Part 3 of a 3-part series. The Australian market presents export opportunities for Kiwi firms across a number of sectors. Here we look at food & beverage, manufacturing, and technology.
Without doubt, one of the biggest market opportunities in Australia lies in food and beverage (F&B) – a sector that New Zealand excels in.
The sector is outlined well in NZTE’s Australian Food & Beverage Landscape e-booklet (https://www.nzte.govt.nz/-/media/NZTE/Downloads/Regional-downloads/AusPac/Australian-food-and-beverage-landscape.pdf
It explains that Australia’s F&B industry had a turnover of approximately A$172 billion in 2017.
The Australian F&B retail market is dominated by Coles and Woolworths, who command 70 percent of the market. However, they are under consistent pressure by new entrants to the market: namely Aldi and Costco.
The recent launch of online platforms such as Amazon and Alibaba has also added a new competitive element to the market.
But while price has always been a major focus of competition in the Australian market, new and different products are vital to all retailers to maintain or increase market share, or to develop new categories that will attract customers and grow margins.
There has been other exciting developments in the food retail space too, with advanced and artisan stores opening. Woolworths has opened its most advanced store in Ascot, Queensland. They call it ‘Woolworths 3.0’, and it comes with a drive-through service area, an expanded range of ready-to-eat meals and a ‘cheese cave’ with a large international section.
Meanwhile Coles is planning a rollout of 120 smaller neighbourhood stores over the next five years with a focus on health foods, artisan and vegan products. The new stores are expected to have 1,500 grocery items that are not available in standard Coles stores. This allows Coles to tailor stores to suit individual communities, particularly those in inner-city locations with smaller store footprints. All in all it appears there will be more opportunities going forward for New Zealand’s boutique food and beverage exporters.
Australian F&B retailers have been responding to the increased demand for healthy and convenient food options too, with new store concepts and product offerings.
For example, Woolworths introduced “Ready to Create” meal kit bags similar to Hello Fresh, Youfoodz or Marley Spoon, the first meal kit concept available at a mainstream Australian retailer.
The online supermarket services space has been hotting up too. Both Woolworths and Coles are increasing their online presence, while Costco is also planning on launching an online store.
Private or ‘own brand’ products now make up more than 20 percent of the sales of the major food retailers and 80 percent of sales for Aldi.
Coles and Woolworths are looking to increase sales of ‘own brand’ products even more – to more than 30 percent of turnover. This is significantly different to the New Zealand market where ‘own brand’ sales make up just 12 percent of supermarket sales.
For Kiwi exporters looking to target Australia’s food service industry, again there are major opportunities. Being a complex channel it is important that companies identify their highest value channel whether that be traditional foodservice distributors, Quick Service Retail (QSR) such as burger or café chains or, with Australia’s aging population and increasing nutritional requirements, the growing opportunities within the aged-care and hospital channels.
Australia’s retail market throws up a number of opportunities for export-ready Kiwi firms to be aware of – and there is the huge growth in online sales to consider which offers New Zealand companies alternative retail channels to reach Australian consumers.
The rise in demand for organic products across the Tasman cannot be ignored either. To succeed in this industry, New Zealand exporters require the correct organic certification to suit the Australian market.
Other points to consider include the ‘premium factor’ – New Zealand products often come under the relevant ‘high quality’ category so marketing efforts should focus on premium platforms instead of selling into stores that mark down price points and don’t have a premium brand image for Australian consumers.
Pressure is also coming on retailers and brand owners in regard to product stewardship and therefore environmental packaging and whole product life analysis expectations are increasingly being put on companies.
Ingredient labelling, source or origin and localised grower storytelling has also become part of brand development for companies wanting to succeed in the Australian market.
Australia has presented a number of opportunities for specialised New Zealand manufacturing firms, particularly in the Australian food processing sector. The large Australian government spend on infrastructure in the eastern and southern states (particularly New South Wales) is also creating opportunities for innovative New Zealand manufacturers.
New Zealand companies specialising in transport and energy systems have especially benefited. New Zealand’s strengths in renewable energy and management of electricity distribution networks may also present significant opportunity from Australia’s recently announced large-scale hydro, solar and wind projects.
Emergency response and defence are other major areas of government procurement that New Zealand firms from the marine (Stabicraft), physical and cyber-security sectors (Gallagher Technology, Aura, Endace) are seeking opportunities.
Following the Australian 2016 Defence White Paper, Australia allocated capital expenditure of AU$200 billion – which represents close to AU$1 trillion in additional expenditure to service the defence sector. NZTE is in the early stages of identifying opportunities for customers in areas such as marine engineering, project management and construction.
New Zealand companies are considered “local” for the current and upcoming defence industry expansion, which is a huge benefit for New Zealand companies that can be part of the large contract supply chain.
Technology and agritech
Australia usually looks to the US for its technology inspiration – but this doesn’t mean that there aren’t opportunities for New Zealand’s tech companies to do business in Australia. However, to succeed they need the financial and HR resources to set up properly.
Australia’s ICT industry continues to grow, and was valued at NZ$87.5 billion in 2016.
A key area of NZTE’s focus for customers in this sector is cloud-based B2B technologies targeting Australian companies in areas such as social media monitoring, business intelligence and communications.
New Zealand businesses are well positioned to help deliver greater efficiencies in Australian federal and state level public sector services through software and ICT digital services.
On the agritech front Australia’s agricultural industry is facing changes and needs to innovate to maintain and extend its competitive position internationally. Australia has targeted growth in agricultural exports as an offset to fluctuations in hard commodities, and herein lies more opportunities for New Zealand firms.
NZTE is working with a customers across a range of agricultural technology products and services including water management (Filtec), vineyard management (TracMap) and effluent handling systems (Reid & Harrison).
While New Zealand’s agricultural success creates a strong brand proposition, Australia’s dry-land pasture farming systems and sheer size and scale mean that companies must focus on relevant, accessible markets. Kiwi companies also need to be aware of regulatory differences that can significantly impact market strategy in Australia.
Australia may appear to be an easy step for fledgling exporters, but there’s really nothing easy about exporting to any country – even one that’s just three hours flying time away.
You simply must do your homework, and don’t for a minute expect everything to run smoothly.
A Deloitte survey commissioned almost ten years ago defined the key predictors of success in the Australian market – and they still hold true today. You can boil them down to five points (the Five Cs).
The first ‘C’ is clarity. Have a clear vision of your product, market definition and planning of how to achieve success.
The second is Cash. Significant financial resources are needed to meet market establishment costs. It’s always more expensive to get established in a market than you anticipate.
The third is Connections. Create the right networks to increase your market knowledge and access to opportunity.
The fourth ‘C’ is Capability. Have the people capability, governance structures, processes, oversight from New Zealand management and sufficient financial backing.
And the final ‘C’ is Commitment – commit significant resource, both time and money.
Part 3 of a 3-part series on exporting to Australia, reproduced with permission from the 2019 New Zealand Export & Trade Handbook – published early February. A highly-valued reference guide for Kiwi exporters and importers. Take advantage of the pre-order special rate of $30 (save $10) on purchasing the Handbook. https://adrenalin.co.nz/store/2019-nz-export-trade-handbook#