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Continuing our exclusive series on China, Kevin Parish, GM of Primary Collaboration New Zealand (Shanghai) Co. explains how sharing the risk, cost and knowledge of a very complex market gives even small companies a fighting chance to succeed.

Exporter: Describe how you see the overall market opportunity today in China, and how things will develop in 2017. What will be the main factors influencing and impacting the China market for New Zealand’s producers?

Kevin: China is still growing at impressive speed, albeit with a minor reduction in growth. You see this on the streets of the most ‘Western’ cities like Shanghai as well as 3rd tier cities like Kunming. The amount of development and investment in this country is staggering – as Vaclav Smil quoted in his book “China has used more cement in three years (2011–2013) than the US used in the entire 20th century”. 
In 2017 there will certainly continue to be minor corrections in the economy and this will of course be very dependent on President Trump once he starts to implement his foreign and trade policies. 
As in previous years, New  Zealand exporters selling into China (or intending to) will need to apply focus to clearly identify the niche that they want to target. China, like the US, is actually made up of many markets with different climates, cultures, taste preferences and food offerings. Understanding these nuances is key to developing a well-defined strategy to succeed in China. Influencing factors for Kiwi companies going forward will as usual be strongly connected to the 5-year planning process that China adheres too. Green technology, food safety and the transition from low cost manufacturer to high-tech, are all areas of focus and therefore opportunity for New Zealand exporters. 
One other challenge that China is faced with is the ageing population syndrome. Currently there are about 7.6 employees per retiree – by 2050 this number will shrink to just 2.1 employees. This will place immense stress on the working population and the Government – again another potential opportunity for New Zealand companies. 
E-commerce continues to go from strength to strength in China – with Singles Day (11/11) again breaking records in 2016 and pulling in a record US$18 billion in sales. 
Of course, there are some interesting observations behind this total. Firstly there is potentially a high return rate on the day – data is not always released on this but in 2013 the China Industry Research Network revealed Singles Day attracted a return rate of about 25 percent. 
Secondly, Chinese consumers tend to pre-book items in the weeks leading up to Singles Day – therefore flattening out the sales preceding 11/11, and it certainly has an impact on bricks and mortar stores. 

Exporter: What steps should fledgling New Zealand export firms take to maximise their chances of success in the China F&B market and minimise their risk? 

Kevin: Think carefully about your entry plan to China. Make sure it’s the right move for your business and that overall you can sustain the level of investment required to be successful here – as it won’t happen overnight. 
Spend time and money on the due diligence stage when it comes to identifying partners in market – getting it right the first time will save you a lot of angst later on. 
Get some solid advice from a legal perspective and make sure you are compliant – China is a complex market and this complexity combined with language and cultural differences adds an additional layer for most businesses to deal with. Talk to those who have been there done that and look around your network in New Zealand for companies that have been successful.    

Exporter: PCNZ operates on a collaborative business model – why is this model best suited to tackling the China market? Why don’t more exporters adopt collaborative strategies?
Kevin: PCNZ offers its clients the opportunity to share risk, cost and knowledge in a very complex market. The model brings scale to what are effectively small businesses by global standards and allows clients to promote and support each other’s brands. 
With a team of Market Managers constantly out in the market meeting existing and potential partners, they often come across opportunities for other client’s brands – therefore a strong referral network. 
PCNZ can also organise to collectively promote the suite of products with an end user – like a 5-star hotel or retail chain. Basically PCNZ provides the in-market marketing function for our clients. The knowledge sharing aspect should not be underestimated as this was one of the key reasons PCNZ was created. The team provide a strong feedback loop to New Zealand clients – thus giving them real time, relevant information which they can use to develope their strategies and resource accordingly. Information is also shared at market level – on partners, suppliers and contractors – thus validating those that are delivering high quality services. 
Other sectors have looked at the collaborative model over the past couple of years and I have spoken to most of them. It takes a certain amount of drive from key individuals to get these projects ‘off the ground’ and this needs to come from the business community. Government can play a role in connecting the dots but it’s up to industry to actually invest and drive it forward. 

Exporter: What are your top tips for F&B exporters looking to enter the China market for the first time? 
Kevin:
1.    Engage with as many people as possible that have business experience in China and take an open mind into these conversations.
2.    Get into the market and take a first hand look at the opportunities and soak up the culture.
3.    Explore outside the main cities and gain an insight into the mass urbanisation that is taking place. 
4.    Talk to people who may actually be your potential customers (end users) – and beware of the nodding ‘no’. 
5.    Try and get a real perspective on the potential of your product – be prepared to adapt if required.
6.    Spend time/money finding the right partner that aligns with your business in channel, customer and cultural aspects. 
7.    Be prepared to invest in the market – it’s no longer a ‘cheap’ market to operate in so keep this in mind.
8.    Finally read a book called ‘Mr China’ on the plane, download the WeChat messaging app, get a good VPN and an APEC card.

Exporter: What are some of the fears, misunderstandings and misconceptions about the China market that need clarification or explanation? 
Kevin: ‘Turning the tap on’. China is not a market that you can just switch on and walk away. All companies need to have a clear strategy around how they manage the market and support their partners. There is an element of distrust in doing business in China and New Zealand companies certainly need to be aware of this – but many Chinese partners are dealing in good faith. 
Having an awareness of the different businesses practices will go a long way once you get into doing business there. 

Exporter: How has PCNZ performed to expectations?
Kevin: PCNZ has been operating for just under two years. We have formed a solid foundation for growth during this time with the support of many people and organisations, including New Zealand Trade and Enterprise. 
PCNZ has been able to attract top quality people – some have a strong bond with New Zealand and others just want to have a connection to New Zealand. We currently have nine FTEs and will continue to build the team as required. 
PCNZ has established a good operational ‘rhythm’ in the way we conduct business and has implemented a high compliance framework to ensure we are respectful of both the Chinese and New Zealand authorities. 
PCNZ is now starting to proactively work in the market as a collective group. In October we launched a two month promotion with the Hyatt Hotel in Beijing and in 2017 we are looking to replicate this model in other cities in China and in the retail channel. One of our strong indicators of success if where our clients join PCNZ and then move into their own business – KONO is an example of this. They now have a trading business up and running and PCNZ has helped support them – they remain a shareholder in the business and are actively involved in specific marketing opportunities. 
PCNZ is now looking for new clients to work with to take on the challenging China market. 

For more on Primary Collaboration New Zealand go to www.pcnz.com.cn    
 

Glenn Baker

Professional writer/editor with 35-plus years experience - including radio copywriting, various television writing/production roles, and writing for business magazines. I have also co-owned a wholesale food distribution business.

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