To market, to market

2011 has been declared another difficult year for New Zealand’s hard-working exporters – but there have been some positives. Patricia Moore wraps up the year and showcases two shining examples of export initiative.

Since the late 1700s New Zealand has exported goods to the world. That world has grown considerably and we’ve come a long way from Kauri spars, seal skins and flax. But the challenges facing today’s exporters are probably greater than ever.
“It’s tough going; things are still strong in commodities in Asia but overall it’s been a very difficult year,” says Hans Frauenlob, GM, products and services, at NZ Trade and Enterprise.

Over at Export NZ, executive director Catherine Beard is slightly more optimistic.

“The overall picture is a good one for manufactured exports and the traditional food, fibre and wood commodity sectors. Overall total exports – not counting services exports – were up 12.7 percent on last year. Basic manufactured exports were up 6.4 percent on last year and higher value-added, elaborately transformed manufacturing exports went up 3.9 percent.”

At Westpac, the head of international business Barry Squires says global economic events have impacted on New Zealand exporters in many ways, whether it is increased volatility in the exchange rate, increased credit risk on exporters’ customers, weaker demand for some products or requests for longer trading terms.

“The exchange rate story is a combination of high commodity prices for our key export commodities – this drives the long term value of the Kiwi dollar – and short term volatility driven by global markets. The constantly changing economic environment makes markets nervous and this is reflected in the volatility of the rates,” says Squires.

“The GFC has clearly increased payment risk for exporters. The most important part of any sale is collecting the money and for a variety of reasons this has become harder.

“This can include weakened balance sheets for importers’ banks overseas, making working capital facilities in the importer’s country harder to access.

“This means the New Zealand exporter can be asked to assist by providing longer payment terms. In turn, this creates strain on the exporter’s cashflow,” says Squires.

“It’s really important for exporters to understand these risks and have robust policies in place to manage them.”
With economic commentators suggesting a slow and gradual recovery, both Beard and Frauenlob see 2012 as dishing up more of the same. The Western world is struggling to overcome its debt levels, and there’s a lot of uncertainty in many markets.

But the big thing for New Zealand is that our key markets – China, Australia and Asia – generally look set to continue to prosper and grow, says Beard. Exporters she’s talking with are taking the view they need to be globally competitive to survive. This involves being very productive, taking a broader view of where they site their manufacturing (closer to markets in some cases), moving away from competing on price through investment in constant innovation, and having a real point of difference.

“Smart exporters are also looking closely at customers’ wants and needs – the trends for spending – and trying to keep one step ahead of the market.”

Looking beyond the ‘headline challenge’ of managing currency (“it’s always an issue but global instability has exacerbated it”), Frauenlob agrees exporters need to be focused on competitiveness and ensure that the offerings they’re taking to market are differentiated and really high quality. “That’s more important now than ever. In a tough trading environment you have to be exceptional.” 

Demand will remain for New Zealand’s safe food products, he says, “They’re a historical strength and I think those sectors are in relatively good nick. The technology around agriculture is another area that’s probably going to go quite well.”
However, he’s not as confident around high-end luxury consumer goods.

“The opportunities are there but trying to command a premium price for a discretionary purchase in a crowded market is going to be pretty tough for the next year or so.”