’t charge a membership fee – it wants to build scale. “We’re building a community of a million, and it will always be a free community.” But of course a database of even 100,000 offers monetising opportunities, and there are companies that already pay to market products and services to the Kea network through its various platforms.

It also goes without saying that social media sites Twitter, LinkedIn and particularly Facebook, are now instrumental in building and strengthening the Kea cause, and have become an increasing area of focus in recent years. Facebook users utilise the site to generate interest in all things Kiwi and make valuable connections.

Addressing a real needI ask Watson why she thinks Kea’s big

hairy goal of making New Zealand the world’s most globally connected country will succeed? “Because it addresses a burning need,” she replies. “Ex-pats and friends of New Zealand really do want to connect with this country and with each other. And Kiwis here want to connect with ex-pats overseas.

“Also, we’re going to where the ex-pats are – we’re not trying to drag them to us.” Technologies like Facebook have a crucial role to play here, she adds. “2.4 million Kiwis are already on Facebook – so let’s go where they are.”

Kea is currently running a global Facebook advertising campaign, she says, to catch the eyeballs of offshore Kiwis and invite them to be part of the global community for New Zealand.

“The numbers on our Facebook page have been growing by more than a thousand a week.”

Watson loves tracking the interactions on the Facebook site – it gets personal, it’s highly social. “There are a lot of homesick Kiwis out there.” And to be a Kea member, it’s just a case of ‘following us’ on Facebook, joining Kea’s Twitter and LinkedIn communities, or signing up on the Kea website and subscribing to the global newsletters, she says. “Whatever channel works for you, works for us. One click and you’re in.”

Of course, being an official, approved ‘private’ member of Kea (as opposed to

‘public’) has its advantages, she adds, allowing you to search the database for key connections. Watson refers to these people as ‘influencers’, high-value people through their business connections – and they are often linked up through a relationship manager in New Zealand. A relationship manager may call up a suitable overseas member with a view to connect a firm in New Zealand, the enquiry may have come via an intermediary. “It’s about the member’s ability to influence on behalf of New Zealand, with their own community of influence.”

Stand-out connectionsConnecting the right people

for positive outcomes has always been Kea’s mantra. In the whole commercialisation or internationalisation pipeline it’s about providing the initial contact and advice, then stepping back, Watson says. “The whole idea is to accelerate the speed to market and help prevent cash being burnt going in the wrong direction.

Some key connections she recalls (many are on the website) include Wishbone Design (an offshore Kiwi gave the company valuable advice on their retail/online strategies), Icebreaker (assisted its US/Canada retail launch), Velocity Made Good (secured a large US ‘primary supplier’ deal thanks to a Kea member), and CricHQ (used the Kea network to find contacts to enter the Australian market).

Watson is under no illusion that it’s currently tough out there for exporters – made especially so by the stubbornly high exchange rate. Her advice? “If they’re going to cope with the high dollar, then they must get higher up the value chain.” Retaining ‘ideation’ and R&D on these shores is vital she believes, and encouraging businesses into areas where the exchange rate is less significant is one area Kea is tasked with. She also sees an inspirational role for Kea – spreading stories of courage and success by Kiwis both here and overseas.

It’s those success stories that really fire up Watson and her team. “We love hearing about expats we know who’re succeeding in world markets. “A real stand-out for me recently was Victoria Ransom selling Wildfire to Google. It’s even more remarkable because she is such a great supporter of Kea and always sharing her expertise. It was so

“ We’re not here to make money or sell stuff; it may sound corny, but we’re here to make a significant difference; an impact for New Zealand.”

18 EXPORTER

EXPORTER 19

exciting for us.”Watson gets a kick out of

matchmaking too. “For example, a company was looking for a Kiwi expat with expertise in the building industry in southern Africa. We worked our networks and matched the parties up within 24 hours. Awesome – that’s tangible; that’s Kea delivering on its promise.”

Some matches happen almost overnight – other matches take months, even years to produce tangible results. Watson admits to being impatient and outcomes driven. She’s had to learn that things never happen as fast as she would like.

Meanwhile she often gets singled out as the go-to person for making business connections. It’s because of her profile, her role and her reputation for advocacy. She is genuinely interested and passionate about the fortunes of Kiwi businesses, describing herself as “a champion for the country and its businesses.”

Watson tells me she’s heading to San Francisco, New York and Boston in a few weeks. You can guarantee she’ll be sharing many great New Zealand business stories with Kea ‘influencers’ while she’s there. You can also guarantee there’ll be many willing listeners, and down the track, some great outcomes for the homeland.


Who funds Kea?Traditionally Sir Stephen Tindall and

the Tindall Foundation have made ‘as needed’ funding contributions to keep Kea New Zealand functioning. Today it is 50 percent funded by four central government agencies – with the balance made up by several revenue streams: local government, private sponsorships/partnerships, events (for example, World Class New Zealand and Inspire), advertising and commissions (for example,

a jobs or talents board for Kiwi ex-pats run in partnership with Haines Attract).

“To ensure Kea’s sustainability our financial strategy is to encourage diversified revenue streams,” says Dr Sue Watson. “Our goal is to become even less dependent on government funding – although I think it’s important that the taxpayer is a shareholder in this national economic development asset that we’re building.”

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EXPORTER 21

Five questions for the new chair

Phil Veal, new chairman of Kea New Zealand’s global board, is also co-chair of Kea North America and a partner at middle-market advisory firm Growfire, based in New York City. Passionate about putting his extensive international business experience to good use and good service for New Zealand, he was happy to answer Exporter’s questions.

EXP: With Kea New Zealand entering a brand new phase, what excites you the most? What are your personal expectations about the new role?

Phil: The potential impact of a million engaged New Zealanders offshore is what excites me most. Imagine what we can do for our country and economy if we can build and harness that kind of network!

From a personal perspective, I’m honoured to have the opportunity to help develop this strategic national asset for New Zealand.

EXP: Your CV makes extremely interesting reading – you’ve spent much of your life away from these shores. What drove you to take up this position?

Phil: I’ve spent almost exactly half of my life outside New Zealand, and I’m sure there are plenty of Kiwis in similar situations. But here’s the interesting thing: none of us are 50/50 about our home country – we’re all 100 percent plus. I’ve used an Aussie word to describe the power of New Zealand’s global network: it’s the ‘boomerang effect’. You’d expect expatriates to become less engaged with greater distance and longer time away from their homeland, but with Kiwis, I’ve observed the opposite! We become more engaged. Our job at Kea is to put that level of engagement to work for the good of the network and the country. We’re also helping offshore Kiwis find their way back to New Zealand for work and lifestyle reasons – and that’s important because it shows the network works both ways.

EXP: In terms of connecting Kiwi firms with key contacts and investors offshore, what have been some of the highlights for you during your time with Kea?

Phil: I’ll give you an example from my experience: I met Derek Handley and Paul Cameron of Booktrack through Kea. Booktrack is an innovative New Zealand company that has built a platform to reinvent the experience of reading. Their platform plays a soundtrack to the book you’re reading, paced to your reading speed. It’s an amazing technology for any reader, and particularly for reinforcing the reading habit among kids. Paul – who came up with the idea – and Derek are two fantastic entrepreneurs, and I wouldn’t have met either of

them, or invested in Booktrack, if I hadn’t been plugged into Kea. There are many other examples, both big and small, and if you follow @keanewzealand on Twitter, you’ll discover many other great things happening.

EXP: You say you want to help Kiwi firms with “the guts to go global”. What’s your advice to small Kiwi firms who’re sizing up an overseas market for the first time – the US in particular?

Phil: There’s a handful of lessons that I think are important for New Zealand businesses going to the US. First, get engaged in the conversations in your target market – start with @keanewzealand on Twitter and LinkedIn, and build from there.

Then gather your resources (capital, connections, etc) and squeeze every last drop of juice from them. Seek out, listen to, and act on the counsel of smart people, like Andy Hamilton at The ICEHOUSE in Auckland, and the NZTE-sponsored Beachheads programme, under Ben Anderson’s leadership in the US – to name just a couple.

Most importantly, persevere! There are not many doors – especially in the US – that open magically at the first knock. Sell yourself and sell your business hard. We’re the world’s greatest travellers, and we need to improve ourselves to be the world’s greatest travelling salespeople!

EXP: When your time as chairman of Kea eventually ends, what legacy do you want to leave?

Phil: I’d like to think that in the next year or two, we will build enough scale and momentum into our global network to create a real economic and social impact in New Zealand. One way I like to think about it is: taking our “Stadium of Four Million” from last year’s Rugby World Cup and turning it into a “Country of Five Million” – a country that doesn’t stop at Cape Reinga but just keeps on going.

Phil Veal talking at the official handover luncheon

> FEATURE

The offer came at the right place, at the right time. During a social event at the New Zealand Trade Centre (NZTC) several years ago, Scott Kington, managing director of Madeblunt learnt about the track his company could go down – outsourcing the warehousing and distribution of the company’s umbrellas.

He had met Chris Shaw, general manager of Multifreight, a family-owned freight and logistics company, at the NZTC function and soon warmed to the idea of letting the experts handle the company’s warehousing and distribution.

Kington says this was the best thing the company did. “Initially we tried to do everything ourselves. That’s a waste of time really. By outsourcing the logistics we can really free our time to do what we do best – to grow the business.”

Madeblunt – which exports to the US,

UK and Japan, among other countries – does not have its own warehouse or logistics handling – New Zealand orders are taken and distributed by Multifreight.

For Multifreight, third party logistics (3PL) is not its core business but was extended as a service to Madeblunt due to the freight relationship it already had.

Chris Shaw says that small to medium sized companies often don’t have enough economy of scale to ship or distribute goods efficiently.

“Local companies are always struggling to get going. The cost is high for fulfilling small orders. Sending samples or small shipments to develop a market is costly,” he says, adding that often the per-shipment fee for 100kg of goods is not that much more different from sending 2,000kg.

Kington says 3PL is a great solution

because you don’t have to pay (beyond the cost of storage) until goods have to be picked, packed and sent. He says Madeblunt has a good relationship with its third party logistics company which is based near the airport, making it easy for weekly visits.

The problem with storageWhere do you store your samples while

you are getting ready to go to the export market or to exhibit your goods?

This was one key headache for Bob Sievwright, founder and co-owner of Tauranga-based Trimax Mowing Systems, back in the early 1990s.

Trimax’s problem became the seed for another business idea which has taken off and is currently helping Kiwi exporters meet their logistics and distribution needs.

Sourcing logistics solutionsExporter explores the labyrinthine world of freight and

logistics and discovers there are big efficiencies for the taking.

By Yoke Har Lee-Woolf

22 EXPORTER

EXPORTER 23

Sievwright started Base3usa – dedicated to helping Kiwi exporters without their own capacity, to fulfil their warehousing, logistics and fulfilment needs. It offers this service in the US.

In the early 90s, Sievwright had to ship samples of Trimax’s mowers to California. Trimax mowers are used for large-scale mowing of huge spaces such as turf grass, farms and sports fields, throughout the US.

“I faced the problem of: where would I send my initial shipment to?” he recalls. It didn’t help that Trimax mowers were oversized machines that didn’t easily fit in the back of a normal-size truck for dispatch across the continent.

Initially, he was lucky enough to have come in contact with an organic almond grower in Hilmar, California, which he was able to use as a base to store Trimax’s products.

Eventually Sievwright set up Base3usa to help itself, as well as other Kiwi companies with their warehousing and logistics needs. Based out of Atlanta, Base3 can help an exporter meet their warehousing needs, provide order fulfilment and virtual office services.

Base3 managing director Moira Moroney says it’s a choice location as 80 percent of the US population is found on the East Coast.

Finding that perfect matchFor exporters looking to find a

warehousing and order fulfilment house, it pays to start by assessing the company’s business model to fit a matching service. Selecting a sensible logistics location is paramount in helping a company move goods around in a cost-effective manner. In the US, for instance, many warehouses only handle consumer

orders. Others cover only retail orders, while some focus solely on handling bulk loads such as pallets.

Warehousing close to market is important. Someone looking to service the grape industry in the US, for example, should store their goods on the West Coast, while the East Coast is a better base for consumer products with nationwide appeal.

“Base3usa will ensure goods arriving in warehouse are counted, stored for easy picking and packing; and dispatched immediately there is an

order,” Moroney says. For exporters or e-commerce

customers ‘visibility’ is everything, he adds. This means a highly functional integrated system between the exporting company and the 3PL supplier which enables the exporter to track orders, keep watch over whether the orders are fulfilled and provide up-to-date information for stock planning.

Back home, New Zealand warehouses can’t even begin to match the gargantuan sizes of US warehouses. Although local warehouses are miniscule by comparison,

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Catching errant milk powder ‘exporters’

You can’t just buy milk powder off the shelves in local supermarkets and try to ‘export’ it to your customers in China. Sometimes it takes a sharp-eyed freight forwarder to turn these culprits away.

New Zealand’s Ministry for Primary Industries (formerly Ministry of Agriculture and Forestry) has rules dictating that every dairy product that leaves New Zealand can be traced throughout the exit journey. This means unless you have been licensed as a dairy exporter, your products will be turned away by the forwarding company.

Freight forwarding company International Cargo Express (ICE), has had to recently turn away several shippers trying to send milk power to China.

Fresh producer manager at ICE, Pino Scully, says every fresh produce or food product that leaves the country goes through a chain of process. “We have had to turn away some shippers

because they could not meet regulatory requirements.”

Besides ensuring compliance is met, especially for fresh produce, freight forwarders have to ensure they make the right investments to provide the right conditions in the warehousing of the goods destined for export.

Peter Furlong, general manager at ICE, says the company has made heavy investments to ensure it can meet compliance requirements and can offer top notch refrigeration technology for chilled and frozen goods.

Fresh produce has to be prepared well before it travels. “We have to make sure the product can travel at the optimum temperature so we must spend time getting the product ready for travel,” says Scully.

Strawberries are particularly tricky to handle, says Scully, as they need to be pre-cooled and insulated before heading to the aircraft.

24 EXPORTER

Kiwi freight and distribution companies have achieved a certain level of maturity and capability which local exporters expect to see replicated elsewhere in the world – this according toTim Baxter, country manager for world logistics goliath DHL. Yet that is not easy to find.

Cheap is not the answerCompanies seeking 3PL solutions

make the most common mistake of going for the ‘cheapest’ option, says Matthew Casbolt, managing director of DHL Supply Chain NZ. These companies may end up paying for poor service, he says, which can lead to loss of market share.

To find out what is a reasonable amount to pay for a 3PL service, start by looking at how much it would cost to handle the freight and logistics in-house. “If you have an idea of the cost structure, then you can decide what you want to pay based on the revenue you generate,” Casbolt suggests.

Also, think about ‘reverse logistics’ or what happens when your products are returned by customers. Consider the cost of handling the redistribution or reselling, recycling or destruction of returned goods, he says.

Some 3PL suppliers offer more than just logistics. DHL, for instance, is able to ‘value add’, meaning it has the ability to relabel products, bundle products, ‘replug’ to meet the New Zealand market requirements, among other services, Casbolt says.

Fees & flexibilityIn the labyrinthine world of freight

and logistics, there are many facets to consider while picking a 3PL supplier, says Paul Grey, founder of World Wide Access – another company specialising in helping Kiwi exporters distribute goods in offshore markets.

Get a good picture of the fee structure by finding how the supplier charges for order fulfilment of handling one unit against handling multiple units, he adds. If a company requires

flexibility from its 3PL to deal with small orders such as one or two units, and requires some repackaging, the big warehouses and order fulfilment companies that deal with only moving goods in pallets may not be a suitable supplier.

“Also, consider if you are getting your stock out in bulk? Is delivery cost going to be an issue? Does your warehouse supplier give you guaranteed delivery dates?”

Grey says many Kiwi companies do not understand how specialised the 3PL suppliers can be outside New Zealand, in very large markets such as the US.

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Great expectationsFreight forwarders have a big

responsibility in making sure your exports not only head to their destination in good shape but actually clear border control.

According to New Zealand Trade and Enterprise, the following are some of the aspects freight forwarders handle:

• They can help organise and negotiate how to move goods from your factory to the exit port.

• They can help pack your product onto pallets or into containers.

• They can help with export documentation, custom permits and licences.

• They can provide advice on the best terms of trade and help with risk management of goods in transit.

• They can also help with arranging storage or warehousing and delivery.

EXPORTER 25

Knowing specifics is important, he says.There are warehouses that handle

only apparel, or warehouses that accommodate goods coming in at a certain dimension, and if the product’s dimension doesn’t fit, then it goes into another warehouse in another state.

“We have had customers experience this in the UK – the (3PL) supplier won’t do individual orders as the warehouse only handles bulk and won’t unpack cartons,” Grey says. “So to fulfil the distribution needs, the company needed to change supplier or find two separate suppliers.”

For many Kiwi exporters, using e-commerce is definitely becoming the way of the future. Yet, to succeed in building customer and brand awareness, nothing beats having that physical presence.

Moroney from Base3usa says: “Exporters still need to make enough commitment to sales in their respective markets. E-commerce doesn’t create ‘sales’ that traditional sales and distributors do. Kiwi companies still have to spend time in the market to manage the sales process.”

This article can be accessed online www.exportermagazine.co.nz Yoke Har Lee-Woolf is an Auckland-based business writer.

Email [email protected]

YO K E H A R L E E-W O O L F / W R I T E R

Keep an eye on warehouse stock

For EasiYo, the North Shore-based yogurt maker (see separate profile story in this issue – Ed), running a tight logistics and supply chain begins at the company’s warehouse.

Chief executive Paul O’Brien highlights the importance that manufacturers pay to adhering to a system of ‘lean thinking’, which begins with highly accurate stock management.

“We keep stocks right down and make products when we need to, to cut down on the level of finished goods. It is all about a passion for stock accuracy. We aim for 99 percent-plus accuracy – every one percent miscalculation on stock can be a stress,” O’Brien adds.

Distributors based overseas are encouraged to adhere to good stock forecasting habits, O’Brien says.

“We reward our best forecasters and penalise the worst.”

What this means is that suppliers distributing EasiYo’s products need to be reasonably on top of their stock management and prediction, to get the products they want, he says.

Being in the food manufacturing sector, EasyYo is focused on ensuring stocks are rotated well. Batch control is another aspect that EasyYo is hawkish about. “If you have to recall products, you need to know who you sent your products to for easy recall.”

Where possible, the company practices ‘hot shipping’ – putting goods in containers and getting it ready off-site in storage while waiting for health and safety clearance. This reduces the resources needed to store the goods on-site, O’Brien says.

26 EXPORTER

At EECA Business, we look for the big opportunities in energy efficiency – those that help improve productivity and profitability for firms and that strengthen the wider economy.

One of the biggest is improved fuel efficiency in road freight – a key link in the supply chain.

Most of the 130,000 trucks on our roads are fueled by diesel. In total, they travel more than 2.5 billion kilometres and use about one billion litres of diesel worth around $1.3 billion every year. After wages, diesel is the most significant cost for road freight operators and price increases are felt keenly in an industry with profit margins as low as one to four percent. When the price of diesel goes up significantly the increase is passed on to consumers and business – including exporters generating valuable foreign earnings.

With the pump price for diesel tipped to be more than $2 a litre within the next 10 years, the rising price of diesel is perhaps the biggest

challenge facing the road freight industry. Underpinned by increasing global demand for oil, increases in diesel prices can be mitigated to an extent through improved fuel efficiency. EECA’s research shows that fuel efficiency could typically reduce fleet fuel bills by ten percent. This is worth about $130 million every year in direct cost savings across the industry. At a company level, a fleet of 25 trucks using a million litres of fuel annually could realistically make annual savings of $130,000.

Because the cost of diesel is such a significant input for fleet operators, a ten percent fuel saving could typically increase the bottom-line profit of fleets as much as threefold, but the benefits don’t end there. A reduction in diesel fuel consumption reduces New Zealand’s reliance on oil imports and increases our energy security. Fuel efficient driving means lower maintenance bills, fewer accidents and a reduction in associated health and safety costs. Saving fuel also reduces

the emission of carbon dioxide and pollutants.

Despite these many and varied benefits, New Zealand’s heavy vehicle fleet is one of the least fuel efficient in the OECD. So what is holding our heavy vehicle fleet operators back?

The most significant barriers are a lack of awareness of the benefits of fuel efficiency, and knowledge of how to best go about improving fuel efficiency. This means very few operators take a systematic approach to improving fuel efficiency.

EECA’s Heavy Vehicle Fuel Efficiency programme aims to change this and bring significant savings to road freight operators. It will deliver fuel savings of at least 15 million litres by 2014 across New Zealand’s heavy vehicle fleet, resulting in around $20 million worth of diesel fuel savings with a 40,000 tonne reduction in carbon emissions.

Heavy Vehicle Performance Advisors will work directly with fleet operators to help put in place tailored fuel efficiency programmes and access financial assistance from EECA. Supporting the advisors is a best-practice fuel efficiency information resource on the EECA Business website, featuring practical tips and information to help operators ask and answer the tough questions.

Raising the profile and business benefits of fuel efficiency with operators will encourage them to make fuel efficiency part of their day-to-day business. When this happens, fleet operators will be more productive and profitable, with the wider economy, including exporters, accruing the many associated benefits.

Article by Stu Ross, business transport programme manager at EECA Business.

Addressing road freight inefficiencies

EXPORTER 27

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28 EXPORTER

New Zealand’s FTAs: Unravelling the complexities Unsure about how to tap into the benefits of New Zealand’s

Free Trade Agreements? Cameron Gordon presents a no-nonsense, how-to guide to help you get started.

> FEATURE

Free Trade Agreements (FTA) provide New Zealand exporters with excellent trade opportunities. If applied, FTAs often result in significantly reduced tariffs (import duties), allowing for more competitive pricing and/or greater profit margins for New Zealand’s exporters and their in-market partners. But to take advantage of FTAs, a certain level of understanding is required.

You shouldn’t assume that your offshore customer is fully aware of the FTAs that their country has with New Zealand – least of all, how to use these FTAs for their benefit.

Running on the assumption that the Customs body at the border will assist you and your partner to claim reduced tariffs is also not a recommended strategy, as the results can differ on a daily basis.

If you’re serious about exporting and paying the lowest tariffs possible, you’ll need to be much more proactive.

New Zealand FTA How-to GuideWith specific expertise in New

Zealand FTA certification processes, Incite has developed a comprehensive online guide to using New Zealand’s FTAs that includes working examples, which can be accessed by visiting

www.exportincite.com/services/using-ftas.

The objective of this step-by-step guide is to outline the practical steps that you can take to assess the tariff benefits available to you under the FTAs New Zealand has in the Asia region and how to claim those benefits.

Do Free Trade Agreements really mean free trade?

The name implies it, but don’t be fooled, Free Trade Agreements do not actually mean trade is 100 percent free – rather, that over a period of time (which can be as short as one year or as distant as 20 years) import tariff rates will progressively decrease; either to zero or down to a minimum rate.

Generally, the more reliant a country is on the success of an industry, the longer that country will impose duties or quotas on imports in order to protect their domestic industry against foreign competition.

How are payable tariffs calculated?

The FOB value of your goods includes all costs involved in the manufacture and transport of your goods to the domestic port or site of

final shipment abroad. Tariffs (import duties) are applied to your goods at the border of the importing country according to the FOB value of the goods, not the landed cost.

This is an important distinction. Some Customs bodies have been known to try and charge unassuming traders tariffs on the landed cost of the goods, which includes transport and insurance costs. This is neither correct nor legal and while the practice is not common, you should be careful not to fall into this trap.

HS Codes: the key determinantThe first step towards determining

the tariff rate that will be payable when your export product is cleared through Customs in the importing country is to know your HS Code (Tariff Code). An HS Code is a numerical code, where the first two digits of the code represent the chapter of the Harmonised System of Codes the product is classified under, digits three and four represent the heading within that chapter that the product is classified under and the fifth and sixth digits represent the subheading within that heading that the product is classified under. Where it is necessary, products are classified beyond six digits at the discretion of

> FEATURE

EXPORTER 29

national authorities.The Working Tariff Document of

New Zealand outlines the Harmonised System Codes enforced for products imported into New Zealand. To view the Working Tariff Document of New Zealand visit www.customs.govt.nz and click on ‘Tariff information’ in the menu on the left. You will find a link to The Working Tariff Document on this page.

It’s important to understand that HS Codes are only strictly ‘harmonised’ across countries as far as the sixth digit in an HS Code. Past the sixth digit, it is likely that individual countries will have their own classifications. New Zealand has tariff items down to the eight digit level, at which tariff rates are struck, and statistical keys beyond that.

The first step is to confirm the first six digits of your export product’s HS Code. The most common source of advice for this step is your freight forwarder, customs agent or directly from the National Tariff Advisory Unit (NTAU) at New Zealand Customs (NTAU can be contacted at [email protected]).

Once you have obtained your product’s six digit HS Code, the next step is to confirm that this code is the same as the HS Code classification that will be applied to your goods by the Customs body at the port of entry.

Your importer in the country to which you are exporting can play an important role in this process, working with the authorities on your behalf to obtain this information.

If possible, a tariff ruling should be obtained from the relevant authorities in the importing country in advance of the shipment, to ensure that you have mitigated your exposure to risk when the goods reach the border.

Accuracy in determining the correct applied tariff rates can be the difference between your goods being competitive or uncompetitive in a market and can be a major factor in your long-term success.

Do your goods qualify for reduced tariff rates?

Not all goods exported out of New Zealand qualify for preferential tariff rates under the FTAs we have with partner countries. FTAs are documents negotiated between Governments that set out, among

other things, the commitments that each FTA partner country has made to the goods classified in the FTA and the import tariffs applied to these goods at the border.

All FTA documents have a Rules of Origin chapter, which outlines the standards your products must meet to qualify for the reduced import tariff rate (if available) when your goods are exported to an FTA partner country.

FTA Rules of Origin outline how your goods will qualify for payment of reduced tariffs, based on whether the goods are wholly obtained in an FTA partner country, are manufactured from products that originate in more than one of the FTA partner countries, or are manufactured from

components that originate both in countries that are part of the FTA and countries not part of the FTA in question.

Every FTA should be treated as being unique and the rules for determining if your product qualifies for reduced tariffs under the FTA should be studied and understood and, if necessary, expert guidance should be sought.

What tariffs are payable on my export products?

All FTAs have a section within each of them that outlines the tariff rates payable when goods that are exported from one FTA partner country are imported into another.

For a comprehensive guide to determining the tariff rate that is payable on the export of your products to FTA partner countries visit: www.exportincite.com/services/using-ftas.

How do I claim the preferential FTA tariff rate?

The documentation used to claim any preferential tariffs available differ across the FTAs that New Zealand has with partner countries. Some FTAs, such as the New Zealand-China FTA and the ASEAN-Australia-New Zealand FTA (AANZFTA), have a specific Certificate of Origin format that must be completed by the exporter and certified by a New Zealand Customs-appointed FTA certification body.

Other FTAs, such as the New Zealand-Malaysia FTA and the New Zealand-Thailand Closer Economic Partnership (CEP) have declaration clauses that need to be printed on the commercial invoice that attests that the goods are deemed originating under specific rules of origin within each FTA.

Because FTAs are lengthy documents full of technical and legal jargon, exporters in many cases cannot be blamed for shutting off and putting the use of FTAs in the too-hard basket. There is a disconnect, not just in New Zealand but also in Asia, between high-level talk about the benefits that FTAs present businesses and how these FTAs can be practically applied.

If you are serious about using New Zealand’s FTAs to get your products into market at the most competitive price possible, an investment in understanding the FTA process must be made by you as exporter, and your offshore partner. The potential benefits are simply too great to assume that you are getting the maximum benefits these FTAs present.

“ If you are serious about using FTAs to get your products into market at the most competitive price possible, an investment in understanding the FTA process must be made by you as exporter, and your offshore partner.”

Cameron Gordon is Asia market director at Incite, an international trade services firm that connects New Zealand food and beverage suppliers with partners in the high growth markets of South East Asia and Taiwan. For more information about Incite visit www.exportincite.com

C A M E R O N G O R D O N / W R I T E R

30 EXPORTER

Exporting your brand Charlotte Henley walks you through the basics of brand

protection when entering overseas markets.

> FEATURE

If you have a successful brand in New Zealand and want to use and market it overseas, there are a number of potential pitfalls to be aware of. Most of these can be avoided with care and planning.

There are some basic things you should do before exporting your brand: conduct a trademark clearance search, consider any local translation issues, and file trademark applications.

You might also elect to licence your trade mark rights to a third party for financial return.

There is a possibility that someone else may already own ‘your’ brand overseas. When Burger King moved into the Australian market a number of years ago they found a smaller entity already owned the trademark Burger King, and as a result they had to rebrand their restaurants as

Hungry Jacks. Before you move into a new market,

you should ensure no other entity has prior rights to your brand (or any confusingly similar brand) in that market. If you do not, you could end up in an expensive dispute over who has the right to use the brand.

If another entity already owns the same or a similar brand in any of your overseas markets, you may

EXPORTER 31

need to consider a new brand name, and consequently a new marketing strategy if you want your brands to be consistent across all your markets. This is often the case with packaged goods.

It is also important to consider not only the exact goods or services you are selling under your brand, but any similar goods or services. Apple Computers was sued in 1978 for trade mark infringement by Apple Corps (which is the owner of the Beatles’ founded record company Apple Records). While computers and music records may not immediately appear to be similar goods, the parties did end up in a dispute which was only settled out of Court years later for a substantial amount.

It is possible to conduct brand clearance searches in most, if not all, countries prior to use and this is highly recommended. However the timing is important. While it is optimal

to conduct the clearance search close to when you will be entering the new market, conducting a search late in the process – when all your marketing collateral and signage has been finalised and printed – can be problematic. It can be very costly to rebrand (and replace your collateral and signage) if you find out that someone else does in fact already own your brand name in that market. Instead, clearance searches should be conducted at the time you are considering moving your brand into a new market or when you are selecting a new brand to use across a number of markets.

How will you protect your brand? Once you have conducted your

clearance searches, it is worth considering how you will protect your branding. The best option is to seek

registered trademark protection.New Zealand registered trademarks

do not provide you with protection overseas. Trademark protection will therefore be needed in each country in which you want to use your brands. You cannot generally enforce trademarks until they are registered, which can take months or years from their filing date, so this must be an early consideration in your strategy.

While it is possible to make use of the Madrid Protocol to coordinate the filings of your various overseas applications, it is not possible to simply file one international application to automatically give you protection in all countries. Also, unless you are seeking protection in a large number of countries it is not necessarily cost efficient to file a Madrid application.

If you wait to file any trademark application until you have determined if you will be successful with your products in the new market, there can be risks. For example, a third party may attempt to register your brand name themselves. In some countries (including China) the first person to file a trademark application is taken to be the owner – in other countries it is the first person to use the mark. In either case, it can be expensive and time consuming to fight over your trademark.

Translating (or mis-translating) your brand

When Kentucky Fried Chicken (KFC) originally moved into the Chinese market in the early 1990s, its “finger-lickin’ good” slogan was mistranslated into Chinese characters that meant “eat your fingers off”.

It is worthwhile obtaining the advice of a local translator/marketing expert to assist with an appropriate translation of your brand name. Plugging your name straight into Google translate can have unintended consequences. Even close markets such as Australia can use a different dialect. For example, a “thong” is either footwear or underwear depending on which side of the Tasman Sea you’re on!

Unintended associationsA joint initiative between Russia’s

Gazprom and Nigeria’s state-operated NNPC was originally called Nigaz,

which prompted outrage. Unintended meanings for your

brands can have a negative impact on your goods and services. Conducting a major launch with a name that has a negative or unintended association can also mean you lose potential sales and goodwill in the market and it may be costly to have to rebrand. Most clearance searches should consider the meaning of your mark and if this has any adverse connotations.

Licensing your rightsIf you do enter into any licence

arrangements regarding your brands you should ensure you have considered the reputation of the entity you will be working with and that you have a strong licence agreement in place. This is to ensure you have control of the quality of goods or services being manufactured or supplied under your brand, and the ability to exit the arrangement if it all turns sour. You should also ensure ownership of your branding (and any changes to your branding) is clear in this agreement.

Remember, when exporting overseas, your brand is your reputation. There are things you can, and should, do to ensure success offshore. Ignoring the basics can be very costly indeed.

Charlotte Henley is a partner at Kensington Swan specialising in intellectual property. Ema O’Brien, an associate, assisted with this article. www.kensingtonswan.com

“ You cannot generally enforce trademarks until they are registered, which can take months or years from their filing date, so this must be an early consideration in your strategy.”

32 EXPORTER

> FEATURE

New Zealand currently has a network of 37 enforced Double Tax Agreements (DTAs), primarily with its main trading and investment partners. DTAs are viewed as beneficial by most countries as they:

• Allow international business to be transacted with a degree of certainty.

• Clarify the taxing rights for each country.

• Avoid double taxation and prevent tax evasion by allowing countries to obtain information in other jurisdictions on taxpayers’ affairs.

New Zealand’s DTA network is targeted to include countries where real benefits are likely to accrue (i.e. with

our main trading partners). Benefits are likely to be limited if there are low levels of investment and trade between New Zealand and the other country.

Tax practitioners and New Zealand businesses continue to debate whether the IRD and New Zealand Government are correctly focusing their efforts to ensure that New Zealand’s DTA network is sufficiently wide reaching and up to date – so as to help New Zealand exporters and companies that invest overseas.

It is in New Zealand’s best interest to enter into DTAs and ensure that existing DTAs are renegotiated on a structured and timely basis. Renegotiated DTAs generally have lower withholding tax

rates on cross border payments of dividends, interest and royalties.

Lower rates of withholding tax:• Allow the repatriation of profits to

New Zealand with less overseas tax being deducted, resulting in more funds being repatriated back to New Zealand investors / shareholders.

• Reduce the possibility of New Zealand companies exporting or conducting business overseas being subject to tax in the overseas country.

Can do better?Given the IRD’s limited resources,

most people would probably agree that it is doing a satisfactory job with

Some consistency pleaseIs New Zealand dropping the ball with its Double Tax

Agreement network to help exporters and investors overseas? Greg James poses the question and some home truths.

EXPORTER 33

respect to New Zealand’s DTA network. However, with more Government funding, the IRD could do significantly better.

Inland Revenue has a work programme to ensure that New Zealand continues to enter into new DTAs with appropriate partners and old DTAs are reviewed and renegotiated to ensure they provide appropriate benefits. The department is currently in the process of renegotiating DTAs with Japan and the Netherlands and entering into new DTAs with Luxemburg and Vietnam. Based on the IRD’s current resources they are at full capacity – more resources must be allocated.

It has, however, become apparent that there is no cohesive strategy from Government on entering into and renegotiating DTAs and tying this process into other agreements (i.e. Free Trade Agreements negotiated by other departments).

DTAs and FTAsOne of the reasons for the

disconnection between entering into FTAs and DTAs is that different Government departments are in charge of negotiating the respective agreements. Notwithstanding this, one would think it is not unreasonable to expect some degree of consistency and a coherent approach to be adopted by Government with respect to entering into FTAs and DTAs and for the process, when possible, to be linked.

To follow are examples where this has not happened with respect to Asia (New Zealand’s current major trading focus).

New Zealand’s DTA with China is becoming increasingly important due to the significant amount of trade between the two countries and the number of Kiwi companies setting up operations in China. New Zealand entered into a FTA with China in 2008, being the first country to do so. Since entering into the FTA exports to China have grown

from NZ$2.3 billion to NZ$5.8 billion, a figure which substantially exceeded expectations for potential export growth prior to the agreement being signed. China is now New Zealand’s second largest trading partner after Australia, and ahead of the United States.

However, New Zealand’s DTA with China was entered into in 1986. Given that China is one of New Zealand’s largest trading partners, it was surprising that at the time New Zealand was negotiating the FTA, a process was not commenced at the same time to renegotiate the DTA. We understand that New Zealand and China have only just started discussions in this respect. Based on past history it will take a number of years for any new DTA to become effective.

Under the current New Zealand/China DTA, compared to recent DTAs that China has entered into or renegotiated, very high rates of withholding tax are payable. Under China’s more recent DTAs (or renegotiated DTAs), such as the one entered into last year with the United Kingdom, the withholding tax rate on dividends is five percent. This is just one of the DTAs China has recently entered into or renegotiated with a five percent withholding tax rate on dividends. With respect to New Zealand, under China domestic law the withholding tax rate on the payment of dividends is ten percent (i.e. there is no treaty reduction).

More inconsistenciesThere also appear to be

inconsistencies in strategy when New Zealand negotiated to become part of the ASEAN, Australia and New Zealand FTA. It was clearly recognised at the time that entering into this FTA would be beneficial to all parties involved. New Zealand has a number of important trading partners in the ASEAN region and this is one of the regions where

exports and international business have been seen to, and are forecast to, grow significantly. Unfortunately, a number of the DTAs New Zealand has entered into with its ASEAN partners are out of date, for example; DTAs were entered into with the Philippines in 1980, Indonesia in 1988 and Thailand in 1998.

More planning So, where to from here? Planning for

entering into a DTA is essential as it can take a number of years to update or enter into new treaties. Strangely enough it is often a more difficult and time consuming process to renegotiate existing treaties than enter into a new one, as starting with a clean sheet of paper is easier than renegotiating existing terms. Also a variety of political issues can come into play, which are completely unrelated to the DTA process, and the treaty can be used as a pawn in a bigger political game.

If New Zealand is going to continue to grow internationally, the Government should do all it can to assist exporters and reduce barriers for doing business overseas. It should have a clear strategy going forward on how to achieve this – to help New Zealand businesses compete on a level playing field with our large international competitors. This includessour DTA network. The Government should be applauded in being the first country to enter into a FTA with China; however, the ball is being dropped with respect to a consistent approach in enterin renegotiating DTAs as part of New Zealand’s wider network of international agreements.

Greg James is principal tax consulting at WHK and has eight years experience providing tax advice in the United States and Asia. Email [email protected]

Is your tax structure helping or hindering your exporting revenue?

An effective international tax planning strategy can ensure you correctly meet your international tax obligations and minimise your overseas tax payable. Greg James, WHK Tax Principal, has eight years experience providing tax advice in the United States and Asia. Talk to Greg today.

P: 09 968 8502 E: [email protected] www.whk.co.nz

Exporting or investing overseas and faced with complex international tax rules?

Exporter 180mm wide by 40mm high Nov.indd 1 26/09/2012 8:51:29 a.m.

34 EXPORTER

Asia’s trade corridors New Zealand’s trade commissioner to Thailand, Karen Campbell, provides

a snapshot of the Thailand marketplace and stresses the importance of adopting a pan-Asia view when focusing on South East Asia.

By Glenn Baker

> MARKET INTELLIGENCE

EXPORTER 35

It’s true that if you really want to learn about a particular overseas market – you go there and experience it. Karen Campbell is in the enviable position of living and working in Bangkok, Thailand’s capital, where she is New Zealand’s Trade Commissioner, and therefore well versed in the intricacies of a unique market.

Nelson-born and bred, and long-time resident of Thailand, she was previously employed by Bangkok Bank as executive vice president, product and distribution department, and prior to that, worked for Visa International (Asia Pacific) in Singapore and Japan.

So what is modern-day Thailand really like? Over the phone Campbell paints a picture of a country eager to distinguish itself from its regional neighbours. It is a country with an administration keen to promote populist policies. Elected on the back of a recent history of civil unrest, the government is currently increasing the minimum wage province by province. That’s having a flow-on effect of increasing labour costs, but that’s not necessarily a bad thing, says Campbell. Thailand is willing to leave lower-value manufacturing to the likes of Laos and Cambodia while it gets on with the job of producing higher-value goods. Your hard drive may, in fact, come from there.

The government is also working on making access to health care easier for its citizens, and leading-edge technology – such as tablet computers – available to schools.

With a population of 67 million, Thailand is a significant market in terms of size. It’s a market that has grown quickly and seen a rising level of domestic wealth in the past ten to 15 years. Discretionary spend on imported food and beverage and health items, such as wine, cheese, honey, colostrum and mussel extracts, is rising.

The opportunities for New Zealand companies are many, says Campbell, reeling off sectors such as health and medical IT, food and beverage, engineering, agri-business, education, to name just a few.

“It’s important to note that Thailand has a royal family and has never been colonised,” says Campbell. “In fact, the occasion of the 50th anniversary of the King and Queen of Thailand coming to New Zealand in 1962 was recently

celebrated in Auckland.”The point about the country having

never been colonised emphasises the ongoing need for English-language education partnerships, she says, and this is a major opportunity for New Zealand providers of education services.

Of course Thailand is an ASEAN

(Association of South East Asian Nations) member, which means that, for most New Zealand exporters, the ASEAN-Australia-New Zealand FTA offers a number of trade incentives. There is also a Closer Economic Partnership (CEP) agreement which was signed in 2005 and which gives a timetable for reducing tariffs and

Karen Campbell

36 EXPORTER

increasing quotas. While a large number of products are already tax free, in 2015 a new wave of zero tariffs are scheduled to come into force. New Zealand Trade & Enterprise can also assist with introductions and building relationships in-market. “Thailand has a Board of Investment which offers a number of incentives for foreign companies to set up manufacturing facilities, such as tax waivers, reduced capital requirements and relaxed rules on visas and work permits,” says Campbell. But accessing the Thailand market is not all plain sailing, she says. Although there has been a push for a greater level of standardisation of regulations amongst the ASEAN countries, there are still significant variations – such as FDA rules.

Her advice is to be prepared. First, understand the market; spend a lot of time with any potential Thai partner to develop a relationship. Compare the people and the company values with

yours. Working on the structure or form of that partnership can follow she says.

Pan-Asia viewpointWhen approaching the Thailand

market, it’s important to remember that ASEAN connection – because access to Thailand can later lead to access across borders to Malaysia, Laos, Cambodia, Myanmar and/or Vietnam.

“This pan-Asia view is becoming increasingly important. The development of regional infrastructure means that New Zealand exporters should no longer think about Asia solely on a ‘country-by-country’ basis,” says Campbell.

“Thailand sits at the centre of a geographic land mass which is rapidly becoming a hub.”

The map on the previous page illustrates her point. The north-south corridor is in place (red line) giving full road access all the way from China

to Singapore. The east-west corridor, which will connect Myanmar with Vietnam, is well under way. The grey line (southern corridor) will connect the planned port of Dawei (in Myanmar) with Thailand’s eastern deep-sea ports and on through Cambodia into Vietnam, and may change the flow of some shipping which currently goes via Singapore and the dangerous Malacca Straits.

So find the right partner in Thailand, suggests Campbell, and you could have access to potentially five other south-east Asian countries plus southern China.

Of course, finding that partner is going to require time and tenacity, she says. Bangkok is just 11 hours away from Auckland, with five direct flights every week, so there’s no excuse for not getting on a plane and checking it out for yourself.


Kiwi at the coalface

Greg Reynolds, managing director of Your BUSINESSinASIA.com, supports Karen Campbell’s contention that ASEAN is a much bigger opportunity that many realise and that time in the market is critical for success. A Kiwi based in Thailand since 2009, his company has delivered various projects across the region and comments that many companies are somewhat light when it comes to their market entry and due diligence.

“Market entry into Asia requires time and focus. Fly-in, fly-out research only gives you the surface story,” he says. “Asia is like an iceberg; their trading strength is hidden in the long term, often generational relationships that have been built over many years.”

Thailand is probably the ultimate example he says. Many Thai companies have effectively locked themselves off from wider opportunities as they only speak Thai. With 67 million people on their doorstep, many have more than enough work on their doorstep. However, he sees a creeping awareness of ASEAN and the open borders planned for 2015 and regards agri-business, IT and education (not just English language schools) among the

best opportunities in Thailand. “Thailand is also a nation of SMEs,”

he says. “So there is a natural fit once you can work around the language barrier and rich pickings to be found.”

He says Kiwi companies who trade successfully tend to be those who clearly understand their own domestic success and are able to articulate that in plain English. Once they have absolute clarity of who they are and what makes them so good then, either by frequent visits themselves or engaging with professional’s already in-market, they must build their understanding of the complexities and opportunities in the market.

“Many arrive expecting to make sales and then go home, which is simply naive. Would a New Zealand company give the time of day to a Thai arriving on a one week visit with a product or service to sell and sign an agreement on the spot?” he asks. “It is almost embarrassing to see many Westerners arrive with that objective and seem almost insulted when they cannot get past first base!”

The opportunities across the wider ASEAN region are almost mind blowing and the only difficult question

is where to start. Reynolds top picks are Thailand and Malaysia for size and scale and Singapore for more boutique, higher-average-value products or services. Like Campbell, he’s a strong advocate of Thailand due to its geographical location in the region and the number of other ASEAN nations trading with it. “You are more likely to be found once you are trading in the region and then the opportunities scale up remarkably quickly.

“Get here now!” is his parting comment.

EXPORTER 37

In recent times the Brazilian economy has been stoked along by consumer growth and the commodities boom. Although mineral commodity prices have slowed the Government has brought in a range of policies to stimulate the economy.

Brazil is incredibly strong in food commodities, which are holding up well in price as production elsewhere in the world is affected by bad weather. Brazil

has plenty of scope to intervene in its economy to push it along and follows a protective course for its industries (particularly manufacturing) which want to capture a slice of the growing consumer market while being protected from outside interests.

Unless firms actually set up in Brazil, invest and create jobs, it can be hard to make headway – however it does depend on the niche. Brazil is a huge

market so it can be protective. It has a population of 194 million, is bursting with natural resources, is bigger in size than Australia yet is pretty much all green and growing.

For many items (especially luxurious goods) Brazilian consumers are taxed heavily. As an example, an iPhone in the US is roughly US$500 – in Brazil it’s US$1,000. Brazilian manufacturer’s have long used import taxes and a


Brazilian prospectsBrazil may still be a tough nut to crack for many Kiwi export companies, but as

Tim King reports from São Paulo, the opportunities are definitely there.

38 EXPORTER

relatively weak currency to support inefficient business practices. Although in their defence they also have to operate with a myriad of taxes and costs which contribute to product cost.

With a strong currency and performing economy in the face of

global turmoil, Brazil has become a target for many overseas companies, which has put increasing pressure on its manufacturers. It’s hard to see many existing Brazilian manufacturers developing more export goods until the government solves some of the country’s massive infrastructure issues; simplifies and reduces taxes; and adopts policies which open up local companies to greater competition, forcing them up to international speed.

These problems, however, can be seen as an opportunity for experienced New Zealand businesses. Brazilian labour costs, although growing consistently and already high by developing country standards, are still significantly lower than Western countries like New Zealand. This allowed manufacturer’s to utilise labour-intensive production systems that focus on quantity of employees rather than quality. A New Zealand manufacturer prepared to invest and set up in Brazil with the right product and train staff to similar productivity levels to those achieved back home, could be in a position to lock in solid long term growth and gain the benefits of being considered a ‘local’ company whilst significantly outperforming other operators.

Brazil does have its share of poverty and social problems; however it’s definitely improving in many areas, with a growing middle class and better wealth distribution. Consumer

sentiment is strong and the Brazilians are positive about their prospects. The biggest opportunities

I believe the two biggest opportunities for Kiwis are: ag-tech and knowledge adding value to primary industry production; and capturing market niches on the back of strong consumer growth.

The new Free Trade Zones currently being developed in Brazil may also be a great opportunity for New Zealand businesses. Companies that add value to primary materials or intermediary goods should assess this as a strategy.

Basically, within a zone all inputs have no tax, CAPEX set-up has no taxes, but at least 80 percent of production must be exported (likely to change to 60 percent by year end). Operating within a Free Trade Zone means you can also sell up to

40 percent of production into the Brazilian market and be under the radar of import taxes. This gives you a competitive start in the Brazil market while targeting other markets in South America and beyond.

New Zealand companies with good technologies and processes can potentially capture enormous scale and sell production onto established customers in other parts of the world.

Essentially you can sell a proportion of products into Brazil and be on a level pegging with a Brazilian-based competitor – quite a feat in such a protectionist region.

However, this strategy will require good partners to help pull a project together; you’re not just dipping your toe in the water!

Brazil is seeking to capture more value add within its shores and therefore assist employment, so the

“ The new Free Trade Zones currently being developed in Brazil may be a great opportunity for New Zealand businesses. Companies that add value to primary materials or intermediary goods should assess this as a strategy.”

Yealands Estate wines in a Brazil supermarket, supported in-market by BRAANZ.

EXPORTER 39

Free Trade Zones are planned for all over the country- with the first operating by 2013.

Mistakes and misconceptions

Relationships take time to build; therefore many trips to market may be required. Show your commitment and build your credibility – expect things to take twice as long and cost twice as much as anticipated. Brazil is a continent – don’t conquer it all. São Paulo is the most sensible place to start, but don’t expect to complete more than two to three meetings per day – the place is enormous and traffic can be horrendous.

I think New Zealanders perception of what Brazil holds is different from reality. I’ve seen many people blown away by the scale of everything. This is not a dense jungle which rolls down to the beach where Brazilians kick footballs and drink caiparinhas! Granted, some aspects of life and business are behind New Zealand standards but in many industries Brazil leads the world (for example, aircraft manufacturing and ethanol production).

Brazil is becoming the world’s food bowl; a leader in agricultural production. New Zealand should capitalise on this by providing technologies and ideas to increase productivity.

There are good opportunities to invest in farming here too, but partner with people who know what they are talking about. We know some successful New Zealanders with dairy farms that are going very well here!

There are other Kiwi success stories too. We helped Hunza Lighting find an importer/distributor and the company is building a presence in the outdoor lighting market for premium projects. It recently supplied into a high end shopping mall called JK Iguatemi.

Structurflex found a partner in Brazil through our efforts and is now chasing opportunities in tensile membrane projects; watch this space! We also maintain relationships between New Zealand Pharmaceuticals and Brazilian meat companies – providing a valuable link on the ground with its commercial Brazilian partners. Market assistance

NZTE/MFAT may help but obviously with a million and one industries and a massive country here it is not so easy for them to tell you all you need to know and understand your business at the drop of a hat. There is a good bunch of a dozen kiwis or so doing business who can give advice and plenty of war stories! What I can say is that with my consultancy we have lived a while in Brazil so we know the best of both at home and abroad and we have plenty of experience in helping companies develop Brazil. But while doing legwork of finding out information for companies we can start building relationships and knowledge of the niche which gives us a great advantage to go on and help companies commercially in the market. Companies need a cost efficient method for commercial in market assistance (Brazil is expensive) and it is very important to build relationships with Brazilians which takes time. Living here means that we can maintain the relationships, solve any problems, find further opportunities and give confidence to customers/clients of support. Even if you establish a distributor model it is probably a good idea to have someone here maintaining an eye on them as too often it can still go pear shaped! A South American perspective

Brazil is the elephant in the room of South America with about 55 percent of the continent’s total GDP. Brazil has its share of barriers, bureaucracy, taxes and rules – however good niches for New Zealand businesses can be successfully targeted. It requires clear thinking around the best business structure to take the most efficient advantage.

Understand the viability required to operate in a more protective market like Brazil. Consult in-market experts to decide on the most efficient business model to adopt, and do your homework on finding the right partners.

As for other South American markets, the FTA with Chile does make it a lot easier to do business there, import taxes are far less complicated. New Zealand firms should also look harder at markets like Colombia and Peru; both are following business oriented and open market policies and Colombia is now South America’s second biggest market!

Uruguay is another stable country to do business in. Unfortunately Argentina, which has so much potential, has a political system which, in my opinion, is sending it into another spiral of destruction. Just go there for the rugby and steak!

Venezuela is another interesting society – by the time this is published they’ll have had elections and we’ll know if Chavez will continue on his path of spending his oil money on social projects. If he loses the election, new leadership should open up the Venezuelan economy.

Braanz Consulting has been operating for more than two years in Brazil. Kiwi Tim King and Australian colleague Brendan Dennis have trade and business backgrounds and assist foreign companies interested in doing business with Brazil. Visit www.braanz.com

“ Brazil is becoming the world’s food bowl; a leader in agricultural production. New Zealand should capitalise on this by providing technologies and ideas to increase productivity.”

40 EXPORTER


The Philippines: beyond the statistics

The Philippines is a market that holds great promise for New Zealand’s food and beverage exporters – but it also comes with unique challenges.

By Cameron Gordon

According to a report published by HSBC earlier this year, the Philippines is set to moven27 places up the growth ladder to become the 16th largest economy in the world by 2050.

the archipelago is also likely to achieve average growth of seven percent annually over the next 40 years.

The positive forecasts that the Philippines economy is receiving, combined with a population that grew from 88.6 million to 94.8 million between 2007 and 2011, mean that New Zealand exporters are well within their rights to get excited about the opportunities that may be available to them in the Philippines. Furthermore, the fact that English is one of the country’s national languages makes the

Philippines one of the easiest countries to do business with in Asia from a communication perspective.

If the economic performance of the Philippines achieves the HSBC’s expectations, the countryes population will benefit greatly from improved living standards and greater purchasing power overall. This is particularly significant in an economy which currently has a visible divide between the few “haves” and the many “have nots”. New Zealand exporters will also benefit.

The relatively low purchasing power of middle class Filipinos today is reflected in the priceg of imported goods in major retail channels such as S&R, SM, The Landmark and Rustan’s supermarkets. A stroll down the aisle of one of these

supermarkets reveals that prices are very much at the low end of the scale in comparison with other ASEAN markets.

To give you some perspective into just how tight price points are in the Philippines, I have heard of one instance where a major international food conglomerate adjusted their pricing on one of their top performing items up by one peso (NZD0.03) and the dramatic dip in sales forced them to rapidly revert to their original pricing.

The regulatory environmentRegulations governing the registration

and importation of products in the Philippines are at best bureaucratic and can cost importers large amounts of precious time and money.

All food and beverage products

EXPORTER 41

imported into the Philippines must first be registered with the Food and Drug Administration (FDA). This process takes around three months on average, unless the product falls into a sensitive sector such as infant nutrition, where understanding product specifications required to comply with FDA regulations baffles even the most seasoned importer and the processes can take years rather than months.

The end result is that, unlike Singapore or Malaysia where there is little red tape that prevents importers from getting a product into the market, in the Philippines importers will think long and hard about the opportunity cost, ever mindful of the investment required by their company to register the new products with the FDA.

The key variable in having registration processes completed correctly and without delay is working with an importer that has the relationships and experience to navigate this tricky maze.

Market entry costsMuch like in other markets on

Southeast Asia, it is very rare that distributors in the Philippines will agree to cover the market entry costs required to list new items in key retail outlets. The major costs are product listing fees and advertising and promotional (A&P) funds for participating in compulsory promotional campaigns carried out by the retailer.

One of the most common explanations is based on past experiences where seemingly harmonious partnerships between the brand owner and their distributor come to an abrupt end when the brand changes hands or is merged with another business that has existing distribution networks in the market. Remember, it is the product that is listed, not the space on the shelves, so the brand stays on the shelves but the profit from sales is transferred to another distributor. It’s easy enough to see why most distributors are simply not willing to take the risk of paying the listing fees and ending up with nothing if the partnership ceases.

A common strategy used by distributors to mitigate risk is to launch new products in retail outlets that do not charge excessive listing fees or expensive compulsory participation in promotional campaigns.

In the Philippines, this could mean

that distributors might start by listing new products in S&R supermarkets (www.snrshopping.com) or The Landmark (www.landmark.com.ph), both of which are known to charge minimal (if any) listing fees, before embarking on listing in Rustan’s Supermarket (www.rustans.com.ph) or SM (www.sm-shoemart.com), which demand expensive listing fees and promotional commitments. You need to be sure that your products will perform well before this investment can be justified.

When entering retail outlets with new food products in the Philippines, I am told by distributors we work with that, on average, 15 pe cent of sales must be reinvested into advertising and promotion programs, per item, to support sales. This is coupled with listing fees for approximately 80 of the major retail outlets in Metro Manila, which can cost around $NZ 2,000 per item.

Supply chain considerationsNew Zealand exporters of perishable

food products need to carefully consider the challenges that exist in the supply chain in the Philippines from the moment they hit the border through to when goods are on display in retail outlets.

The border authorities in the Philippines are not at the top of the list of ASEAN countriesrwhen it comes to the rapid clearance of goods across the border, or for their careful handling of goods waiting to be cleared. I can’t count how many horror stories I’ve heard where temperature controlled containers have been unplugged with perishable items inside slowly cooking on the hot tarmac while negotiations take place about the clearance of goods.

What’s more, because many of the

retailers in Philippines have a central distribution warehouse, distributors lose the ability to ensure the product is handled correctly the moment the goods are deposited at the retailer’s warehouse. Many retailers operate on a sale and return or consignment basis with their suppliers, so there is little to keep them motivated to correctly handle food products because, at the end of the day, if spoilage occurs it’s the distributor’s problem.

The Philippines also has the second highest electricity costs in Asia behind Japan. some retailers are known to switch off their air conditioning at night to save on electricits. Therefore, high temperatures and humidity in the Philippines, combined with large fluctuations in storage conditions between and air-conditioned environment during the day and a non air-conditioned environment in the evening, can present major problems for temperature-sensitive products.

Success comes with challengesMake no mistake, to successfully

establish a market in the Philippines comes with its challenges. It takes a lot of work to grow a brand from a position of having no value todone that consumers actively seek out on the shelves. And while brand owners may need to reduce the margins that they are used to receiving in other ASEAN markets, in order to be competitive, those with a long-term view on the country’s future economic growth will understand the benefit of getting intotthe Philippines now.

Cameron Gordon is Asia market director at Incite, an international trade services firm that connects New Zealand food and beverage suppliers with partners in the high growth markets of South East Asia and Taiwan. For more information about Incite visit www.exportincite.com

C A M E R O N G O R D O N / W R I T E R

42 EXPORTER


Q: To foreigners, India can seem a daunting, complex and difficult

market to do business in. What advice would you give to someone entering the market for the first time?

A: Apparao Mallavarapu, India Beachheads Advisor

Over the past ten years, things have changed significantly in India. The government is more receptive to changing laws to help businesses stay competitive with other countries. The environment is changing too – five years ago it was all ‘mum and dad’ shops and markets. Today, you see huge malls and cinema complexes.

There’s a lot that can be brought into India and it’s very different from the culture in China. Still, you need to be prepared for cultural and process differences, as you would in any new country. You have to be sensitive to the way of doing things. But this does not mean your business ethics should

change – bribing should be a ‘no-no’.India is hyper-competitive – you

need to have done your homework. Things do take longer and you could get frustrated. At times like that, it’s easy to forget how long it took you to get established in your own home market; it does take longer in another country. You need to be patient.

You also have to carefully think through your market entry strategies – either pan-India, although it’s a big country, or by region.

Q: What are some of the common risks of doing business in China?

How do you avoid these risks?

A: Gavin Crombie, China Beachheads Advisor

The biggest risk is choosing the wrong partners. A business relationship is akin to a marriage

– if you get it right, sheer bliss and happiness; if you get it wrong, you’re off to the divorce courts. Find the right people. With distributors, don’t be tempted to choose one to serve the whole country. China isn’t unified – think of it as similar to Europe with different cultures and languages.

Be vigilant about intellectually property but don’t be paranoid. China has moved a long way to protect IP. Divide your technology into several packets and keep them secret.

Also, don’t believe everything you read about China in the Western press. Be wary of generalising. Use your common sense. Spend time experiencing things on the ground and getting involved.

It’s very important not to make political statements. Don’t talk about the three ‘Ts’ – Tibet, Taiwan and Tiananmen. You’ll be seen as suspicious and not to be trusted. You’re a visitor, so keep your views private.

If things don’t go the way you expect, don’t jump to conclusions. Spend time researching first – there may be a valid reason; understanding that could profit your relationship.

Q: If we asked you to give three dos and three don’ts about doing

business in China, what would they be?

A: Garth Smith, China Beachheads Advisor

From the BeachheadsNZTE’s Beachheads programme is a global public-private partnership designed for high-growth businesses looking to succeed internationally. It connects participants with expert advisors who have the knowledge and networks to help them achieve international growth. Beachheads advisors are successful private sector executives who are committed to sharing their knowledge and experience by offering pragmatic advice and insights into the realities of doing business internationally. In this issue, three advisors answer questions about doing business in India and China.

EXPORTER 43

Do listen for nuances in conversation and employ a good translator. New Zealanders have a direct speech pattern; Chinese don’t – they’re generally not confrontational. If you have a particularly important question and you get one answer, ask the same question again later – make sure you have the right answer. Often, a good translator will need to infer the answer; the person may have said something different.

Do your homework, assess the situation and keep an open mind – what you learn could turn your concept upside down.

Do make sure you have the commitment and capability if you do decide to do business in China. This includes finance, resource management, distribution and a long-term commitment.

If you enter into an intimate relationship with a local person, don’t parade it around. Discretion is more appropriate.

Don’t be ill-mannered or lose your temper – you will lose face. If you lose your temper inappropriately, you will be written off as a child. You can be firm and fair – people respect that.

Don’t ever think you are an expert on China. It’s a very complex place. For any observation or experience, you can find the exact opposite is also true.

For more information, visit www.nzte.govt.nz/beachheads.

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44 EXPORTER


During the Volvo Ocean Race earlier this year, it was interesting to see a Chinese entrant for the very first time. The yacht was sponsored from Sanya City, China’s southernmost city on the south coast of tropical Hainan Island and the country’s biggest tourism destination. This sponsorship is an example of China’s developing policy on tourism, and on Hainan Province in particular. The policy presents many opportunities for which New Zealand firms are very well placed.

While much of New Zealand’s trade with China has necessarily been through the main centres, there is a growing awareness to diversify where possible

and recognise that China’s provinces tend to act quite independently. It is often difficult to have nationwide or even inter-provincial structures, agreements or effective partnerships.

Traditionally a source of fish, agriculture and pearls for mainland China, Hainan Province was only recognised as a separate province in 1988 and was subsequently nominated to be China’s largest Special Economic Zone. The island province sits on the same latitude as the Hawaiian islands (18°N) and, dubbed ‘the Hawaii of the East’, it has become increasingly attractive to China’s rapidly growing middle classes.

Indeed, with almost 30 million visitors in 2011, the strains and pressures are already very evident, and this is one of the big drivers for a rejuvenated federal, provincial and municipal policy framework.

In December 2009, China’s State Council announced ambitious plans for Hainan in order to elevate it into a world-class tourism destination by 2020. Since then, a tremendous amount of civil and private development has ensued, including airport extensions, a high-speed rail network and innumerable individual developments. This has given rise to some concerns, widely covered in a recent report from the World Travel

In the zoneLook beyond Shanghai, Beijing and Guangdong; China’s island province of Hainan has opportunities aplenty for Kiwi exporters. Local expat Kiwi

businessman Michael Holt offers a unique trade perspective.

EXPORTER 45

& Tourism Council. This comprehensive report (www.wttc.org/site_media/) offers a wide view of the number and nature of opportunities available within Hainan.

Between 2011 and 2015, more than 15 major resorts and around 65 five-star properties are scheduled for completion in Hainan. Many more developments are planned. By 2021, it’s estimated that travel and tourism will contribute NZ$51 billion per year to Hainan’s GDP, with 2.6 million jobs directly connected. It is the only Chinese province to allow visa-on-arrival entry for foreign visitors, and is trialling an increasing range of duty free shopping outlets at the province’s airports, a first for China.

More than 13,500 new yacht berths are planned by 2015, along with a massive growth in leisure boating infrastructure. In addition, rules on lengths of boat stay are favourable – encouraging Hainan as a regular stopover on the East Asian seaboard.

Hainan already has Asia’s largest golf facility, the Mission Hills Resort, but there are 26 other golf courses, with 40 more under construction. Hainan staged two of last year’s big ticket world golf events: the Star Trophy and the World Cup.

Hainan is rapidly developing its MICE business too, with a range of convention and meeting facilities being developed. Many developers are seeking active partnerships in developing theme parks (for which they can receive generous land grants), and will centre around concepts such as movie parks, natural heritage, coffee culture, and the future Space Centre and Satellite Launch programme in Hainan’s Wenchang district.

Some 60 cruise ships a year stop over at the resort island, carrying 230,000 passengers in 2010 alone. Even so, it has been frequently reported that apart from walking on beaches and eating in restaurants, many tourists can find little

else to do. There is a strong need for a much wider capacity in activities such as marine recreation, adventure activities, wider sporting facilities, game parks, and so on.

In late 2010, the new East Ring Intercity Railway opened, with trains operating at 280 kilometres per hour. The West Ring is due for completion in 2015.

Both airports at Haikou and Sanya are going through major upgrades, and a new airport is scheduled for completion by 2015 in the city of Qionghai, servicing both that city and the nearby city of Boao.

The province has concerns about energy generation, clean water supply and so on. Plans are underway for various clean energy projects in the west of the province, as well as several coastal desalination plants and their associated pipeway projects.

Market attractionThe ongoing supply of goods and

services for more than 30 million tourists a year (not to mention the nine million inhabitants) represents an excellent market for New Zealand food, wine, health products and supply services. Until now, the logistics infrastructure in Hainan has been inadequate, but this too is changing rapidly.

Human resource and training requirements to service all this growth is going to be immense and even now, Hainan suffers from insufficient education and training facilities. One common complaint relates to poor service and insufficiently trained hospitality personnel, stemming from a lack of tertiary and vocational courses presently available – a situation that will continue to intensify.

All this development has to be balanced with concerns over the environment for the non-tourism economy – especially agriculture and established rural communities, irrigation and water, waste management, land-use and ongoing resources planning.

In almost all the areas mentioned in this article, the Hainan government either directly seeks expert foreign partnership, or encourages these on behalf of private interests. The breadth of opportunity for engagement in a single Chinese province is unprecedented, and an open invitation has been issued to all capable, interested parties.

However, New Zealand firms

seeking these types of discussions will naturally have to marshall their Chinese connections and skills, as well as take a robust approach towards determining ideal partners, appropriate officials and an above-board approach.

Relationships will need to be cultivated at provincial and municipal levels, as well as with licensed private development firms.

We’re invitedBut this is the future of trade with

China in many respects. New Zealand is recognised for its expertise in many of these areas, and our trade must necessarily be more than logs and tins of milk powder. The country with the world’s largest population is gearing up to supply its people with all the middle (and upper) class luxuries that countries like New Zealand have enjoyed for decades, and we’re invited to participate economically.

Specifically in Hainan province, specialist Kiwi consultancies and service providers, designers, large and boutique food and beverage suppliers, construction specialists, training providers and so on, should all be taking a close look at participating both in the development and in the ongoing supply of one of modern Asia’s biggest tourism developments.

Michael Holt is a New Zealand businessman who has lived in Hainan with his Chinese wife and family since mid-2011. He is a principal of Auckland-based design firm gardyneHOLT and runs Eden Education – an education business in Haikou. Email [email protected] or visit www.gardyneholt.co.nz or www.edeneducationchina.com

“ The breadth of opportunity for engagement in a single Chinese province is unprecedented, and an open invitation has been issued to all capable, interested parties.”

46 EXPORTER

FAIRS & EVENTS

“The tradition of fairs in Frankfurt goes back to the Middle Ages. The autumn fair, which is now called Tendence, was first held as a harvest festival in the 11th century,” says Detlef Braun, a member of the executive board of Messe Frankfurt GmbH.

Nowadays Tendence is an important trend barometer for the second half of the year. 1,852 exhibitors from

66 countries were at the Frankfurt fairgrounds from the 24 to 28 of August 2012; 46,000 visitors attended. The trade fair was divided into two sections: ‘Giving’, with 1,064 exhibitors, and ‘Living’ with 788 exhibitors. Germany was represented by 846 companies, while 553 exhibitors came from Asia.

“Looking for trends, finding new products and having face-to-face

contact”, is the reason Gus Wiltenburg travels to Tendence. “It’s about people, it’s about talking, it’s about meeting,” he adds. Wiltenburg is the managing director of Mondo Group, one of New Zealand’s leading importers and distributors of products in the health and beauty care, bath and body, gift and fashion categories.

Wiltenburg welcomes the networking opportunity a trade show in Germany

Frankfurt: where the world meetsAs an international trade fair location, Germany’s Frankfurt is outstanding. It is home to a variety of highly regarded exhibitions, such as Ambiente, Tendence, Paperworld, Christmasworld, Heimtextil, the IAA International Motor Show,

Frankfurt Book Fair, and many more. Doris Evans reports.

EXPORTER 47

offers him. “You can get a really good feel about trends and you learn to look outside the square when you wander around the halls,” he says.

Bayard Sinnema from Craftcorp Group attended Tendence to validate the designs and development his company wants to present to New Zealand’s retailers for Christmas 2013. “I am pleased with the feedback I’ve received here,” says Bayard. Established originally as a manufacturer in New Zealand, Craftcorp was founded 25 years ago with the idea of bringing Christmas products to the Australasian marketplace.

Wiltenburg and Sinnema usually get a lot of leads when they visit trade shows. However, not every lead ends in a contract. “A lot of contacts are great until you start talking price and then the crunch comes,” says Wiltenburg.

Tendence is the smaller of the two flagship trade fairs for buyers and suppliers in the consumer goods market. Ambiente, which takes place in February, is the leading international trade fair for products such as tableware, kitchenware, household, giving and decorating, as well as home and furnishing accessories. Within the consumer goods sector it covers the entire global market from premium to volume segments. This year’s Ambiente was fully booked with more than 4,500 exhibitors from 87 countries and covered an area the size of 48 football pitches.

“Ambiente and Tendence provide the opportunity to meet potential clients from all over the world,” says Detlef Braun. “These trade fairs are about bringing people together, about innovations, emotions, ideas, conversations and deals. This is what you are missing if you are not at our international consumer goods fairs.”

Guest of honourMesse Frankfurt also hosts a

number of world-renowned guest events. These include the International Motor Show and the Book Fair. The Frankfurt Book Fair in October is the biggest book and media fair in the world, with around 7,500 exhibitors from over 110 countries. This year New Zealand’s ‘guest of honour’ status at this prestigious event has generated record-breaking rights sales for New

Zealand writers and publishers. 66 book titles have been translated and published in Germany in 2012, an unprecedented number for New Zealand’s publishing industry.

“New Zealand has been attending the Frankfurt Book Fair for over 20 years, but New Zealand books have never seen such international exposure,” says Kevin Chapman, president of the Publishing Association of New Zealand and managing director of publishing house Hachette New Zealand. “This is a standout year in New Zealand’s publishing history.”

The Messe Frankfurt’s exhibition grounds are located near Frankfurt Central Station in the heart of the city. The 10 halls offer 355,678 square metres of exhibition space, as well as an outdoor exhibition area covering

over 96,000 square metres. “Attending one of our famous

trade fairs is a great opportunity to visit Frankfurt and find out that Messe Frankfurt provides the perfect platform for doing business,” says Braun.

With around ¤467.5 million (NZ$734.20 million) in sales, Messe Frankfurt is one of the world’s largest trade fair organisers. The group boasts a global network of 28 subsidiaries and approximately 50 international sales partners. Sixty percent of the company belongs to the city of Frankfurt and 40 percent to the state of Hesse. More than 400 trade fairs, congresses, events and conferences take place each year in Frankfurt. © Doris Evans.

48 EXPORTER

JANUARY9-12Heimtextil – Frankfurt, Germany. Home and contract textiles. www.heimtextil.de or email [email protected] – Munich, Germany. Architecture, materials and systems. www.bau-muenchen.de or email [email protected]

20-22Winter Fancy Food – San Francisco. www.eurofair.co.nz or email [email protected] Spielwarenmesse International Toy Fair – Nuremberg, Germany. www.toyfair.de or email [email protected]

FEBRUARY6-8FRUIT LOGISTICA – Berlin, Germany. International Trade Fair for fruit and vegetable marketing. www.fruitlogistica.com or email [email protected] – Frankfurt, Germany. The world’s ‘most

important consumer-goods trade fair’.www.ambiente.messefrankfurt.com or email [email protected] 25-28Gulf Food – Dubai, UAE. www.eurofair.co.nz or email [email protected]

MARCH5-7EcoBuild London – building and construction products with an eco-focus. www.tradexexhibitions.com or email [email protected] 5-8Foodex Japan – Tokyo. Food, beverages and services. www.eurofair.co.nz or email [email protected] – Hanover, Germany. Heart of the digital world. www.cebit.de or email [email protected] Berlin – Germany. ‘The world’s leading travel trade show’. www.itb-berlin.com or email [email protected] Russia – Moscow. www.eurofair.co.nz or email [email protected] 12-16ISH – Frankfurt, Germany. Bathrooms, building, energy, air-conditioning, renewable energy.www.ish.messefrankfurt.com or email [email protected]

17-20IFE – London. The UK’s ‘most respected food and drink trade event’. www.eurofair.co.nz or email [email protected] 18-20The Big Show – Muscat, Oman. Building and construction. www.tradexexhibitions.com or email [email protected] – Dusseldorf, Germany. International wines and spirits fair. www.prowein.com or email [email protected]

APRIL1-3Ecobuild China; EXPO Build China; Expo FineFood; HOTELEX China – all in Shanghai. www.tradexexhibitions.com or email [email protected] & Hotel Indonesia – Jakarta. www.eurofair.co.nz or email [email protected] 15-21bauma – Munich, Germany. Construction machinery, building materials, etc. www.bauma.de or email [email protected] – Brussels, Belgium. www.eurofair.co.nz or email [email protected] & Hotel Vietnam – Ho Chi Minh City. www.eurofair.co.nz or email [email protected]

MAY4-9IFFA – Frankfurt, Germany. The trade fair for the meat industry. www.iffa.com or email [email protected] Qatar – Doha. Building and construction. www.tradexexhibitions.com or email [email protected] HANNOVER – Germany. Forestry and wood industries. www.ligna.de or email [email protected] – Hong Kong. Food, beverages and foodservice. www.eurofair.co.nz or email [email protected] Food & Hotel – South Korea. www.eurofair.co.nz or email [email protected]

FOR MORE INFORMATION CHECK OUT THESE WEBSITES:• www.tradex.co.nz

• www.messereps.co.nz

• www.eurofair.co.nz

• www.nzte.govt.nz

• www.austrade.gov.au

• www.germantrade.co.nz

• www.biztradeshows.com

To promote your export business

event, email the details to

[email protected]

FAIRS&EVENTS

EXPORTER 49

In his role as CEO of the Employers & Manufacturers Association (Northern), Kim Campbell fields a lot of media questions relating to topical business-related issues. Not surprisingly, with his extensive background in manufacturing and exporting, responding to such questions comes easily (in fact, during our interview he fields a call from a journalist).

I’ve got eight questions, 60 minutes and the tape’s rolling – we launch into it.

I ask Campbell how he would describe the current state of New Zealand’s export sector and what feedback he’s getting from members.

“People are saying it’s particularly tough out there, but it has always been difficult. World markets have always been competitive,” he says. There’s an edge of frustration to his voice. “As for the currency exchange rate, I’m not as sympathetic as perhaps I ought to be, because the currency has forever gone up and down. Anyone involved in exporting anywhere in the world will tell you that their biggest challenge in exporting is the fluctuation in currency values.

“How do you manage around this? Organise your business around it. Look at your business model – where are your sourcing your materials from? What currency are you trading in – does it have to be US dollars? Where is the value added in the

marketplace? And how do you protect your pricelist?

And before you sell offshore, ask where are the risks in the movements?”

Campbell’s keen to convey the difference between market development and exporting.

“If you want to have a long-term position in a market somewhere, you need to develop that market. Not just export. A sounder strategy is to sell more goods or services to less places,” he argues.

Aside from the exchange rate issue, Campbell says EMA members sense that we’re not using the few advantages we have as a nation through “economic neo-conservative orthodoxy”.

What’s that about? “Government’s traditional reluctance to intervene anywhere to play to our advantages.” By no means have we reached the level of value-adding that is being achieved by Scandanavian and certain European countries, explains Campbell, citing Germany’s mantra of ‘make it better, not cheaper’.

“If there has been a change in recent times, it’s that we’re better at not selling on price. Although I’d argue that because we’re auctioning off basically all of our milk, for example, we could be viewed as a ‘commodity currency’. Therefore our currency will always remain volatile and used as an off-set against a

stable currency like the Swiss franc or British pound.

“Until we re-jig our economy from a commodities one to a product one, that’s always going to be the case,” he says.

Campbell poses a question for me. Why isn’t the government adjusting its procurement policy to favour more local, and smaller, businesses? Importing train seats from Spain rather than giving the business to a New Zealand manufacturer is insane, he says.

Managing cyclesThe current export environment has

its share of frustrations for Campbell. He’s not fazed by the current fall in commodity prices impacting the primary sector, particularly coal mining because he understands the difference between inventory cycles and economic cycles. “People despair,

As he sees itKim Campbell, chief executive of the Employers & Manufacturers Association Northern Inc, answers questions on exporting, the economy and the road ahead. By Glenn Baker.

> VIEWPOINT

“ Anything that can be done to free-up the capital markets and encourage foreign direct investment (FDI), particularly so smaller businesses can access working capital, should be actioned by the government.”

50 EXPORTER

but it was so predictable. You’ve got to manage those cycles.”

He’s also concerned about the lack of sophistication in supply chain management. “While there are companies doing it well, firms must better manage the relationships that go into the supply chain and build enduring distribution models.”

More investment in the marketplace is needed, as is a more savvy approach to working capital management, which he says many Kiwi firms have been poor at. They often underestimate what’s needed to weather the economic cycles, he says. Kiwi companies seem to have very short planning horizons for much of what they want to accomplish – unlike older European companies with inter-generational ownership. “They deal with the ups and downs with a long-term view of market development.

“It’s a big challenge, because New Zealand has a very thin capital market and anyone who has any risk capital tends to put it into real estate. All this goes to the core of our export woes.” Anything that can be done to free up the capital markets and encourage foreign direct investment (FDI), particularly so smaller businesses can access working capital, should be actioned by the government, he says.

Campbell describes the government’s goal of increasing exports to 40 percent of GDP by 2025 as “laudable”, but one requiring massive recapitalisation of New Zealand’s productive sector. A lot of our plant is old and the depreciation has been spent. “What the government is doing to support innovative exporters, in the education sector for example, is the right way to go, but that alone is not going to get the required FDI. We must invest heavily in plant and equipment in order to become a more competitive and productive economy.”

Adding value, addressing skillsAs a matter of principle, New

Zealand must invest more in markets where there is true value added, says Campbell, even the dairy industry can do more. “Intellectual property and adding value are certainly areas we need to get better at. Think a ‘smart hands, not ‘busy hands’ economy.”

To address the skills shortage, he suggests it’s high time the student loan scheme was revamped. Interest-free student loans should only be applicable to sectors that are experiencing ongoing skills shortages. “That’s what the rest of the world does.”

New Zealand needs to reduce the number of ITOs, tidy up subsidies for skills training, encourage older and minority groups to return to work with the likes of adult apprenticeships, he adds. “Get rid of ageism. What’s wrong with giving a fit 60-year-old who wants to work a chance?”

FTAs and the way forwardCampbell believes there needs to

be more publicity surrounding the crop of Free Trade Agreements that the government has negotiated. “And people should be careful of their expectations. Not all impediments, such as market inflexibility and technical barriers, have been removed.”

FTAs, the earlier ones of which

are only just beginning to mature now, are far more than just PR exercises he says; exporters must pay attention to the cultural opportunities – the working holidays and those schemes which encourage closer cultural ties and ultimately build trade relationships. “For example, Malaysia’s Colombo Plan during the 50s and 60s, a precursor to the modern-day FTA, has worked enormously well for New Zealand over the years.”

His advice is to keep an eye on the FTAs – many tariff reductions are just starting to come into play. Constantly re-assess the opportunities.

The key to trading in the ‘new normal’ is to figure out how to make money in a bad year, says Campbell. “Set your break-even level for a bad year; then in good years invest in your business – in your plant, equipment and everything else.”


Making a difference

Exporter asked Kim Campbell how the job at EMA is going after his first year. He loves being part of a place that really does make a difference, he replied.

“We’re a moderate, sensible voice that’s being heard. We have substantial financial resources, a committed and capable board and we’re very active.

“One observation I’ve had since returning from overseas is how argumentative and negative New Zealanders have become,” he says, adding that he’ll only wade into a debate if he has something positive and worthwhile to contribute. He prefers to stick to business-related matters, rather than social policy

– “the one exception being perhaps education, which has a direct bearing on business.”

Campbell says the EMA is in “very good heart”, ready to “fight the fight’ on any issue it cares strongly about, and it’s experiencing strong growth in membership across all size businesses. In an economy that’s not doing all that well, that’s satisfying, he says.

Campbell says EMA members appreciate the more than 600 training courses EMA provides each year, and services such as the free advice line – which generates more than 38,000 calls annually – many of which bring EMA’s legal services into play.

“ We must invest heavily in plant and equipment in order to become a more competitive and productive economy.”

EXPORTER 51

Mistake No 4: ‘Once it leaves the warehouse it’s not my problem anymore’.

If you’ve been following this column you’ll know that the first three big export mistakes are ‘Just giving it a go’, ‘Not doing your homework’ and ‘Forgetting about customers’.

The fourth mistake is to believe that the export ends when the shipment is passed to your freight forwarder.

Managing the logistics from your suppliers to the end user is something that you cannot ignore. We took out a five-year lease on a building in an area that had more than 250 power-cuts over a period – from monetary lapses (that would crash the entire IT system) to lost days when staff were sent home. Powerco was less than helpful in dealing with the problem until hundreds of local residents and businesses set up an action committee and threatened to go global with the story. After all, who worries about the security of electricity supply in New Zealand before committing to new premises?

Here are three questions to consider when arranging your shipping and insurance:

1. When will the shipment reach the customer?

If the goods are not big enough to fill their own shipping container, then they will wait to be consolidated with other shipments from other customers. This process can take minutes, days, weeks or months – so read the small print in your freight contract.

2. What insurance cover do I need?

Insurers love to find ways to avoid making payments – they have entire teams of people who do this, known

as loss adjusters. What is worse, exporters frequently find that the insurance they have will not cover them, as an insurer will claim that damage or loss occurred at a point where there was no cover, or even if there was cover there was no loss. An example of this is the MV Rena grounding on Astrolabe Reef. Insurance companies delayed making payments for several months on containers which were still on board the vessel – they were not technically ‘lost’ as they could still be salvaged.

3. What do I need to stack it on?Contrary to popular belief, there

is no standard international size for storage pallets. You should therefore find out what size your customer uses in their warehouse so that it can be easily stored there without the need to load and unload it onto the right-sized pallet.

Oh yes, some countries no longer accept wooden pallets at all, accepting only plastic.

All of these areas and much more are covered in Module 4: International Logistics – of the Diploma of International Trade. This is the fourth of eight modules that help Kiwi exporters reach the same global standards as their overseas competitors by providing work-based distance education that leads to Global Trade Professional™ status.

The New Zealand School of Export is registered to accept NZTE Capability Development Vouchers for its Exporter Health Check, Diploma of International Trade and Global Trade Professional services and is the only organisation in New Zealand to have been awarded IATTO’s Accredited Provider status.

So, are you ready to raise your game? In the next issue of Exporter magazine: The biggest mistakes exporters make – Number 5: ‘Of course we’ll get paid.’

For a free confidential discussion on how to grow as an exporter, contact: Dr Rom Rudzki, director, New Zealand School of Export. Phone 06 356 5656 or email [email protected]

The biggest mistakes exporters make

How to avoid making the big export mistakes. By Rom Rudzki.

> VIEWPOINT

“ Contrary to popular belief, there is no standard international size for storage pallets.”

52 EXPORTER

The US marketplace is exciting and open to new products that are well presented. Americans are also very aware of any brand associated with New Zealand. We are no longer an unknown on the other side of the world.

Offering an ability to expand product and service sales beyond our shores is a target. But how do we bring to life what we sell for customers and agents?

Experiential marketing was well demonstrated at a few of the US companies I visited on my recent MBA tour through California, Kentucky and Illinois, which took in a range of businesses. But the New Zealand companies we visited in the US seemed slow to exploit experiential marketing and controlling the presentation of their retailed product.

PayPal, at their base in San Jose, provides a fantastic experiential environment as they describe a future in an actual living room where a purchase will be made on an iPad (note the buying decision will likely be made on an iPad, not an iPhone, though they are functionally similar). The room is complete with couches, pictures on the wall, and a plasma screen to demo the software. A doorway leads to a hardware store, café and retail clothing store. At each

stop guests are given an outstanding presentation by Josh, a smiling host who seems to revel in offbeat questions that enable him to show what he’s got. Who would guess that this is his 186th demo?

ZoomSystems, based in San Francisco, supplies upmarket vending machines selling high-end products. These machines can now be found in airports and malls. Tactile demonstrations help get guests familiar with the transactions.

A visit to Apple’s flagship store in downtown San Francisco is an experience in ‘over the top’ service. There you find 370 staff in a store the size of a Whitcoulls – all wearing blue t-shirts. When a customer enters they get immediate help or they can call for help on one of the tablets. A personal service staff member walks around the store with each customer, describing the products, getting to know the customer’s needs and is never interrupted or compelled to help another customer. It’s a fantastic customer experience – so ‘over the top’ they have a small theatre for presenting demonstrations on a screen and dedicated staff teaching customers how to make videos. If you’re an Apple convert, you can even buy an iPad from a vending machine after leaving!

But in contrast, visit the Kiwi Landing Pad – Sir Stephen Tindall and Sam Morgan’s stepping stone for New Zealand companies into the US market, based in San Francisco. Here you will find a drab warehouse. The selection of location may aim to be hip, but the acoustics are appalling and the presenters of Kiwi products cannot be heard. Customers would identify more with the products, such as Xero, if they concentrated on presenting the experience. There are lessons to be learnt from experiential marketing and visiting PayPal, ZoomSytems and Apple.

The American market is open to Kiwi products and services. But they need to be presented with a high quality experience that matches the supplier’s ambitions. Dedicated customised environments, where products and services are presented clearly and demonstrated with enthusiasm will pave the way for growth. Then all we need to do is let our Kiwi character shine through.

Darryl Smith is an Executive MBA student with Massey University. He completed a study tour of the US in June 2012. Email: [email protected]

> VIEWPOINT

US lessons on experiential marketingTaking a product or service to the States may seem daunting. But practicing a few fundamentals in how products are presented will reap you great rewards. By Darryl Smith.

Josh demos in the PayPal living room.

EXPORTER 53

In its growth agenda the government has announced that it intends to develop a business brand that encompasses more of New Zealand’s positive attributes and tells ‘New Zealand’s story’. This positive step for enhancing New Zealand’s export footprint needs to be supported with more collaboration between export businesses.

I was given a rare opportunity to visit a range of innovative businesses such as Nestle, Dow AgroSciences, Alltech and ZoomSystems on my recent MBA business study tour in the US. During this trip I gained a good insight into the companies’ business models and what makes them so successful. A strong and consistent feature that stood out for me was the engagement of these business people and their willingness to share knowledge. They freely and openly shared their business knowledge, strategies, successes and failures in a way that was very foreign to me coming from New Zealand.

The business people we engaged with expressed a positive attitude toward us and were not fearful of sharing their knowledge and expertise. This sharing of information was in fact perceived as an opportunity to solve problems and gain mutual benefits. An example of this was observed at Nestlé who, due to peak capacity constraints in their production process, outsource the manufacture of certain ice creams to competitors.

Collaboration was also observed as a strong driver in the Silicon Valley technology cluster in San Francisco, where successful companies work together for mutual benefits to drive performance and growth. I saw numerous examples where collaboration was endorsed and occurred frequently

with other companies in the same sector. A generic business brand that

encompasses more of New Zealand’s positive attributes and tells ‘New Zealand’s story’ will no doubt enhance our export footprint, but there is a strong need for collaboration and the sharing of knowledge to further drive industry innovation and boost export performance. My message to leaders and participants in the export sector, specifically in the agri-food industry, is that attitudes need to change. Opening up our market networks and knowledge for sectors to work together will advance the agri-food industry and export sector cause to a global market place.

I’m in the agri-food export business and inspired by the benefits I’ve seen from collaboration between companies and business people we met in the US. Now I’m asking myself, ‘‘am I ready to step up and collaborate’? Are large

export sectors in New Zealand, such as agri-food, ready to work together after years of aggressive competition and in-fighting?

Adopting a collaborative’’ approach, changing attitudes, counteracting generations of historical tradition and taking action for reform will be a big challenge for New Zealand export businesses.

The global market offers endless opportunities. New Zealand export and agri-food businesses need to collaborate to take full advantage of this or be left behind on the world stage. The challenge is firmly in front us.

Shane Newman travelled on the same study tour and is managing director of NH Packing & Farming Co. www.nhpacking.co.nz

Collaboration: a prerequisite for export growthThe government’s agenda for boosting exports goes a long way in supporting businesses trying to gain brand recognition in the world’s markets. However, it does not deal with another major issue holding back our export sector. By Shane Newman.

> VIEWPOINT

54 EXPORTER

> VIEWPOINT

Making mini apples cool and convenient is gaining serious bites in overseas markets, thanks to the vision of Phil Alison, MD of Havelock North Fruit Company.

Phil bought the global rights for growing the miniature apples – which are one and a half times the size of a golf ball – from Prevar, which is the commercial arm of Plant and Food.

He could see their potential appeal in our modern, fast-paced, time-poor, health-conscious world. Their size could provide a new way of eating apples as a convenient, all-natural, healthy snack packaged in a tube.

The “fruit in a tube” concept was born after Phil saw an orchid packaged in a tube, and while pondering names over a glass of red wine, a new brand name for the apples was born: ‘Rockit’.

Small but perfectly formed through years of careful cross-breeding, these fire-engine red apples pack a powerful punch of sweetness, freshness and crunchiness.

“We’re like the Red Bull of the fresh

produce industry,” says Phil.The idea is that they can replace

the water bottle on your desk, and can go anywhere with you – popping conveniently into the cup holder of your car and slipping easily into your sports bag, handbag, golf trundle or child’s buggy.

They are living proof that innovation and finding a new market niche can be applied to something as traditional and basic as an apple. This was recognised at the Food Awards when Rockit won the KPMG Food Enterprise Innovation Award and were hailed for their food innovation and production excellence and as being “an inspiration to the wider industry in New Zealand and overseas”.

Phil’s business acumen was such that he quickly recognised the importance of protecting their IP, including trademarking the name Rockit and the ‘fruit in a tube’ concept.

They were snapped up by Marks & Spencer after Phil sent a sample over to the UK – which consequently saw them

strike a big hit at Wimbledon. They are also achieving great success in Taiwan, where consumers “can’t get enough of them,” says Phil. “We’re busy trying to ramp up production to meet demand.”

The board of directors and shareholders brought in through its Enterprise Angels investors has given Phil’s company a broad ranging skill set that has helped with the export strategy. But business growth and the ability to scale up are now the priority.

The same innovative approach Phil originally took to marketing Rockit apples now needs to be applied to scaling up production. They have just converted 60 hectares in New Zealand to grow the tiny apples and have plans to expand even more. Executive director Steve Saunders went on a five week round-the-world scouting trip with Phil to talk to potential territory licensees, and was so impressed by the market potential that, upon his return, he helped set up a new group of investors to ramp up production.

Havelock North Fruit Company is now franchising the opportunity out to overseas markets such as the US – looking for an exclusive grower, importer and exporter (in season).

“New Zealand couldn’t possibly supply a huge market like the States. Equally, the Asian market or even New Zealand will want Rockit apples out of season, and will therefore import northern hemisphere fruit.”

These guys look set to realise their ambition to go global with what is already the highest returning apple in the world.

Catherine Beard is executive director of ExportNZ.

A ‘rockiting’ successCatherine Beard has the story behind one of this country’s most innovative fruit exports.

EXPORTER 55

There is no doubt that New Zealand’s economy is in desperate need of an upgrade. Elaborately transformed products offer a means to capture intellectual property in things that can be sold at a high price ameliorating the impact of currency fluctuations.

It is well established around the world that research and development (R&D) incentives, broadly delivered via fiscal policy, encourage higher levels of investment in R&D, which are a precursor to higher levels of economic activity based on that investment.

Levels of R&D investment in the private sector are very low (albeit that some of the investment will be masked by existing tax rules). The latest attempt to fix this under investment is the Advanced Technology Institutes (ATIs) announced by the Government.

Of themselves the stated goals and aims of the ATIs are laudable. However, it should be recognised that these aims have been present in similar initiatives that have failed miserably in the past 20 years or more, and yet we still see the same ideas recycled, rebranded and re-released again and again. It is more than likely that the ATIs will join the other failed initiatives because it shares the characteristics of all those earlier efforts. The ATIs are a continuation of the provider-centric grant-based funding which has struggled to make an impact in the manufacturing sector.

Incentives through tax codesThere is more than adequate

international evidence that in order to achieve the necessary increase in R&D activity incentives must be delivered through the tax code. This allows firms to determine the merits and targets of the investment rather than bureaucrats.

More appropriate solutions would be reducing the corporate tax rate, implementing R&D tax credits, and implementing tax exemptions on retained earnings for start-ups engaged in R&D.

Grant-based handout systems have a notoriously narrow reach. After a couple of decades very few companies that have been part of government programmes remain. Picking winners has not worked at the macro level. During the last decade, primary processed product exports have increased by 122 percent, while exports of elaborately transformed manufactures only increased by 22 percent against an inflation background of 13 percent.

The Crown Research Institute system has its place, but not in elaborate transformation. Industrial Research Limited (IRL) may not have functioned particularly well for industry (where are the $440 million in annual sales spun out from IRL? Ten times IRL’s annual costs of $44 million is a reasonable return to expect), but the CRI system is appropriate for the air, sea and land- based activities that have a natural coherence absent from the elaborately transformed sector.

The ATI system also continues a policy of focusing on larger firms as a target of the grants. A distinction should be drawn between small and large firms on what incentives are needed.

As for companies in the mature or later stage growth phase, would they not be pursuing these opportunities in any case, anticipating a return? The absence of action without the grant maybe demonstrates the opportunity is not that attractive – again a tax credit would incentivise investment without removing the risk.

For start-up or earlier stage companies the problem may not be the attractiveness of the opportunity, it might also be funding or skills deficits. Here grants can help. Even so, better models of investment intervention exist (the Seed Co-Investment Fund Programme is one example – look at the record of, say, powerHouse in comparison to IRL over the years). A model that adds necessary skills and money to technical ideas is needed. The idea that you help technical companies with injections of more technology has the cart drawn before the horse – that is why the commercialisation track record of the SCIF funds far surpass those of the of IRL.

The Research and Development Tax Credit the Government removed in 2008 got much closer to what is desirable for innovation to grow. A return to a tax-based incentive is much needed. John Walley is chief executive of the NZ Manufacturers and Exporters Association.

ATIs no replacement for tax creditJohn Walley believes the Government’s Advanced Technology Institutes won’t solve the problem of low R&D investment. Tax-based incentives are best, he says.

“ Grant based handout systems have a notori-ously narrow reach. After a couple of decades very few companies that have been part of government programmes remain.”

> VIEWPOINT

56 EXPORTER

> VIEWPOINT

International trade greases the wheels of the global economy and is a significant wealth creator. For the past two years, however, global market uncertainty and inconsistent demand dynamics have stunted trade growth.

We are confident that the long-term outlook for cross-border trade remains strong. The underlying forces behind it remain very much intact – driven principally by resilient demand in emerging economies – but the short-term forecast is far less certain.

HSBC’s latest Global Connections report estimates that global trade growth over the next five years will remain moderate at 3.7 percent before accelerating to 5.9 percent in the 2016 to 2021 period. The short-term picture in Asia-Pacific is slightly rosier, with expected annual trade growth of 5.4 percent to 2016. Overall, we forecast that global trade will expand by an annualised 4.7 percent over the next 15 years, or 98 percent in aggregate.

Although New Zealand’s key markets in Asia have suffered less than other regions, partly thanks to intra-regional trade, they have not been immune to global strains. Markets in Europe are still struggling, and despite tentative signs of recovery in the United States, exporters are bracing themselves for continued uncertainty.

Europe remains the most significant near-term threat; Eurozone weakness is dragging down growth rates across the world. Volatile energy prices also provide plenty of reason for concern, while slower short-term GDP growth in China will challenge some traders.

Taking these and other metrics into consideration, HSBC research indicates that today’s challenging conditions are unlikely to improve substantially in the immediate future.

Shifting trade patternsThe big story over the next two

decades is not so much about the changing pace of trade growth as about a tectonic shift in the patterns of trade. While developed markets will continue to dominate trade in absolute terms, it will be so-called ‘south-south’ trade – the exchange of raw materials, products and services between and within regional emerging markets – that will define the broader economic narrative

Indian companies, for example, are opening up trade in pharmaceuticals with Africa and emerging Asia, creating new corridors along a modern-day ‘southern silk route’. This trend is being replicated globally, and will gather momentum as economies we call emerging today become more developed.

We anticipate that China will overtake the US as the world’s largest trading nation by 2016, accounting for 12.3 percent of global trade. India, the world’s second largest emerging market, will also witness a substantial leap to prominence. Between 2012 and 2016, India will outstrip China in terms of import and export momentum, which are forecast to increase by 6.8 percent and 7.6 percent per year.

In the medium term, the growth of emerging markets’ trade will not only benefit their neighbours, it will also make the global economic system less vulnerable to exogenous shocks like the 2008 credit crunch and the European debt crisis.

The ebullience of the emerging markets is reflected in HSBC’s latest trade confidence index, which measures expectations over the next six months. The global index remains steady at around 113. 100 represents neutrality – but countries like Indonesia (130),

India (128), and Brazil (119) look secure in their belief that the growth story will continue. Enhanced value chain

In the coming years, huge opportunities will come from high GDP growth in Asia-Pacific and changing consumer demographics. We are already seeing evidence of an enhanced ‘value chain’ in the emerging economies as consumers become more sophisticated and as better workplace skills spur a shift towards higher-end production. Industries showcasing this evolution include makers of machinery and control equipment, printing and ancillary machinery and telecommunications infrastructure. So, while much recent commentary on trade has concentrated on the challenges facing exporters, we believe there is light at the end of the tunnel. Changing demand patterns and relationships are creating new openings, and New Zealand businesses, perched on the rim of the world’s most dynamic economic region, could be among the major beneficiaries.

Gary Cross is head of global trade and receivables finance at HSBC. Email [email protected]

This publication does not constitute personalised financial advice. No consideration has been given to the particular investment objectives, financial situation or needs of any recipient. Readers should seek independent legal/financial advice prior to acting in relation to any of the matters discussed in this publication. No guarantees are given in relation to the accuracy or completeness of this information. No member of the HSBC Group is liable for damages arising out of reliance upon this publication. Any opinions in this document constitute the authors present judgment, which is subject to change without notice. Issued by The Hongkong and Shanghai Banking Corporation Limited incorporated in Hong Kong SAR, acting through its New Zealand branch.

Some light at lastShifting trade patterns and enhanced value chains are cause for hope for New Zealand’s battling exporters. Gary Cross suggests there is finally light at the end of the tunnel.

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