Over the past ten years China has grown to become New Zealand’s largest trading partner with two-way trade surging towards NZ$30 billion per annum. With trade statistics through to the year December 2018 being analysed Damon Paling takes a closer look at which export sectors and sub-sectors are on the move in China.
Firstly, here’s a quick word for Services. New Zealand enjoys around 450,000 Chinese visitors each year along with around 40,000 Chinese students studying undergraduate or postgraduate. These two communities, coupled with around 300,000 people of mainland Chinese ethnicity living in New Zealand, creates a fantastic tailwind for exporters of goods to China. The power of word-of-mouth amongst family and friends via WeChat is not to be under-estimated. Moreover, some studies have shown than Chinese who have had a great New Zealand experience are up to five times more likely to purchase New Zealand products upon their return back home.
Leading with primary exports and importantly, consumer brand activation, here’s a look at how each export sector is performing in China.
Dairy
Total dairy exports grew 8% and reached just over $5 billion as Chinese middle-class consumers continue to seek protein as part of their daily nutritional needs. This growth was driven by milk powder ($2.6 billion), butter ($797 million), liquid milk & cream ($523 million) and infant formula ($465 million). Cheese exports were flat at around $341 million. Interestingly, ice cream exports doubled to reach $24 million. Unsurprisingly, New Zealand is the leading supplier of China’s imported dairy, with a 55% market share, followed by Australia and France. Of particular note was the premium consumer brand activation by the likes of Anchor, A2, Taupo Pure, Lewis Road Creamery, Open Country Dairy and Pamu to name just a few.
Beef and Lamb
Total beef and lamb exports grew 39% to reach slightly over $2 billion. This was driven by quantity and price increases in the type of cuts that are further processed in China for consumption in hotpot restaurants and/or beef jerky. Lamb/mutton exports reached $1.2 billion and beef exports reached $782 million. Animal gut & bladder exports also enjoyed strong growth to reach $125 million. Interestingly, chilled or fresh meat exports, which only secured market access in mid-2017, have now reached $44 million. New Zealand ranks third as a China meat import country, lagging behind Brazil and Australia. Efforts are underway to engage Chinese consumers with higher-value cuts and an authentic, heathier, grass-fed narrative.
Seafood
Total seafood exports grew by 11% to reach $585 million, thanks largely to live lobster exports growing in value by 10% to reach $309 million. Frozen fish exports fell by 4% to settle at $153 million. Squid and green shell mussel exports reached $40 and $38 million respectively. Although the seafood import market in China is fragmented, New Zealand does retain ‘heroic’ status amongst Chinese consumers thanks to perceptions around our large, deep and pure waters. Increasingly, live lobsters, live green shell mussels, and live clams are appearing in modern retail such as HeMa and Super Species. Retailers and distributors are asking for MSC certification as part of their good business practices. Fiordland Lobster, Future Cuisine, Cloudy Bay Clams and Sealord all continue to drive value through premium quality retail experiences.
Horticulture
Total fruit exports surged by 33% to reach $606 million. Zespri lead the charge with gold and green kiwifruit exports reaching $399 and $112 million respectively. Apple exports grew 50% to reach $66 million. Cherry exports declined 22% to settle at $21 million, due to unfavorable growing conditions in Central Otago adversely impacting quality. New Zealand slipped one place to seventh and represents 5% of the China import horticulture market share. From April to November the fresh produce sections of premium imported supermarkets and online retailers are flush with Zespri kiwifruit and apple brands such as Jazz/Envy, Mr Apple and Rockit. Avocados enjoyed a pilot season in Shanghai and a doubling of growth is planned for 2019.
Forestry
Total forestry exports grew 16% to reach $3.3 billion, lead largely by the export of untreated logs, which grew 19% to reach $2.8 billion, underpinned by a 15% quantity increase. New Zealand ranked the 6th in China’s forestry import market. Business delegations from New Zealand spent time in China in 2018 to further explore the market and identify opportunities for moving down the value-chain with higher value-add processing.
Beverages
Total beverage exports grew just 7% to reach $62 million. Wine exports declined 2% to settle at $38 million, whilst water exports grew by 23% to reach $19 million. Beer exports grew 64%, albeit off a low base, to reach $3.9 million. Unsurprisingly, France and Australia remained the top two countries for beverage imports and together contributed 48% of the import market share. A consumption shift from ‘Old World’ to ‘New World’ wine continues, but it takes time. New Zealand Wine Growers continue to deliver a series of in-market brand building events throughout the year. Beer brands such as Moa continue to invest in Tier 2/3 cities as they innovate product and build their business.
Wellbeing
Total health and cosmetics exports grew 22% to reach $85 million (excluding exports via AU/HK). Cosmetics exports grew by 30% to reach $35 million, which is set against a backdrop of China’s cosmetics import market growing by 61% in 2018. The import market is dominated by South Korea, Japan, France and the USA. Brands such as Antipodes Skincare, Trilogy, Royal Nectar, Glow Lab and Karen Murrell continue to enjoy growth via cross-border e-commerce (CBEC) and they also invest in seeding their brands on influential social commerce platforms, such as Little Red Book. Total vitamin exports declined by 20% to settle at just $14.1 million. Market access is somewhat restricted to CBEC, with product registration for General Trade typically not feasible. Brands such as Lifestream, Goodhealth, Thompson’s and GoHealthy are expanding awareness via CBEC campaigns and activating through other channels, such as TV shopping.
Honey
Total honey exports declined by 39% to settle at $54 million. The decline was likely affected by high in-market inventory levels, attributable to $80 million of exports in 2017. Offline premium supermarkets and online retailers have quipped about ‘market saturation’ in Tier 1 cities. Manuka honey contributed to 34% of the total honey exports with an almost event spilt between mono-floral and multi-floral. New Zealand continues to lead the world in honey exports to China, followed by Australia and Thailand. Notwithstanding a soft 2018, Chinese consumers have an underlying affiliation for honey and a rebound is anticipated in 2019.
Pet food
Total pet food exports grew 125% to reach $23 million, with market access secured via both CBEC and General Trade. Cat food has surpassed dog food to become the largest export category. Dog and cat biscuits also enjoyed a year of strong growth. China’s pet food import market grew 131% in 2018. New Zealand retains a strong position for market access with quality ingredients and has a golden opportunity to capture a large share of the premium imported pet food segment. Key competitors are brands from Canada, Thailand, and USA.
Vegetables
Vegetable exports totaled $23.7 million in 2018, with pea as the main crop, exports of which grew 5% to reach $19 million. Exports of squash grew 71% to reach $3.4 million.
.Machinery
After three years of decline, exports of machinery recovered from $71 million to reach $108 million, growth of 52% compared to 2017. This trade is comprised of mechanical appliances, machine tools, and milking machines.
Damon Paling is New Zealand’s trade commissioner in Shanghai.
