Exporter Magazine May/June 2012

issue 23 MAY/JUNE 2012

issue 23 MAY/JUNE 2012

• GO GLOBAL REVIEW • TAIT’S VIENNESE VIEWPOINT • MALAYSIAN REALITY CHECK • TRADE MARK TIPS

THe MAGAZiNe BeHiND NZ’s eXPORT DRiVe

Easy access Reinventing exporting for products-focused businesses

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> Choppy seas for shipping lines and exporters > Why you should upskill before entering overseas markets > Meet the deal maker: large projects a specialty

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In the future, it will take many imports to make an export.

By 2025, the value of Japan’s total imports of automotive components, from markets as diverse as Vietnam and Poland, is forecast to overtake its total car exports globally.* As businesses increasingly operate within supply chains that span multiple countries it’s critical to have a wider perspective of how a business operates not just now, but in the future.

At HSBC we make it our business to know your business, intimately and thoroughly. Our Global Trade and Receivables Finance teams are on the ground in the major and emerging trading economies, helping your business to take advantage of opportunities as they emerge, wherever they emerge.

For details, contact our Corporate Banking team on corporatebanking@hsbc.co.nz or visit hsbc.co.nz/corporatebanking *Source: Delta Economics 2011

Issued by The Hongkong and Shanghai Banking Corporation Limited, incorporated in the Hong Kong SAR with limited liability, acting through its New Zealand branch.

> CONTENTS

> FEATURES 12 CONFERENCE NOTES

20

Editor Glenn Baker shares his notes from the Go Global international business forum held in Auckland on March 22nd.

2 6 ALL AT SEA Major disruptions caused by the Rena grounding and Port of Auckland strikes have resulted in challenging times for the shipping lines and for exporters. Mary Mackinven reports.

> COVER STORY 2 0 EASY ACCESS

3 0 UPSKILL BEFORE YOU HEAD OUT

World Wide Access was founded by Paul Grey with the sole purpose of reinventing exporting for products-focused Kiwi businesses, initially targeting the US market. The achievements for its clients have been nothing short of impressive, and now, as editor Glenn Baker reports, China is firmly in the company’s sights.

For Kiwi firms looking to grow their business offshore there is no shortage of courses and experts to help them speed up the process. Yoke Har Lee has been reviewing the marketplace.

3 8 THE DEAL MAKER

arge offshore projects are the core business of a small, but L growing export finance company. Its directors are passionate about helping New Zealand’s export efforts.

4 2 TRADEMARK TIPS

Angela Searle sheds light on some of the myths and misconceptions that exist around international trademarks.

4 6 FAIR COMMENT

30

German trade shows make powerful meeting platforms for Kiwi exporters. Doris Evans gets some positive feedback from recent exhibitors.

5 0 VIEWPOINT 5 5 MARKET WATCH

46 > EXPORTER PROFILES

> MARKET INTELLIGENCE 35 VIENNESE VIEWPOINT

14 FROM QUEEN STREET TO OXFORD CIRCUS

ondon’s streets are being made a whole lot safer L thanks to Traffic Systems – a Kiwi exporter with a ‘can-do’ service attitude.

3 6 MALAYSIA: A REALITY CHECK

15 NOTHING GROWS EXPORTS LIKE ALGAE

upreme Biotechnology is transforming hematococcus, S aka plain old algae, into the next big dietary supplement and Kiwi export success story.

16 A TIME TO GROW Phytomed Medicinal Herbs has invested heavily in product licensing to ensure its herbal medicines meet all overseas regulatory requirements. Now it’s payback time.

18 EXPORTING AN AUTHENTIC NZ STORY ‘Creating a new, green-luxury furniture brand for overseas markets takes passion and hard work. All of which Christchurch business Tréology has in spadefuls.

1 EXPORTER

ait’s decision to open a Vienna office had little to do T with the historic charms of Europe’s ‘City of Music’.

By Lesley Springall.

Two years after two significant FTAs came into force, Cameron Gordon reviews the Malaysian export opportunity for our food and beverage exporters.

4 0 MAN ON A MISSION

rank Li, NZTC’s Asian development manager, F reports on his mission to Hong Kong and China.

41 FAIR TRADING Velocity Trade is one of the first of a new breed of forex specialists. Exporter looks at its services and dispels a few myths around this specialised sector.

4 8 GLOBAL STAGE Innovative Kiwi products seeking a worldwide audience.

NEXT ISSUE: JULY/AUGUST 2012

> EDITOR’S LETTER EDITOR

Stuck in the shallows

Glenn Baker. editor@exportermagazine.co.nz ADVERTISING MANAGER Leanne Moss. Leanne@exportermagazine.co.nz

If there was one thing the recent Go Global International Business Conference impressed

ADVERTISING ASSISTANT Rachel Witberg. Rachel@exportermagazine.co.nz

on me, it was the realisation that New Zealand’s export economy is very shallow.

Peter Chrisp, CEO of NZTE, made some interesting comments in his opening address at the Auckland conference, describing the growth of our export economy as “quite static”, which is a concern.

Chrisp believes that a lack of scale is the core of our problem – we just don’t have enough big exporters. Of the 13,000 export companies

DESIGN AND PRODUCTION Hartman Reid. hartman@adrenalin.co.nz COVER PHOTO Julius Margan. juliusm@xnet.co.nz JOINT PUBLISHERS Cathy Parker. cathy@adrenalin.co.nz Yvonne Carter. yvonnec@xtra.co.nz SUBSCRIPTIONS/ENQUIRIES Sarah Holyoake. subs@exportermagazine.co.nz

in New Zealand, around 12,000 have annual export revenues of less than $5 million. Just 260 companies are earning more than $25 million per year in exports, that’s $36 billion in total – but Fonterra alone makes up

CIRCULATION MANAGER Kim McIntosh. kim@adrenalin.co.nz

almost half of that amount. I thought 12,000 export companies sounded

PROOF READING

impressive – but, as Chrisp pointed out, many export firms are operating

George Ward

in niche markets, or “a niche beyond the niche – and niches tend to get crowded very quickly”.

He says our export sector is moving up the ‘value chain’, albeit slowly,

CONTRIBUTORS THIS ISSUE Cameron Bagrie, Colin Bass, Catherine Beard, Ross Brown, Richard Currie, Doris Evans, Sandy Galland,

and it’s important to participate across the entire value chain. There

Cameron Gordon, Yoke Har Lee, Frank Li, Mary

is no shortage of export opportunities either. He talked of emerging

MacKinven, Rom Rudski, Angela Searle,

opportunities such as the demand in the Middle East for our government, educational and technology services; the worldwide opportunities for health technology services (as Orion Health, supreme winner at this year’s International Business Awards is proving); plus agri-business opportunities in South America.

Lesley Springall, John Walley.

Adrenalin Publishing Ltd. 14C Vega Place, Mairangi Bay. PO Box 65 092, Mairangi Bay, Auckland 0754.

Ph: 09 478 4771 Fax: 09 478 4779

New Zealand companies have “good leadership DNA”, says Chrisp – our business leaders demonstrate admirable qualities such as ingenuity, pragmatism, humility, humbleness and, above all, perseverance. The word ‘perseverance’ was to be repeated many times throughout the conference.

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Kiwi exporters can also be fast and agile, he says – but what we need is a cadre of leadership that can be adaptable in markets. He also says we all

Copyright: Exporter is copyright and may not be reproduced

have a role to play in driving our export economy forward – an economic

publisher. Neither editorial opinions expressed nor facts

development eco-system in this country is crucial.

I don’t think you could have come away from the conference not feeling inspired and encouraged – there were some great stories of market

in whole or in part without the written permission of the stated in advertisements are necessarily agreed to by the editor or publisher of Exporter and, whilst all efforts are made to ensure accuracy, no responsibility will be taken by the publishers for inaccurate information, or for any consequences of reliance on this information.

success, and a wealth of knowledge passed on. And I noticed a new generation of business people there, the exporters of tomorrow, soaking it all up. (For my conference notes turn to page 12.)

But there will always be a long and winding, and dare I say it, rocky, road ahead – it will take ‘coalitions of the willing’ to succeed.

Printing: GEON Distribution: Gordon and Gotch ISSN 2230-6528 (Print) ISSN 2253-2730 (Online) ISSUE 23 www.exportermagazine.co.nz

Glenn H. Baker editor@exportermagazine.co.nz

2 EXPORTER

Mass, velocity and energy equals Hamburg Süd.

Success in shipping is all about attitude. That’s the energy part – the sheer enthusiasm which inspires the way we go about things. But we have the critical mass too – the modern tonnage, high-tech technology, trade lane coverage and service network needed for rapid delivery.

Wherever you are, we’re good to go.

For hands on help call our local experts: Outbound: 0503 222 444 Inbound: 0508 333 666

No matter what. www.hamburgsud-line.com

> MAKING NEWS

Export success for fashion designers

N

ew export milestones have been coming thick and fast in recent months for New Zealand’s fashion labels. Twentysevennames, a directional fashion label based in Wellington has recently started selling its collection on the huge international website asos.com – based in the US. Karen Walker, who earlier this year was named ‘Designer of the Year’ in the MYER Supplier of the Year awards across the ditch, also has a new partnership with Anthropologie, the innovative US retail brand, to introduce her diffusion line Hi There exclusively in America. Anthropologie currently has more than 164 stores across the US, Canada and Europe and ships to many more countries.

Meanwhile, Kathryn Wilson is now selling her fashion shoes through Hong Kong’s I.T department store.

“We had approached their footwear buyers for two seasons prior to securing an appointment,” says Kathryn, “and were delighted to receive a positive response in regards to styling and positioning in the Asian market. We have already received repeat orders for their Hong Kong stores.”

Kathryn says she is also targeting the Japanese market, and has begun to explore China stockists through her Hong Kong distributor.

Singapore limits trans fat levels

N

ew regulations that limit trans fat levels in food sold in Singapore are now in force.

From the 2nd of May, the maximum allowable level is two grams of trans fat per 100 grams of product for food sold to cafés and restaurants as well as retail outlets. Suppliers will also have to declare trans fat levels on food labels.

The regulations do not apply to dairy

products and companies have until May 2nd next year to comply.

Since 2009, products with less than 0.5 grams of trans fat per 100 grams of food have been allowed to be labelled as ‘trans fat free’ and that doesn’t change under the new regulations.

The tougher requirements bring Singapore in line with regulations in many other developed countries. AVA,

Singapore’s Agri-Food and Veterinary Agency, which will monitor compliance with the new regulations, requires foreign suppliers to use independent, accredited laboratories for trans fat analysis of foods.

To find out more visit: www.ava.gov. sg or contact Winston Ong in NZTE’s Singapore office on Winston.Ong@ nzte.govt.nz

Another step towards RMB internationalisation?

T

he People’s Bank of China has recently announced that it is upgrading CNAPS (China’s National Advanced Payment System) which will make it easier to clear Renminbi (RMB) payments both domestically and across its borders, suggesting that this is yet another move towards the internationalisation of the RMB. This move could have a significant impact for New Zealand businesses that

4 EXPORTER

trade with China, as it suggests that even more trade partners will begin demanding payments using RMB as opposed to the USD. Recent visits to China by HSBC executives have also found that there is a surprisingly high level of buy-in for the internationalisation of the RMB, and that critics of the process are now in the minority. This highlights just how important it is for New Zealand

companies to continue to forge ahead with their RMB plans.

Even with the current difficult macroeconomic environment, this high level of buy-in points to a minimal risk of roll back of the internationalisation. Nor should there be any concerns around the lowering of expectations for the RMB’s appreciation. The HSBC believes that the RMB will appreciate in 2012, albeit at a lower rate of around three percent.

> MAKING NEWS

Japanese distributor for Ecoya

E

coya recently signed an exclusive agreement with Japanese company Kinu Corporation to distribute its products in Japan.

“We are delighted to sign this exclusive contract with Ecoya as it gives us real strength in the growing home fragrance market,” says Wataru Kajimura, president of Kinu Corporation.

The agreement followed a successful trial with leading Tokyo retailer of luxury home goods ‘Bus Stop’.

Geoff Ross, chairman and CEO of Ecoya, says the group has seen 135 percent growth in sales, year on year in Asia. Trilogy products are already in Japan – the biggest single Asian

market for the group’s skincare range, with well-known Tokyo estore Iseta, being the single biggest account and Cosmekitchen the largest chain. Beyond Australia, Asia is where Ecoya sees very strong growth coming from, primarily within our biggest market Japan, but also in China and Korea.

“The Ecoya group currently has sales to countries outside of New Zealand that equate to 72 percent of its total sales, and we expect this is likely to grow.

“It used to be that brands travelled ‘west to east’, meaning they would start in the western retailers and eastern countries would then pick them up.

In our case we have seen several

examples of the reverse,” says Ross.

“For instance, Ecoya started in Harvey Nichols Hong Kong and will soon be in Harvey Nichols London.”

China our biggest seafood customer

C

hina has now become the leading importer of New Zealand seafood.

The Ministry of Agriculture and Forestry has released the latest fisheries and aquaculture production and trade figures showing the total value of fisheries and aquaculture exports for the calendar year (to 31 December 2011) was up 2.9 percent on the previous year, at

NZ$1.53 billion.

China imported NZ$299.6 million worth of New Zealand seafood in the 2011 year, beating Australia for the first time. Their main imports are New Zealand live rock lobsters, hoki and squid. The US is the third-largest importer of our seafood, followed by Hong Kong.

The total volume of seafood product exports increased marginally (0.5 percent) to 301.5 thousand tonnes.

Aquaculture export volumes increased by 3.8 percent to 45,031 tonnes during the year ending December 2011, and total aquaculture export earnings increased by 12.0 percent to $307.4 million.

Choose the ultimate business location and enjoy more cost-effective exporting www.thetaurangabusinesscase.co.nz

EXPORTER 5

> MAKING NEWS

Our top international companies revealed

O

n Wednesday March 21, New Zealand’s top export individuals and companies were revealed at a glittering gala dinner staged at Auckland’s Langham Hotel, and it was indeed a night to remember. Supported by strategic partner ANZ, the 2012 New Zealand International Business Awards revealed that there is much to celebrate on New Zealand’s international business front.

A special congratulations goes to Orion Health, who took away the Supreme Award, proving that persistence (a word that was repeated many times on the night) pays off in the long run.

You’ll find profiles on all the Awards winners in the April issue of sister publication NZBusiness

and on the www. exportermagazine.co.nz website. Or go to www. nzte.govt.nz/awards

Cawthron’s lucrative new export market

I

ndependent research organisation, Nelson-based Cawthron Institute, has broken into a new and lucrative export market that promises rich returns for the country. Acting CEO Daryl Wehner says the Institute has managed to extract and sell minute amounts of complex organic compounds sourced from algae to an international market for significant prices.

“Our sales over the first nine months have exceeded a quarter of a million dollars and we have several large orders already placed awaiting delivery.”

The compounds, natural toxins produced by algae, often found in food such as shellfish, are necessary for research and other high value products, including pharmaceuticals, making them of special interest to scientists working in these fields, as well as regulatory bodies.

6 EXPORTER

Cawthron Institute is one of only a handful of organisations worldwide with the capability to produce these rare naturally occurring compounds to the market.

Daryl Wehner says this emerging market provides a great opportunity, not only for Cawthron but also for New Zealand, especially once the potential for pharmaceutical development for the treatment of diseases is explored.

“We have spent 15 years developing our science and expertise in this field, initially to ensure the safety of the New Zealand seafood industry, and now we have an opportunity to convert this capability into unique, high value, highly sought after compounds.

“Any product that sells for about 50,000 times the price of gold would have to be the ultimate in New Zealand’s search for differentiated

high value exports.”

Cawthron recently sold one milligram of an extracted natural compound, equivalent in volume to three grains of salt, to a European country for ¤3,000 EURO or NZ$5,500 and ten milligrams of another compound to the US for over NZ$45,000. A level teaspoon full of these compounds is worth several million dollars.

Cawthron’s laboratory services manager, Nico Van Loon says because the compounds are present in very small amounts in the algae, compared to the likes of omega 3 fatty acids which are present in relatively large concentrations, extracting them is technically very difficult – “very much akin to finding a needle in a haystack.”

But he says the potential returns could be phenomenal with sales to date solely in response to customer enquiries.

> MAKING NEWS

GO UK winner good to go

U

K Trade & Investment (UKTI) has named New Zealand biofuel company LanzaTech the winner of the GO UK competition.

LanzaTech finance

manager-operations Beno Samuel says it is a huge honour and very exciting.

“Although LanzaTech has its roots in New Zealand, we are very much a global company having offices

in the US, China and India. The UK and Europe, however, has been very much on our radar and is a place of tremendous potential for our business.”

The GO UK competition invited New Zealand companies to submit business plans for a chance to win a $30,000 prize package including airfares and professional services.

British High Commissioner Vicki Treadell says all finalists were of the highest calibre and that it’s very encouraging to see many New Zealand businesses looking to expand into

the UK market given the economic uncertainty.

“We have every confidence that LanzaTech will quickly establish themselves, make an impact in Europe, continue to deliver strong results and put New Zealand on the map.”

New Zealand businesses get the same opportunities and benefits in the UK as local companies, thanks to the unique memorandum of understanding between both governments which will help LanzaTech hit the ground running.

Expansion for Sistema

S

istema, a household name in New Zealand made storage containers, has expanded its operations to fuel development and meet consumer demand both locally and internationally.

46 percent growth in exporting and 33 percent year-on-year progression of Sistema has led to the development of a new $7.5 million purpose-built production facility officially opened by Prime Minister John Key in March.

The new 6000 square metre facility will enable Sistema to double its production and create 50 new jobs over the next two years and up to 100 jobs in its five-year plan.

“This investment cements our commitment

to stay in New Zealand and manufacture in New Zealand,” says Sistema MD Brendan Lindsay. “We are all very proud to produce a product that not only competes in the global arena but in many cases is the market leader.”

A testament to the 100 percent Kiwi owned and operated company is the fact that every 1.3 seconds a Sistema product is purchased somewhere around the globe.

Sistema currently produces its entire product line in their Penrose factory, employing more than 300 staff and exporting to more than 22 countries. It is on track to post a $100 million turnover this year, of which exports equate for 80 percent.

EXPORTER 7

> MAKING NEWS

Biting into the US apple market

N

ew Zealand’s apple exporters have been busy supplying their crop to worldwide markets and Kiwi-grown apples are as popular as ever with overseas consumers.

However, this season marked a special occasion for the apple industry as the long-awaited first ever commercial export shipment of Honeycrisp apples made its way from Timaru to Philadelphia in the US, onboard the Maersk Line vessel, ‘Irene’s Rainbow’.

The Honeycrisp apple has been described by the New York Times as “the iPod of the orchard”. Known for being “explosively crisp” with amazing flavour and texture, the variety was

originally discovered and developed by the University of Minnesota Department of Horticulture, and consistently tops the lists of US consumer favorites.

The inaugural shipment of two containers comes after many years of test planting in a number of trial orchards around New Zealand.

Honeycrisp is a cool climate variety and South Canterbury and Central Otago orchards have delivered excellent results.

New Zealand fruit marketer Fruit 2U Limited is in charge of marketing New Zealand-grown Honeycrisp apples to US-based company Pepin Heights.

Director Murray Linnell is convinced about the positive prospects for this

particular variety, saying the potential counter-seasonal demand from American buyers could be as high as one million cartons, the equivalent of 850 FFE.

While New Zealand might not be able to supply them all, local export volumes are expected to climb steadily to 150-200 FFE over the next few years.

Craft brewery secures US deals

N

atural ingredients, traditional brewing techniques and sustainable shipping practices have seen Moa Beer secure impressive deals with some of America’s top retail chains.

The Marlborough craft brewery has secured nationwide beer distribution at Whole Foods, America’s largest organic supermarket chain, with more than 300 stores, of which 250 are licensed.

As a result of two US market visits

by Moa GM Gareth Hughes in 2011 and early 2012, Moa has also won a highvalue deal at the Yard House chain of restaurants and bars. The deal has been enabled in part by the company’s use of environmentally friendly recyclable “key kegs”.

The craft beer is also heading to Vegas – it will soon be served in some of Las Vegas’s top casinos.

Pure Advantage trustee and Moa executive chairman Geoff Ross says

8 EXPORTER

the brewer’s craft credentials attracted the suppliers – but its green credentials make it possible.

“Moa is a natural beer, with no chemicals or preservatives, which sits well with discerning Americans. The fact Moa is bottle-conditioned and fermented – just like beer used to be – means it travels well too.

“And the very fact it’s from New Zealand appeals to American consumers. They see New Zealand as a pure place which is ideal for brewing a natural beer.

“The use of innovative new technology is also helping us conquer the challenges of distance, such as the environmentally-friendly key kegs,” Geoff says. “Moa is the first New Zealand brewery to export using these kegs and the benefits to our business will be huge, both in driving top line and reducing costs.”

> MAKING NEWS

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EXPORTER 9

> F E AT U R E

Exporters upbeat about 2012 The results of a recent survey show that Kiwi exporters are adaptable in meeting their objectives and optimistic about export sales growth in 2012.

BY C A M E RO N GO R DO N

T

he end of the financial year provides a great opportunity to look back on the previous business year to assess where successes have been generated and which areas need greater focus in the coming year.

In the second half of March, Incite, in partnership with Exporter and NZBusiness magazines, gave New Zealand exporters the opportunity to benchmark against other international traders and gain valuable insights into some of the common issues facing New Zealand exporters by participating in our Export Survey.

Ninety percent of the companies that took part in the survey were New Zealand goods exporters, with services exporters making up ten percent and a crossover of four percent of exporters that fit into both categories.

Participating companies ranged from major New Zealand multinationals to new and emerging exporters.

The 2011 financial year received a pass mark from the majority of participating exporters – with 46 percent recording slightly increased export sales and 28 percent recording significantly increased export sales.

Eighteen percent of exporters experienced no change in their export sales and only eight percent of exporters had their annual export sales decrease.

A clear trend emerged about the regions that exporters felt presented the best opportunities for their

10 EXPORTER

businesses in the 2011 financial year.

From a sales growth perspective, 61 percent of exporters experienced their greatest increase in export sales to customers in the Asia region in the 2011 financial year. Looking to the Oceania/Pacific region, 27 percent of exporters say that it was in this region that they experienced the majority of their gains in export sales in 2011.

Interestingly, although 76 percent of exporters received the majority of their trade enquiries from Asia, compared to 18 percent from the Oceania/Pacific region in 2011, conversion into profitable export sales was almost neck and neck: 46 percent of exporters in the survey experiencing the greatest profitability in export sales to customers in Asia and 44 percent from customers in the Oceania/Pacific region.

Participating exporters painted a rather dismal picture about their export activities to Europe, the United States and the Middle East in 2011, with a total of ten percent of exporters confirming that these markets combined make up their most profitable markets and 12 percent confirming that these markets combined were responsible for their greatest increase in export sales in 2011.

The year ahead Exporters are feeling a little more optimistic about European, US and Middle Eastern markets moving into

2012, with 14 percent of exporters in the survey targeting each of European and US markets for growth in 2012, while eight percent of exporters plan to target the Middle East.

When focusing on the markets that exporters feel will generate the greatest increase in export sales in the 2012 financial year, the results are clear-cut with 69 percent of exporters predicting the largest growth in export sales will come from the Asia region, while 21 percent expect that the Oceania/Pacific region will offer their business the best opportunities.

Although exporters have expansive plans for diversifying and growing a range of markets in 2012, unsurprisingly when taking the data above into consideration, New Zealand exporters are particularly focused on two regions in the 2012 financial year. Eighty two percent of exporters are targeting Asia for export growth in 2012, while 38 percent are targeting the Oceania/ Pacific region.

On the whole, sentiment is upbeat about the 2012 financial year with 46 percent of exporters forecasting that their export sales will increase slightly

69 PERCENT OF EXPORTERS PREDICT THE LARGEST GROWTH IN EXPORT SALES WILL COME FROM THE ASIA REGION, WHILE 21 PERCENT EXPECT THAT THE OCEANIA/PACIFIC REGION WILL OFFER THEIR BUSINESS THE BEST OPPORTUNITIES.

”

throughout 2012 and 42 percent of exporters anticipating a significant increase in export sales.

Data received from the survey shows that New Zealand exporters are taking a hands-on approach towards developing new business offshore. Fifty-four percent of survey respondents indicated that their company’s best source of trade leads come from enquiries received directly from offshore, while 28 percent find that their most useful leads are generated in-house. Twelve percent of exporters identified third party private sector consultants as the best source of trade leads for their business.

A similar trend emerged about New Zealand exporters’ attitude to due diligence and market intelligence.

Forty percent of exporters find that the best source of market intelligence is generated internally and 32 percent of exporters find that trade enquiries received from potential international partners provide the best source of market intelligence.

International trade-related service costs affected exporters significantly during the 2011 financial year. Forty- six percent of exporters surveyed had their freight costs increase slightly during the year and ten percent of exporters had their freight costs increase significantly, while only 32 percent of exporters experienced no change in freight costs.

Increasing freight insurance costs affected exactly half of the respondents with 46 percent of exporters having their freight insurance costs increase slightly and four percent having their costs increase significantly.

Fifty percent of exporters had no increase at all.

Times Square shopping mall, Hong Kong

FTA impact Exporters are generally positive about the effect that New Zealand’s Free Trade Agreements (FTAs) are having on their export sales. Forty percent of exporters feel that the agreements New Zealand has in place are having a slight positive effect on export sales to New Zealand’s FTA partner countries, while 22 percent feel that these FTAs have a significant positive effect on export sales. Thirty-six percent of exporters feel that the FTA’s New Zealand has in place are neither positively nor negatively affecting their export sales to FTA partner countries.

Although the international economic climate continues to present New Zealand exporters with challenges in growing their businesses offshore, the results of this survey clearly show

that our exporters are adaptable in meeting their objectives. By focusing export-related efforts on markets that continue to display growth characteristics in consumer spending and confidence, including Asian and Australian markets, New Zealand exporters remain optimistic about meeting their export sales growth and profitability projections in 2012.

CAMERON GORDON / WRITER

Cameron Gordon is Asia Market Manager at Incite, an international trade services firm that connects New Zealand food and beverage suppliers with partners in South East Asia and Taiwan. Email camerongordon@exportincite.com or visit www.exportincite.com

EXPORTER 11

> F E AT U R E

Conference notes Go Global was an intensive on-day international business forum held in Auckland on March 22nd. Editor Glenn Baker opens his notebook from that day.

7

.30am: First impressions of Go Global? Well organised; a high calibre of speakers (NZTE’s regional directors are in the country for a high-level meeting this week); and a good mix of exporters if my table is anything to go by. A forum geared to supply inspiration, motivation and education!

8.45am: NZTE CEO Peter Chrisp is up first – shares his thoughts on where the greatest opportunities lie for our exporters, and how his organisation and its networks can assist. His main message? Kiwi exporters are moving up the value chain but it’s slow progress. We need more depth to our export economy – we’re relying on too few major exporters. High-value food, wine and technology exports have great potential, along with educational, technological and health services.

New Zealand has the technology, leadership and innovation ‘DNA’– but it’s going to take collaboration, a “coalition of the willing”, everybody working together to crack new markets for exporters. The TEAM acronym springs to mind – Together Everyone Achieves More.

9.15am: The early morning session includes talks by three CEOs: Neil Cowie of Pumpkin Patch, Simon McDonald from Triodent and Helen Darling from Oritain Holdings.

Cowie’s nuggets: export partners must have a vested interest in the business and understand it fully; it’s important you understand your in-market partners strategies too – are they in line with your brand values?; know your point of difference and

12 EXPORTER

NZTE chief executive Peter Chrisp addressing the conference.

beware of copycats – be prepared to defend yourself; have an exit strategy from a market – you never know when you might have to pull the pin.

McDonald is impressive – clever products, clever man. He says if you’re going to exhibit at a trade show, upsize your booth so you look like a global player.

I like his ‘less is more’ design principle too – and he has anecdotal evidence on the benefits of taking forward orders on new products, even if you’re not quite ready. One such instance made around $1 million difference in sales.

Liked Helen Darling’s advice on the importance of people networks. “Talk to anyone at anytime and anywhere about what you do.”

10.30am: After morning tea, a talk

by Ben Anderson of Lonergan Partners and chair of North America Beachheads. He’s been based in California’s Silicon Valley since 2006. Makes the point that “talent really does matter”. Hire the best if you’re tackling the US market. Will your existing talent, practices and capabilities be enough to carry your firm forward? Anderson has loads of great tips for accessing the US market and a reminder about the role LinkedIn can play. Use LinkedIn to network in overseas markets. Use it to acquaint yourself with your competition (perhaps connect with people who’ve recently left their employ); to contact experts; do due diligence on potential partners and employees in market; as

agreements are based on relationships rather than documents – remember names, and offer gifts; online shopping is still in its infancy.

India’s economy is undergoing rapid change which throws up many opportunities. Our FTA is still under negotiation – now’s a good time to enter the market. The NZ Inc brand in India is well regarded thanks to our shared Commonwealth heritage – and I suspect shared love of cricket.

well as source freelancers, consultants and advisors.

11.15am: The BNZ Breakout Sessions.

I’m in a bit of a conundrum as to which to attend. Australia/Pacific/US, China/ Asia or India. I choose the latter. I’m familiar with Grant McLauchlan’s Crest Commercial Cleaning and its launch into India and keen to learn more about that market. McLauchlan’s in-market experience with CrestClean India proves invaluable to the discussions. It seems transferring funds to India can be complicated, and there is a high cost associated with borrowing money in India. Some tips: understand the culture – it’s a very family-oriented society; choose your partners carefully; in India business

12.30pm: No time for lunch for me, and sadly no more conference. I have the first of two pre-arranged interviews with NZTE regional directors. First up, Anne Chappaz, RD for Europe, Middle East and Africa. Her trade background’s extensive; as is her patch. From her Hamburg office her responsibility stretches from Ireland to Russia, Pakistan to the Gulf and right down to Capetown.

Where does Chappaz see trade opportunities right now? Western Europe is largely over its crisis she believes – power and wealth-creation is moving north to areas such as Germany and Scandinavia – “so there’s a geographical opportunity happening”. There’re opportunities in both budget and premium areas of the market says Chappaz – ‘premium’ the operative word for our exporters.

Europe is a region that’s “buying on value and values”. Values meaning the likes of branding, sustainability, product quality, origin, or the ‘aspirational experience’. Public sector organisations are also desperately looking for cost-saving products such as software, says Chappaz. (Think Orion Healthcare or Simpl.) “So they can deliver better solutions and create efficiencies at the same time.

Essentially deliver more for less.”

Chappaz explains what’s happening in the Middle East – as a result of the ‘Arab Spring’ uprisings, governments are spending billions to meet the wants and needs of their people – on jobs, healthcare, education, housing. And those governments see New Zealand in a positive light – we’re neutral. Middle Eastern countries want to be up on top of the world indexes in terms of ‘best place to live’, best governance, ease of doing business, health and education outcomes – and it’s providing opportunities for Kiwi companies with services solutions. But be prepared to

be in for the long-haul, be well-funded and willing to invest in the markets and the relationships there. “You can’t do it at a distance and you can’t do it quickly”, says Chappaz.

As for other standout opportunities – keep an eye on Turkey and Russia, she says. Turkey will be covered in a series of seminars around New Zealand in June (the NZTE website has details).

Russia is showing promise thanks to an FTA on the table and a growing middle class with disposable income.

1.45pm: A chance to chat to Paul Grey, founder of World Wide Access and subject of this month’s cover story.

It starts on page 20 – an impressive business model for small Kiwi exporters wanting to dip their toe into overseas markets.

3.00pm: I meet Marta Mager, RD for the Americas. Based in LA, and again, a big territory. Look beyond the news headlines, says Mager, there are pockets of wealth in the US; there are opportunities and profits especially for trend-setting technology companies, and health IT companies. “There is a broad portfolio of Kiwi companies continuing to do really good business out of the US.” As well as a consumer market, the US is also a healthy capital market – ideal for Kiwi firms looking to secure tech-focused venture capital.

There is plenty of support on the West Coast too –the Kiwi Landing Pad is an office-space in San Francisco open for Kiwi tech companies in particular; and Plug and Play, an incubator being trialled by NZTE. The US public sector defence procurement market is another vein of opportunity. Tait and Zephyr are just two Kiwi companies tapping into this ‘first responder market’.

Canada, Mexico, Brazil, Chile, Uruguay – Mager is a mine of information on the potential of these markets. She urges exporters to tap into the Beachheads programmes, available on both the North and South American continents.

(Too many notes to cover here. I’ll have to save her comments for another story in a future issue.)

EXPORTER 13

> EXPORTER PROFILE

From Queen Street to Oxford Circus The streets of London are being made a whole lot safer, thanks to a Kiwi exporter with a ‘can-do’ service attitude.

BY G L EN N B A K E R

I

f you’ve crossed an intersection in Auckland’s Queen Street lately, you couldn’t help but notice the large countdown timers for pedestrians – the brainchild of Kiwi firm Traffic Systems. Well, next time you’re in London, at one of the city’s 6000 intersections – perhaps for the 2012 Olympics – you could well see the same technology in action.

Traffic Systems won an international tender to supply pedestrian countdown timers to Transport for London (TFL) – the result of three years hard slog, according to Traffic Systems director Andrea Ransley.

Mayor of London, Boris Johnson, had championed the issuing of the tender in an effort to reduce the number of accidents at the city’s pedestrian crossings. He could see that timers would impact on the number of lethal last-minute dashes across the road.

This successful contract for Traffic Systems ultimately had its origins when Paul and Andrea Ransley, two of the most experienced operators in the traffic industry, founded Total Traffic Systems in 1994. They quickly built the business up before selling to Australian company Tyco Projects in 2000, and it wasn’t long afterwards that the couple launched Traffic Systems – now New Zealand’s largest specialist traffic signals business, with 65 staff and around 400 intersections to oversee.

Paul is MD, in charge of all

14 EXPORTER

operations and technology development, while Andrea is CFO, with a knack for contracts and service provision.

So how did the London contract come about?

It transpires that TFL were aware of the Queen Street timers and after successful device testing and trial at four London intersections, Traffic Systems was invited to put in a bid. It was one of two successful tenders – and the deal gives the company the opportunity to install up to 6,000 intersections and puts the rest of the UK, and indeed Europe, on its radar.

“We had a proven record and TFL was extremely happy with the product quality and liked our ability to deliver at short notice,” says Andrea.

“Countdown timers are a relatively new technology, so there aren’t many companies with the knowledge and equipment to deliver the service. That expert knowledge combined with our ‘can-do’ attitude and attention to detail made us a winning proposition.”

The ‘can-do’ attitude cannot be understated, she says. “Many of the tenders were from large corporates.

They move slowly and don’t react to problems and opportunities the way we do.

“We solved any problems very quickly. We were happy to use local and foreign partners to solve them and we never let anything get in our way.”

Andrea says the London product

trial was not without its funnier side.

“We took our test products over there and spent many hours adjusting the software to solve various challenges. So picture us in a London hotel room in the middle of summer, with no air conditioning and the door open to let in some fresh air. We must have looked like terrorists with all our timers counting down and a box with wires spewing out! It’s a wonder MI5 didn’t turn up, fully armed!”

Andrea says there have also been some serious lessons learnt along the road to export success.

“Staff are your biggest asset – you need to train and retain them.” Taking on an extra staff member can make life so much better, she says, reducing stress and improving productivity.

Her other advice for business owners is to think very seriously before taking on a business partner and giving them more than 24 percent control.

“Ensure you have a watertight shareholder agreement and a strong ‘out’ clause if someone wants to exit the business.”

Good advice from somebody who fully appreciates the importance of timing.

Glenn Baker is editor of Exporter magazine.

> EXPORTER PROFILE

Nothing grows exports like algae It has 6000 times the antioxidant value of vitamin C, and now Supreme Biotechnology is one of only five companies globally transforming hematococcus, aka plain old algae, into the next big dietary supplement and Kiwi export success story.

BY CO L I N B ASS

T

ony Dowd, CEO of Supreme Biotechnology, was hell-bent on riding the tidal wave of biofuels in 2006. Backed by his boutique venture capital firm, New Horizon Capital, he had tallow in his sights. As a bi-product of meat processing plants it was shaping up to be the next big thing. It certainly wasn’t hard to find an investor in the UK at the time.

However, on the verge of doing a tallow deal, a BSE scare in the US hit international headlines increasing the price of this once waste product fourfold and ultimately destroying Tony’s business case. Back went the funds to the investor.

Tony quickly adjusted his sights and started looking at other options – palm oil, peanut oil, jatropha. With a higher biomass per hectare than any other plant matter and its ability to grow fast in confined spaces, algae captured his attention. However, at $400/barrel it just did not stack up as a biofuel.

It was during his global research efforts he came across the oldest scientific research institute in New Zealand: the Cawthron Institute. At Cawthron, they too were captured by the potential of algae. In fact they had established a process to grow algae as part of their world-renown aquaculture research programme. This, coupled with the presence of Nutrizeal, a local company experienced in extracting the world’s most powerful natural antioxidant (astaxanthin) from the algae, resulted in Tony quickly establishing a relationship to develop

a powerful nutraceutical from algae and Supreme Biotechnology was born.

With only a few suppliers of astaxanthin internationally, Tony didn’t take long to secure half a million pounds to carry out more R&D, develop a prototype and set up a pilot plant.

The Ministry of Science and Innovation has been alongside all the way with helpful support. The reality, however, was to see set up costs come in double what was initially budgeted.

“I have a saying,” Tony remarks with his investor hat on. “If you expect an ambitious project like this to take four times as long, cost four times as much and deliver a quarter of the return, then you might be close. Luckily we’ve done better than this but it pays to manage your expectations.”

Production commenced in March 2011 with the first UK exports following quickly afterwards.

Through connections provided by the company’s largest investor, Supreme Biotechnology now has strong relationships with one of the largest online health marketing companies in the UK, Health Spark, which has used Supreme’s product in two of its brands – HeathSpark and SuperFit. “With this customer we are delivering under their brands.

Ultimately a strategic approach should always be to have control over your own brand. But to be a key supplier to a reliable client is a good way to get things cranking,” says Tony.

Using the learning in the UK, Supreme Biotechnology is now delivering its first shipments to the US under the company’s own brand,

Tony Dowd: “We are looking at a multi-level marketing approach for Asia.”

Photo courtesy of the Nelson Mail.

AstaSupreme.

“Again we benefited from the networks of our international board members and investors. Our medical director, a leading international expert in astaxanthin, introduced us to a Kiwi expat who is now carving out a market for Asta in the US,” explains Tony.

Closer to home, Tony has his sights set on South East Asia. Already providing product to Indonesia and with interest coming from Japan for raw material, he sees huge potential for growth.

“We are looking at a multi-level marketing approach for Asia. It suits the size and value of nutraceuticals and it’s a popular model already for delivery in certain Asian countries.”

The future looks bright for Supreme Biotechnology. With customers forecasting demand at greater than five times current capacity, the company is now raising additional funds to take advantage of the huge potential international market.

Colin Bass is a Nelson-based freelance writer. Email colin.bizlab@gmail.com

EXPORTER 15

> EXPORTER PROFILE

A time to grow Phytomed Medicinal Herbs has invested long and hard to ensure its products meet all regulatory requirements in overseas markets. Now it’s payback time.

BY G L E N N B AK E R

W

hen I visited Phytomed’s Avondale factory in early April, the place was buzzing. The company was days away from launching its Kiwiherb product line into Australia, and there was much to be done.

Managing director Phil Rasmussen greets me in a reception area crowded with various productionrelated boxes – “it’s not normally like this,” he assures me.

Phytomed is poised for major export growth, but Rasmussen would be the first to agree that it has not been an overnight success story.

Where they are today is the result of many years investment in acquiring the necessary product licences to access overseas markets.

Phytomed Medicinal Herbs is a producer of premium herbal medicines for qualified health practitioners – with emphasis on the word ‘premium’. And to understand Phytomed’s unwavering commitment to product quality, you first need to understand the history of the company and its founder.

Phil Rasmussen’s life revolved around medicinal herbs right from an early age – as a child growing up near Gisborne he was introduced to plants by his parents, who were keen gardeners. He studied pharmacy (has a masters degree in pharmacology from Otago University), dabbled in homeopathy and, while living in the UK, became interested in herbal medicines, and began growing his own medicinal herbs on an ‘allotment’ and selling herbal ointments.

16 EXPORTER

He qualified as a medical herbalist (aka ‘phyto-therapist’) and over his career worked in all three areas of pharmacy – hospital, drug information and retail/community.

Phytomed was founded in 1998 and began trading around three years later from Rasmussen’s backyard – it took that long to write all the necessary documentation, he says, but it was to prove a wise investment.

“The documentation was, still is, required under the pharmaceutical code of Good Manufacturing Practice or GMP – that’s the international standard for pharmaceutical companies, and is required for export.”

Rasmussen had noticed that many of the ingredients for Western herbal medicine were based on plants indigenous to North America, Europe and Africa, and many were on the endangered list. So he was keen to utilise flora and fauna native to New Zealand in products. He says the chemistry of New Zealand’s plants had been relatively well researched since World War Two. What was missing was the pharmacology – what they do medicinally.

New Zealand not only has unique flora – it also has a great growing climate, says Rasmussen – the right soil, location, agronomy (the science of optimal growing) and horticultural science input. “You can grow pretty much any premium quality plants you want to here. Western herbs such as echinacea, ginkgo and ginseng, we grow locally because the quality here is the best in the world.”

Export focus Rasmussen says Phytomed differs to other New Zealand natural health product exporters in that their focus is currently not Asia. “Our products are mostly Western herbs, and to create awareness and educate consumers on our products in Asian countries such as China would require huge resources. It’s much quicker and easier to educate consumers in the UK, or Ireland or California about the qualities and benefits of medicinal herbs such as echinacea.”

He says their current export focus is two-pronged: UK/Europe and Australia. That’s big enough for a small (20 staff) but growing company (sales grew by 40 percent in 2011) that specialises in premium products.

They’ve invested significantly in meeting regulatory requirements in those markets – particularly Europe.

Not many New Zealand natural product companies are exporting to Europe like Phytomed, and Rasmussen puts this down to the fact that he lived in the UK for many years and has contacts there; plus it’s easier to gain brand awareness in those markets.

He sees good long-term opportunities in countries such as Germany and Holland.

“The regulations have recently become much tougher in Europe,” says Rasmussen. “There are stringent pharmaceutical stability studies to ensure that your product maintains its qualities throughout its shelflife – along with extensive product information requirements.

“If you’re serious about export full traceability is crucial he adds. “And you need to guarantee that what’s stated on the label is, in fact, what’s in the bottle.”

Rasmussen believes Europe and the UK, despite economic challenges, is still a lucrative long-term market opportunity for Phytomed. People there are discerning, looking for lowercost alternatives to traditional drugs, and antibiotic resistance is becoming a major issue. There’s a need for a new paradigm, he says, “in terms of building immunity and controlling infectious diseases.”

He says for all sorts of reasons the use of effective herbal products everywhere has increased during the recession, and their take-up will be fuelled even further as countries switch to user-pays health services.

“People will be forced to take more responsibility for their own health.”

Kiwiherb for Aussies As well as its bulk herbal extract sales on both sides of the Tasman, Phytomed has been exporting its organic-certified Kiwiherb medicinal herb range to the UK and Ireland, and a small amount to Asia, for some time, and is starting its push into Australia with the brand in May (hence the extremely busy office!).

To achieve TGA (Therapeutic Goods Administration) GMP certification in Australia, Phytomed had to fly auditors to New Zealand at its own expense. “The lack of an MRA between the two countries definitely slowed our growth,” he admits. “That’s been the toughest aspect, to be honest.

“We’re starting in Australia with an exclusive distributor in New South Wales and our own local rep on the

IT’S MUCH QUICKER AND EASIER TO EDUCATE CONSUMERS IN THE UK, OR IRELAND OR CALIFORNIA ABOUT THE QUALITIES AND BENEFITS OF MEDICINAL HERBS SUCH AS ECHINACEA.

”

ground,” says Rasmussen, “so we only bite off as much as we can chew.” And they’re going for the ‘low-hanging fruit first’ he says – to pharmacies, where the most market growth is happening, and health food stores.

Exports equate to around 35 percent of total sales, but with the Kiwiherb launch into Australia and the first of its new product licences about to be secured in the UK, Rasmussen’s predicting that figure to reach over 50 percent in the next financial year. “We should do well in Australia, provided we get the distribution model right and can control marketing and distribution as much as possible.”

Looking ahead Having a sound board of directors has been instrumental in steering the company forward, says Rasmussen.

The board includes industry notable Graeme Boyd, the former CEO of Comvita. The result has been more time spent on strategy and managing the company’s robust growth.

Rasmussen sees increased regulation and the rationalisation of brands and products impacting on the global medicinal herbs industry.

He believes the market will continue to grow, particularly for products that work. “Proof of effectiveness will become more of a requirement of both purchasers and regulators too – that’s a global trend,” he says, and he predicts that clinical trials will become increasingly necessary.

Meanwhile, with key senior management being appointed, Phytomed is entering an exciting growth phase. Rasmussen keeps a close eye on any new industry research and stays committed to what he believes are the three keys to the company’s sales success: quality in terms of levels of active ingredients and dose; staying away from the ‘me

too’ market and producing innovative products (such as combining manuka honey with herbs); and providing good customer service – “all three sales reps in New Zealand are trained practitioners of herbal medicine and can ‘talk the talk’.”

As for personal testing of his own products, he never leaves the country without a good dose of echinacea to boost his immune system. He’s living proof of his products’ effectiveness.

Glenn Baker is editor of Exporter.

EXPORTER 17

> EXPORTER PROFILE

Exporting an authentic NZ story Creating a new, green-luxury furniture brand for overseas markets takes passion and hard work. But the message from Christchurch business Tréology is ‘don’t be scared of new markets, just pick up the phone and make things happen’.

BY SA N DY G A L L A N D

‘J

ust do it’ is the mantra of Tréology founder, Andrew Davies. “Our potential customers are people just like us and because they live thousands of kilometres away really makes no difference. I see that sending product to America is really no different to sending product to Auckland – there’s just more paperwork involved.”

Andrew and wife Melany-Jayne have spent the past eight months working solidly to launch Tréology – a bespoke furniture company that will supply a little slice of sophisticated Kiwi magic to those living in city apartments overseas.

Recently they travelled to New York, Los Angeles and San Francisco to unveil Tréology to their target market – interior designers to discerning, design conscious, US city dwellers.

Tréology’s philosophy is to accentuate the warmth, texture and uniqueness of timber by showcasing its natural beauty. The business only uses genuinely sustainable timber.

These are either naturally felled or is native timber rescued from earthquake-ravaged buildings in Christchurch.

Andrew is the fifth generation

18 EXPORTER

of the Davies family to be involved in timber craftsmanship. He is also MD of Davies Furniture, a respected timber furniture manufacturer.

However, to realise his dream of supplying a slice of New Zealand’s natural beauty and present it as genuinely sustainable, bespoke, luxury furniture range, he knew a new company with its own brand was necessary.

Bringing this brand to life has involved much market research. “You have to understand the market you are going into. You also need to know why you are choosing that market.

“We could have easily spent $15,000 commissioning studies into the Eastern seaboard of America, but I believe it is easier to pick up the phone and just start talking to people.

Andrew also says by conducting his own research, and establishing relationships with interior designers and end users in his target market, the information gathered is much more relevant.

Davies Furniture has been exporting for decades. “What I have learnt is that filling your own container and shipping it yourself, ensures your product gets there in the best possible condition.”

One of the most poignant lessons Andrew gleaned in his market research was the value, to the US market, in presenting a totally authentic and genuine New Zealand story. To help make this happen, he engaged a creative team. This consisted of a marketing professional, graphic designer and writer, who with Andrew and Melany-Jayne, conceptualised and brought to life Tréology.

“We started by sharing our values and dream for the company. We also did a huge amount of market research and brainstorming about our ideal client, where they lived, what they did, what made them tick and what their family looked like.

“By getting a picture in our head of exactly who would buy our products, we were then able to begin to build a brand that would appeal to these people on an emotional level.”

Sandy Galland is a Christchurchbased communications specialist.

Email sandy@yourstory.co.nz

IN HONG KONG, A NIGHT OF KARAOKE COULD BE KEY TO WRAPPING UP THE BIG BUSINESS DEAL.

TRUE

FALSE

If you’re thinking about exporting to Hong Kong, there’s no room for guesswork.

New Zealand Trade and Enterprise can give you the tips and tools you need to move your business into this market; from country overviews and language and culture, to sales and marketing suggestions. That way, you’ll know that karaoke often goes hand in hand with business. Hopefully you’ll also know Neil Diamond’s Sweet Caroline.

Visit www.nzte.govt.nz/answershere or call us on 0800 555 888.

Get the answers here. Succeed over there.

EXPORTER 19

> COV E R STO RY

Easy access World Wide Access was founded by Paul Grey with the sole purpose of reinventing exporting for products-focused Kiwi businesses, initially targeting the US. The achievements for its clients have been nothing short of impressive.

BY G L EN N B A K E R

20 EXPORTER

W

hichever way you look at it, exporting is a daunting prospect – particularly for first-time exporters.

It’s the proverbial minefield – eating up time and profits.

But for many exporters there is an easier way.

Kiwi-owned company World Wide Access has invented a means to slash the cost and time to market compared with conventional methods, and owes its success to the software product development experience and talents of its founder Paul Grey.

I caught up with Grey at Export NZ’s recent Go Global event in Auckland, and asked how World Wide Access came about.

“My background is software development, and it’s software technology that makes the World Wide Access export model possible,” he says. “I was CTO of Peace Software which over the course of 20 years we took international, successfully breaking into the US market. I was based in America for much of that time and, believe me, there’s no substitute for that experience.

“We grew Peace Software to become New Zealand’s largest software product development company and achieved a successful exit to a Fortune 500 company in 2006.”

During his eight years in the US Grey had seen many Kiwi companies struggle to gain a toe-hold in the market – dealing with distribution issues in particular, but also all the other potential traps associated with trade into the US. He also noticed the Americans’ propensity to shop online and the incredible success of large Internet-related shopping and ‘drop-shipping’ sites like Amazon (the biggest with sales of US$48 billion), TheFind, Shopzilla, NexTag, Buy.com, Google Shopping and a host of others – familiar to US shoppers, but mostly unheard of in New Zealand.

Here was an opportunity for Kiwi exporters to tap into this vast market.

But first they had to be educated on the unique online (e-commerce) marketing model that exists in the US – a very different kettle of fish to New Zealand’s, and one that requires a complete change of mindset.

It was a mindset Grey was finely tuned into.

He set about creating the software

technology that would open doors for exporters here – partnering only with key premium-product focused online shopping sites. His objective was simple, he says. “Slash the cost and time to market compared with conventional export market entry, and build a better way for New Zealand products to reach customers in big retail markets overseas, starting with the US – the biggest of them all.”

World Wide Access created a system that combines exporting, logistics, e-commerce, and web-based software engineering and automated operations in a way that wouldn’t have been possible just a few years ago.

“We make it faster, easier and cheaper for products to succeed in export markets,” he says. And he has a string of success stories to prove it, starting with Merino Kids.

“Having spent a year building the software systems, logistics and selling capabilities to enable the World Wide Access exporting concept, it was a gratifying milestone in 2008 to make the first sale of a New Zealand product in the US, a Merino Kids baby garment to a customer in New Jersey,” recalls Grey. “We haven’t looked back since. In the three years since introducing the Merino Kids baby sleep bag in America it has grown from being an unknown brand to the number one-rated product in its category.”

A better export model Grey is quite clear on why his export model has been so successful in the US, and why he is now also targeting the awakening online shopping giant in China – but more on that later.

“Simply, it’s a better way to export, and there are three major reasons why. First, it’s faster to market and costs less. New Zealand companies can be selling their products in-market within weeks, without needing to establish a costly direct presence or giving control to a distributor. Suppliers decide how much stock to send and we take care of the rest – from shipping, customs clearance, duties and taxes, to managing payment processing, order fulfilment, customer service, returns and refunds.

“Secondly, we’re world-class at e-commerce. Our model works because we make it easy for shoppers

to find products online, and easy for them to buy. We generate export revenue that can only be realised by being in-market and selling at a world-class standard. Selling over the Internet from New Zealand will never get you there,” he says.

Customer expectations of online retail are far higher in the US, Grey adds. “The American online shopper might be using a PC, iPad or smartphone. They are sophisticated and demanding, and expect discounts, free shipping, guaranteed delivery times, constant communication, online order tracking, even the option to have a product gift-wrapped and at their door the next day.

“Thirdly, Kiwi exporters can’t match our technology. Our OrderPipe mobile sales dashboard is an example

THE WORLD WIDE ACCESS EXPORT SELLING MODEL WORKS BECAUSE WE MAKE IT EASY FOR SHOPPERS TO FIND PRODUCTS ONLINE, AND EASY FOR THEM TO BUY.

”

of the advanced level of software technology that underpins the World Wide Access export capability. It was developed by our software engineering team to monitor our own sales in markets overseas. OrderPipe is now being used by e-commerce merchants worldwide to monitor their sales in real time.”

Proof of just how robust this export model is came not long after the Merino Kids US launch – when the global financial crisis struck.

“It became apparent that our first year would involve selling to customers in the midst of a deep recession; a tough time to be getting an international business off the ground,” says Grey. “But we’ve achieved strong growth against that backdrop and now that economies are recovering, World Wide Access is very well-positioned.”

He says around 18 months ago they decided to take on more suppliers, and there’s been no shortage of

EXPORTER 21

takers. They currently represent around 15 exporters in-market. “It is a compelling opportunity for people and we’re always on the lookout for new products, referrals and recommendations,” he says.

“And, of course, a whole lot of things suddenly become possible once you find a way to get products into market.”

Service steps Grey explains the services he provides his clients. First up there’s a feasibility checklist. Is the product market ready? Is it packaged properly to survive a distribution chain? Does it have proper barcode labels and is it compliant with all relevant regulations

PUT YOUR PRODUCT WITH US AND IT’S LIKE PUTTING YOUR PRODUCT WITH EVERY SHOPPING MALL IN THE COUNTRY, ALL AT ONCE.

”

in the destination market?

Next comes a pricing and cost competitiveness check. And is there the ability to scale, given the opportunity?

“We have the ability to start small for our clients – they don’t have to risk a container volume, but there has to be that ability to scale up,” says Grey.

Once the contract is signed, clients place some starting stock with World Wide Access – either a whole range or a subset, depending on market needs. “Citta Design homeware, for example, has just come on board.

The Citta Design range we’re taking into America is all products they’ve designed, that are unique to them.

“Basically World Wide Access funds the whole process,” says Grey, right from the point of receiving the goods in New Zealand. “So shipping, customs clearance, warehousing, translation, marketing, selling, automated order fulfilment, banking, and of course online listing – everything is covered, and the client gets paid by us, a New Zealand company.”

Suppliers can also track sales and inventory online and receive monthly

22 EXPORTER

payments directly into their New Zealand bank accounts.

Is there any risk for the exporter?

“Only a very small one,” says Grey.

“Only if we couldn’t sell their stock for a low price that recovers their manufacturing cost. But, to be honest World Wide Access takes on more risk than the supplier.”

World Wide Access makes income in the long term through a margin on sales. “Our goal is to achieve volume in years three, four and five – so we’re motivated to sell volume. It’s a long term relationship – sell volume and everyone wins.”

As for creating that “high quality online representation of products” for their clients, Grey reminds me of the mindset shift necessary to understand the US online market. “In New Zealand you basically have two choices for selling online – create your own website or list with TradeMe. The US was like that 10 years ago but e-commerce there has moved on.

This difference in frame of reference is why it’s hard for New Zealand companies to succeed online overseas without someone like World Wide Access.

The website itself represents only 20 percent of the puzzle, he says.

There is another 80 percent relating to automation of the entire selling process.

“There’ve got to be real-time inventory levels – so you never sell a product you don’t have. Do that in the States and you’re dead in the water.

“Live stock levels, three or four delivery options, local return addresses, local service numbers – there are a whole raft of services required for people to even consider buying, not least of which, is the product available from their favourite US online shopping site? We provide all this.”

Grey is adamant about the need for New Zealand suppliers to have their brand and products on the big e-commerce sites, not some obscure little site based in New Zealand.

“Put your product with us and it’s like putting your product with every shopping mall in the country, all at once. It will be seen and will have a fair chance of being successful in America.”

Budgets and marketing When all set to go with World Wide

Access, the exporter must allocate a budget to launch their brand in the market.

“What we do is identify things that get results that can be done on a ‘Kiwi’ budget,” says Grey, adding that if you’re serious about investing in the world’s biggest market, you can get away with investing something in the vicinity of NZ$2,000 a month to start building your brand overseas – a trivial amount compared to costs involved in other more traditional entries.

He says World Wide Access can help on aspects such as PR-style ‘article marketing’ (“a good way to tell the brand story”).

“There needs to be some basic product promotion done so the brand has a chance of succeeding. We’ve proven with our Kiwi brands so far that with this level of marketing budget, we can get the wheel to start turning. Then our ability to make the product easy to find and easy to buy oils that wheel, keeps it turning. And any further promotion accelerates things even further. Before you know it we’re into that 60-day order fulfilment cycle, and our clients are getting their monthly payments.”

Is it really that painless for exporters?

“We can’t solve everything and we can’t make it free, but I reckon we eliminate 90 percent of the cost of market entry,” says Grey.

“I tell people that the best form of market research is to get product in market, and see what sells. You can spend $100,000 with a market research firm, but they are not going to tell you which colours, which sizes, and which products are going to sell.

Six months with us and you’ll know exactly what the market wants. In 18 months we can even give you a seasonal profile.”

Accessing China today Having proven itself in the US market and with sales doubling year on year, World Wide Access now has its sights set on China. Its systems are already up and running and the first sales channel is with Amazon China.

“This came about through our strong and successful relationship with Amazon in Seattle,” says Grey.

“Amazon has only recently entered the Chinese market with Amazon.cn and we were the first international

company to have sold a product through Amazon.cn to a customer in China.”

Being able to sell on Amazon China is a world-first achievement, he says, and represents a significant opportunity for New Zealand products to get in front of millions of shoppers.

“Building a path to market that takes products right to the doorstep of consumers in China is a strategic investment for us. Like many, we see the enormous potential in China’s

growth, and we’re doing something about it, today.”

The timing couldn’t be better with the New Zealand-China FTA in place, and China is already one of the world’s largest e-commerce markets.

According to a recent report by the Boston Consulting Group it could exceed even the US in size by 2015.

Grey says their offering is not about serving the mass market in China.

“The question is; How many people are there that want niche premium products? Is the niche big enough?

Merino Kids is already being represented in China by World Wide Access, along with the ingenious Nooski mouse trap.

Question is – who wants to be next to fast-track their products into China?

Paul Grey would like to hear from you.

For more information go to: www. orderpipe.com or www.world-wideaccess.com/better-way-to-export/.

Glenn Baker is editor of Exporter.

Beyond baby steps

Christina Piet met Paul Grey at NZTE’s High Impact Baby & Child Series in February 2010. It was early days for World Wide Access back then, but she could see that this was an entirely new way to export. “I could see they had a top system and Paul spoke my language in terms of warehousing and product positioning.”

So what did she see as the main benefits of using the World Wide Access platform?

“Speed to market is unsurpassed.

I had delays on my side of things initially as we were moving production from China to New Zealand at the time. But once we got going with World Wide Access, our Solids Starter Kit started selling from day one, directly to our target

market of new parents with babies who’re starting solids.”

Piet says that without World Wide Access she wouldn’t have had the opportunity or ease of entry into new markets that she’s currently experiencing. “Paul and his team are now going to distribute my baby food freezing trays in Japan. The decision to enter the Japanese market was made in April, and new parents in Tokyo will be freezing their freshly made baby puree in our Made in New Zealand trays in June.”

Piet is sold on the World Wide Access service. “They sell direct to the consumer in their export markets. For a niche baby product, this means I get much higher margins than I would by

working with any other traditional distributor.

“Unlike working with a traditional distribution model, with World Wide Access I maintain control of my brand, product pricing and positioning. I’ve seen it happen with too many top New Zealand brands in overseas markets: they sign with a distributor and their product gets dumped onto the market. There is no control. Even with the best of agreements or contracts, the distributor’s job is to distribute your product and, once it leaves their warehouse, it’s not their job to care what happens next.

“World Wide Access’s model also gives me full freedom to retain the wholesale side of the business. But they can distribute to your retailers too, if you like.”

Piet says the principles of online shopping transcend traditional barriers of entry into new markets. “What draws a person to buy something online and the tools required to sell a product online are exactly the same whether it be in the UK, US, China or Japan.

“Everything we did to enter the US market can be replicated in Japan and we now have Japanese Mums waiting to buy a Solids Starter Kit with local shipping because they make babyfood much the same way as we Kiwis do.

“But not all markets are the same. In China, they don’t freeze babyfood so obviously it’s not a market for that particular product.”

EXPORTER 23

Real access, real growth at a steady speed – one that we could control. World Wide Access has excellent local knowledge and can bridge the gap between what a New Zealand online customer expects and what a US online customer demands. The difference is vast, but World Wide Access make this transition viable.

World Wide Access launched Real Nappies’ cloth diapers into the US at the end of 2009.

It is now the Albany-based business’s biggest export market. Exporter spoke to owner Liz Mole about the partnership.

E: How did you find out about World Wide Access, and what prompted you to partner with them?

LM: We were introduced through Module Marketing, an excellent marketing company we use. We met with Paul from World Wide Access and his enthusiasm and understanding of the US market sold us straight away. The very thought of entering into the US before we met World Wide Access was far too daunting. The obvious question of how we even start the process and gain exposure was always an issue.

E: What do you see as the main benefits of using the World Wide Access platform?

LM: By using World Wide Access we were able to grow

24 EXPORTER

E: Where do you think your export achievements would stand now if you had not partnered with World Wide Access?

LM: I do not think we would have even dreamt of tackling such a huge market as the US. Obvious barriers such as growing too fast or monetary restrictions would have stopped a small Kiwi company like us from going any further.

E: What are your long term export goals?

LM: After our success in the US and UK we are next going to launch in Japan with World Wide Access and China shortly after. Launching Real Nappies overseas has opened up new avenues for us and, through this exposure, we are weekly

E: What advice would you have for other potential exporters to the US (or China) in regard to taking up the World Wide Access service?

LM: If you are looking at taking the next step and going global look no further than World Wide Access.

To even scrape the surface in a market such as the US or China would require tens of thousands of marketing dollars and you may not even make a drop in the ocean. Stick with the experts – yes you invest stock and a marketing budget up front but what a market to have access to!

E: What other lessons have you learnt on your export journey so far?

LM: We are very sheltered here in New Zealand, overseas markets are tough to break into and culturally very different, but the opportunities are there. Concentrate on what you do best: perfecting your product/ service, let World Wide Access do what they do best: leading you to new opportunities.

receiving enquiries to distribute our products in overseas markets. We have since taken on new distributors in four new markets, however we are being careful not to overexpose ourselves and grow too quickly. The beauty of World Wide Access is that we have been able to tweak our export model, grow at a pace that suits us and learn some valuable lessons. They understand our constraints and work through these with us, so success is guaranteed.

THE BOOK

that backs our export drive

NEWLY UPDATED FOR 2012 The New Zealand Export and Trade Handbook continues to be a vital reference guide for Kiwi exporters and importers.

Available Now! As the world economy stumbles from one crisis to another, it has never been more

proved to be the best publication available to our exporters and includes a wealth of useful

important to ensure that you have the best information and help available when trading

information as well as key contacts that can provide assistance. If you are going to buy one book on the practicalities of exporting, make it

internationally. The 2012 Edition of the New Zealand Export & Trade Handbook has again

this one!

Rom Rudzki, Founder New Zealand School of Export.

To order your copy call Sarah Holyoake (09) 478 4771 or email: Sarah@adrenalin.co.nz Purchase on-line at www.exportandtrade.co.nz

EXPORTER 25

> F E AT U R E

All at sea Major disruptions caused by the Rena grounding and Port of Auckland strikes have resulted in challenging times for the shipping lines and for exporters. But somehow they’ve managed to cope.

26 EXPORTER

BY M A RY MAC K I NV E N

P

eak export production seasons are the major influence on scheduling for the world’s largest global shipping line, Maersk, says its New Zealand managing director Julian Bevis.

In New Zealand the seasonal peak is roughly January to June and a little before Christmas.

Prior to every peak Maersk evaluates the freight volumes for each commodity and refines the port schedules to provide transit times, tonnage and port coverage that exporters want.

“Then we try to stick with the schedule through the peak season for stability and reliability, although individual commodity production can change. For example, the apple season might be compressed,” Bevis says.

Another consideration for the shipping lines is the balance of imports and exports. Most import containers get delivered to the Auckland, Tauranga and Hamilton triangle; and exports are packed nationwide into the ship space they vacate.

A big problem for the shipping companies is exporters booking space but not turning up. “Our margins are thin and we must have full boats,” explains Bevis. “Sometimes we have to overbook if we are not certain, just as airlines do – although we try not to.”

Nevertheless it is always worthwhile for exporters to check to see if there is space available on a ship, he says.

“We know it’s not easy for an exporter when their prices are shifting, etcetera, but if you talk to us we can understand. If you pay more we might find a way to deal with [your cargo].

“Or sometimes [there will be space] because someone else has ‘fallen over’ or we leave some empties behind to make space. It’s not necessarily booting someone else off – that would be our last option and it’s very much the exception.”

Maersk maximises its use of assets with measures including speeding its ships up or slowing them down (to save fuel and reduce carbon emissions), using bigger or smaller

ships, or changing the schedule or price.

“It’s not unusual at all to do so.

But we balance this with our product offering.”

Bevis says a definite selling point for them is that Maersk tops the industry in achieving on-time delivery of advertised container services worldwide – at 87.5 percent, according to Drewry Shipping Consultants.

Maersk Line New Zealand prefers electronic bookings too. “This frees up the office staff to deal with the exceptions, the newcomers and inevitable problems – such as if a truck breaks down on the way to port,” says Bevis.

Shipping to the islands Pacific Forum Line NZ (PFL) is owned by 12 island nation governments including the New Zealand government, and operates ships small enough for the demand and the ports.

The Maersk ship from Shanghai to Auckland transfers containers onto PFL ships to go to Samoa, where PFL is Maersk’s agent. Another agreement sees PFL sharing a boat with Pacific International Line.

An influential factor for PFL is delays due to tropical cyclones.

Schedules are not regular, says CEO Henning Hansen. “We might hold the ship for an hour to wait for a container load. We might sail on 15, 16 or 17-day frequencies.” Slow steaming is built into the product offering, with boats sailing at 10 to 14 knots instead of 24 knots during pre-GFC days (and big global carriers are now down to about 16 knots).

PFL customers book by phone, not the website, because the less developed countries it serves have unreliable power and limited access to computers, Hansen says.

PFL ships mostly dock at Auckland, so for nationwide distribution it books customers’ cargo with Pacifica Shipping (1985) Ltd – New Zealand’s only coastal shipping line, which also operates trucks and stores, and integrates with rail.

“We are doing our best to position ourselves as the extended arm of international lines’ services,” says Pacifica Shipping CEO Steve Chapman.

“As ships get bigger we will see the

KEY TAKEAWAYS > Talk to providers: ask questions and tell them your shipping needs. > Timing: book by the cut-off time to allow for loading and unloading of ships and other processes. > Insure cargo adequately. > Talk to a variety of shipping lines, freight forwarders and others and work through the transport options. > Build relationships with a shipping line that’s long term, for a regular exporting pattern to handle the peaks and troughs. > Where possible, sell on CIF terms to retain control of the shipping process. > Take a longer term view, set up robust supply chains.

[lines’] migration out of the second tier ports: maybe in five to 20 years they will only visit two New Zealand ports. For operators like us, this is where we will play our part.”

Ship transit times are often only slightly longer than road or rail and up to 25 to 50 percent cheaper, he says.

Ports are not stores Ports must unload imports and load export cargo as fast as possible so ships can stick to their call schedules.

Ports of Auckland sales and marketing general manager Craig Sain explains that most ships come in and out of ports on a fixed day and usually weekly. They unload in the morning then load exports and leave that night for their next port, with the last port of call usually Tauranga before heading to Asia and beyond.

Ports use financial deterrents to limit ‘dwell time’ – charging a storage component for imports not removed after three days from landing (although not charged at the Auckland container terminals while they were strike bound).

Export goods have seven days free time before the vessel arrives.

Sain says in peak season container

EXPORTER 27

space gets tighter because it is prebooked. Shipping lines sometimes bring in extra loaders but there is a cost to arriving with more empty containers, raising export prices.

Container supply in this period can also be a problem.

The Port of Tauranga encourages exporters and importers of all sizes to tell the port exactly what they need from a port company, says CEO Mark Cairns.

Larger companies have relationships with shipping lines as well as ports. “They work in partnerships on a long-term basis with 10 to 15-year agreements that allow us to invest and provide for the future. We prefer an open and trusting environment about how much they are willing to pay.”

Disruption at overseas ports affects schedules, because once a backlog occurs it’s hard to tidy it up, explains Port of Lyttleton’s marketing manager Simon Monk.

The port is endeavoring to increase efficiencies at its 24/7 operation, that is seeing record volumes due to local economic growth. But Port of

28 EXPORTER

Lyttleton is also waiting on a complex and large earthquake insurance claim.

Some trucking companies are willing to deliver after hours but exporters and importers are not so keen to open their doors outside normal hours of operation.

Coping with the unexpected Last year’s MV Rena grounding in the Bay of Plenty and the months of industrial action at the Ports of Auckland container terminals this year have undoubtedly shaken New Zealand businesses.

Lessons from the Rena event include the need to insure cargo, establish a robust supply chain, not wait till the last minute or present everything on one ship, says Hansen.

Meanwhile Bevis expects the debate might open on oil pollution precautions.

And Cairns hopes for measures to prevent another Rena disaster rather than require New Zealand to respond.

Traders affected by the Rena disaster should talk to a freight forwarder or shipping line, says Sain.

Port companies are bound by all sorts

of confidentiality agreements with a shipping line around liability, and so on.

Taking a cue from his company’s marketing campaign, QBE Insurance (International) Ltd marine manager Graeme Orchard says, “Sh*t happens more often than we think, and the occasional damage claim is not the only risk in trading internationally.”

Hence the importance of having comprehensive marine cargo insurance to the full value of the cargo shipped; and having cover with local New Zealand insurers, who have been able to respond more quickly than their counterpart overseas insurers to general queries, settling claims and negotiating with the salvors on recovering and on-forwarding any undamaged goods, as well as the salvage charges incurred.

Where containers were recovered from the Rena, these needed to have salvage claims promptly settled with the salvors and then repacked and quickly on-forwarded to the original destination. All additional and unexpected costs fall on

the exporters.

Union strikes did not affect most Pacific Island carriers because they operate from Auckland’s general wharves, but PFL’s Henning Hansen says goods transferred through the container terminal were sometimes delayed.

Maersk ships continued to call at Auckland to deliver imports as the port asked, though with reduced port services, Bevis says. Producers had to take their exports elsewhere.

The strikes resulted in record volumes being handled at the Port of Tauranga, which is not good for New Zealand, says Mark Cairns. “New Zealand needs all its ports functioning as best we can because we are so far from export markets.”

The usual seven-day free export storage space was temporarily reduced to five days at Tauranga until the doubled container volume eased back.

“The Employment Relations Act needs to deal with this, rather than that we have latent capacity to deal with it again,” he says.

The Port of Lyttleton also

experienced significant delays and schedule changes as a result of the Auckland strikes.

And, right through the crisis, the supply of empty containers was building up in Auckland.

QBE Insurance’s Graeme Orchard says exporters and importers can recover any additional costs in storage and local transit under marine cargo insurance policies with a “Strikes Diversion” expenses cover extension.

Desperate measures Pacifica Shipping’s Steve Chapman says its ships could only discharge and not pick up during the dispute, so it couldn’t ‘get under the cranes’.

It got to the point where, he says, “We are working at the general wharves with a shore mobile crane that is used for building warehouses and apartments, not a specialised container crane. It’s as slow as a wet week but we are willing to spend the time there because the supply chain is fast grinding to a halt.”

Truck companies added a surcharge for waiting at the wharves. Rail

eventually had no capacity to move freight out of Auckland and road was so expensive exporters didn’t want to use it, says Chapman.

Pacifica’s calls went from weekly to fortnightly into Auckland via the conventional wharves, adding huge additional costs in exchanging cargo, which caused Pacifica to add a surcharge for the duration of the dispute.

“Imports will be more expensive because importers are paying for goods to be transhipped to Auckland, and we will see shortages on supermarket shelves.

“It just shows how important Auckland port is for imports and export markets. See what happens when it goes down; the rest of the supply chain cannot handle it well,” Chapman says.

MARY MACKINVEN / WRITER

Mary MacKinven is an Auckland-based business writer.

Email marymackinven@orcon.net.nz

EXPORTER 29

> F E AT U R E

Upskill before you head out For Kiwi firms looking to grow their business offshore there is no shortage of courses and experts to help them speed up the process.

BY YO KE H AR L E E

D

iane Hurford, founder of Brolly Sheets, gets asked this question at least once a month by business newbies in the country: how does one set up an ABN (Australian Business Number) for doing business across the Tasman?

According to Hurford, this is just one of the countless learning curves a novice exporter needs to navigate when he or she enters new countries or tries an untested market. This information may be already available yet it is often not easy to locate – especially for someone not knowing where to search.

The path to global markets is often steep and treacherous. Hurford herself is still on an exploratory path, figuring out how to best conquer the UK and US markets for the waterproof bedding covers she currently exports.

Many of Hurford’s exporting skills were learnt the hard way – sometimes by trial and error, others by weaning information through the grapevine,

Diane Hurford through networking and searching on the Internet.

Recently, she sat down for a fourhour strategic planning session with Deloitte’s to build the blueprint for her business for the next 12 months.

“It means taking a day out of your business to focus on strategic planning. Many people don’t know you can get help in this area.”

Hurford has also, on another occasion, taken time out to attend a short course on doing business in China. She has also found networking with other business women helpful.

Through Auckland Tourism, Events, and Economic Development (ATEED), she found out that New Zealand Trade and Enterprise (NZTE) provide funding for building business capability.

Learning how to export, Hurford says, can be made less challenging once you have someone who can show you the basics and get you connected to an informed network.

Several organisations in the country are all poised to provide exporter education. These include NZTE, ATEED, Business New Zealand, The Employers & Manufacturers Association, and the ICEHOUSE, who either run courses themselves or hook up with education providers to help provide exporters with the skills and knowledge needed.

Some courses are basic, aimed at new exporters; others are more advanced; while at the highest level the focus is on helping exporters go global through highly targeted executive programmes.

The level of New Zealand’s exports (of goods and services) has stayed the same over the past two decades, at about 30 percent of the country’s gross domestic product. The country’s success is tied to how fast it can grow exports, and this is where training and education has an important role to play.

Skills gap As far back as 2006, Murray Painter and business partner Mark Carrington saw the growing knowledge gap among younger entrepreneurs – most lacked the required skills to succeed at growing their business overseas. The two co-founded The Export Academy based in Hawkes Bay to provide specific knowledge for exporting.

Painter says as the entrepreneurs of the 1960s and 1970s retired, the younger crop of business people coming through the pipeline lacked export-specific knowledge.

Companies that were large enough to employ specialists tended to, Painter adds, build silos of specialists.

The Export Academy’s vision is to build a programme that can be tailored to those keen to pursue the path of exporting, or already in the business but need new skills.

At The Export Academy, which has the tick of the NZ Qualifications

AS A COUNTRY, WE HAVE TO THINK BIG. TO SUCCEED, WE HAVE TO THINK ‘WE ARE GLOBAL’ FROM THE WORD GO.

”

Authority, students can enrol in correspondence courses to gain a certificate (one-year course) or a diploma (two-year course) in Export Enterprise; or a Bachelor in Exporting (three years). Fees are pegged at $12,500 per annum.

The Academy has managed to enrol students for its short courses but not for its Bachelor course. Painter says the downturn in the economy has made it difficult to attract companies – already struggling with cost cutting imperatives – to spend $12,500 per year for an employee to do the programmes offered.

Global from day one At the Palmerston North-based NZ School of Export (NZSOE) those wanting a certificate or diploma of international trade can do so by distance learning. The school is accredited by the Association of Trade Training and Organisations (IATTO), a global body providing endorsement for international trade training and certification.

Dr Romuald Rudzki, director and co-founder of the NZSOE says exporters can no longer afford not to aspire for global business from day one. Niche exporters, particularly, need to move beyond the local market to grow.

“Clearly, as a country, we have to think big. To succeed, we have to think ‘we are global’ from the word go. This means having to deal with countries over different time zones.

For some, it means growing very large very quickly in their niche,” Dr Rudzki says.

Each exporter has a different need in terms of his or her skill development. Dr Rudzki is keen to help every individual find something that is specific to the individual’s industry and need. “We have to tailormake solutions for them (in meeting skills),” he adds.

There is a wide range of students

EXPORTER 31

KEY TAKEAWAYS > NZTE’s Capability Development Vouchers can partly fund the cost of acquiring specific skills needed to help grow exports.

Rom Rudzki coming through the NZSOE, Dr Rudzki says. They range from those who already have a Masters in Business Administration (MBA) to those who have never set foot overseas.

Dean Pan, sales manager (China) for New Image International, a company specialising in colostrum and valueadded dairy product manufacturing, completed a Diploma in International Trade with the NZSOE. He found the education helped with improving his knowledge of tools and models

Chris Boys

for export development, specifically new market entry strategies. The programme also offered him the opportunity to develop networks with other passionate exporters willing to share their international trade knowledge.

Pan says the course’s flexibility enabled him to study at his own pace and helped him refine his thoughts on exporting out of a small country but competing on a global and sustainable level.

Christopher Boys who founded

> The current model of delivering exporter education enables local service providers and economic development agencies to meet localised needs. > The DIY mentality will slow down any potential for global growth.

Katabolt in a joint venture with The ICEHOUSE, says a “phenomenal” amount needs to be done still in New Zealand to help exporters reach the global market.

After working overseas for over a decade, he was involved in helping start-ups through angel investing and mentoring when he saw the need to provide a structured approach to help companies reach customers overseas.

Exporters who seek help from Katabolt are put through a market validation phase to find out if there is indeed a market for their product or service out there; whether the product will be suitable and needs modification for a market; and how to get the product across using the right distribution channels.

“We work with high growth companies to help them fast-track their growth. We are all about speed (in getting to markets),” Boys says.

Katabolt provides those who walk through its doors access to a ready network of 200 associates across the world who can help nudge them into the right direction in terms of gaining a toehold in target markets.

NZTE’s role The best place to begin for someone without any idea of who to talk to is to try NZTE which has, together with the Ministry of Science and Innovation, put in place a network of 14 regional business partners who can help businesses needing assistance.

The NZTE’s regional business partners help exporters through not

Peter Bull only providing assessment of his/ her business needs but also funding – through the NZTE’s Capability Development vouchers which can be used to partly fund the cost of acquiring specific skills needed to help them grow exports.

Peter Bull, NZTE’s director Better Business Services, notes that the current model of delivering exporter education enables local service providers and economic development agencies to meet localised needs.

The seasoned business person who has used a service before should have no problems finding help. However, a business start-up would need to spend some time sifting through the Internet or through contacts to find out what is available, Bull adds.

“Should we rationalise this? What I would say is, it is (the current service) driven by different needs. Over time these will become the local sources of expertise,” he says.

Through these regional partners exporters throughout the country can tap into 300 service providers offering some 3,000 courses to help them build a better exporting company, Bull notes. As at February, more than 1,500 companies have contacted NZTE’s regional business partners and 1,000 have taken advantage of the business capability vouchers, which provide 50 percent funding for the education.

Global dreams For the big players, that is companies already exporting over $20 million or so and has demonstrated potential for high growth, the University of Auckland’s Business School runs a Global Executive Leadership programme that has a highly focused 12-month programme to help a Continued on page 34

32 EXPORTER

ADVERTISEMENT

Meat industry export manager sharpens his tools Heading multi-million dollar abattoir equipment exporter IBEX Industries is a former hospitality professional who doesn’t mince his words.

IBEX general manager Ray Connor is nearing the end of MBA study with The University of Auckland, where he has shared his opinions, learned from others and come to some major life realisations.

Connor left school young and became a chef. While working full time, he decided he would study towards a bachelor of commerce and administration - Ò for all the wrong reasons, as I had some struggle transitioning out of hospitality and into the working world.Ó Ò I left university with a BCA with a double majors and an A average, but completing this in two years I always felt I had rushed the learning.Ó Connor worked with a film industry software startup, catapulting it into Hollywood, before joining IBEX in 2005. As New Zealand Trade and EnterpriseÕ s supreme exporter of the year in 2007 it was rocketing ahead

with innovation, new global business and the challenge to sustain growth.

ConnorÕ s approach was simple. He says Ò exporting is not that hard,Ó and believes, in business, Ò you have to get your hands dirty.Ó Ò Whether youÕ re doing business in Auckland or Brazil, business has some fundamental rules and they are quite simply, based on honesty and respect for other people.Ó IBEXÕ biggest seller is its trimmer range, developed to be reliable and robust. Ò Our value proposition is different to our competitors. Ensuring a low cost of ownership over the life of the tool is the only way we can have a point of difference. WeÕ ve removed or significantly reduced any components that failÉ itÕ s really been design-led innovation.Ó Connor had considered doing an executive MBA for a while before it was his competitive nature that spurred him to apply. Ò I had a good friend who was looking at it. But life just kept getting busier and I thought, youÕ ll never find the time unless you make it. That was probably the catalyst Ð I didnÕ t want to be left behind.Ó Ò I realised I probably needed a few more tools in my toolkit.Ó Ò The MBA challenges you to reframe your thinking, so that when you deliver an outcome itÕ s a wellrounded one.Ó Strategy at IBEX has benefited from his study. But academic learning aside, Connor says the MBA has challenged him to re-prioritise what he thinks is important. Ò The main thing that I got out of it was it challenged me to look inside myself and who I was as person, and

my contribution to society.Ó Ò ItÕ s not to say that I never really valued people before, but now IÕ ve come to realise that people are your biggest asset. IÕ ve also realised what IÕ m good at, but I also know what my weaknesses are. I donÕ t have to pretend that IÕ m good at everything.Ó His team at IBEX have flexible work time, which reflects ConnorÕ s stereotype-busting ethics, and his mantra, Ò above all else, family first.Ó Ò IÕ ve got an incredible team and our success is only possible due to their hard work and efforts. ItÕ s a hard business to staff for because of the initial reaction to what we do. It attracts a certain type of people who arenÕ t precious.Ó Ò But the saying goes, at the end of life youÕ re not going to look back and wish youÕ d worked more - thereÕ s a lot of truth in that.Ó Nearing the end of MBA study, Connor was looking forward to spending time with his own young family, the great outdoors and claiming back his lost social life.

His advice for others is that itÕ s not the MBA letters, but the attitude the dedication to personal development and shift in thinking - that will help them get ahead.

The University of Auckland Master of Business Administration (MBA) has intakes in January each year, and welcomes applications from business leaders. Find out more at www.gse.auckland.ac.nz/exp

EXPORTER 33

Where

What

Website

The New Zealand Export Academy

Offers diploma, certificate or Bachelor in Exporting. Short courses are also available.

Accredited by NZ Qualifications Authority.

www.exportacademy.ac.nz/

New Zealand School of Export

Offers certificate and diploma in international trade. Exporters can gain certification as a Global Trade Professional though the school’s courses. Accredited by the International Association of Trade Training and Organisations (IATTO).

www.export.ac.nz/

New Zealand Trade and Enterprise

Works with, and through, 14 regional business partners to upskill exporters, and build business capability. Provides part funding for approved courses.

www.nzte.govt.nz

The ICEHOUSE

Runs a 17-day programme for owners to help their companies grow. There are also business manager programmes, coaching programmes and senior leadership programmes.

www.theicehouse.co.nz

University of Auckland (Business School)

Runs hundreds of short courses on business and administration. The University also runs a highly targeted Global Executive Leadership Programme to help companies with global ambitions. This is a 12-month course, finishing in an offshore location.

www.business.auckland.ac.nz

Katabolt

Privately-owned exporter education service. Company’s executive and network of global associates help speed exporters’ progress into target markets.

www.katabolt.com/the-katabolt-process

NEW ZEALAND BUSINESSES HAVE TO ASK FOR HELP. THIS NO 8 WIRE MENTALITY OF ‘I’LL DO IT MYSELF’ SLOWS DOWN YOUR POTENTIAL FOR GLOBAL GROWTH.

”

company achieve its business goals or plans. The programme had its first batch of “graduates” in March.

For most small businesses, finding the right education or help is still a tricky business. Brolly Sheets’ Diane Hurford, for instance, says every market presents a different challenge. She would like to see the development of clusters to help link together similar industries for knowledge sharing.

Practical information, like how to set up an ABN (Australia business

34 EXPORTER

number), may be available out there but not easily located, she says.

“Knowledge about marketing, for example, how to get people to come to your website is also something that every small exporter needs to know.”

Hurford, through her experience at Brolly Sheets, is finding that in the US working with a logistics company can help her reach customers in North America without the costs of setting up a physical office there.

The UK, another market that Brolly Sheets is trying to build, presents its unique challenge. “The UK is a really segmented market; it is a totally different market,” says Hurford. “We found that print advertising didn’t really work for us in that market. We wasted money on print advertising which didn’t work.”

She would readily share that knowledge with someone going down that same track, she says.

“If someone rings and asks for advice, I am more than happy to share

my knowledge.”

As a company that ranked 24th in Deloitte’s Fast 50 in 2011, Brolly Sheets faces the normal growing pains of a fast-growing business trying to swallow as big a market as it can take. “We have 4.5 staff basically.

We are trying to manage that (the growth) with the resources we have.”

Katabolt’s Christopher Boys, has a final reminder for exporters: “The biggest message I try to get out is this: New Zealand businesses have to ask for help. This No 8 wire mentality of ‘I’ll do it myself’ slows down your potential for global growth.”

YOKE HAR LEE / WRITER

Yoke Har Lee is an Auckland-based business writer.

Email yokeharlee@yahoo.co.nz

> MARKET INTELLIGENCE

Viennese viewpoint Tait’s decision to open a Vienna office had little to do with the historic charms of Europe’s ‘City of Music’. By Lesley Springall.

V

ienna. The name alone conjures up images of Europe’s stately past. The capital of Austria, the city of Mozart, Beethoven, Strauss and Brahms, among others, Vienna bristles with history and romanticism. But its more obvious charms had nothing to do with Tait Radio Communications’ decision to open a new office there.

It was far more interested in the neighbours.

Vienna lies in the east of Austria and is close to the borders of the Czech Republic, Slovakia and Hungary. “The Vienna office is all about investing where we see growth coming,” says James Kyd, Tait’s chief marketing officer. “It’s a fantastic hub to access Central and Eastern Europe.”

The city is also brimming with well-educated people who speak a number of languages and understand the nuances of its less wellknown neighbours.

For Kyd and the Tait team, Central and Eastern Europe hold particular promise because of the area’s growing relationship with its far richer Western neighbour, the European Union.

“The area has a large workforce, which is increasingly being leveraged and tapped into by the EU,” says Kyd. “[Plus] a number of Central and Eastern European countries have just joined or are vying to

join the EU and when they do they tend to invest in their infrastructure; their utilities, transport and the safety of their citizens, and that’s driving demand for the solutions Tait can offer.”

The Vienna office is part of Tait’s strategy to transform itself from a Kiwi exporter to a global solutions company. “To do that it’s pretty imperative you’ve got a presence in the market and you’re close to your customers.” Being close allows Tait to get under the skin of its customers, to understand what they really want to achieve and to provide the solution they need, says Kyd. “It allows us to provide more elements of what they are ultimately doing, so it means bigger contracts because we’re providing more services.”

Tait already has some strong links to the area through customers such as the Polish Railway Network, Moscow Fire and Plzen Bus in the Czech Republic.

But it’s not just going after anything it can get, says Kyd, it’s concentrating on where it sees the best opportunities (geographic and sector) before moving on to lesser well-known areas.

“Not all of these countries are equal, far from it. As we get more into Eastern Europe we have to focus more, select the markets we’re going to invest in and not try to cover them all.”

Central and Eastern Europe

is vast and culturally diverse – another reason why it’s important to focus on one or two areas at a time and have local people who understand all those cultural nuances and can operate effectively within them, says Kyd. At a recent meeting with Kazakhstan’s police agency, for example, Tait’s people were introduced to three people in the room; business cards were swapped and the meeting took place.

But all the time there were three others in the room who never spoke and were never introduced; they simply watched, says Kyd. “So you need to understand how business is done in these markets, before you enter them.”

Kyd also suggests it’s useful to have a clearly written company policy about where to draw the line so your people abroad know what their company considers acceptable and what they don’t. He admits

Tait has walked away from business deals in the region because they crossed the boundaries of what Tait considers good business practices.

“Making sure you understand the transparency of the sales and decision making process before you sign a contract is key.”

Vienna is a safe place, well served by international transport and with a talented pool of people to dip into while you learn about the markets, says Kyd. But as for stopping to admire the “blue” Danube that cuts a path through Vienna’s historic parkland or the city’s equally famous Imperial Palace, The Hofburg, Kyd says he’s ashamed to admit that so far he’s seen nothing more than the inside of his hotel room and Tait’s new offices.

Lesley Springall is an Auckland-based freelance business journalist.

EXPORTER 35

> MARKET INTELLIGENCE

Malaysia: a reality check Two years after two significant FTAs came into force, Cameron Gordon reviews the Malaysian export opportunity for New Zealand’s food and beverage exporters. top ten export destinations with a whopping increase in excess of 16 percentage points. There is no doubt that both the AANZFTA and New Zealand-Malaysia FTA can take some responsibility for this success.

With a population of approximately 28 million people and a healthy demand for international goods and services, especially in the capital city of Kuala Lumpur, Malaysia presents very good opportunities for Kiwi exporters that are committed to developing new export markets.

However, as with any potential export market a degree of caution is required and due diligence on new business opportunities should be carried out thoroughly.

What the two FTAs that New Zealand has with Malaysia do not address are some of the non-tariff barriers that can make getting established in the market a challenge, especially for exporters of food and beverage products.

New Zealand exporters should weigh up the opportunities with the challenges. The positive indicators, such as healthy trade statistics, need to be looked at in the context of the realities of doing business in what is a very different market to our traditional export markets of Australia, Europe and the US.

I

n 2010 the New Zealand Government made two significant public statements about the importance of the Malaysian economy to New Zealand – firstly in January with the entry into force of the ASEANAustralia-New Zealand Free Trade Agreement (AANZFTA) and secondly, in August, with the entry into force of the New Zealand-Malaysia Free Trade Agreement.

36 EXPORTER

Both these FTAs give New Zealand exporters preferential access to what is currently our largest ASEAN merchandise trade export market.

Exporters should indeed appreciate the positive trade platforms that these two FTAs have created.

For the 12 months ended February 2012, merchandise trade exports from New Zealand to Malaysia experienced the greatest percentage increase out of exports to any of our

Halal certification Being a Muslim nation, there are tight restrictions on the types of food and beverage products that can be sold in Malaysia, as Halal plays a very important role in the fabric of Malaysian society. What Halal means for New Zealand food exporters is that for their products to be sold in the mass market (we will cover niche markets a little later), they must be certified Halal by a certification body sanctioned by the Malaysia

Department of Islamic Development, or Jakim for short. In New Zealand there are two certification bodies sanctioned by Jakim to provide Halal certification services; the Federation of Islamic Associations of New Zealand (FIANZ) and New Zealand Islamic Meat Management and New Zealand Islamic Processed Food Management, which are both based in Wellington. [See the ‘useful resources’ section for contact information on these two agencies.]

Halal certification is a requirement for food products that will be sold in traditional trade and modern trade outlets to the greater Malaysian

IF YOU ARE SERIOUS ABOUT DEVELOPING THE MALAYSIAN MARKET, REGULAR VISITS TO THE COUNTRY ARE NECESSARY TO SHOW YOUR COMMITMENT.

”

population. Retail buyers in these environments are rarely willing to stock items that are non-Halal. As a result it is very difficult for exporters of non-Halal mass market products from any country to convince importers and distributors in Malaysia that it is a good idea to import their products – quite simply because their channels to sell these types of products into are extremely limited.

To obtain Halal certification for Malaysia New Zealand exporters must pay a fee to either one of the sanctioned Halal certification bodies which will in turn make an assessment about whether the product qualifies as Halal. If the product is approved a Halal certificate will be issued as confirmation.

For exports to Malaysia, it is very important that exporters confirm before going through the Halal registration process that the certification body they are using is Jakim sanctioned – otherwise the process will be a wasted exercise.

Where Halal certification is not as important in Malaysia is in niche modern retail outlets such as Cold Storage or Mercato supermarkets in the Kuala Lumpur metropolitan

area. Generally consumers that shop at these outlets are either expatriates or Chinese Malay, who are not concerned about whether a product is Halal certified or not.

Importers and distributors that supply these channels are more likely to import and distribute food and beverage products that are not Halal certified. There are a number of Malaysian companies that specialise in importing regular consolidated shipments of gourmet food and beverage products to satisfy the demand from consumers with a taste for international products.

Wine market There is a growing consumer market for wine in Malaysia, but our wine exporters need to be cognisant of the sensitivities that exist in Malaysia around alcohol consumption. These constraints mean that the tariff and non-tariff barriers for wine imports are high. Much like in any country with barriers to entry, importers can, in some instances, use creative means to circumvent these barriers, which essentially allow them to put wine on the shelves at the lowest cost possible and maintain a healthy margin.

It is important that wine exporters spend time getting to know the Malaysian market and its intricacies.

Finding the right partner in Malaysia that can successfully manage the compliance and regulatory issues, while working in partnership with you to grow your brand in the market is crucial to achieving long-term success.

The regulatory and compliance challenges in Malaysia often mean that buyers are often not as quick to jump at opportunities to partner with offshore suppliers as their Singaporean neighbors might be. So, if you are serious about developing the Malaysian market, regular visits to the country are necessary to show your commitment.

The FTAs between New Zealand and Malaysia do encourage Malaysian importers and distributors to take a second look at opportunities to partner with New Zealand firms. In my frequent visits to Malaysia I see an enthusiasm from buyers to explore new opportunities. Converting this enthusiasm into export sales takes diligence.

To ensure that you give your

company the best chance of succeeding in what can be a somewhat challenging market, begin by gaining a fundamental understanding of the unique factors that influence your category in Malaysia and the constraints that local regulations create. It’ll put you in good stead.

USEFUL RESOURCES: • ASEAN-Australia-New Zealand FTA (AANZFTA) http://asean.fta.govt.nz/ • New Zealand-Malaysia FTA http://www.mfat.govt.nz/Tradeand-Economic-Relations/2-TradeRelationships-and-Agreements/ Malaysia/index.php • Federation of Islamic Associations of New Zealand (FIANZ) Tel : +64 4 387 8023 Email: fianz@vodafone.co.nz or fianz@xtra.co.nz • NZ Islamic Meat Management and NZ Islamic Processed Foods Management Tel: +64 4 385 2033 Email: admin@halal.co.nz

CAMERON GORDON / WRITER

Cameron Gordon is a New Zealand specialist in FTA export compliance. He has advised and assisted many of New Zealand’s largest companies about obtaining preferential access to key Asian trade markets through taking advantage of New Zealand’s FTAs. For more information contact Incite on 09 889 0041 or at info@exportincite.com

EXPORTER 37

> MARKET INTELLIGENCE

Large offshore projects are the core business of a small, but growing export finance specialist – and its directors are passionate about helping New Zealand’s export efforts.

BY G L EN N B A K E R

L

ooking to hammer out a financial deal to secure a medium to large scale offshore project? Talk to the ‘deal maker’ – Greg Fitzsimons of Export Finance Limited (EFL). He’ll not only get the ball rolling, he’ll keep it rolling until the finance is secured and the project completed.

Greg, along with co-director Matt Vyle, are passionate about helping Kiwi exporters and have the specialist skills and experience to ‘make the deal happen’ – rather than have a project stall due to lack of financial backing; a common occurrence in today’s fragile financial environment.

Those skills and experience, and indeed connections, come from their previous association with ABN Amro bank, where Greg worked in the debt team, mainly on structured trade and asset-based finance transactions.

“We closed asset-based transactions for mining companies and large infrastructure projects,” he says. “A highlight was the completion of the first project finance transaction (for a project in Istanbul) utilising New Zealand Export Credit Office (NZECO) support. We also obtained bank and NZECO approvals for a NZ$100 million agri-business project in South America.”

Greg says he enjoys helping the country’s export drive as well as problem solving and believes his success comes down to having the interpersonal and structuring skills to bring transactions together. However, at ABN Amro the client relationship policies were focused on institutions rather than medium-sized privatelyowned corporates.

“Our vision was to be able to talk to all exporters and bring our specialised

38 EXPORTER

project financing skills to a wider market,” he says. And so EFL was launched in 2009.

Greg describes their target market as a niche one – primarily exporters with one-off, often complex, projects valued from NZ$5 million upwards, and where a vendor financing package enhances the offering of the exporter. They work with NZECO, which provides a range of services which can effectively guarantee the buyer’s payment and insure against country risk – working through the

COMPLEX PROJECT FINANCE REQUIRES CAREFUL PREPARATION, DIRECTION AND MAINTAINED MOMENTUM WITH THE FINANCIAL INSTITUTIONS.

”

banks here and in the markets where the projects are taking place.

So where does he see EFL providing the most assistance to exporters?

“It’s in providing that finance arrangement to vendors overseas with credit restraints somewhere in the supply chain – which, in turn, greatly enhances the New Zealand exporter’s offering. It’s assisting the exporter to make the step up from doing say NZ$2 million to $5 million sub-contracts and pitching for greater project roles.

It’s accessing bank support – helping export firms get into shape to deal with the banks.”

Greg says their understanding of bank processes and risk assessment,

mitigation strategies and financial models all helps smooth the pathway to getting the deals done.

Large agribusiness projects (incorporating NZ farming systems, IP and genetic stock) and marine vessel projects are core sectors that generate business for the company. EFL specialises in assisting with the export of intellectual property and systems into overseas joint ventures (often agribusiness) that allow for a share of long-term investment flows to return to New Zealand.

Since launching EFL three years ago, Greg and Matt have put some impressive runs on the board involving specialised construction and engineering projects. EFL arranged the NZECO guarantee that supported the project financing for a New Zealand company interior fit-out of the MV Kay, a Gibraltar-owned mini luxury cruise ship. EFL also negotiated the financing arrangements and lease terms for Marinescape’s recently completed public aquarium in Cleveland, Ohio.

EFL’s work can be complex and challenging. Greg talks of the many ‘moving parts’ to a project finance deal that need to be co-ordinated to get to the day of “Financial Close”.

“We arrange the NZECO guarantee and bring all the parties involved – the buyer, the buyer’s overseas bank, the NZ exporter and NZECO – together,” says Greg. “Many of these export projects are extremely complex transactions that require enormous effort to ensure all elements of the transaction can be aligned at one moment in time to achieve financial close.”

Greg can’t speak highly enough of the

NZECO guarantee. “A New Zealand Government funding guarantee is a very powerful tool. Banking is a tough market and there can be a reluctance to lend on new projects. But the guarantee can help stimulate bank interest in considering the whole arrangement.

“By being able to bring the government along to the transaction you can lower the cost of funding for the venture and the exporter can add real value to his offering. You’re walking in the door with a powerful package.”

He says EFL goes into bat for the exporter, arranging the NZECO guarantee and working with the buyer’s bankers. It also provides the project leadership and ensures the project’s financing momentum in maintained.

“This lets the exporter get on with the business of delivering the core project elements.

“Complex project finance requires careful preparation, direction and maintained momentum with the financial institutions. Our USP is our successful track record of getting complex transactions completed and delivered.”

Challenge of scale ESL operates in a niche market, and Greg says the challenge is finding export projects of sufficient scale.

The dollar value of single export transactions is usually small. To qualify for NZECO backing, projects need to be on a commercial scale rather than involving just funding for private luxury yachts – which he admits eliminates

EFL’S PATH TO PROJECT SUCCESS • Engage expert advice early.

• Identify all project stakeholders and parameters • Understand stakeholder objectives and drivers.

• Develop a detailed financial model integrated with funding structure (essential for negotiation and decision-making).

• Identify project risks and mitigants.

• Perform comprehensive and critical due diligence.

• Ascertain potential funding sources and possible credit enhancements.

• Present a consistent message to banks, NZECO and investors.

• Maintain project momentum. a big chunk of New Zealand’s boat building activity.

There’re also a couple of mindset inhibitors to achieving the necessary project scale he says. Firstly, many exporters don’t have the risk appetite (or mistakenly think they don’t have the skills) to be project leaders – they’d rather just stay a sub-contractor.

“We’re looking to help those that are prepared to step up and take on management of the whole project.

Remember NZECO is backing the buyer or project sponsor to make the payment flows. They’re also underwriting the debt facility during the project’s construction period – which allows exporters to step up to larger projects,” says Greg.

Secondly, there’s a reluctance to pay fees to a project enabler such as EFL – which are sometimes seen as a slice of the exporter’s margin rather than an investment to ensure the project

happens. “We try and overcome this reluctance by focussing our fee on the exporter’s successful project delivery rather than charging an hourly rate whether the deal happens or not.

“Not surprisingly there are exporters who want to do it all themselves. We know of export projects that have been on the table for years – but a DIY approach to financing has resulted in limited interest from the banks.”

Greg says after three years they’re now looking to widen their client base, develop repeat business, and broaden their focus into areas such as assisting with large scale contract performance bonding applications. One thing is for sure, if there’s a deal to be done out there, he’s ready and willing to step up and make it happen.

Glenn Baker is editor of Exporter.

Coming up in the July/August issue of Exporter: • AIR FREIGHT

• FINANCE FOR EXPORTERS

A comprehensive look at air freight services and issues from an export company’s point of view. Exporter talks to the leading air cargo companies for tips and advice on air freighting goods to overseas markets. What are the potential traps? How can exporters make efficiencies and cut costs? Who are the new players and what level of service should be expected? Book your advertising space today.

Exporting goods or services inevitably requires additional outside funding for the companies concerned. This special feature looks at the various funding avenues and options available to New Zealand’s exporters – some traditional, some not-so-traditional. A feature peppered with great advice and, as always, educational case studies.

Book your prime space within this excellent marketing opportunity today.

To discuss advertising opportunities call Leanne Moss on 09 477 0368 E leanne@exportermagazine.co.nz

EXPORTER 39

> MARKET INTELLIGENCE

Man on a mission Frank Li, the New Zealand Trade Centre’s Asian development manager, visited Hong Kong and China in March to raise awareness of New Zealand wine and connect Kiwi exporters with Chinese distributors. Exporter caught up with Frank on his return.

E F

: Was your trip to China up to your expectations in terms of outcomes? rank: Yes, it did reach our expectations. Highlights included our visit to Hong Kong where we carried out some market research and met with the Hong Kong Trade and Development Council. The meeting was successful and they have already reciprocated with a visit to the New Zealand Trade Centre.

After signing a formal partnership agreement with the Guangzhou Exhibition Centre they are planning

to visit us mid-May with a number of potential food and beverage buyers.

We feel very fortunate to have government support from Zhengzhou city and Shanghai too. They are both arranging potential strategy partners to help us enter their markets.

E

: What trading realities between the two countries did this trip reinforce for you? And do you think the NZ-China FTA is making a difference? rank: People are excited about the NZ-China FTA and the recent lift on tariffs but the reality is there are

F

40 EXPORTER

still a number of barriers to efficient trade between the two countries. These barriers include the fact that Chinese testing standards (CIQ) are different to New Zealand’s and it is often difficult to meet requirements.

Chinese importers report that they still find it very difficult to bring in high-quality New Zealand products and this is a source of frustration. Also the strength of the NZD has increased prices and means the exchange rate is not in favour of Chinese importers.

E F

: How are our wines and products generally viewed in China? rank: New Zealand already has a very strong brand especially in the food and beverage sector.

Consumers, particularly middle class, are looking for safe products and they see New Zealand as one of the best suppliers because of our natural, pure and green image.

The New Zealand wine industry has a long journey ahead to raise its profile in China as not many people believe New Zealand is a specialist producer of wine. Some people still don’t even

recognise New Zealand as a wine producing country. Further promotion is desperately needed to put us on the map as a successful wine producing nation.

There are many wine buyers out there if you are prepared to invest in growing the market. Two weeks after our trip we received an order from Beijing for a container of mid-range cabernet sauvignon and merlot/malbec from one of our trading members.

E F

: What feedback are you getting from your contacts in China about the economy overall? rank: The Chinese economy has slowed a little as the property market is being manipulated. This affects overall consumer consumption as people are spending less due to less confidence. The demand for imported products, however, is very strong as consumers demand safe products.

The Government is supporting importers to help provide higher quality/ safe products to Chinese consumers.

The overall economy in China has grown rapidly in the last ten years, and an increase in income means the general population can now afford to buy imported goods. Many large corporations are restructuring their businesses, particularly those in property development. They are starting to consider opportunities in import/export trading. We see a lot of potential in working with these types of companies because they already have very strong working relationships with government departments.

> MARKET INTELLIGENCE

Fair trading Velocity Trade is one of the first of a new breed of forex specialists in New Zealand. Exporter looks at its services and dispels a few myths around this specialised industry.

I

t’s appropriate that Velocity Trade should have a high-rise office in Auckland’s CBD with a birdseye view over the sparkling Waitemata harbour. It’s indicative of the high vantage point it has on trade and the world’s currency markets.

Velocity Trade is a foreign exchange (FX) broker with a finger on the pulse of currency fluctuations. The company entered the AsiaPacific region by joining forces with a Kiwi-established company, LatitudeFX. Over the years LatitudeFX had provided online foreign exchange margin trading, primarily to individual traders with a unique offering of direct market access and no interference into client trades.

The acquisition allowed Velocity Trade Limited to continue to provide foreign exchange trading services to corporations, institutions and individuals.

“We are the only locallybased company in New Zealand offering both physical and levered foreign exchange services,” GM Sargon Elias explains, adding that Velocity Trade’s service on international money transfers is unique.

“We are linked to a number of the world’s leading FX providers, giving us access to wholesale interbank rates. This access, combined with our efficient online systems and minimal

overhead costs, allow us to provide international foreign exchange transfers at a much reduced cost. These savings are passed on to our customers.

“Institutions profit from currency transfers by adding a ‘margin’ of up to 2.5 percent onto the exchange rate, as well as charging transfer fees, usually around $25 per transaction. We provide a transparent service offering a more competitive spread so clients receive a rate much closer to the wholesale interbank rate. By offering better rates we can save our customers between two to three percent, on average.”

Elias is aware of the misunderstandings associated with their industry. Most people don’t really understand exchange rates to begin with, he says.

“They may not know that there is a mark-up added to the rate, and that there is a better alternative. Most get caught up in the transfer fee and even if they are aware that FX companies exist, the only visible saving is the $25 transfer fee, not usually enough to stop them from using their bank.

“The biggest hurdle for us is simply creating awareness that we are a competitive, service-oriented organisation who can assist in securing our clients a fair rate,” adds Elias. “Once awareness is created, then we must earn

(L-R) Sargon Elias and Curtis Moonan

the clients’ trust and get them to switch from their current provider, as most people become comfortable simply using the bank.”

Foreign exchange companies are a fairly new concept for New Zealand he says, so there has been a major requirement to educate the local market. Velocity Trade attends trade shows and events where they personalise their service to prove that they’re “real people offering fair rates and an unmatched customer service”.

With the bumpy markets here to stay, Elias says clients are looking for a stable price platform to safeguard imports.

“One of our clients imports cars from Japan several times per month. We advise him whenever the JPY is weak or the NZD at a high so he can lock-in the rate. That way even if he doesn’t have any cars to bring back at that time he will have bought the JPY at a good rate.”

A typical client is a sole operator who imports machinery equipment from

Europe, typically for around EUR100,000 and re-sells to clients, mainly in New Zealand and the US. Using Velocity Trade he saves approximately two percent on these payments to Europe helping to secure his price on the purchase – therefore putting him in a better position to profit on the re-sale of the machine.

But it’s not just about saving clients’ money. Elias says they take the time to get to know their clients and their FX needs. They give each client a personal account manager to keep them informed of relevant market updates that might help secure a better rate. They also help devise a strategy that will mitigate risk and save the most money in the long run.

“We believe that, through providing a competitive service, we assist firms to save on foreign exchange, mitigating the risk of adverse movements. As a result, we aim to help them indirectly: gain a competitive edge and create opportunities for retaining jobs and creating new ones.”

EXPORTER 41

> F E AT U R E

Trademark tips Angela Searle sheds light on some of the myths and misconceptions that exist around international trademarks.

Y

our trademark is potentially one of your most valuable business assets – the ability to use it, unimpeded, is something many of us take for granted. If you do business overseas or have goods manufactured offshore, protecting your right to use your name on the international playing field is even more important.

If you have not registered your trade mark – your brand name, then you leave yourself wide open for someone else to swipe it from underneath you.

Here’s my response to three common questions raised in relation to international trademarks:

Q1

: Can I get a trademark registration that will protect me in every country? In other words, is there a worldwide registration?

Simply put – no. Trademarks are territorial in nature. Therefore, you need to file in each country in which you anticipate trading. A European registration does, however, cover 27 countries (excluding Norway and Switzerland).

The international filing system known as the Madrid Protocol will shortly come into effect in New Zealand. This provides a cost-effective and efficient way for business owners to ensure protection for their trade marks in multiple countries through the filing of one application.

After an International Registration has been issued, the trademarks Office of each country designated by that registration will determine whether the protection will be granted in that particular country. Once the individual trademarks Office confirms protection, the mark is protected in that country just as if that office had registered it from the outset.

The Madrid Protocol also simplifies the subsequent management of the mark, since a simple, single procedural step serves to enable the renewal of the registration and to record subsequent changes in ownership or in the name or address of the holder (rather than recording each change for each individual registration).

While the system, coming into effect in New Zealand later this year, will make it easier to file in multiple countries, it also makes it easier for overseas entities to file here – thus increasing your risk if you have not protected your trade mark here.

An International Registration is also dependent on your home country registration for the first five years – so if

for any reason your home registration is removed, your International Registration also lapses. Having said that, it is possible to transform your protection into standard national registrations if your International Registration is removed. . : I hear there are pitfalls to registering a trademark in China? Is this true?

Trading in or manufacturing goods in China raises many issues not found in other countries. Firstly, the first entity to file an application to register a trade mark gets superior rights to that mark in China (as opposed to the first to use a mark – as is the case in other countries).

This means that even if you have been exporting your products to Asia for years, another trader can register your trademark before you and gain superior rights. Accordingly, it is really important to safeguard your rights by filing an application for registration before it is too late. A disgruntled distributor, employee or a competitor could file an application to register your trademark – and then block you from using that mark.

Filing an application pre-emptively is a lot cheaper than overcoming the issue of another party using your mark.

Do not assume that you’re immune because you don’t do business in China yet. Act now and avoid the disappointment and cost of developing a new brand when you start operating there or getting goods made there in the future.

Secondly, it is important to apply to register a trademark in the Chinese language – as well as English. This is because most Chinese consumers do not speak English – and if they cannnot pronounce your mark, they will make up their own name for it. This has a number of serious pitfalls. Firstly, it may not be complimentary. Alternatively it may be descriptive and therefore a competitor could start to use the same mark to honestly describe its goods/services, thereby causing consumers to be confused, and potentially losing sales.

China is a huge market and it is really important to ensure that your trade mark has adequate protection in this country.

Q2

know what you don’t know. If you get it wrong, you might not know until someone challenges you or tries to steal your mark out from under you. They might even succeed!

When filing a trade mark application overseas, many countries will require you to have a legitimate physical address for service in that country. This is where a trademark attorney comes into his or her own.

Secondly, each country has different trademark laws – no one can know them all.

I have international affiliates in most countries of the world, ensuring I can engage someone with specific knowledge of that market to ensure that your mark is well protected.

Many self-filers also go wrong by defining their goods/services too narrowly, therefore not allowing them scope to expand the breadth of their goods or services being provided under their existing mark – or by filing an application to register a logo, whereas they would obtain much stronger protection if just the word mark was registered.

An attorney will also have more success at overturning any objections that are raised during the registration process – and objections are commonplace.

Angela Searle is a trademark attorney at Canterbury-based Trade Mark Intelligence and has been working with both SMEs and large global corporations for almost 20 years.

Email angela@tmintelligence.co.nz or phone 03 312 0934.

Q3

: I can register a trademark myself – why would I use an attorney?

“Do you file your own tax returns?

Would you write your own will?

Registering a mark is the same. Yes you can do it, but it’s a case of: you don’t

EXPORTER 43

> T E C H S PA C E

Made in New Zealand; found in China.

Ross Brown uncovers a distribution disaster and reveals a technology to help prevent it happening again.

“T

hat’s one of ours. It shouldn’t be here!” The bottle stood, front of shelf, in a dusty Mom-andPop store in a colourful alleyway in Guangzhou. Shipped to Europe, but now on a shelf in China, it shouldn’t have been anywhere near. It was cheap too, almost 18 percent below the official price for Southern China.

This is yet another case of grey market product or ‘parallel importing’ destroying export plans.

It is China, but it could have been India, or Vietnam, or any of a dozen other countries. It happens. It is hard to track, and even if you – a Kiwi exporter – see your product on display, how do you ascertain how it got there? If that particular batch of product was supposed to be in Europe; is there a shortage there now? Or could this be a case of theft and the production of counterfeit, inferior product and illegal replication of packaging?

What to do? We weren’t cast members of “CSI Supply Chain” who could forensically track how a batch of bottles got to China. We couldn’t even get the shopkeeper to understand why he shouldn’t be selling this product. How do you find the path that brought product to this location and at this bargain price? How many other batches were spread throughout Southern China, we wondered?

The reality is that exporters have a hard time keeping track of distribution once product is shipped offshore. There is a need to look into security issues around theft and trans-shipping of products en route to distributors. Local distributors may offer up a paper trail but how bona fide and enforceable is the process to market?

44 EXPORTER

Fortunately, there is a technology that can shed new light on the supply chain and the path to the consumer’s hand. It requires minimal investment, allows rapid identification of legitimate product, and is globally accessible.

Quick Response (QR) codes, these thumbnail-sized square black and white barcodes were originally conceived as an improved parts tracking tool for the automotive manufacturing industry.

Hijacked by marketing departments, the technology has now become a frontend means of engaging with online consumers. Internationally QRs are widely used to link the real world with the digital world of information and promotions. Using a phone’s camera, QRs are a quick and automatic link for both consumers and suppliers to access information. The process is zeroclick on iPhones, iPads and most new smartphones.

From a consumer’s perspective QR codes reveal a volume of information that would be impossible to compress into a small packaging space. As the web can be updated in real time, QRs bring new life to printed material and enable new ways for brands to interact with customers via mobile phones.

Contrast Media is a Kiwi company behind new technology enabling suppliers to scan a QR code and track the distribution of shipments while at the same time deliver a marketing message and recover consumer information – all from the one QR. The increasing adoption of QR codes by consumers worldwide means businesses can track where and when products are being scanned. Every time a consumer uses his or her phone to view a QR code (24/7, at point-of-sale or

post-purchase) the scan can be logged and reported.

So if you ship to Hong Kong and someone in Vietnam, or France for that matter, scans your QR you get to hear about it. Contrast Media’s solution is to let the behaviour of your customers tell you what you need to know as the “HardLink” platform automatically records the location of each scan using one of two methods. Scans are located by using the mobile network information captured during the scan process. This location is normally accurate to within a few kilometres and good enough to differentiate export shipments. Additionally, if consumers choose to share their location via GPS lookup on their phone, then this more exact location data can be captured and passed to the export team.

Product batches can be assigned to a territory by ‘geo-fencing’ a market. This involves selecting a country or range of countries, or by specifying a geographic area bounded by specific latitude and longitude boundaries. If a product batch is assigned to a territory and scans occur outside of the geographic area then they are considered suspect. A small number of scans is not sufficient cause to raise an alarm because products are often transported out of a territory by consumers for legitimate reasons, but a large number of scans would be suspect.

Knowing exactly where New Zealand products are being consumed in the world has to be the key to building a lasting export strategy.

Ross Brown is key accounts director at Contrast Media. Email ross@contrastmedia.co.nz

S PA > FA>I RTSE C & HE V E NC TE S

Local: 31 May 2012 World Class New Zealand Awards – Auckland. A celebration of New Zealand innovators and entrepreneurs who have made a significant contribution to the country’s growth and development as well as its international reputation. www.keanewzealand.com/wcnz 14 June 2012 Turkey Market Focus – 7-9am, Smart Business Centre, 65 Chapel Street, Tauranga.

In conjunction with NZTE. Guest speakers will talk about their experiences exporting to Turkey.

For ExportNZ BOP/EMA members.

Email: tracy@exportnz.org.nz.

22 June 2012 AirNZ Cargo ExportNZ Auckland Awards - Gala Dinner, Langham Hotel. To register email catherine@exportnz.org.nz 29 June 2012 BNZ Bay of Plenty ExportNZ Awards - Baypark Function Centre, Mt Maunganui. Visit www. bopexportnzawards.co.nz Let us promote your export business event.

Email the details to editor@exportermagazine.co.nz

– The 18th International

For information email John Gore,

Agriculture Exhibition and

jlg@eurofair.co.nz

Conference, Tel Aviv. Producers, researchers, distributors, farmers,

18-23 Sept 2012

administrators, and all others

Photokina – World of Imaging –

involved directly or indirectly

Cologne.

with agriculture and/or water

www.photokina-cologne.com

technology are invited.

3-7 Oct 2012 13–16 June 2012

Intermot – International Motor,

PropakAsia – Bangkok, Thailand.

Scooter and Bicycle Fair – Cologne.

The 20th International Processing,

www.intermot-cologne.com

Filling and Packaging Trade

10-13 Oct 2012

Exhibition.

RehaCare – Rehabilitation,

Visit www.eurofair.co.nz

Care, Prevention, Integration – Düsseldorf. www.rehacare.com

19–22 June 2012 CommunicAsia 2012 – Singapore.

10-14 Oct 2012

The 23rd International

Buchmesse – Frankfurt Book Fair –

Communications and Information

Frankfurt. www.buchmesse.de

Technology Exhibition and Conference.

23-26 Oct 2012

Visit www.eurofair.co.nz

Glasstec – International trade fair for glass production, processing –

31 August-5 Sept

Düsseldorf

IFA – Consumer Electronics –

www.glasstec-online.com

Berlin. www.ifa-berlin.de 23-27 Oct 2012 2–4 Sept 2012

Orgatec – Modern Office & Facility

spoga/gafa – The garden trade fair

– Cologne. www.orgatec.com

– Cologne. www.spogagafa.com 13-16 Nov 2012 11-16 Sept 2012

Electronica – Components,

Automechanika – World’s Leading

Systems, Applications – Munich.

Trade Fair for the Automotive

www.electronica.de

Industry – Frankfurt. www.automechanika. messefrankfurt.com 13-16 Sept 2012 Kind + Jugend – The trade show

For more information on trade shows, check out these websites:

International:

for kids’ first years – Cologne.

13–16 May 2012

16-21 Sept 2012

APPEA Conference (Australian

iba – World Market for Baking –

Petroleum Producers and

Munich. www.iba.de

www.nzte.govt.nz

17-20 Sept 2012

www.austrade.gov.au

World Food Moscow 2012 – Where

www.germantrade.co.nz

www.kindundjugend.com

Exporters Conference) – Adelaide.

Visit www.appeaconference.com.au 15–17 May 2012

the world of food meets Russia. NZ

AgriTech 2012 Israel

Pavilion managed by Eurofair.

www.tradex.co.nz www.messereps.co.nz www.eurofair.co.nz

www.biztradeshows.com

EXPORTER 45

> F E AT U R E

Fair comment German trade shows make powerful meeting platforms for Kiwi exporters.

Doris Evans gets some positive feedback from recent exhibitors.

G

ermany is top dog at organising international trade fairs. The country hosts a number of the world’s largest fairs, such as Anuga in Cologne, the Frankfurt Book Fair, the Toy Fair in Nuremberg and CeBIT in Hanover. They are a vital source of information, a powerful meeting place and a high-profile platform to introduce new products.

Many New Zealand exporters already recognise the effectiveness of German trade fairs.

Gillian Williams, director of Foreign Accents International in Tauranga, thinks that the Ambiente trade fair in Frankfurt is a “fantastic platform”. This exporter of handmade ceramics with exclusive designs has been attending Ambiente for five years and still considers the event as “one of the best fairs ever”.

With 4,543 exhibitors from 87 countries, Ambiente, which ran from 13 to 16 February 2012, is regarded as the world’s most important consumer-goods trade fair.

“As a buyer the Ambiente is the fair to go to,” Williams says. “The choice is unbeatable.” Ambiente 2012 was no disappointment either. “Although I had the feeling the fair was poorly

46 EXPORTER

attended, it was very good for us. Four good orders out of one event is an excellent result,” she says. Ambiente 2012 attracted 140,000 visitors from all over the world, slightly less than the year before (144,991 visitors).

Boskke, a 100 percent New Zealand company, was a first-time exhibitor in Frankfurt. The company showcased its lifestyle/gardening products made from recycled polypropylene. Sales and marketing director Jake Morris was pleased with the outcome and is considering attending Ambiente on a regular base.

“The response was very strong, the German market is obviously a key market for Europe and our biggest selling country,” Morris says. “A trade show like Ambiente attracts a lot of international customers. We have followed up with distributors and retailers from around the world after the show,” he adds.

Boskke was based in the UK in 2009 to be closer to their target markets.

“We found it very difficult to generate business from New Zealand, but once we moved here, doors began to open quite quickly. We still have admin support in New Zealand, but having representatives in the market is essential, says Morris.

Reaching the decision makers Intensive market research has shown that trade fairs in Germany are likely to reach all levels of decision makers and key buyers. They are also an excellent venue for launching new business ideas.

Wellington-based company Wishbone Design, a design and manufacturing company for kids’ bikes and accessories, is an example of how trade fairs can help get a business on track. The company

kicked off at the Toy Fair in Nuremberg four years ago, where they presented their products for the first time.

“It was a roaring success,” Wishbone’s director Jennifer McIver recalls.

“This year’s Toy Fair was great as well,” McIver says. 77,500 buyers and retailers from all over the world visited the event from 1st to 6th of February 2012 in Nuremberg.

McIver travelled to Germany with the intention of adjusting the company’s strategy in Europe and to find a good wholesale relationship. “We got some really hot leads,” she says. “German trade shows offer an easy way to get into direct contact with wholesale buyers,” McIver adds. Working directly in the German market, the Toy Fair offers a

GERMAN TRADE SHOWS OFFER AN EASY WAY TO GET INTO DIRECT CONTACT WITH WHOLESALE BUYERS

”

chance to cut out the distributor and directly approach the wholesale market.

Sarah Gardner, from NZ company Flatoutfrankie, was among the exhibitors who presented their products for the first time in Nuremberg. She was placed at the NEC, the new exhibitor centre, which is an excellent starting point for newcomers. The 347 stands are in the spotlight of the media as well as the visitors in Nuremberg.

Flatoutfrankie designs flat packed cardboard toys to “inspire creative and active play”. “The whole of Europe is in Nuremberg,” Gardner says. The result of her participation at the Toy Fair was 120 leads to follow up and 40 serious conversations.

Partnerships Besides meeting business partners, sharing information or introducing products, trade fairs can also be utilised to demonstrate partnerships.

Together with its European marketing partner, French company Sofruileg, New Zealand’s Plant & Food Research launched a new kiwi berry product at this year’s Fruit Logistica from 8 to 10 February in Berlin. Fruit Logistica is the leading industry event for the international fresh produce trade. The event registered a record number of

2,537 exhibiting companies and more than 56,000 trade visitors from 139 countries attended the show.

Wendy Cashmore, Plant Varieties Manager at Plant & Food, knows Fruit Logistica by heart. She has been travelling to Berlin for eight years and thinks the fair is getting bigger and better all the time. “Each of the contacts we made in Berlin does not necessarily lead to business, but it leads to other contacts. At the exhibition we can catch up personally with the partnerships we have built,” she says.

However, it is not the cheapest option to go overseas and exhibit at a prestigious trade fair. “A lot of companies see the possibilities international trade fairs offer, but attending one can kill your budget,” says Williams. “Our government should consider assisting exporters when it comes to trade fairs. I am not thinking of huge amounts of money, but even supporting on a small scale would help

immensely,” she says.

Jake Morris recommends relocating key sales staff to Europe. “It’s much easier to explore the market, execute sales visits and trade shows, and offer ongoing sales support to your customers from here,” he says. It might be more cost-effective, too.

According to Association of the German Trade Fair Industry AUMA’s forecasts, 182,000 exhibitors and 10.3 million visitors will take part in 160 trade fairs in 2012.

“Around 100 to 112 exhibitors from New Zealand participate in 35 to 40 German fairs per year,” says AUMAspokesman Harald Kötter.

For a little country on the other side of the planet – that’s an impressive commitment.

Doris Evans is an Auckland-based writer.

EXPORTER 47

GLOBAL STAGE

EXPORTER LOOKS AT INNOVATIVE NZ PRODUCTS CURRENTLY ON DISPLAY AT THE NEW ZEALAND TRADE CENTRE

The NZTC team recently returned from a successful business development trip to China. The objective of the trip was to showcase our members’ products, identify new markets and to visit the Chinese trade delegations we have recently hosted.

One of the highlights of the trip was signing a partnership agreement with Guangzhou Industrial Famous and Excellent Products Exhibition and Sales Centre. This high-profile occasion was supported by New Zealand’s Consul General Mr Pat English and Guangzhou’s Vice Chairman of Trade and Economic Development, Mr Chen Yong.

This new partnership forms an important market channel for NZTC in Southern China and is the beginning of a close trading relationship.

One of NZTC’s newest members and trading partners is the Canterbury beverage company ‘Aroha Drinks’.

In the Maori language, “Aroha” is a word meaning love for the land and its people. In 2007 the first batch of Aroha cordial was made from wild elderflowers grown on the Canterbury Plains. Today there is a range of Elderflower Sparkle juices and cordials. They use the sweet taste of the elderflower to balance the acid in fruits such as Feijoa, Rhubarb and Blackcurrant. The Cordial range has recently grown to include a Tart Rhubarb, Gooseberry, Ginger Honey & Lemon and Wild Rose-hip. Already exporting to Hong Kong and Southern China, Aroha drinks are excited about expanding their export markets. www.arohadrinks.co.nz

48 EXPORTER

New Zealand Trade Centre is excited to introduce a new natural skin care range Blanchett Anti-Aging Face Collection.

Blanchett is a family business who base themselves on their retreat-like property in Matakana, an hour north of Auckland. They are blessed with a lake full of White Lotus during the Summer and an Olive grove which forms the base of their new Active Botanical skincare range. After trialling their products for over two years they truly believe that they are not only lovely to use, but totally beneficial.

Using highly-effective natural botanical ingredients, it is a complete system designed and formulated to repair and protect delicate facial skin.

The range is free from parabens, mineral oils, petrochemicals, artificial colours or other disruptive chemicals, not tested on animals, from sustainable sources and of course made in NZ! www.blanchett.co.nz

House of Chocolate started manufacturing in 1995 and are situated on Auckland’s North Shore in Beach Haven Village.

House of Chocolate are relatively new to Export but after being inundated with requests from overseas visitors they are now working with New Zealand Trade Centre to help grow their export markets.

Their New Zealand Fruit Sensations range is truly unique and combines the best New Zealand fruit with exquisite dark or white chocolate. The drying process retains the natural flavour of the fruit and leaves the fruit as crisp as a wafer. A premium product, the delicious Fruit Sensations range offers retailers, high end hotels and corporates a unique chocolate range that won’t be found anywhere else in the world. www.houseofchocolate.co.nz

NEW ZEALAND TRADE CENTRE. 38 ALBERT STREET, AUCKLAND CBD. (CORNER OF ALBERT AND SWANSON STREETS) INFO@NEWZEALANDTRADECENTRE.COM PH: +64 9 929 1180 WWW.NEWZEALANDTRADECENTRE.COM

EXPORTER 49

> VIEWPOINT

From the Beachheads

New Zealand Trade and Enterprise’s Beachheads programme is a global public-private partnership designed for high-growth New Zealand businesses looking to succeed internationally. The programme connects participants with expert advisors who have the knowledge and networks to help them achieve international growth.

Beachheads advisors are successful private sector executives who are committed to sharing their knowledge and experience by offering pragmatic advice and insights into the realities of doing business internationally.

Here, advisors answer questions about doing business in the US, Japan and India.

Q

: We are now ready to establish a more permanent presence in the United States and want to hire local staff, but I am confused about where to begin. How do I go about recruiting the right people? Are there any common mistakes New Zealand firms make when hiring in the US, and how do I avoid following the same path?

A

: Ben Anderson, chair of the North America Beachhead Advisory Board and partner at Lonergan Partners: It’s really important to have the right talent – every poor hire sets you back in a big way.

Many New Zealand companies arriving in the US see salaries for high performing talent as expensive.

50 EXPORTER

They can be two to five times higher than in New Zealand, so New Zealand companies typically hire a less expensive person or bring someone in from Auckland. These

people underperform, or are at a disadvantage, and within six to 18 months the CEO and board lose confidence in them, they are replaced and then the company starts the vicious cycle again.

To go about it properly, you need to have a very clear strategy about what you want to achieve in the next 12 to 18 months – for example, secure your first five major customers in California. Remember that roles are more focused in the US. Recruitment companies can be helpful, or engage an experienced advisor for 12 months to help you create clear position profiles and to identify talent. Use LinkedIn for this – most of the talent you will be interested in is on LinkedIn – and then go after them. You can also see who your competitors are hiring

and what their backgrounds are.

The CEO must front the recruitment process and engage with the talent.

Don’t delegate this – your competition has their best people competing with you for the talent. The US is used to very articulate propositions, good communication and quick decisions.

The compensation [remuneration] must be good and usually include a percentage ownership (equity) in the company. In California, the notice period is only one or two weeks.

New Zealand companies are reasonably good at retaining staff but they must have good lines of communication, regular reviews and weekly ‘checking in’. People are used to a high degree of analytical performance management – as an example, Google’s employees publish their goals for the next week for all to see. Be quick to remove underperformers.

Q

: I’m negotiating with a potential business partner, but they have said that contracts are not used in Japan. Is this true and can I insist on a written agreement? Otherwise how do I ensure there’s a record of what we have agreed on?

are careful in a meeting not to allow older people to lose face. They also don’t like to say ‘no’ abruptly. Outside, one-on-one, they may be more direct.

The result is that it takes longer to make a decision.

But while there will be an initial hesitation, we do have written agreements for major things like sales, investment and employment. So if someone says that contracts are not used, I think they may have something else in mind. They may think it’s too premature and want to do business on a trial basis first. Or they may not like the proposition but don’t want to reject it.

In this situation, it may be better for a New Zealand company to have a less formal arrangement such as a memorandum of understanding, a non-disclosure agreement or even just minutes taken at a meeting. You may have to be a little flexible rather than pushing for a formal written agreement.

: Meishi Sonobe, chair, Japan Beachhead Advisory Board: It’s true that legal contracts are used less in Japan than in Western countries. Japan is traditionally more relationship-driven and less contractdriven. Japanese people like to spend time getting to know a person first and are interested in long-term relationships.

Introductions and references are very important. The Japanese have a tendency to be more contextual – not black or white. For example, they

”

Q

: What opportunities do you anticipate opening up in India in digital solutions? Do you think New Zealand companies have particular strengths in these areas and how should they approach the markets?

A

A

ONCE YOU’VE DONE YOUR RESEARCH AND YOU ARE COMMITTED, DIG A DEEP TRENCH, HAVE PATIENCE AND BE READY FOR THE ROLLERCOASTER RIDE.

: Ashish Hemrajani, India Beachhead Advisor and partner in Vista Solutions: New Zealand SMEs have some amazing talent but generally they don’t know how to channel their resources to market and grow quickly to stay competitive.

In the digital area, New Zealand can use India as a stepping-stone to scale up and launch in Europe, the Middle East and the US. India is viewed as a world-leader in ICT. For example, one of India’s most valued IT firms, CMC, has a company in New Zealand that takes a lot of smaller companies under its wing and helps them grow by infusing a process to build scale and resources, targeting markets in and outside India.

It basically combines the New Zealand brain pool with the Indian talent pool.

New Zealanders can work with larger companies in India using the India Beachhead and New Zealand Trade and Enterprise to help them with contacts and advice. We can help them find a partner, get their strategy right, give them access to capital and

resources, and give them guidance on the rules India has.

Focus on the commonalities – there are certain shared value systems, we both speak English and we both like to beat Australia in cricket! It is true that when you visit India you will find snake charmers and elephants on the street but you will also see high-rise buildings and MercedesBenz cars. And New Zealand is not simply a honeymoon location known for its sheep but also produces really innovative digital solutions and computer graphics.

India is like a Ferrari on steroids.

The way you look at it is the key. We have a strong credit system. Our size and scale set a big challenge for New Zealand companies. But once you’ve done your research and you are committed, dig a deep trench, have patience and be ready for the rollercoaster ride.

For more information about the Beachheads programme visit www.nzte.govt.nz

EXPORTER 51

> VIEWPOINT

The biggest mistakes exporters make How to avoid making the big export mistakes. By Rom Rudzki. Rule No 1: ‘Just give it a go’.

T

op of any list of mistakes exporters make comes the simple fact that those who fail simply haven’t got the skills to succeed. This may be for a variety of reasons: lack of time, pride (the kind that comes before a fall), or ignorance of the export process. But whatever the reason the results are the same, they end up wasting time and money on a venture that is doomed to fail from lack of preparation. This is why the Boy Scout motto ‘Be Prepared’ is sound advice because the more you prepare, the greater your chances of eventual success.

Most people would never dream of going on holiday to another country they know nothing about, and yet these same people will cheerfully part with large amounts of staff time and business income on what is nothing more than passing water into the wind.

Author Robert Kiyosaki once wrote that ‘Excuses are the lies we tell ourselves’ and many exporters make lots of excuses for not doing things properly.

So what is ’properly’?

Well, it comes back to another saying: ‘A professional is someone who CAN do a job when they DON’T feel like it, whereas an amateur is someone who CAN’T do a job when they DO feel like it.’

However, it gets even worse. Exporters just ‘giving it a go’ won’t have bothered to find out about ‘big picture’ stuff such as the global trends affecting their business (e.g. green miles), competitors in their industry, or even who can help them for free.

This ‘big picture’ also includes knowing who the professionals are in your own industry, such as IATTO in my industry – exporter education.

Every industry will probably have such a global body which should be at the pinnacle of its game and provide help and forecasts about where both

52 EXPORTER

the industry, and the world in which it operates, is going. Just looking at your competitors is not enough – they may be even further behind the times than you are! And just because they’re big doesn’t mean they have brains to match. In fact the bigger the company, the more likely it is to substitute financial muscle for the brains of innovative thinking and the heart of customer care.

For example, in exporter education, it is clear that exporters working fulltime no longer want to go on campus to attend classes even if these are in the evenings and weekends.

Exporters need the flexibility to be able to study at work, at home and whilst travelling. They also do not want administrative deadlines that make no allowance for the realities of daily life. But, most importantly, they want to learn stuff that is actually useful and immediately applicable at work – whether it is getting hold of a template agency agreement or knowing how different Incoterms affect the price they should be quoting.

So what will the future of exporter education look like? It’ll offer courses that solve real problems at work; materials that are delivered in hard copy and electronically over the web; tutors who are experts in their own field such as marketing or finance; a professional qualification recognised overseas; and ongoing access to information that informs decisions at work. Like any industry, education is going through big changes that will transform it beyond recognition.

Even the best prepared multinationals with very deep pockets get exporting wrong big-time. Coca-Cola’s entry into the Indian market was a disaster as they used TV adverts showing urban youth to promote their drinks – akin to using the Mongrel Mob and Black Power to promote products here – not a ‘good

look’. So Coca-Cola overhauled its entire campaign to show entire families drinking Coke together from glasses at mealtimes.

Getting started So how to avoid making such ‘Give it a go’ mistakes? Here are six questions to get you thinking: • Do you know what global trends will transform your business in the next five years, such as the price of electricity and water?

• Who are the innovators in your industry? How do you monitor what they’re up to?

• Who are the professionals and the amateurs in your industry?

• Where can you get free help from?

• Which New Zealand companies have entered a particular market before you?

• What advice can they provide?

All of these areas are covered in Module 1 Global Business Environment ‘The Big Picture’ of the Diploma of International Trade. The first of eight modules that help Kiwi exporters reach the same global standard as their overseas competitors by providing work-based distance education that leads to Global Trade Professional status.

The New Zealand School of Export is registered to accept NZTE Capability Development Vouchers for its Exporter Health Check, Diploma of International Trade and Global Trade Professional services. It is the only organisation in New Zealand to have been awarded IATTO’s Accredited Provider status.

For a free confidential discussion on how to grow as an exporter, contact Dr Rom Rudzki, director, New Zealand School of Export.

Email: rom@export.ac.nz.

> VIEWPOINT

Collaborate here, compete there Catherine Beard introduces us to our ticket to export success.

W

ith the world as our market, how do Kiwi exporters compete and win against bigger companies from bigger nations with bigger capabilities?

Perspective has a key role to play in our export strategy – seeing ourselves and our fellow Kiwi firms from a more global standpoint.

Quite simply, in the words of Professor Shaun Hendy, we need to “think like a city of four million people,” in order to overcome the challenges of our distance from markets and low population density.

While Hendy’s report concentrates mainly on innovation, there are powerful examples of how networking can quickly generate scale.

In 1990, Finland’s economy looked much like New Zealand’s today, with a strong primary sector export focus.

Inventor collaboration increased the rate of innovation. A network of more than 1000 inventors formed in the late 90s has contributed to the rapid development of a ¤10 billion ICT export sector.

The power of collaboration is also a theme that emerged from a study of Asian markets by Dr Val Lindsay and her team at Victoria University.

It recommends that “firms build collaborative networks within New Zealand for developing business in China and India.”

In the global context Kiwi companies need to work together instead of against each other.

Instead of worrying about what our cousins down the road are doing, we need to be aware of what our overseas competitors are doing.

Our biggest threat is not each other, it’s the firms in other countries that are using their bigger balance sheets or banding together through joint ventures to leverage their might.

Small countries of a similar size to New Zealand, like Finland, Denmark and Israel have all worked out how to overcome their size disadvantage.

Now’s the time to take action and use joint ventures and collaboration to get some visibility in the fast developing new super economies of Asia where New Zealand has economic and geographic advantages.

As the Asian middle classes grow, New Zealand companies should think about what those consumers want to buy. Exporters are already responding to the growth markets – Asia now takes 40 percent of our food and beverage exports, while the UK only takes five percent.

The Government’s target of tripling our food and beverage exports over the next 15 years is a good ambition to have.

The Ministry of Economic Development’s Food and Beverage Information Project is a step in the right direction to help exporters in the food and beverage industry collaborate and add value to their products.

Graham Stuart, CEO of Sealord, believes the project will help share insights into market opportunities and ensure competition is focused where it should be – on the overseas market. I agree with his sentiment that New Zealand exporters should be helping one another take on the world and win. Collaboration doesn’t have to be formalised by legislation or a Government initiative. Firms can take the initiative themselves.

Collaboration can build scale quickly enough that we don’t miss opportunities.

It’s also important to leverage “Brand New Zealand” and the values associated with it.

Pacific Prime Wines, a joint venture of five New Zealand wineries, is a good model of collaboration. It established its

own US importing business and secured distribution into 14 states from New York to California in nine months. The business set up a subsidiary company in Oregon which drives marketing and sales activities across the continent through a team of US staff. Local knowledge and strong networks have enabled rapid progress in this highly regulated and ultra-competitive market, and they expect to grow sales to $10 million within five years.

Pacific Prime Wines has been able to leverage off the resources of five medium-sized businesses to create an enterprise with sufficient scale to tackle a major market directly.

Most importantly, it has bypassed the importer tier, allowing direct access to trade customers and greater control of its brands in the market.

There is also huge potential in China, but an education job needs to be done there first. Consumers only really began drinking wine ten years ago and only ten percent of it is imported.

The Australians are already making significant inroads with their marketing efforts, and with our China FTA it would be a crime to let this opportunity slip by.

If New Zealand is to reclaim higher OECD rankings and as Hendy says, ensure its economic geography is not its destiny, we need to continue developing scale by collaborating.

We need to act as if we’re a city of four million people if we’re to ensure a future where we enjoy rewards on a similar scale to comparable civilisations around the world. That’s the first world, not third world.

Catherine Beard is Executive Director of ExportNZ. www.exportnz.org.nz

EXPORTER 53

> VIEWPOINT

Bringing us into line The latest Accounting standards framework changes may impact on exporters. Richard Currie explains the framework and its benefits.

T

he accounting industry is going through another significant round of changes to bring New Zealand financial reporting into line with international standards and provide harmonisation with Australian standards.

These new changes also mean that a large number of exporters (especially privately owned entities, such as family owned and managed businesses) may now require their financial statements to be audited by a chartered accountant.

Tiered framework The External Reporting Board (XRB) is an independent Crown entity established by the Financial Reporting Act 1993 to regulate the issue and maintenance of the standards.

One of its functions is to prepare and issue accounting, auditing and assurance standards governing the preparation of financial statements, and the audit of those financial statements. The dominant set of financial standards in New Zealand is the New Zealand equivalent to the International Financial Reporting standard, known as(NZIFR).

The XRB met on 13 March 2012 to discuss the Accounting Standards Framework and The Board has agreed to the following For-Profit Entity tiers: Tier 1 (full NZIFRS): entities that are publicly accountable; and for-profit public sector entities that are large.

Tier 2: NZIFRS Reduced Disclosure Reporting (RDR): large entities that are not publicly accountable i.e. large private entities (companies, partnerships and trusts); and for-profit public sector entities that are not large, which elect to be in Tier 2.

Tier 3: NZIFRS Differential Reporting: entities that are not

54 EXPORTER

publicly accountable and either (a) all of its owners are members of the entity’s governing body, or (b) are not large which elect to be in Tier 3.

Tier 4: Old General Acceptable Accounting Principles (Old GAAP): entities that are not publicly accountable, are not required to file financial statements, and are not large and which elect to be in Tier 4.

The new framework is expected to

THESE NEW CHANGES ALSO MEAN THAT A LARGE NUMBER OF EXPORTERS MAY NOW REQUIRE THEIR FINANCIAL STATEMENTS TO BE AUDITED

BY A CHARTERED ACCOUNTANT.

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be available for adoption from around September/October 2012.

So How will these changes impact you?

Private sector entities are considered large if their revenue exceeds $30 million or assets exceed $60 million.

Such entities will be required to prepare NZIFRS compliant financial statements (with reduced disclosure if within Tier 2). They will also be subject to being audited by a chartered accountant. Your accounting systems will also need to be robust enough so the auditors can provide a clean bill of health.

If you are one of the companies likely to be affected by the above changes, we recommend that

you commence a dialogue with a professional adviser such as your accountant and, if not already audited, begin to search for qualified and reputable audit firms now.

Auditors are required to sign off on the financial statements showing a true and fair view of the business as at the date of the financial statements, and the year preceding (to provide comparative information).

The benefits These changes are not without their benefits.

Completing an audit can provide companies with ideas for improvements to systems and procedures and recommendations to ensure compliance with company regulations and guidelines for effective governance.

Companies will be able to easily consolidate their results within their related group of entities; and to review their results and operations in a more transparent manner against competitors.

Overseas readers of these financial statements will not require any specialist knowledge to understand New Zealand prepared financial statements and therefore any international business dealings will be made easier for all the relevant parties concerned.

Richard Currie is principal - audit and assurance at WHK. Email richard. currie@whk.co.nz

> M A R K E T WAT C H W I T H ANZ’S C AME R O N B AG R I E

Taking stock of the economy New Zealand is rich in renewable natural capital; one of many factors impacting our economic growth.

T

hree years on from the GFC, it is worth summing up what we have seen locally in that time.

To summarise: • Commodity prices have gone up and retreated but generally remain elevated.

• After a recession and a tepid recovery, the New Zealand economy is the same size as it was in 2007. In per capita terms we are still almost five percent smaller.

• The household saving rate has improved from minus six percent of disposable income in the year to March 2007 to plus 0.2 percent in the year to March 2011 (and we estimate it has continued to around three percent).

• The current account deficit has fallen from its peak of 8.9 percent of GDP at the end of 2008 to four percent as of December 2011.

• The net external debt position of the nation has fallen from 85 percent of GDP in March 2009 to 72 percent of GDP as of December 2011.

• Household debt as a share of income has fallen from 154 percent in March 2008 to an estimated 147 percent today.

So have we done enough penance?

No. Structural indicators have merely improved from being awful to poor.

We are still a deeply indebted nation suffering a hangover. Three years of a flat economy, strong commodity prices, and of late a strong uplift in dairy volumes, has left our current account deficit at four percent of GDP. We’re borrowing less to fund a savings shortfall, but borrowing nonetheless. New Zealand still needs to see a sustained period where export growth outstrips growth in the domestic economy.

There is much scripted about ways to unlock the tradable and export sector’s potential. Certainly one can see a huge upside via the extensive network of FTAs already negotiated or under negotiation, rapidly growing demand for protein and

associated products in Asia, and the value of the NZ Inc brand. Equally critical is that growing demand is able to be met by supply capacity, which means attention to the basics such as education (more science and fewer arts degrees) and key infrastructure.

The currency – both the level and its volatility – are cited as growth constraints. True. In a post credit crisis world, volatility is here to stay, and the central banks of some major trading partners will continue to undermine their currencies via the likes of quantitative easing programs. This does not mean we should join them: adopting such policies is a sign of weakness and problematic in itself. If there was a fast-track way of gaining a competitive advantage for NZ Inc via the currency, we would have implemented it. Typically the prescribed solutions are even less palatable than the problem itself. Prudential mechanisms that could keep the OCR lower for longer could help, but not necessarily. It was only a year ago that there was talk of Australian interest rates going to five percent, with the RBA hiking. Instead, they’ve been cutting. The market is gunning for more, and yet the Australian dollar is still through parity. This suggests that introducing measures that target the link between interest rates and the currency is no sure bet for a lower exchange rate.

Is there a magic bullet to rebalance the economy? Not that we can see, though one area of strategic strength is underappreciated and could form a larger part of the story.

Typically, New Zealanders think of Australia as the “lucky country” courtesy of their mining resources. The World Bank has estimated the wealth of nations in US$ per capita terms, and it confirms this, with Australia ranked 13th.

But what is interesting is that New Zealand ranks 8th for natural capital (subsoil assets, timber resources,

non-timber forest resources, protected areas, crop land, and pasture land).

The top seven for natural capital are all oil-producing nations.

New Zealand tops the list for ‘renewable’ natural capital per capita; arguably the more important measure in a world of diminishing non-renewable resources. This is not by a little bit either.

New Zealand is a whopping 50 percent wealthier in renewable natural capital per capita compared with the next country, Tonga, and nearly nine times wealthier than the global average.

These “assets” represent key sources of strategic strength for they represent growth levers that can be pulled.

Unlocking a renewable endowment is not easy. You wouldn’t want one area of opportunity to undermine another, so sensible regulatory heads are required. Moreover, having a large natural endowment does not guarantee success for a nation. Indeed, it has historically tended to invite corruption and foreign exploitation. You need the legal/economic framework, attitudes and institutions to unlock them sensibly.

Just like successful businesses need something in their offering that is ‘different’ (whether that be brand, relationships, or a better service proposition), the same applies for a nation. New Zealand is better placed than is widely acknowledged.

The rebalancing of the New Zealand economy away from a spend-centric model to a more balanced growth model means we will need to sensibly use our renewable endowments. It is critical we embrace the opportunities that are offered, for the more you pull an incomegenerating lever – and our natural endowment represents a huge lever to pull – the less pressure there is for austerity to pay back the years of living beyond our means.

Cameron Bagrie is chief economist at ANZ New Zealand.

EXPORTER 55

> VIEWPOINT

Debt path déjà vu The current account balance shows economic rebalance isn’t happening. John Walley explains why.

A

focus on rebalancing the economy towards savings and exports has been a big part of the Government’s rhetoric since 2008, but despite some gains in reducing spending, the same conditions that caused an imbalance largely still remain.

The exchange rate, of course, is persistently high and we still see debt flowing into assets rather than productive industries, albeit in smaller quantities.

At an individual level running a current account deficit means spending more than is earned; the gap is filled from savings (if there are any), borrowing (if a lender will lend) or selling stuff (if there is anything to sell). This process stops when those three sources are exhausted and towards the end borrowing will become increasingly expensive as lenders worry more about default.

At a national level it is more complex but

OFFSHORE BORROWING TO FUND THE CURRENT ACCOUNT DEFICIT DRIVES THE NZ DOLLAR UP FURTHER, THIS HITS EARNINGS IN THE TRADED SECTOR, WHICH IN TURN CREATES A BIGGER CURRENT ACCOUNT DEFICIT.

”

As shown in the graph above the current account has been in deficit for almost all of the last decade and the trend is heading downwards again. Our credit rating downgrades last year hinged upon this high level of debt and projections that it would worsen in future years, and it is clear that this debt situation also undermines the competitiveness of our traded sector, which in turn drives the current account towards even greater deficit.

56 EXPORTER

essentially it’s the same process: sell assets, borrow or draw down on reserves.

Borrowing from offshore has a sting in the tail.

It causes a rise in the exchange rate, lowering earning capacity in the traded economy.

A comparison of the exchange rate over the past decade (graph top right) is almost a mirror image of the current account position.

There is a cyclic effect here: offshore borrowing to fund the current account deficit drives the NZ Dollar up

further, this hits earnings in the traded sector, which in turn creates a bigger current account deficit.

A focus on a current account surplus has to address the capital inflows that drive up our currency and that would mean using domestic savings and capital controls to limit overseas credit – essentially policies to ensure that New Zealand does not spend more than it earns.

These same policies will also provide the macroeconomic stability needed for exporting.

I’m reminded of a line that Sir Angus Tait once said: “There are three ways

to generate real wealth; you grow things, you make things or you dig things up.”

These are the activities that our economic policies must favour.

We went down this debt path last decade; we cannot afford to repeat the same mistakes again.

John Walley is chief executive of the NZ Manufacturers and Exporters Association.

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