China Business: Cleaning up after the milk spillover vital for Brand NZ

Michael Barnett. Photo / Natalie Slade

We need to raise the value of what we export, and not play a commodity game, says Michael Barnett.

The March "milk run" into China was initiated by the New Zealand Government and was fundamental to the restoration of reputation and its credibility of the New Zealand brand.

It was a response by Government to business and in particular to small and medium exporters of not only infant milk formula but also any product that had a New Zealand brand on it.

For infant formula exporters the scandal was especially damaging. Many of these were small entrepreneurs who have spent years developing product designed for the Chinese market and investing in difficult distribution networks. They have achieved market presence through visits and costly marketing and competed for shelf space against the international brands from Australia, Switzerland and France.

These exporters became the collateral damage of the quality problems associated with our dairy industry. When the news of the issues was announced in the Chinese media the tap to this lucrative market was turned off and they quickly saw other international brands replace them on shop shelves. The powerful social media in China went viral and these small exporters began losing up to a million dollars a week.

The call they made was to Government and that was for our NZ official presence in China to be lifted and for some ministerial visits to provide a more comprehensive message about the wider commitment NZ has to food safety and quality processes.

NZ business can be grateful that Prime Minister John Key has such pulling power in markets such as China. When you look at the high level of political contact he achieved on the visit, NZ should feel assured that if ever we needed a message to restore brand reputation in China, Key certainly delivered on this.

The fact is that while Key made the right contact and delivered an excellent message, the problem he was correcting was not just the damage done to major exporters of dairy products. It was the collateral damage done to small and medium exporters and also the reputational damage done to the New Zealand brand - a brand all NZ exporters depend on.

Key's visit made headlines in China media. Gathered in one room at a NZ Government-sponsored function in Beijing were NZ exporters - many who have been in China for decades and had made larger investments than recent arrivals - but all of whom had been tainted by the product safety performance of Fonterra over the past 12 months.

If we look back, history will remind us that over a decade ago the Government of the day gave Fonterra a quasi-monopoly for dairy product exports from New Zealand and inadvertently provided the company with a brand monopoly linked to the NZ brand.

This has been a positive for Fonterra exports. But in recent times it has not been so positive for New Zealand.

In saying this we should consider dairy brands that New Zealand competes with in China such as Danone and Nestle.

When issues arise with products from Nestle, all products from Switzerland are not adversely affected. And if there are issues with Danone, Chinese media do not link that to all products from France.

But more recently when Fonterra's botulism scare occurred, the media in China reported it in a way that the NZ brand suffered along with all food products from New Zealand.

This is the issue we need to address. And there is a response.

The new brand story from NZ Trade and Enterprise is brilliant. It talks of "open spaces, open minds, open hearts."

It is a story of our land and the guardianship we have over it; our minds and how we are open to diversity of ideas and innovation and open hearts being open to people and the difference they can contribute to our nation.

It is a brand story we cannot afford to have taken by a single corporate entity but it is a story that our people, our cities, our regions and our businesses can collectively take to the world and make a difference.

In future when we look at China or any future partner and the impact they may have on our exports and as a result the creation of employment or investment in New Zealand, we should not lose sight of our own values and brand.

On one hand we should optimise the relationship based on our brand values, and on the other not lose sight of the fact that we are a nation of limited resources and production.
So the objective of our export strategy should be to raise the value of what we export and not play a commodity game that dilutes our brand and offers little future to New Zealanders.

Michael Barnett is Chairman NZ Infant Formula Exporters Association.