Food, glo­ri­ous food & bev­er­age

Revving up NZ’s ex­port per­for­mance

Exporter - - FRONT PAGE - By Glenn Baker.

It prob­a­bly comes as no sur­prise that New Zealand's food and bev­er­age (F&B) sec­tor continues to set the pace for our ex­port per­for­mance; or that the F&B in­dus­try is ab­so­lutely crit­i­cal to achiev­ing the govern­ment's longterm ex­port goals.

The ev­i­dence is in the 2013 Food and Bev­er­age In­dus­try Re­views, put out by The Min­istry of Busi­ness, In­no­va­tion and Em­ploy­ment (MBIE) – re­ports that also high­light the di­ver­sity of our F&B sec­tor, far be­yond dairy.

Pro­cessed food ex­ports were worth around NZ$2.1 bil­lion in 2012 – up by $8.1 mil­lion on 2011. The New Zealand wine in­dus­try alone con­trib­uted NZ$1.2 bil­lion in 2012.

The need for New Zealand to pro­duce high-value (pre­mium) food and bev­er­age prod­ucts has long been recog­nised as the best ex­port strat­egy go­ing for­ward, as they deliver more prof­its and jobs than com­modi­ties; and it's gen­er­ally agreed that our ca­pa­bil­ity to pro­duce com­modi­ties is limited by our ge­o­graph­i­cal size and our de­sire to pre­serve the nat­u­ral en­vi­ron­ment. We all know the im­por­tance of liv­ing up to our ‘clean, green' im­age.

Other fac­tors im­pact­ing on New Zealand's F&B ex­port strat­egy is the rise of the in­formed con­sumer who de­mands health­ier, safer, au­then­tic food and drink in his or her lo­cal su­per­mar­ket – wher­ever in the world that may be.

Chang­ing con­sump­tion habits, par­tic­u­larly in Asia, rep­re­sent one of the great­est op­por­tu­ni­ties ever for New Zealand's food and bev­er­age ex­porters. Shaun Con­roy, NZTE's re­gional di­rec­tor East Asia, who works across mar­kets from In­done­sia to South Korea and Ja­pan, be­lieves Asian con­sump­tion is at a turn­ing point. “The roughly 3.5 bil­lion con­sumers in emerg­ing Asia still ac­count for less than 30 per­cent of global GDP,” he says. “Pro­pelled by rapid ur­ban­i­sa­tion and the rise of its mid­dle class, Asia is set to be the world's con­sump­tion en­gine.”

The win­ners will be com­pa­nies that evolve their busi­ness mod­els from ex­porters to in­mar­ket play­ers.” – Shaun Con­roy, re­gional di­rec­tor East Asia, NZTE.

Food price rises and chang­ing di­etary habits will lift spend­ing on food in this re­gion, he be­lieves, and meat is def­i­nitely on the menu. The FAO has pre­dicted that global meat con­sump­tion will rise to 460 mil­lion tonnes in 2050, an in­crease of 65 per­cent in just 40 years.

“Meat con­sump­tion is grow­ing the fastest in Asia and the po­ten­tial for higher de­mand is huge, due to rel­a­tively low per capita meat con­sump­tion.”

Food con­sump­tion trends are hap­pen­ing in ev­ery mar­ket, Con­roy says. “For ex­am­ple, in Korea and Ja­pan, we're see­ing a rise of sin­gle ur­ban dwellers. This pro­vides op­por­tu­ni­ties for the sale of in­di­vid­u­ally por­tioned meals; whereas in Thai­land and Viet­nam there is a de­mand for health food and bioac­tives – such as sup­ple­ments and manuka honey.”

Con­roy has a strong mes­sage for F&B man­u­fac­tur­ers eye­ing up Asian mar­kets. “The win­ners will be com­pa­nies that evolve their busi­ness mod­els from ex­porters to in-mar­ket play­ers. These are com­pa­nies that im­port, process, value-add and mar­ket to their cus­tomers,” he ex­plains. “They be­come in ef­fect sup­ply chain man­agers that source in the low­est cost mar­ket, process in the low­est cost mar­ket and sell in the high­est cost mar­ket – tak­ing ad­van­tage of ef­fi­cien­cies in freight lo­gis­tics, labour and tax, while op­ti­mis­ing their busi­ness to take ad­van­tage of re­gional FTAs.”

As men­tioned ear­lier, on of the great­est strengths New Zealand's F&B ex­porters have is the abil­ity to lever­age the coun­try's rep­u­ta­tion for safe and clean food. “It's vi­tal ex­porters up­hold their com­mit­ments to food safety to the high­est pos­si­ble level,” says Con­roy, “and have a plan in place to act quickly if there's a breach in their sys­tems.”

Do your re­search and choose your op­por­tu­ni­ties wisely, he ad­vises. “It's bet­ter to take your time to work out the right path to mar­ket than to jump into a sit­u­a­tion that may be dif­fi­cult to ex­tract yourself from in the fu­ture.”

Safety and au­then­tic­ity

Men­tion food ex­ports and the words ‘safety' and ‘au­then­tic­ity' are never far away. Fol­low­ing cer­tain events in China in 2013, F&B ex­porters need no re­minder of the need to main­tain the in­tegrity of their prod­uct right through the sup­ply chain – from sourc­ing raw ma­te­rial to point of sale.

There are new tech­nolo­gies avail­able to help deliver this out­come – one be­ing AsureQual­ity's in­Sight brand, which gives shop­pers in­de­pen­dently ver­i­fied in­for­ma­tion about the prod­ucts they're about to buy. For pro­duc­ers and man­u­fac­tur­ers, el­i­gi­bil­ity is via strict as­sess­ment and a li­cence from AsureQual­ity, which al­lows them to place the in­Sight logo and QR code on their prod­uct pack­ag­ing.

“The fo­cus is to pro­tect and up­hold the rep­u­ta­tion and value of prod­ucts and com­pa­nies that be­lieve in, and can demon­strate, trans­parency, in­tegrity and safety,” ex­plains AsureQual­ity sales and mar­ket­ing man­ager Mark Inglis. “Con­sumers want to know more about the food they are eat­ing. Where's the proof that a prod­uct is safe and au­then­tic? in­Sight of­fers a sin­gle mark that ad­dresses mul­ti­ple in­ter­ests and con­cerns.”

It's all about trans­parency, says Inglis, en­sur­ing that good man­u­fac­tur­ing pro­cesses are fol­lowed and all prod­uct claims cred­i­ble. It ad­dresses en­vi­ron­men­tal sus­tain­abil­ity, so­cial and eth­i­cal con­cerns, nu­tri­tion, ori­gin, se­cu­rity, food safety and qual­ity as­sur­ance; ev­ery­thing that would con­cern a busy, mid­dle-class shop­per in down­town Hong Kong or Shang­hai – or any­where else for that mat­ter.

Tenda Nu­tri­tional Foods, an Auck­land-based pro­ducer of in­fant for­mula prod­ucts, is the first li­censee to take the new in­Sight brand to China. Inglis is con­fi­dent other ex­porters will want to utilise the brand to dif­fer­en­ti­ate them­selves in to­day's crowded FMCG mar­ket­place.

“We're al­ready see­ing grow­ing cus­tomer and con­sumer ex­pec­ta­tions and con­cerns re­lat­ing to food safety and qual­ity such as an­i­mal wel­fare, en­vi­ron­men­tal im­pacts, prod­uct prove­nance, and sus­tain­able farm­ing prac­tices; and there's grow­ing prod­uct dif­fer­en­ti­a­tion based on moral pref­er­ences such as or­ganic, food miles and fair trade,” he says. “When you com­bine these trends with the in­creased food safety reg­u­la­tions in emerg­ing coun­tries where New Zealand has strength­en­ing trade re­la­tions, such as China, the de­mand for prod­ucts such as in­Sight be­comes even more ap­par­ent.”

A re­cent en­trant in this tech­nol­ogy space is Ex­pander – a com­pany founded in March 2013 at Welling­ton's Light­ning Lab ac­cel­er­a­tor. It's sys­tem, which is well into com­mer­cial­i­sa­tion, has an­ti­coun­ter­feit and an­a­lyt­ics com­po­nents, as well as con­sumer en­gage­ment.

Ex­pander gen­er­ates a unique QR code for each in­di­vid­ual pack­aged item, rather than per batch. These can be sup­plied as printed codes to be at­tached to just about any form of pack­ag­ing, or in elec­tronic form for use with vari­able data print­ers at pro­duc­tion-line speed.

“Con­sumers can scan the code with any smart­phone,” ex­plains Ex­pander's CEO Er­win Ver­slei­jen. “That launches our mo­bile-friendly web­site, which checks the code and im­me­di­ately con­firms it is valid.

“It's a great de­fence against coun­ter­feit­ers be­cause any bo­gus code will be im­me­di­ately re­jected. Coun­ter­feit­ers can't just copy a sin­gle code be­cause we'll iden­tify that quickly.”

The Ex­pander sys­tem makes it much harder to pass off a fake prod­uct as gen­uine and greatly in­creases the risk that coun­ter­feit­ers will be caught, so they'll find an eas­ier tar­get in­stead, says Ver­slei­jen. “Re­tail­ers also won't want to be caught with in­valid prod­ucts, so they'll be care­ful to get the real thing. As we have a global view on scans, we are also able to track grey mar­ket trade for our cus­tomers.”

Ex­pander's key fea­ture is its anti-coun­ter­feit sys­tem, but savvy ex­porters will re­alise this is a won­der­ful mar­ket­ing chan­nel too, says Ver­slei­jen. “You've started a con­ver­sa­tion with your cus­tomers based on trust and trans­parency, rather than a com­mon mar­ket­ing pitch. So when our codes are scanned, we can also of­fer the con­sumer use­ful in­for­ma­tion, such as tast­ing notes for wine, or per­haps a loy­alty pro­gramme. We in­vite the con­sumer to reg­is­ter for fur­ther in­for­ma­tion and com­mu­ni­ca­tion, so­cial net­works and so on.

“We also record each scan so ex­porters can log into the Ex­pander dash­board and see a map show­ing all the scans of their prod­ucts, high­light­ing any that are in­valid, ap­pear to be grey-mar­ket or out­side the prod­uct's shelf life. They can fil­ter this map or browse the raw data. They can view and down­load con­sumer's reg­is­tra­tion in­for­ma­tion.

“Many Kiwi man­u­fac­tur­ers haven't had much in­sight into their end users, and Ex­pander can help change that,” he says. “The fact that man­u­fac­tur­ers now also have con­sumer data also al­lows for much faster re­call process in ex­port mar­kets.”

Ver­slei­jen says they're fo­cus­ing on Asia, and in par­tic­u­lar China, where prod­uct safety and au­then­tic­ity are key con­cerns and QR codes are in com­mon use. They've also de­signed the Ex­pander sys­tem to in­te­grate with ex­ist­ing sup­ply chain track­ing sys­tems.

You can't help but ad­mire the com­pany's mo­tives. “Our mis­sion is to help Kiwi ex­porters dif­fer­en­ti­ate them­selves,” says Ver­slei­jen. “We want New Zealand ex­ports to be the most cred­i­ble prod­ucts on the planet.”

Big­ger prof­its through adding value

Adding value to F&B com­modi­ties has for a long time been the key to re­al­iz­ing healthy bal­ance sheets for New Zealand's ex­porters. In a tiny of­fice in the Auck­land sub­urb of Grey Lynn, Graeme Peter­son, MD of Aquity In­ter­na­tional, and Alis­ter Gates, CEO of Vi­talZing, have been hatch­ing a plan to cre­ate a highly prof­itable ex­port busi­ness by adding value to bot­tled wa­ter.

Peter­son is an F&B in­dus­try vet­eran of 35 years – ini­tially adding value to meat com­modi­ties, hav­ing re­al­ized that in the com­mod­ity game, un­less you have a ma­jor point of dif­fer­ence, it's ex­tremely dif­fi­cult to sur­vive by yourself. In re­cent times, bot­tled wa­ter has been his fo­cus. His com­pany man­ages the Wa­ter For Ev­ery­one brand, for which Peter­son was tasked to lift out of the strug­gling com­mod­ity space with a bit of ‘out­side the square' think­ing.

No mat­ter how much vol­ume you pro­duce, it's never go­ing to be enough to turn a de­cent profit in low-mar­gin mar­kets such as China, he says – where en­quiries are in­evitably based on ‘How big is your wa­ter sup­ply? How many bot­tles can you pro­duce a day? And how many con­tain­ers can you ship per week and what is the low­est price?

“It's a myth that high vol­umes mean big prof­its – in re­al­ity high vol­umes, in a mar­ket like China, can mean you'll go broke.”

Wa­ter is also a hugely dif­fi­cult prod­uct to get across borders, says Peter­son; a lot can go wrong. He re­calls the 18 months it took to ac­cess the Malaysian mar­ket and 15 months to get into Ja­pan.

Peter­son's think­ing has also been in­flu­enced by the tiny per­cent­age of the bot­tled wa­ter mar­ket oc­cu­pied by ‘nat­u­ral, out-of-the-ground' wa­ter (with high lev­els of ‘to­tal dis­solved solids') and so­ci­ety's ad­dic­tion to what Peter­son refers to as “lolly wa­ter” – wa­ter with added su­gar, sta­bilis­ers, preser­va­tives, colour­ing and other un­men­tion­ables which he says amounts to “dead nu­tri­tion”.

It’s a myth that high vol­umes mean big prof­its – in re­al­ity high vol­umes, in a mar­ket like China, can mean you’ll go broke.”

– Graeme Peter­son, Aquity In­ter­na­tional.

The so­lu­tion is the su­gar-free Vi­talZing range of bot­tled wa­ter with spe­cially de­signed ‘dos­ing cap' tech­nol­ogy that al­lows con­sumers to add nu­tri­ents, flavours and vi­ta­mins at the time of use, en­sur­ing they get the full, and im­me­di­ate, ben­e­fit of those in­gre­di­ents. Rather than fo­cus on flavours, each pow­der fo­cuses on “an event or cause”: for ex­am­ple, there's ‘Col­la­gen' for women, ‘Per­for­mance' for sport and ex­er­cise and ‘En­durance' for people un­der stress or work­ing long hours. There'll be additional prod­ucts based around green tea, cal­cium and elec­trolytes.

The ini­tial Vi­talZing range is set for a May/June launch, along with a ‘wa­ter drops' flavour­ing/sweet­ener based on the ste­via plant.

Peter­son has al­ready taken a ver­ti­cally in­te­grated ap­proach to mar­ket for his bot­tled wa­ter, in­volv­ing or con­trol­ling an in-coun­try im­port hub and there­fore main­tain­ing com­plete con­trol over the safety and se­cu­rity of sup­ply – al­ways a ma­jor fac­tor when ship­ping bot­tled wa­ter. Ja­pan, China and Hong Kong are the cur­rent fo­cus, and the Vi­talZing ‘added-value' range will be mar­keted us­ing the same dis­tri­bu­tion model.

Aus­tralia's the first stop, fol­lowed by Ja­pan (“one of the hard­est places in the world to get into”) and Malaysia.

Peter­son and Gates are ex­cited about in­tro­duc­ing a brand new cat­e­gory to the bev­er­age mar­ket. Ma­jor US com­pa­nies are also show­ing in­ter­est in the ‘dos­ing cap' mar­ket, and Gates an­tic­i­pates they'll be col­lab­o­rat­ing with some in or­der to build mar­ket aware­ness in over­seas mar­kets. Closer to home, he says they plan to set up a ‘cen­tre of ex­cel­lence' in New Zealand for the pro­duc­tion of the caps and pow­der for­mu­la­tions, which lo­cal wa­ter pro­duc­ers can tap into.

NZ Cen­tral

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