Niche markets creating opportunities in Southeast Asia for NZ exporters

While much of New Zealand’s export focus has been on China in recent years, other areas in Asia are emerging as promising intermediate markets with considerable potential for export growth.

Exports to China have increased 70 percent since 2009 to their current level of NZ$5.6 billion. The new NZ$100 million-milk formula plant in Dunsandel, Canterbury also highlighted an increasing interest from Chinese investors, who took a 51 percent stake in the Synlait plant.

But other areas in Asia are also showing opportunities. Karen Campbell, New Zealand Trade and Enterprise trade commissioner to Thailand, said exports from New Zealand to Thailand increased 37.7 percent to NZ$733 million in the year to June 30. 

This increase had followed a quiet period, with 2009 and 2010 exports falling back from a high of NZ$813 million in 2008. However, the rebound is clearly on, and leading the surge is the food and beverage segment, which grew 50 percent year-on-year. The annual growth rate is usually 10 to 15 percent.

“We’re trying to persuade companies to produce value-added foods and beverages for distribution in Thailand,” said Ms Campbell.

She saw the increasing popularity of specialty products such as honey, oils, premium ice cream, organic juices and boutique beers as indicative of the way in which New Zealand’s niche positioning and reputation for product safety could help extract value. This was particularly true when products were marketed through channels such as hotel chains and selected bakeries.

The growth of functional dairy foods (products such as low-fat, high calcium and protein-enhanced milk) was also attracting increasing attention, along with biomedical and biohealth products such as colostrum-based health supplements.

Primary sector exports had also increased, with fruit exports up more than 40 percent  Zespri international continues to make solid progress in building volume both in Thailand and across Southeast Asia.

But the fast-moving consumer goods sector is not for the faint-hearted. Howard Bryant, principal of specialist consulting group Retail Asia, said targeting outlets and consumers was the key.

“Commercial buyers are not terribly sentimental or forgiving. Buyers are reviewing hundreds of SKUs on a daily basis. There has to be something in it for them – something that helps them grow the category...makes them more money and helps their customers.”

Ironically, in some cases the relatively low profile of many New Zealand producers can be an advantage.
“When you are faced with a wall of Unilever or Nestle products you are receptive to something fresh and new, but it has to be commercially sustainable as well.”

It was only when producers moved away from commodity offerings that they had a chance to carve out more value.

“Margins can be created through a thorough understanding of niche market opportunities and the entry strategies that can secure the niche shelf space. Above all, producers need a commercial proposition of volume, quality and price.”

However this is a process not all New Zealand exporters understand or sign up to. Greg Reynolds, managing director of Your Business in Asia, a market entry and business development consultancy in Asia, said many New Zealanders had a transactional rather than strategic focus.

“Kiwis generally are too trusting, and too quick to do a deal.”

Though large corporations had the resources, the time and the capital to undertake the necessary due diligence, small to medium-sized businesses often looked for shortcuts.

“Success in New Zealand can be achieved through a lot of energy and a ‘No. 8 fencing wire’ mentality. In international markets, if you don’t have the rigour at board level and a commitment to solid financial planning you can easily be caught out.”

Reynolds said that had been a hard lesson for one Australian company.

“They came into the market and quickly inked a five-year exclusive supply contract with a very presentable and influential distributor, only to find out afterwards that he was also the distributor for their biggest competitor and had signed the deal to close them out of the market.”

Reynolds said US companies tended to do better than their New Zealand and Australian counterparts.

“American companies, perhaps because they recognise their insularity, are more prepared to acknowledge they may not know all the answers, so they commit more readily to thorough market appraisals. They are certainly more conservative in their approach, but at the same time are more open to learning, looking for well developed plans with clear process and progress points. When they make decisions, they generally stick.

“If Kiwis could take a leaf out of their book, trade and export activity in this region would really take off.”

The writer Justin Barnett is a New Zealander who has been living and working as a communications advisor in Thailand for more than 12 years. He is currently Managing Director of Grayling in Thailand, and Vice President of the New Zealand Thai Chamber of Commerce.

Image: A Thai supermarket. Niche products and New Zealand’s reputation for product safety can help Kiwi producers make inroads into Thailand and other parts of Southeast Asia.