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Nelson-based food processing company Tasman Bay Food Group began exporting to Australia in 1999, and says its business model was to set up an Australian company from day one.
Established in 1984, Tasman Bay Food Group manufactures a range of quality products under its own brands and also contract manufactures quality products for the food industry. This includes fruit juice, fruit bars, fruit pies, instant noodles, cookies and baked and frozen goods. Its products are sold through supermarkets, schools and health food stores in Australia and New Zealand.
The company markets products to schools under the 'futurefoods' brand, including a wide range of healthy and affordable products that are sold through school canteens. Futurefoods works closely with school canteens to develop healthier options for children and young adults that fit with the Ministry of Health’s Food and Beverage Classification system and, where possible, achieve the Heart Foundation’s Tick of Approval.
Its product range includes well-known brands such as Juicies, Moosies, Hot Bites and Cookie Tree. These are sold in both New Zealand and Australia, and they have launched a range of organic cookies and fruit bars under the Natures Harvest brand, also sold in both countries.
The company says it is crucial to understand the Australian market, the competition, and where your product offering will sell and at what price.
Tasman Bay Food Group’s decision to enter Australia was driven by the following factors:
Market similarities
Australians have the same interest as New Zealanders in providing their children with quality, healthy food. Tasman Bay’s Juicies product was selling well in New Zealand schools and the company was confident it would do also do well in Australia.
Creating an Australasian business
Given the similarities in food purchasing between New Zealand and Australia consumers, it was logical for Tasman Bay to expand its operation to service both markets.
Growth opportunities
The size of the Australian market made it attractive to Tasman Bay. Although there is more competition in Australia, companies that find a niche in the market and have a good supply chain in place have good growth prospects.
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In the late 1990s, when people suggested Tasman Bay’s Juicies product would sell well in Australia, the company visited the market and met with schools and health officials in New South Wales (NSW). Juicies are made from 100 percent pure fruit, so are viewed as a natural and healthy snack to sell in schools.
The visit confirmed for the company that its product was price competitive and compared well with other offerings. Tasman Bay subsequently introduced Moosies, a flavoured, frozen milk-based ice confection, and the Hot Bites cup noodle range which are also sold in Australian schools.
The business model was to set up an Australian company from day one – Tasman Bay Australia – which has an Australian bank account and postal address but no employees, and to pay a third party to warehouse, freight and distribute goods in Australia. Bills are paid from New Zealand. This gives Tasman Bay New Zealand complete control of its Australian operation, and it knows exactly where its stock is going and who its customers are.
Tasman Bay New Zealand sells product to its Australian sister company at a set value, regardless of the exchange rate, with the New Zealand company absorbing the impact of currency fluctuations. Having a successful, profitable operation in New Zealand has allowed the company to cope with any losses and the costs involved in establishing it’s Australian business.
Challenges
Finding reliable distribution and warehousing has been challenging for Tasman Bay, particularly in the early days when product volumes were small and relatively insignificant to its Australian distribution and warehousing partners. Some of the items it sells have a shelf life and quality issues arise if they are not rotated regularly.
The company built a network of distributors and tried various strategies to manage its business in Australia, including hiring an agent and sending a New Zealand sales representative to the market for six months. However, keeping the business going required a lot of input from New Zealand-based General Manager Martyn Barlow who estimates he has travelled to Australia more than 40 times in the last decade. While this has been demanding, it has also given him a thorough understanding of the Australian market.
Hiring dedicated, Australian based sales representatives, in NSW and more recently Victoria, has been a trigger for growth. They are locals who know the area and can build good relationships for the company. This move demonstrates Tasman Bay’s commitment to the Australian market and strengthens its relationship with distributors, some of who have been with them since 1999 and who are also benefiting from increased sales. After trying a variety of warehousing arrangements, the company now works with one operator who handles all its product, including frozen lines.
Dealing with the Australian Quarantine and Inspection Service has been frustrating. Containers of food product are regularly quarantined for inspection or because of minor errors in accompanying documentation, resulting in delayed deliveries and, occasionally, product relabelling or even dumping.
Another frustration has been navigating different health standards in each state and having to work with separate canteen associations in each state to get Tasman Bay product endorsed for sale in schools.
Tasman Bay produces some product specifically for the Australian market, and has had to adapt packaging to suit a bigger market. This includes making smaller product packs for new customers who want to begin with lower volumes and putting bar codes on every item rather than just the box they come in.
Tasman Bay Food Group has learnt a number of lessons from investing in Australia:
Tasman Bay’s business in Australia is growing steadily. Sales figures for February 2010 were around 250 percent higher than the same month the previous year.
The company has diversified its product offering, adding more options to the foods it supplies to school canteens, and has moved into the health food sector with the Natures Harvest brand.
It is also using its New Zealand facilities to contract manufacture food items for Australian companies and is beginning to sell some of its food products in retail outlets serviced by its distributors.
To be successful in Australia, a New Zealand business needs to be able to provide robust answers to the following questions. In Tasman Bays’ case:
Does the business know what success looks like?
Tasman Bay has a thorough understanding of where its products fit in the marketplace and what it needs to do to remain competitive. It has systems in place to cope with fluctuations in demand.
Does the business have the time and the money to break into a new market?
Tasman Bay had a profitable New Zealand operation and the production capacity that was able to subsidise the Australian company during establishment phase. However the Australian business initially drained cash from the New Zealand company and slowed down development plans on this side of the Tasman.
Does the business understand the Australian market?
Tasman Bay spent considerable time on the ground in Australia to ensure it understood the Australian market. Finding the right distributors, warehousing and sales staff has been time-consuming. On the positive side, running the business remotely from New Zealand has given the company total control over its Australian operation.
Does the business understand how the product will be differentiated in the Australian market?
There are hundreds of food manufacturing companies in Australia so Tasman Bay knows it needs a point of difference to succeed. Its offering stands out because it gives customers a healthy, quality product at a competitive price. Does the business have a clear path to market?
Tasman Bay targeted a specific market (school canteens), leveraging off its experience with the same sector in New Zealand. Its challenge has been to establish a good supply chain, supported by a sales drive, to ensure its products get to that market.
Tasman Bay continues to invest in production plant in New Zealand to ensure it can produce efficiently and economically and keep its prices down. The range of food items it supplies to school canteens in Australia is expanding and the company is branching into a new area by supplying affordable organic products for mainstream consumers. These are supplied to Australian distributors who, in turn, supply health food stores in New South Wales and Victoria.
Steady growth in Australia for Tasman Bay will continue to come from school canteens however the company aims to double its sales in the next 12-24 months through its move into the heath food sector. Tasman Bay also continues to explore grocery retail opportunities with their distribution partners. If these opportunities are realised they would significantly increase sales volumes to Australia.
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