20 September 2017
A critical stage in international growth for any company is the point when they decide to establish a legal entity in-market and put their own people on the ground. It’s critical because of the time and cost involved, but also because it helps a company really understand what’s happening in-market and respond quickly.
Getting things right at this stage of growth can be a key factor in establishing a long-term sustainable business. Setting up in-market creates a drain on time and money that can be terminal even for medium-sized companies – China’s business landscape is littered with case studies of companies that didn’t get it right.
One way that New Zealand businesses can mitigate the risks at this stage in their international growth is through collaboration. NZTE works with groups of New Zealand companies who have formed coalitions to pool their knowledge, experience and capability and effectively share risks of establishing an in-market presence.
An impressive example of this approach is Primary Collaboration New Zealand (PCNZ) based in Shanghai. PCNZ established a legal entity in Shanghai in 2014. The original companies involved were some of New Zealand’s most well known produce companies: Sealord, Synlait, Silver Fern Farms, Mr Apple, Bostock NZ, Freshmax, Kono and Villa Maria.
Based in Shanghai, Kevin Parish leads PCNZ in-market. I caught up with him recently and he shared some examples that demonstrate how being part of the coalition has helped the individual member companies:
- PCNZ engaged an experienced ‘foodie’ to represent one of their members in the high-end food service channel. Over 18 months the business in this channel grew from zero to NZD$12 million, with a margin around 30% higher than the traditional business lines.
- One member’s importer started distributing product that was found to have quality issues and, without consultation, promised their customers a refund of USD$48,000. Having a PCNZ representative on the ground meant the coalition member quickly understood the size of the issue, responded to keep the customers happy and reduced the refund to only USD$8,000.
- Another member mostly operated through wholesale markets in China meaning they had no line of sight to the end customer or even to retailers. PCNZ helped move large parts of their business to direct engagement with retailers and e-commerce partners. This move has increased value capture and allowed the member to gather valuable insights from channels and consumers that now influence their marketing campaigns and strategies.
These are great examples that demonstrate the value of having people in-market and, specifically, the value of the PCNZ coalition to each of its members. However, PCNZ members are doing so much more, like creating collective impact through joint in-market promotions and sharing market knowledge to support each other.
Getting people in-market under the PCNZ entity has enabled sustainable growth to the point where some of the original member companies have now established their own trading entities – interestingly though they’re voting with their feet by also remaining part of PCNZ. The lesson for all of us: collaboration works!
The value of this coalition has not gone unnoticed. Recently, Ora King Salmon, ANZCO Foods and Natural Food Group (K9 pet food) all joined PCNZ and are recruiting their first people on the ground.
NZTE has supported PCNZ since the beginning and continues to view the collaboration model as a great way for New Zealand companies to make the decision of putting people in-market less risky. If you are interested to find out more about PCNZ, check out their website.
If you are interested in finding out more about how NZTE can help catalyse collaboration and help your company add additional value to your existing international growth, contact us.