Hello world

As New Zealand Trade and Enterprise regional director Europe (and, for several months this year, NZTE acting general manager international), Hamburg-based Anne Chappaz has a vast area in her bailiwick. “Not just the EU-27 (New Zealand’s third largest export market) but Russia, Turkey and the ‘Stans.”
In spite of Europe’s financial turmoil, it’s an area she considers hugely important to New Zealand’s export success. “It’s not growing like China but it’s a very important market for delivering margin and cashflow to companies which want to grow globally.”
Whether growth will approach that of last year when New Zealand’s exports to the EU-27 were valued at just under $5.4 billion – 7.4 percent annual growth – is hard to tell, but she reports they’re “certainly not seeing many companies throw up their hands in despair and leave. For companies that are agile, astute and adventurous there are some really good niche opportunities appearing.”
In the year to December 2011, New Zealand’s total exports grew by 9.6 percent to reach $47.7 billion. Over our five top export markets – Australia (still our largest export market), China, the EU-27, ASEAN-10 and the US – annual growth varied between 2.3 percent to the ASEAN-10 and a whopping 22 percent to China.  
Looking at the year ahead – and, in spite of the problems created for exporters by the fluctuations of the kiwi dollar – ExportNZ’s 2012 survey, in the field from May to July this year – indicated the majority of exporters were pretty positive, says executive director Catherine Beard.
“Just over half (51.8 percent) expected profitability to improve and 35.7 percent expect to employ more people.” The same survey indicated slightly under 20 percent of respondents expected orders to rise substantially, with around 50 percent expecting a slower improvement in orders.
When asked about the broader picture, Chappaz suggests the only certainty exporters can rely on for 2013 is uncertainty. The slowdown in China and a leadership change there, the outcome of the US presidential election, uncertainty in Europe, geopolitical issues that are making waves in the Middle East; exporters need to understand the broader context, she says. “The world is so connected these days that if sovereign debt means Europe implodes it won’t just be a European problem – it will be a global problem.
“But we’ve had these issues before and either nothing is ever quite as bad as we fear or something else comes along to balance it; a movement of something really positive and expansionary.”

Key restraints
Chappaz lists five key constraints facing New Zealand enterprises ready to take on the world; access to capital, scale, distance, risk appetite and experience. “Businesses can tap into NZTE to help them deal with these constraints.”
Capital is probably the hardest one, says Chappaz. “While there’s often ambition and willingness and a real excitement about becoming an exporter, companies with low levels of revenue may find themselves in difficulty. You could find yourself spending two years getting an order, a year getting it right, then two years getting paid; effectively a heavy commitment of time and energy and no return for five years!”
Scale is what Chappaz calls “an interesting one”. Because New Zealand is such a small domestic market, businesses have to become skilled international operators before they’ve really had time to learn what it means to run a business at scale. As well as tackling internal issues around leadership, management and production, a company can gain credibility by participating in trade missions and working alongside NZTE and MFAT in market.
Facilitating collaboration with companies working on multi-customer activities – such as the recent Frankfurt Book Fair and work they’re doing with the wine and health sectors – is another way NZTE is helping businesses create scale.
Distance is always going to be an issue for New Zealand exporters – although Chappaz points out growth markets are closer than they’ve been in the past. But again NZTE can help by neutrally representing exporters. “We can act as eyes and ears and a voice for you in the market, but it’s still critical for the CEO and marketing and international managers to be in their markets as often as they can.”
NZTE’s experience in the market means they’re able to help potential exporters reduce the risk, says Chappaz. “We know the market; we know what other companies have done and what they learnt along the way and can share that without giving away confidential information.”
Experience is closely linked to risk, says Chappaz. “Market intelligence is so important. You may have successfully exported to Australia but will the same model work in Russia?”

Local assistance
Potential and existing exporters can tap into assistance from ExportNZ in six export regions across the country. Auckland, Waikato, Bay of Plenty, Hawke’s Bay, Christchurch and Dunedin all have what Beard refers to as ‘capability building’ services.
These can include seminars on a huge range of related topics from exporter training to market differences; risk management covering currency, insurance and credit; using FTA’s effectively; effective use of the Internet to reach markets, and so on.
“Regional offices all work with local export committees to decide their own programme of events.”
Exchange rate volatility was one of four key issues identified by respondents to ExportNZ’s survey as an obstacle to export growth.
Gary Cross, HSBC’s head of Global Trade & Receivables Finance, says the global economic environment means it’s important to stay nimble. “A persistently high New Zealand dollar may be here to stay for a while yet. Businesses need to consider the reasons the exchange rate is relatively high – quantitative easing, New Zealand’s relatively high interest rates and so on – and how these factors impact their markets and their business.”
Trading internationally creates a foreign exchange risk that needs to be managed along with other associated risks, says Cross, and exporters need to lock in their profits through the use of products specially designed to manage risk. “They need to talk to their financial advisor or foreign exchange (FX) specialists regarding the products that best suit their needs and appetite for risk.”

Market validation
Finding new markets is an ongoing challenge for New Zealand’s exporters and while China has dominated the news as the next big thing, there are risks involved. Mainfreight Group MD, Don Braid, addressing the recent China Business Summit, warned potential exporters to be very careful with their brand and talked about ‘rigorously fighting’ for theirs.
And they’re not alone. “I always say China is probably not for the faint-hearted.” says Catherine Beard. “We know there are plenty of multinationals that have gone to China and lost their shirts. Companies need to do due diligence and be quite strategic about the countries they choose. A lot of our exporters are small to medium companies so they need to go into markets where they can afford to invest both time and money in building relationships.”
Norm Morgan, of Tradex Exhibitions, has a depth of experience with the Gulf Cooperation Countries and believes New Zealand exporters should be looking in that direction. “We overlook Vietnam, Australia’s doing better there than we are; South Korea’s another, it’s pretty stable and the beauty is an aging population with money.”
Helping businesses to internationalise successfully is critical to New Zealand achieving its aspirations for economic growth, says Chappaz. “There are some great companies with innovative products that are carving out a niche in global markets. Supporting that growth, as part of the NZ Inc family, is an exciting and rewarding role for NZTE and its team of internationally-based staff.”

Fair deals
Trade fairs exist for one reason; to get sellers and buyers together. How much is bought and sold varies, and it doesn’t all happen on the exhibition floor. But how can an exporter not plan at least one key trade fair a year, asks Monica Surges, CEO of the NZ German Business Association. “Go initially as a trade visitor and check out the competition, then as an exhibitor to show the world what you have to offer.
“In just one week you can show your company and its products to the world, entertain important existing customers and welcome new ones.” The alternative – a year of business trips – doesn’t bear thinking about she suggests. “Hours on aeroplanes, staying in impersonal hotels, time away from your family; this equates to a lot of time and money, not to mention the lack of a life.”  
Surges experienced the recent Frankfurt Book Fair first-hand. “New Zealand broke all visitor records with some 90,000-plus people going through the amazing New Zealand pavilion over the five day period. What an opportunity to profile a product – in this case New Zealand!”
Indeed it was an opportunity to showcase New Zealand in the middle of Europe in a rather unique way, says ExportNZ’s Catherine Beard. “Exporters have been telling us they want the New Zealand brand to be more than just ‘100% pure’ or clean and green. That message doesn’t cover the fact that we can do high-tech manufacturing, creativity in the arts, the whole movie story, produce world-class writers. Exporters are keen that we’re seen not just as the farmyard of the South Pacific.”
Norm Morgan believes the turmoil wrought by the GFC has made it even more imperative for exporters to attend relevant events. “Markets have changed. There are new people running businesses, your old customers may well have left to set up in business on their own; a trade fair is probably the only way of keeping track of who’s doing what and where.”
Trade fairs also enable exporters to keep up with the markets and Morgan says, again as a result of the GFC, the whole scene has changed. “There have been take-overs and mergers, products have gone or been modified.
“Most New Zealand businesses are not big but there will always be a niche for them. They’ve just got to stop believing what the news media tells them and go out and actually see for themselves.”
Trade fairs don’t always attract the level of attention given the recent Frankfurt Book Fair. “While they’re the visible bit, it’s actually not about spending a lot of money building a gorgeous pavilion with everybody standing up and smiling for two days. It’s about the strategic programme of market development which can be hinged around a critical date on the calendar when all the people you want to talk to are in a single place,” says Chappaz.
“What’s really important is the time and preparation spent before that moment in time. This can take months or even years to do well. Then there’s the follow-up and again, that takes time.”

Patricia Moore is an Auckland-based freelance writer. Email [email protected]

Choosing a freight forwarder
Creating a demand for products is just part of the export story; until the goods are landed, on schedule and as specified, the dollars aren’t going to come rolling in.
Choosing the right freight forwarder is extremely important, says Peter Furlong, GM at International Cargo Express (ICE). “They can assist in providing the full range of options when deciding which airline or shipping line to work with, balancing price with transit times, routings and reliability.
‘Your freight forwarder can also assist with documentation requirements for leaving New Zealand and the destination country.” Furlong says these are becoming more and more important, particularly with countries where New Zealand has free trade agreements in place.
Using a reliable and experienced freight forwarder becomes even more essential with perishables or dry food products. “A lot of these products have a short shelf life so it’s important they arrive with all the correct certification and have been carefully packed and transported at the correct temperature. A freight forwarder also needs a good overseas network of agents who can assist with customs/quarantine clearance and delivery if and when required.”
Furlong says the Rena was a wake-up call for many exporters. “Disasters can happen on our doorstep and it’s important to have marine insurance in place.” Again a good freight forwarder has all the information any exporter is likely to need and Furlong says in many cases the freight company can assist in negotiating a good premium for a client over periods of 12 months. “The freight company can also explain the risks involved with ‘General Averages’ which many exporters and importers may not be aware of.”
New Zealand has fast become an exporter of quality perishables; delivering them in perfect condition is vital. “Sea freight using refrigerated containers that hold goods at the desired temperature means it’s a reliable option. Air freight is not cheap but handled correctly it should see product delivered anywhere from 24 to 72 hours, depending on the final location.” The downside is insulation that causes fluctuations in temperature or delays that affect shelf life and potentially the price to the exporter.
Size is not a factor when it comes to service levels and experience, says Furlong, “but smaller exporters can benefit from the buying power of a reasonably sized freight partner like ICE.”
Technology is changing almost every aspect of business today; shipping freight is no exception. Furlong says the ability to track consignments by sea or air is increasing all the time. “This is especially true for point to point [airport to airport or port to port] movements. Outside of that freight forwarders are investing a lot in increasing the size of the window so clients can get visibility on their shipments from door to door if required.”
Some 90 percent of customer transactions through Maersk Line are now carried out electronically. Customers can select origin and destination as well as a range of other customer service options and have their booking acknowledged on the spot. Reducing complexity in this way saves time and reduces the risk of error. Customers can also track the progress of their cargo online and receive email notifications of any change in ETA.
Freight rates have dropped by as much as 30 percent over the past few years – a plus for exporters. Unfortunately input costs, notably fuel prices, have risen significantly. This means companies like Maersk are not covering costs, let alone generating sufficient revenue to invest in developing new products and services and improved technology. A Maersk spokesperson says this is not sustainable; rates will increase in the coming year and they are currently talking to customers about how this change will be effected. (A number of shipping lines have announced price increases which Beard has described as ‘significant’ and likely to hit smaller exporters of perishable goods harder than the larger companies.)
Matching supply and demand is a constant challenge for freight companies, but the closer they can work with customers the more effectively they can meet their needs, says Furlong. “That requires both sides to think beyond the next deal and commit to a longer-term view.”