The Prime Minister's delegation to China with business leaders. Photo / Supplied
New Zealand companies and the government itself gathered more than $1 billion worth of business during the Prime Minister’s delegation to China last month.
The delegation, including 28 business leaders, packed in plenty during the three days in Shanghai and Beijing — dairy, horticulture and seafood displays, and tourism and education promotions to attract visitors and international students. There was even a baking demonstration to showcase New Zealand products to potential customers. And a launch of the new grass-fed standard for red meat and dairy. Producers meeting the standard can display the trusted Grass-Fed certification on their products and market them to the world.
“We knew the China market and were well prepared. By the end of the first day, we had signed 10 memoranda of understanding [MOUs],” said Dame Therese Walsh, chair of Air New Zealand and ASB Bank, who led the business group.
“I’ve done a few of these and this one was very galvanising and momentous. There was a level of sophistication and we hit the high notes along the way,” she said. “We also had big formal dinners with invited guests — current and potential customers — and could wow them with New Zealand culture.”
By the end of the third day, the delegation signed 32 MOUs, including new partnerships and product and campaign launches.
The arrangements, as tallied by New Zealand Trade and Enterprise, represented $871 million worth of exports, said Walsh. “And if you include the government-to-government deals, then the value was more than $1b.”
Two-way trade with China was worth nearly $40b, representing more than 20% of all New Zealand’s exports in the year ending March.
Walsh said most of the business leaders were already doing business in China and they wanted to deepen their relationships and create new initiatives. But there was one new entrant.
Auckland-based The Beauty Lab Collective signed an agreement to resume cosmetic exports to China by way of general trade, paving the way for $200m worth of exports in that sector.
Walsh said the delegation achieved its objectives and outcomes of:
● Securing and growing trade and economic opportunities;
● Showcasing our products, services and people;
● Increasing the understanding of changing market dynamics, particularly post-Covid;
● Ensuring we stay relevant in key consumer markets.
She said the demographics and customer sentiment were changing — it was no longer the same China.
“The seniors want fun and to be healthy, and the kids want education. The number of seniors will increase from 200m to 400m within 20 years.
“The economic growth is shifting from the Tier 1 cities [Beijing, Shanghai, Shenzhen, Guangzhou] to the Tier 2 and 3 cities. I was told there are 79 Tier 2 and 3 cities bigger than New Zealand’s population.
“Consumers are buying smarter, not more, and brand allegiance is lower and can change quickly. Digital and influencers are non-negotiable. There are 67,000 new products hitting the stores each week.
“But clean and green is still our tag,” said Walsh. “The Chinese consumer wants more stories on provenance — the product’s origin, nutrition and well-being, and science.”
Walsh said the fast-food scene was changing in China. McDonald’s will be increasing the number of its stores from 7000 to 10,000, KFC has more than 10,000 stores and Pizza Hut has gone the opposite. They are making their workforce available for [online] delivery and “there’s nothing strange now about having a can of Coke delivered to your home.”
Walsh said on the street China is alive and bustling compared with New Zealand. “I felt people were more refined and organised. Economic clouds come and go, and the key thing in China is the fall in customer sentiment.
“You have to work hard to win it [sentiment]. We need to bring more innovation into our products and to tell the story.”
On the economic front, Walsh said China had deflationary pressure, weak consumer demand, trade friction (with United States) and a struggling property sector. There was a need to stimulate domestic consumption. New Zealand producers had opportunities given the geopolitical uncertainties, and there were new types of consumption in China — electric vehicles, culture, sport, medical and health.
You have to work hard to win [sentiment].We need to bring more innovation into our products and to tell the story.
One of the eye-opening visits by the delegation was to a NIO electric car factory.
The company has invested US$3.6b, established 14 global locations and will be producing 760,000 cars this year, said Walsh.
“NIO has 10,000 patents, 11,000 research and development staff, 14.7m registered users, and has developed a two-minute charge on batteries. They have created an entire community around the brand, encouraging people to own the cars and attract other users. It’s called user co-creation.
“When China decides that’s what it wants to do, they are great at it,” said Walsh. “Chinese manufacturers now dominate the world supply of electric vehicles.”
Walsh’s sector take-outs from the China visit were:
● Strong demand for dairy and horticulture, and growth can be harnessed by enhancing clean and green image through nutrition, science and sustainability
● Strong momentum in meat and seafood, and market access can be improved with consistent and strategic marketing
● Massive opportunity for education to focus on adding lifestyle, safety and practical training — offering the likes of food systems and technology.
● Need more incentives for tourism and a focus on high-value visitors — transit visas and Australia add-on is great but more is required per the Tourism roadmap.
Walsh said it was important for New Zealand exporters to choose their markets [in China] carefully and they act fast. “Get granular with your local market and go deep. There’s massive opportunity in the Tier 2 and 3 cities, with populations up to 10m, and premium products with the clean and green tag is still our strength.
“There’s also the opportunity to be more joined up and show up stronger as the team from New Zealand.”
The business delegation included Fonterra, Westland Milk Products, The a2 Milk Company, Alliance Group, Silver Fern Farms, Zespri, Goodman Fielder, Air New Zealand, Auckland and Christchurch International Airports, Indevin Group (wine), Sealord, Fiordland Lobster Company, Rockit Global (apples), Scales Corp, MitoQ and Beauty Lab Collective.
There were also representatives from Meat Industry Association, Deer Industry NZ, New Zealand Māori Tourism. Ngai Tahu Holdings, Plant and Food Research, Te Pūkenga Institute of Skills and Technology, Victoria University and UP Education.
At the China Business Summit, three of New Zealand’s leading exporters provided insights into how they adapted their strategies to ensure continued growth and success in China — in the face of economic headwinds, geopolitical uncertainty and increased global competition.
China has been a wonderful market for us over more than 40 years. When we started it was all about milk powders but over the last few decades consumption has shifted from ‘drinking dairy’ to eating ‘dairy’ with the likes of cheeses and proteins.
Dairy nutrition has become very important.
“What’s been awesome is the Healthy China 2030 plan which recommends an increase in the intake of dairy nutrition from 300 grams to 500 grams a day for adults. This has the potential of increasing dairy consumption by 700,000 tonnes by 2030. The focus on healthy ageing has led to the rise of proteins. We started with quality and more and more, there’s been a shift to the attributes of how the product is farmed and produced.
The recent launch of the New Zealand grass-fed standard provides an interesting opportunity for us — to add value and bring greater nutrition to Chinese consumers.
We operate in 500 cities across Tier 1, 2 and 3 cities and see rapid expansion. The food service channel has been a phenomenal success, generating $4 billion revenue last year and doubling since 2017.
An important focus is targeting dairy upgrades, from non-dairy creams and other alternatives, and talking about the nutritional, taste and functionality benefits of dairy. This has driven our growth.
We have invested significantly in local innovation capability with six application centres and 50 chefs working closely with customers in the different regions, applying the best of New Zealand dairy to local tastes. The role of innovation has been critical in being able to move with the consumption trends.
Zespri’s purpose is to help people and communities thrive from the goodness of kiwifruit.
We have the ambition of being the world’s healthiest food brand. Every piece of kiwifruit is a healthy eating occasion.
Last year we provided 1.5b healthy eating occasions in China. We will increase that by 200 million pieces of fruit this year, and look at doubling the business over 10 years. We have three building blocks to our strategy:
1. Maintaining strong chain supply partnerships and making sure our partners understand our fruit and our consumers. We also want to provide the best service to them. We have 100 staff in China but every day we have 1000 people working for Zespri supplying the natural nutrition to consumers.
2. Investing heavily in branding and making sure we differentiate our brand by focusing on nutrition. We want our customers to understand that proposition and to enjoy the goodness of kiwifruit every single day.
3. Help raise an awareness of malnutrition and be part of the Chinese social fabric. We have connected with 1000 schools and provided information about having fruit in a balanced diet.
There may be talk about uncertainty and complexity, but we have a great deal of confidence about the opportunities ahead of us in China.
Time on the ground in China is important and the Prime Minister’s delegation was the third time I’ve been up there in a matter of months. People-to-people connections, knowing the consumer channels and where to show up, and understanding that China is “markets within a market” — that’s what Silver Fern is all about.
You have to go narrow and deep in China rather than wide. We have been in the market for 30 years and tipped over $1b in revenue a few years ago.
That’s 25-30% of Silver Fern’s turnover. China is the best-paying market for many of the items that come from our animals.
There’s an opportunity for growth in quick-service restaurants and New Zealand product is at the heart of many of those menus. China is one of the largest protein consumers and red meat consumption is growing substantially. You have to be sophisticated and differentiate your product — the volume we put in for a year, South America does it in a week.
Our grass-fed standard and telling our story is essential — red meat is a cluttered sector. We have developed strong partners — before we used to deal with traders — and we are getting greater transparency in pricing and margin.
There’s been a real shift in how we sell to the market. We have a market for 150m consumers who cure our meat and consider its physical sustainable attributes. We have increased foodservice and gone deeper in the Tier 2 and 3 cities. It is in the central, western and northern parts of China where for us the red meat is being consumed.
We have displays of chilled beef three to four metres long, and we are getting the halo benefit by being involved with five high-end national retail chains.