Success: China's new palate welcomes West

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Auckland cereal-maker is on a sales mission to export Kiwi flavours to Asia.

Justin Hall is aiming for $30 million in annual revenue, half from overseas sales. Photo / Dean Purcell
Justin Hall is aiming for $30 million in annual revenue, half from overseas sales. Photo / Dean Purcell

The shift in Asian diets to include more protein is well known and New Zealand producers have moved quickly to exploit the growing market for meat and dairy products.

Now Smartfoods chief executive Justin Hall, who this week flew to China on a sales mission, believes he detects in the region a broader shift towards experimenting with Western staples, such as cereal.

"The stuff we're exporting to China, it isn't targeting an expat market; it's affluent locals," says Hall. In Asian markets there is a growing demand for cereal.

Hall believes the growing interest in Western foodstuffs mirrors the impact of Asian food on countries such as New Zealand.

Twenty years ago, there were few Thai restaurants, Hall says. Now they are everywhere and the popularity of Asian foods, spices and ways of cooking has even generated a new style of cuisine: Asia-Pacific fusion.

Perhaps something similar is happening in China, Singapore and Hong Kong, he says. For Hall, the growth in export sales of his breakfast foods certainly raises the question: is there a Westernisation of Asian taste in that part of the world? What opportunities might that open up for New Zealand businesses?

Smartfoods is the first cereal and muesli manufacturer in the Asia-Pacific region to use stevia, a sweetener derived from a South American plant, in its products.

The plant extract is calorie-free yet is about 200 times sweeter than sugar. It is used in beverages but Hall is aware of only one other company in the world that has applied the product to breakfast foods.

"Given the interest in finding alternatives to sugar, it has gathered a contemporary following and the end result is a breakfast cereal that's 6.6 per cent sugar - around a quarter of the level of most other products in the segment."

Smartfoods invests heavily in research and development and Hall says it has been a big technical challenge to develop a market-friendly product, which includes the Vogel's range of cereals and muesli.

"Sugar is sweet but it also makes things crisp; it makes it crunch, it caramelises and provides colour," Hall says.

"You can't just take sugar out and replace it with a sweetener, and therein lay the technical challenge in taking this to market."

Hall, the largest shareholder in the private company, said he chose to acquire the rights to use the Vogel's brand as it was well known and respected in New Zealand and Australia.

"That allowed us to get an initial share of market; that was our foot in the door and we've built upon that," he says.

Launched in 2004, Smartfoods now employs the equivalent of 30 full-time staff at its factory in St Johns, Auckland, a suburb that boasts a strong food-manufacturing base. In 2009, Smartfoods "broke the $10 million annual revenue barrier". Now its products are on shelves in Australia, Hong Kong, Singapore, China, the United States, Canada and Europe.

"We've got the equivalent of a 20 foot container of cereal heading to the wharf every single working day of July going to different parts of the world," Hall says.

"Our next horizon is to reach $30 million [revenue] and it's our export markets that will help us get there."

Exports accounted for 25 per cent of Smartfoods' overall market last year. "This year, it will be about 30 per cent and, by the time we get to $30 million, it will be about 50 per cent," says Hall.

The venture has been entirely self-funded, although Hall acknowledges generous assistance from New Zealand Trade and Enterprise in its dealings with Asian retailers.

Local food producers usually struggle to say a kind word about New Zealand's supermarket duopoly, yet Hall is effusive in his praise. "We have world-class retailers here. At Foodstuffs, the stores are owner-operated and there's a lot of empathy and support for Kiwi businesses.

"Australian retail giant Woolworths owns the Countdown stores in New Zealand and that provides us a fantastic springboard into the Australian market.

"Working with these retailers has produced nothing but upsides for us," he says.

"It's often businesses that have been around for a long time and are protecting the status quo that have got issues [with the supermarkets]."

But Hall is eyeing up the Asian markets, and he sees Smartfoods' Kiwi credentials as a competitive advantage.

"There's a real awareness in Asia, particularly in China, that the quality of food that comes from New Zealand is appreciated," he says, pointing to our success in marketing milk powder and baby formula. "There's a real interest in China for our sorts of food because of our clean fields and good ingredients, and that's a great advantage."

- NZ Herald

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