Kiwi Food Firms Need Brand New Approach | Stuff.co.nz

There is a growing hunger in China for New Zealand food, but Kiwi producers are struggling to get shelf space in Chinese supermarkets.

The appetite is driven by the growing middle class's desire for healthy products to feed children, and fears regarding the safety of domestically produced food.

At China's urban grocery stores, beside tanks of live turtles, dried duck clavicle and shrink-wrapped raw chicken's feet, some Kiwi products can be found. Fonterra's processed cheese, Anchor butter and UHT milk brands Country Goodness and Meadow Fresh are widely available, but smaller Kiwi firms find the market hard to access.

Former consul-general Pat English, who lived in China for 20 years, and was recently named New Zealand China Council executive director, said New Zealand had always been seen as having high quality, safe products. But market insiders say New Zealand needs clearer branding asa haven for safe food.

Mahon China Investment managing director David Mahon has been involved in New Zealand's food and beverage industry in China for 30 years, selling Kiwi beef there in the 1980s, then working as an adviser to Fonterra during the SanLu melamine crisis.

"I think we've, as a country, singularly failed to take advantage of the value-added opportunity of the China market in the last 15 years."

He said there was a huge upper-middle-class market prepared to pay a premium that would buy the "story" behind New Zealand products if branding was better.

"There should be a degree of unity amongst producers and a unified strategy to tell the country's story. Individually, small players don't have the money or management depth to take the Chinese market on, develop brands and create a story that consumers would relate to, so you get lots of fragmented attempts.

"Our most successful companies are Fonterra and Zespri because they're examples of New Zealanders working together - if we can do that in other sectors it will make a big difference, approaching the market with scale."

Beijing entrepreneur John O'Loghlen, who co-owns award-winning Gung Ho! Pizza, agreed New Zealand should be marketed as a high-end source of premium gourmet food.

"We need to work out how we're packaging New Zealand. There are competing visions of what NZ Inc is, and Chinese groups have already caught on to this opportunity. We need to brand New Zealand in a way that keeps pushing well-aligned five-star, diamond-studded brands and experiences across industries. There have been some good starts on this, but we need more."

His business partner, Jade Gray, who had been living in China for 15 years, said industries were better placed to compete than individual businesses.

"New Zealand needs to look at its food and beverage offering the way France looks at Champagne or Scotland looks at single malt whisky. There should be very high standards and set qualifications for food products to have "Made In New Zealand" on them. That can't be from having 10 per cent New Zealand milk powder as one of the ingredients."

SWEET NOTHINGS Manuka honey from New Zealand is popular in China, available at shopping centres, and in imported specialty supermarkets, but there is no industry-wide strategy.

New Zealand Honey Producers Co-Operative managing director Warren Reynolds received around 10 emails a week from Chinese distributors and buyers wanting to order honey but was "holding off" until completing a China strategy.

"We know there is demand for it," he said.

But the co-operative became extremely cautious after nearly being burned with a large order from a company that kept changing its name.

"They seemed to have different company fronts. . . . We didn't have any losses because we just refused to release anything unless it was prepaid."

Ohau Gravels wine exporter Peter Healy had a similar experience with a distributor who ordered six cases of wine in 2010, then disappeared. He is now dealing with a Chinese businessman who once lived in Wellington.

Limited channels exist to help Kiwi businesses sell food in China. In 2010 the New Zealand Government opened the first of its New Zealand Focus shops selling Kiwi products at Guangzhou, a city with a population of 4.6 million. Weet-Bix and Jaffas are sold alongside Heilala vanilla extract and Alexandra's sea salt.

NZ Post has teamed up with China Post to list approved products on Ule, a website where Chinese consumers can order authenticated international products. In the past year, it has listed 250 Kiwi products from 25 merchants in six categories. A spokesperson said food products, especially honey, were doing well, followed by health supplements.

Comvita leads the New Zealand supplement market in China, selling there since 2004. Chief executive Brett Hewlett wouldn't reveal sales volumes but said it was "rapidly" becoming one of its biggest markets, although operating there was sometimes challenging.

A sudden change in regulations several years ago meant the classification of propolis changed from foodstuff to medicinal or therapeutic product. So suddenly it could not sell propolis, formerly 40 per cent of its sales in China. Comvita was told reclassifying products would take six to nine months. It took three years.

"It was a significant blow. The rules and regulations in China are a constantly moving landscape."

Auckland's Deep Blue Health sells supplements such as shark squalene and spirulina to China. One of its founders is Chinese and based in Beijing. Bee products have become the most popular since Chinese regulators decided in October that colostrum, then its top seller, would be reclassified as a hormone, and was unsafe for children under six months.

"That just killed the colostrum market that had been very big for us," Deep Blue Health director Tony Lawton said. "It was totally random. No one saw that coming."

Other companies had problems with products getting held up at port or shipping errors. Greg Harvey, the licensee of Mrs Higgins - trading as Kiwi Cookies in China - has three stores in Shanghai. He gets frozen dough directly from Mrs Higgins in New Zealand. Authorities stored a recent shipment at 18 degrees Celsius when it should have been -18?C. "The entire container perished."

His Kiwi insurer was "very good about" reimbursing him.

Roger Young, the owner of Fidel's cafe and Havana bar, helped a Chinese business partner who used to live in Wellington set up a chain of cafes called Flat White and coffee roastery Rickshaw Roasters in Beijing.

"Ask anyone in the food and beverage industry trying to take New Zealand product to China and I bet you 99 per cent will tell you the hardest thing is getting product into the country with the red tape, bureaucracy and bullshit," Young said.

He wanted regulations changed to speed up repeat shipments of the same product, after his last coffee shipment to China sat on the wharf for three months. Unroasted green coffee beans could be stored for two years safely but the holdup was frustrating, and he was concerned about dampness and air quality damaging the product.

"There was no rhyme or reason for it. The first container got through without a hitch . . . It's never easy in China to get anything done. It's corrupt as hell."

Kiwis in China say the acronym PRC has two meanings: People's Republic of China, and the "patience, relationships and cash" vital to doing business there. Buyers at hotels and supermarkets reportedly demand cash to stock products.

Mahon said he had never paid a bribe in three decades of working in China, and that most requests were just opportunistic. Other sources said bribery was just part of doing business in China.

"Absolutely, you have to engage in bribes to get by," one source said. "That does not mean bags of cash but giving face, finding mutual value for them by giving them a reason to deal with you, when others competing for their time are paying wads of cash.

"You need to smooth the wheels in China - maybe that's giving face by having a conversation with somebody, inviting them out to dinner, teaching their kid a bit of English."

Another source said Kiwi companies often used an agent to liaise between them and a Chinese buyer or distributor.

It was mutually understood most of the agents' fees went towards a bribe - but the New Zealand company would have a tidy receipt for their accountant.

"How do you define a bribe? In the West, media junkets go to Rugby World Cup events paid for by huge companies. It's all bartering but Chinese bribes are just more efficient: cash."

Asia NZ Foundation funded Jazial Crossley's travel to China.

- ? Fairfax NZ News

Source: http://www.stuff.co.nz/business/industries/8574364/Exporters-need-brand-new-approach

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