KEY POINTS:
This year's currency fluctuations have been enough to give any low-margin export company manager grey hairs. Worrying about the exchange rate has taken valuable time away from developing new overseas markets.
But the recent currency correction has put those with a good product to sell in a better
shape - and they have also learned some important lessons.
Mike Houlahan, director of foreign exchange specialist Tuatara Management, says the inquiries from smaller companies for which Tuatara is hedging currency have increased in the past six months.
Importers and exporters will each have their turn in the sun and when the market changes they have to be ready to act, he says.
Canary Enterprises, a private dairy firm that supplies hotels, restaur- ants and airlines with butter medallions, approach- ed Tuatara in December last year.
"The currency [market] feels a bit like you are in a casino," says Canary director Derek Bartosh.
"We were unhedged because the expectation was that the currency would fall. But [the NZ dollar] got to 60 and started to increase, and we quite wrongly remained unhedged."
While Bartosh was used to calling Houlahan once a month, recently they have spoken twice a day. "The currency makes the difference of whether the company is going to make a profit or a loss," says Houlahan.
Tuatara created a framework for the company so its management could react quickly to a sudden change in the market - as happened just over a week ago.
"Some action was appropriate when [the dollar] got into the 70s," says Houlahan. "I think they are on the right side of the ledger but they weren't for some time."
Bartosh adds: "Going from 81 to 69-ish makes a huge difference to our export receipt, it's a 15 per cent improvement... that's significant."
Canary Enterprises is a classic "value-add" business with enormous potential, says Houlahan. Now Bartosh can again concentrate on growing the business.
Bartosh says the 6-year-old company, which has a $6 million annual turnover, has also had to cope with rising butter prices. "Not only had the exchange rate moved to 81c but the price of butter has gone up 50 per cent over a four-month period."
Canary didn't instantly go global after forming. It called on the support of consultant Ross McCallum, a founder of Kapiti Cheeses, and now chief guru of "Gourmet Guru".
He has helped Canary take the brand to export markets and, with his network of contacts, has helped it get into markets such as Dubai and Singapore.
In time, Bartosh wants to win over the United States and Japan. But ensuring existing customers are happy takes a lot of time, with at least four visits a year to each key market.
McCallum says keeping the contact up is crucial. "You've got to get out there. You've got to bring them to your place as well as go to their place." And if that relationship is solid, then some of the issues of commodity prices and currency can be alleviated.
Houlahan says companies with higher product margins, such as soft-ware companies, have not been nearly as badly hit by currency fluctuations. And Michael Carden, executive chairman and founder of human resources software company Sonar6, agrees. "A lot of our costs should be fixed," he says. "If the price we can achieve overseas changes because of currency fluctuations, we are just going to have to sell more."
He takes currency hedging into account, but it's not his number one preoccupation.
The 3-year-old Auckland company is forging ahead, with a forecast 400 per cent increase in revenue from last year. It is the first start-up Sam Morgan invested in after selling Trade Me. Morgan is now on board and "is pretty active", says Carden.
Sonar6 has been looking to export, from day one. Britain is its biggest export market and the CEO is based there. Other markets of interest are Australia, the US, and India.
Carden has been surprised at the networks Sonar6 can tap into and which have delivered valuable "lighthouse customers" - early customers that might be offered a special deal because they've been one of first to come on board.
"There are so many ex-pats willing to help," he says. "The first client in the UK was a friend of a friend on the advisory board for New Zealand Trade and Enterprise. That's just the way things work."
Sonar6 has since broken into India through a joint venture with CMC, a big technology company.
CMC has a joint venture with Massey University which looks for suitable businesses to enter the Indian market.
"We can learn about the Indian market and get some insider knowledge," says Camden.
He's an enthusiastic exporter and is keen on breaking into the US but says that will have to wait.
"Most of our focus has been how can you build a really great product and make it better than any other product in the world... We are a single-product company. It has to be as relevant in India as in the UK."
