In the overall scheme of things Tineli is a relatively small player on the trans-Tasman trade route. When you consider that New Zealand’s merchandise exports to our Aussie neighbours are valued at around $10.5 billion (year to June 2012: Statistics NZ), the Nelson-based cyclewear supplier’s contribution is a mere drop in the bucket. But what you’ve got to remember is that there are thousands more businesses just like Tineli all adding their drops. In the year to December 2011, 8883 Kiwi firms were engaged in exporting across the ditch. That represents a steady torrent. And of those firms, currently some 150 are engaged intensively with New Zealand Trade & Enterprise (NZTE) to build their presence in Australia.
Tim Vincent, company founder and manager of Tineli, remembers writing out his very first export order while sitting in his rental car in a Sydney suburb a few years back. “I was there on a sales trip when it came through and it felt pretty cool. I still remember it vividly and fondly – it was a proud moment. I actually felt I was doing some good for the country.”
Tim and his wife Sandy, who is also the firm’s graphic designer, started Tineli in 2005. When some Kiwi friends set up a bike shop in Noosa, Queensland, a few years later, they scored their first Australian distributor. The next major milestone was setting up their one-man Melbourne base in May 2011, which was the result of an approach from Kiwi Jono Kalma, who was keen to be that man. From Melbourne Tineli services every Australian state – although an order to Western Australia usually takes two days.
Tim explains how Tineli’s custom printed club cyclewear, designed in Nelson and manufactured in China, makes up the bulk of sales across the Tasman. Currently only about five percent of Australian turnover is in the more profitable retail stock lines – an area they want to focus on to drive sales growth.
While export growth has happened organically to date, Tim admits that taking part in NZTE’s Path to Market (PTM) programme was a definite boost. It helped fill in a lot of gaps in market knowledge and confirm some of his preconceptions, as well as helping give him the confidence to tackle the market.
Through the programme he met David Powell, director of Lost Ark Discoveries, a former sector manager at NZTE and a PTM provider/facilitator for the past three years. Powell has assisted a number of export companies with their Australian market entry strategy and tactics, and Tim found it reassuring to have him as a sounding board and advisor.
“Through David and the programme I picked up some good strategies,” says Tim. “I also learnt a lot about distribution – for example, prior to the course I wasn’t even aware that contract warehousing existed.”
Powell had suggested employing a contract warehouse, renting a postal box and setting up an answer phone to initially get Tineli a toehold in Melbourne. However, none of that proved necessary once Kalma had approached the Vincents.
Powell and NZTE were also helpful in checking out ‘the lay of the land’ and organising professional services. To get the Melbourne business off the ground, Tim recalls a week-long “mad rush” in the city setting up office and organising a vehicle.
As for comparing the two markets, Tim can’t pinpoint any major differences between Australia and New Zealand – apart from scale. However, he believes red tape is more significant in almost every instance. “For example, you can’t just register a .com.au domain name. You can only register one if you have a corresponding company or trademark first. You also require an Aussie resident director for a company, and you need an Aussie address to do any of the above.”
He hasn’t noticed any anti-Kiwi sentiment in their particular industry either – and describes his direct competition as “healthy”.
As for future sales and export plans, Tim will be happy when the Australian sales figures match New Zealand’s (currently Aussie turnover is about a third of overall sales), but he knows the potential is far greater than that. He’s keen to increase Northern Hemisphere sales in order to offset the seasonal peak in the Southern Hemisphere, and has already established limited distribution in the Netherlands and Japan.
His advice on Oz? “Give it a go. If you have a good product and it’s doing well in New Zealand, then Australia’s an easy, safe, first destination. Just do what it takes.”
Lucky for us
“When I see Australia, I see opportunity everywhere,” says David Powell. “But I also see challenges and potential minefields.”
Powell, who was also trade commissioner for a time in Melbourne, reminds us that some of New Zealand’s biggest companies have failed in Australia. “But on the flip side, some of our smallest companies have found spectacular success there.” The market is similar to New Zealand, he says, but definitely not the same. “Demographically it is very appealing; it’s a largely urban society with three key cities each with the economic market power of the whole of New Zealand.
“If your high end product appeals to a demograph of 50,000 people in Auckland, then that’s around 200,000 people in Melbourne, a similar number in Sydney and a few less in Brisbane.”
Powell describes the Australian market as wealthy and sophisticated, although points out that the wealth and sophistication isn’t always evenly distributed.
“Australia as a market rewards intelligent segmentation and niche strategies. What works in one suburb or block of suburbs in Sydney is nearly irrelevant in others. I like to use the ice cream analogy: In the greater west the market is around value and volume, bigger family packs etc. In the wealthy inner east, houses, households and fridges are smaller and the market is for gourmet, special flavours, $10 to $15 for 500 grams. Knowing your target market intimately is vital.”
Asked to pinpoint opportunities for Kiwi exporters and Powell singles out mid to high end food and beverage retail, branded and ‘storied’ products.
“Coriolis Research did an excellent paper several years ago called ‘Moving to the Centre’ which showed that our opportunities lay in the processed foods section in the centre of a supermarket, not the traditional domain of the outer edges – for example meat, dairy, fruit and veges.
“The growth of the Australian equivalents of our Nosh and Farro are also building the high end of the market. Take a walk through a Leo’s or Thomas Dux and you’ll see what I mean. I’d also put organics and natural cosmetics into this category.”
Also high on Powell’s list are agritech (especially dairy production technologies that address environmental impact, traceability and productivity); energy efficiency products (that can drive government sustainability targets and in some states like Victoria, generate certificates that offset the purchase price); contract manufacturing (labour costs are higher in Australia); branded consumer goods, software and IT solutions.
Distribution the key
Big, complex and comprised of hundreds of niche markets – that’s how Powell sums up Australia, and he suspects that for many of us, our market knowledge is largely based on assumptions.
He admits it can be a logistical nightmare – so look very hard at the distribution options.
“Don’t go ugly early. Many potential partners will promise the earth and demand exclusive national rights. It takes willpower to hold off and ask questions before committing.”
Few Australian distributors operate nationally he adds. “Some do one city well, or one state, maybe two. Normally the further from their home state they are, the less effective they are.
“Ronald Reagan used to say ‘trust but verify’ and I think that’s a good mantra to adopt when looking at distribution options.”
Almost invariably success in Australia comes down to distribution, says Powell – “either the partners you select and support, or the investment in creating your own network. Also your ability to create demand and market pull from the end consumer.”
Even in this digital age, relationships and rapport are very important too, he says. “You can’t expect to make any real inroads by remote control; even if you have a good importer/distributor you need to be over there. Nobody sells your product like you do.”
Spreading the brand
Kate Gibbs of Te Horo Jams agrees on the importance of in-market research – particularly with retail food and beverage. “Look at the type of stores or cafes you want to be in, then talk to the retailers about who they recommend as good distributors.
“Look on the shelves at the products, presentation and pricing. Work out your pricing taking into account freight, exchange rate, servicing the market and margins for on-sellers.
Prepare a pitch and be prepared to have to deliver it a few times before you find success,” she advises.
Kapiti Coast-based Te Horo Jams currently sends its products to a distributor in Sydney, who sells in Sydney, the South Coast, Canberra, Hunter Valley and a couple of stores in Melbourne. They’ve also just sent two pallets (2,000 pots) to a Perth importer who discovered the product on a visit to New Zealand.
“We did sell in Queensland but the distributor went into receivership and we’re looking for a new one,” says Kate. “There are lots of expat Kiwis in Queensland and they love the jam!”
Kate, who manages the business with husband Tim, says they always wanted to export and Australia has nothing like Te Horo Jam. New Zealand fruit gives their jam a very unique taste, she says. “We knew we had a good product and that once people tried it they would love it.”
That was demonstrated by the Sydney distributor who, after saying they already had a full portfolio, changed his mind after being sent a sample pot of Te Horo’s raspberry jam.
Kate also attended a Path to Market course, which she also found hugely beneficial. “After seminars and practical sessions we had to do a ‘lions den’ type presentation to a group of people at NZTE she recalls. “The preparation for that was useful later when I needed to give my pitch to a distributor in Sydney.”
Kate describes the Australian market as “pretty ruthless” – and it’s a case of seeking out more than one distributor. “It’s a challenge to get the distributor to want a New Zealand product, and once it’s on the shelf over there it’s a challenge to get the consumer to pick it up and take it home.”
The exchange rate is another challenge for this fruit grower-turned-manufacturer and marketer – basically a small business that’s doing everything themselves.
Kate says there’ve been other challenges too around shipping, documentation, customs, tax regulations, banking, and so on – “but the biggest was a distributor who would not pay us!”
While the immediate plan is to conquer Melbourne “as it’s such a foodies paradise”, plus Adelaide and Queensland, the Gibbs have their eyes set further afield in the longer term. Singapore, Malaysia, China and Hong Kong are already taking orders, but in terms of export growth Kate believes the sky’s the limit.
Generally if there’s a market for a New Zealand product in New Zealand, there’s a place for the same product in Australia, but Kiwi exporters often find there’s more expense and complexity in that market – particularly around compliance with regulatory requirements, establishing a distribution network with retailers, setting up an office, obtaining local credit references or business histories (New Zealand references and business histories have not traditionally been accepted by Australian companies or banks) and establishing a brand. So be prepared for things to take a lot longer than planned when establishing a presence there.
“Although CER removed many barriers to the free flow of goods and services between New Zealand and Australia, there is still a range of quarantine, customs, rules of origin, and tariff compliance issues that New Zealand companies face when doing business in Australia,” says Daniel Taylor, New Zealand’s trade commissioner/consul general based in Melbourne.
“Regulatory and legislative differences need to be understood. Australia does not offer a single integrated market; instead, it requires compliance with Federal, State and Local Government laws and regulations.”
Taylor says New Zealand companies which have not succeeded in the Australian market have often been guilty of insufficient planning and follow through, and have attempted to treat Australia as an extension of the New Zealand market. “The successful companies, however, have committed significant time, effort and funds into making it a success.”
With its close proximity, similar consumer behavior and culture, Australia indeed makes a great first market for NZ exporters – however, there are still instances when Australia is best bypassed in favour of other markets. Products where Australia already has a large industry supplying the same good – explains Taylor. “For example, exporting milk powder to Australia compared to other markets such as China may be significantly more difficult as Australia already produces a large quantity of milk powder.” This is reflected in the export numbers of milk powder to China, he says.
“Unless New Zealand businesses can create innovative ways to increase a product’s value, such that Australians might see the product as superior to the Australian product, it’s probably better to export to a market beyond Australia.”
It’s also worth remembering that across the Tasman many companies are proactive in promoting ‘buy Australian-made’. For example, Woolworths supermarkets stock Australian produce where possible. Coles supports Australian vegetable growers by sourcing only Australian grown vegetables for their Coles-branded frozen vegetable products. However, Australians generally view New Zealand products as high quality/value, so are not opposed to buying if they like a product.
Intelligence and research
For Kiwi firms eyeing up Australia as a ‘first-step’ export market, David Powell offers these final words of advice. First, check out the Five Cs as key determinants of success in Australia (see separate sidebox). But then avail yourself of some great market intelligence – as distinct from market research.
“Have a good relationship with NZTE onshore and with NZTE in Australia; so often we don’t appreciate the calibre of the staff in market. In most cases they are specially recruited from industry and are able to add a lot of value through their connections, industry knowledge and insights.
“What do you know about Australian culture and sport? Have you adopted an AFL team? It’s almost essential in Victoria; I’ve never found an easier way to build rapport with total strangers.”
And leave the ‘Aussie jokes’ and All Black worship at the airport,” suggests Powell. “Most Australians don’t get the jokes, rarely think about New Zealand, and really don’t care about rugby.”
Glenn Baker is editor of Exporter.
Oz still number one
Australia is still New Zealand’s principal export market, taking 22 percent ($10.5 billion) of New Zealand’s exports in the year ended June 2012, up $146 million (1.4 percent) on the previous year. China, our second largest export market, accounted for 13 percent of total exports ($6.1 billion). USA is third, receiving 8.7 percent of total exports ($4.1 billion).
New Zealand has a positive trade balance with Australia, a surplus of $3.2 billion (31 percent of exports). This compares with a June 2011 surplus of $2.9 billion (28 percent of exports).
Taking the Path to Market
Path to Market is a business capability building programme that bundles a range of services from NZTE with expertise from the private sector to support capable, proven companies to fast-track their entry into Australia.
Entry into the programme is by invitation only. Invited groups of companies from selected industries are provided with a structured, supportive programme that helps them develop a robust export strategy for the Australian market.
Path to Market is targeted at companies either new to exporting or who have export experience but wish to enter markets where they’ve previously not operated.
The three main parts of the programme comprise:
• Export training and advice, including market and regulatory information, customised for the chosen industry that the participating companies operate in.
• Assessment of each company’s sales pitch by a “dragons den” style panel that provides feedback on sales pitch and presentations, market entry strategy, and evaluation of packaging and promotional material.
• A programme in Australia that is specifically targeted to the participating companies. This can include attendance at a trade event, presentations from industry experts, and networking opportunities.
NZTE has offices in both Sydney and Melbourne and can assist exporters with a range of programmes and services including assistance with finding potential partners. The Beachheads programme also applies to Australia, which is a public/private partnership of independent advisors (mostly expats) and NZTE personnel which helps businesses to grow exports.
There is also the online ProjectLink service. For $1,500 per year, Kiwi firms have access to Australian market information. The ProjectLink team sources business leads by talking regularly to decision-makers at key Australian companies. In over ten years it has generated more than $250 million worth of business for Kiwi firms in Australia.
The Five Cs
A Deloitte survey commissioned by NZTE in 2009 defined the key predictors of success in the Australian market. The survey results boiled down to five points – the Five Cs:
1. Clarity – have a clear vision of your product, market definition and planning of how to achieve success.
2. Cash – significant financial resources are required to meet establishment costs. Many of the businesses interviewed needed to make multiple attempts at market entry.
3. Connections – create the right networks to increase your market knowledge and access to opportunity.
4. Capability – have the people capability, governance structures, processes, oversight from New Zealand management and sufficient financial backing.
5. Commitment – commit significant resource (time and finance).
For further details on the Five Cs, go to:
Same, but different
With its sweeping harbour views, the 29th floor of ANZ’s corporate tower in Auckland’s CBD is a long way from Cathryn Carver’s normal outlook – the 10th floor of ANZ’s headquarters in Perth, Western Australia. The two buildings represent the boundaries of Carver’s responsibility; she is managing director Institutional, for Australia and New Zealand, and has a unique helicopter view of trade between the two countries.
While much has been written and spoken about the need to focus on Asian markets, Carver is aware of the need to foster trade across the Tasman because, as she bluntly puts it, each country needs the other to do well. “We feed off each other.”
Talking to Exporter, Carver reiterates the need for Kiwi firms to prepare properly before taking the big step into Australia – that’s the basics: raising capital, legal, business structure, tax, compliance and so on – and be mindful of the different legislation as it pertains to different levels of government in Australia – federal versus state versus local.
“We’re talking two low-growth economic environments [in Australia and New Zealand], so you’ve got to get it right.”
The six-hour flight from Perth to Auckland always reminds Carver of the sheer scale of Australia and its variable conditions on the ground, particularly in regard to labour laws.
All of the above highlights the absolute requirement for sound pre-market entry preparation, she says, and the need to seek advice from people who’re actively engaged in the market being targeted.
As for the Australian economy, she believes ‘green shoots’ are emerging across the ditch in 2013, which bodes well for businesses in both countries. And if the polls are anything to go by, a change of government in September’s election could also prove positive for business sentiment.
Carver believes there are export opportunities across the board in Australia. And, with its lower risk profile, its an ideal first stepping stone into Asia for Kiwi exporters. But rather than identifying whole sectors of opportunity, she’s more comfortable picking individuals or firms who’re good at what they do. That’s ‘Strategy 101 – until you’re really good in your home market, you shouldn’t be going elsewhere.”
And when they’re ready to make that leap, Carver can’t emphasise enough the need for exporters to do their homework. There’s a perception, and most likely a reality, that there’s less red tape involved in establishing and conducting business in New Zealand compared to Australia – so be prepared for more work.