Velvet touch needed as Wilkins keep eyes on China goal

Mike and Donna Wilkins visit the Dachang Fuhua cattle farm east of Beijing. Photo / Mark Mitchell

It's a long way from netball hoops to jumping through the complex hoops of doing business in China but Southland farmer Mike Wilkins is aiming as carefully at opportunities as his wife, former Silver Fern Donna Wilkins, shoots at goal.

The Wilkins operate one of Southland's biggest farming operations and one of the biggest diversified concerns in the country. Both are in China as part of a Bank of New Zealand agri-business delegation, called Port To Plate, tracing the flow of products in China from when they hit the port through to landing on consumers' plates; showcasing opportunities for exporters.

Wilkins Farming Ltd is now 40 years old and has done what many talk about but few achieve - diversification. They farm sheep, beef, deer, and dairy as well as cropping (small seeds, grain and brassicas for merchants, mills or livestock producers) and finishing stock. Not to mention grazing and a contracting/trucking business.

Donna Wilkins (also a New Zealand basketballer and double Olympian) works in the family business when netball commitments (she played for the Central Pulse this season) and three children aged 5 and under allow. It has been the deer industry, and deer velvet in particular, which is interesting the couple most.

They already export to China (and are also an exporter through the various co-operatives in the family's other businesses) but do so by shipping the "green" velvet to partners in Hong Kong. The raw material is then processed into pills, powder and the familiar dried slices stirred into tea or broth and revered by many Chinese as a treatment for, among other things, sexual dysfunction, arthritis, anaemia, osteoporosis and liver health.

Mike Wilkins says he has also made some good contacts which may enable him to develop his deer velvet business further in China. A consistent theme from China-based advisers has been the need for New Zealand exporters to get into premium products and to take their products higher up the value chain, rather than just exporting raw material.

Wilkins is cautious about processing in New Zealand: "The market has really gone away from that. About 25 years ago, the industry was encouraging investment from China in plants here but they have moved away from that now.

"It was the compliance costs, really. They could pay something like $2 an hour for labour at home while it cost, like, $25 an hour in New Zealand. Then you had all the standards and inspections and certifications - all good for the security and health of New Zealand's produce but it didn't really encourage investors.

"It's disappointing but there is actually more benefit to be had in sending whole carcasses up [as opposed to refining the sheep meat into more value-added products] because the Chinese are happier processing the carcass for many more food uses than we do. We get a better price but it's disappointing we can't do that in New Zealand.

"I think in agriculture you have to have that competitive advantage and we are told New Zealand can produce enough quality food for about 32 million people. Well, I think we do need to identify the wealthiest and most receptive 32 million people we can and really promote things like our meat and our velvet in that way."

The well-known pitfalls of doing business in China - a trusted partnership with local distributors, finding a way through China's complex customs, quarantine and inspection regulations and understanding a highly volatile market - have all been on display during the China trip but have encouraged the Wilkins.

"It is difficult - I mean, how do you know who to trust here? It's not easy so it's been good to get some contacts and advice on that."

Wilkins' company perhaps mirrors a Chinese business a little with its many and varied operations. The China market is so volatile that a company can lose market share in what, for most other markets, is the blink of an eye. A classic example was Nokia in China - which went from 30 per cent market share to 2 per cent between 2011-13.

Chinese companies thus often carry a huge portfolio of unrelated businesses, simply to guard against such volatility - as one wilts, another prospers. Wilkins says the family's meat business is an example: "It went on the backburner a little; it became a bit too hard. But we don't lose the business - we keep it on at that level and go back to it when the time is right. In the meantime we put more time and money into this business over here. What I've gained from this trip is that it does encourage us to invest in our business, even when things like land prices go up so much. Sometimes you think you could stop and take the money out - but what would you do?"

Paul Lewis and Mark Mitchell are in China courtesy of the Bank of New Zealand.