Video Transcript: Breaking the US natural products market: tips and tricks from three experts

There are three short videos in the 'Breaking the US natural products market: tips and tricks from three experts' playlist. Read the individual video transcripts below.

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Long time US Natural products leader, Gary Hirshberg:

The market opportunity in the US for natural products companies from New Zealand is essentially unlimited.  Just to give you a sense of it, the organic sector in the US, it's about 50 billion dollars in sales - it's only 5.5% of US food.  So we have an enormous market.  If you've got a little organic apple operation or a natural beef operation you can really truly say the sky is the limit.  Whole new markets are opening up.  Amazon's purchase of Whole Foods is now shining a bright light on the fact that direct to consumer is really here.  So it's really actually impossible to quantify the opportunity.  If you're not in the organic business but you're in a kind of a natural, good for you, grass fed, obviously you're non GMO - those sectors are growing just as fast.  The non GMO market in the US is about equal now to the organic market.  And what's important for you to understand is that these markets are growing at around 20% annually. 

It's all being driven by a new consumer who have never been here before.  It's the millennial consumer, half of whom are parents, so these are people between 25 and 35 years old, who believe that the most important thing they can do is buy consciously.  In other words with their values in mind.  Half of them are parents and so of course there's a big opportunity for kids, if you're producing products - the little apples we've seen here, the jucies, the fruit products.  But an important feature about this consumer, this new millennial consumer, is that they want it all.  They want to know how it was made, how it was grown, who's growing it.  So things like your carbon footprint, animal welfare, how the farmers are being treated, your environmental policies.  Not to mention the absence of negatives, the absence of non GMOs etc, gives you a serious advantage over the conventional marketplace. 

The conventional marketplace is not growing at all in the US, and the evidence of that is that the largest food companies in America and around the world are the ones paying the highest multiples to acquire natural products companies.  These companies are paying historic high multiples, very very high multiples, even for companies that are not yet profitable, because this is where all the growth is.  And so New Zealanders need to recognise that the market is going in this way, you have incredible assets here, you are naturally tailor-made for this market.

The one thing you're lacking is you don't have a unified organic seal, a national seal.  Once you have a national seal sanctioned by the federal government, like we have in the US, like France has, and England, and actually 69 other nations have, you'll be able to then enter into equivalency agreements which will mean that a large retailer in the US for example, or a banker or brokers, will automatically know that: oh yes, the New Zealand seal, that means the same as the US seal, and it will smooth the way.  And if you're not in the organic business, having a national organic seal is still important for New Zealand because it's going to be the rising tide that lifts all boats.  It will kind of confirm the green and good for you aspect of New Zealand agriculture, that will essentially grow brand New Zealand in the minds of consumers there.  But similarly or reciprocally your not having that means you're leaving a lot of money and opportunity on the table.  

Pick a region, pick a marketplace, pick Los Angeles - which is by the way an enormous market.  Pick Portland Oregon, pick something that's fit to your scale.  A lot of important reasons to do that.  One, you create more word of mouth when you make yourself more dense in a given market.  Two, you'll spend a lot less investment on the transportation aspect of growing because it's a big country, it's 3,000 miles across.  Number three, you can get a lot of learning in one city and if you make mistakes which we all do, then you can correct them before you go elsewhere.  You're not trying to be everywhere.  And lastly and most importantly, by going deep into a market or a retailer let's say, you can craft and create a kind of a social media presence that gives you a good defence.  

The US market is extremely competitive.  On the one hand it looms large and it looks like: oh my gosh, all I need is a tenth of a percent of share of this category and I'll be fine.  Every tenth is fought over with enormous amounts of money.  It's an expensive market in which to do business, partly because the long distances over which you have to shift, partly because of the regulatory environment.  We have a lot of lawyers, we have a very active and engaged FDA, Food and Drug
Administration, in the case of food.  And so when you go in you have to go in not just to win but to defend.  If it's going well, your velocities are good, your shelf space is good, somebody, maybe an American company, maybe another New Zealand company, maybe a company from another market, is going to come in, because the retailers who operate on such slender margins, they're always looking for someone else.

I find that New Zealanders are very reluctant to brag or to talk about themselves. It's a kind of inherent humility that is on the one hand admirable, but when you're selling consumer products, it can be fatal. You're only going to get a few seconds of the consumers' attention span, you're only going to get a few minutes of the retailers.

Former co-CEO Whole Foods, Walter Robb:

I think that there's good upsight there because you've got a lot of expertise on the ground farming here in New Zealand, whether it's the dairy cows or the meat.  And I think the opportunities, can you put that together with New Zealand imagination, innovation, and create some new products that you bring to the market.

One is realising the US is a very big country and maybe you could come at it a step at a time as opposed to going for the whole apple in the first would be number one.  Number two is you have to be on the ground with the customer.  So are you here in New Zealand, you're going to have to come over and spend some time with the customer in the store, with the clerk in the store, help them really understand the sort of product that you're doing.  And third is I think play your transparency.  There's a tendency not to tell the story all the way back to the New Zealand story.  I think really amp that up in a more transparent manner. 

Well I think I'm more familiar with New Zealand companies on the fresh side of things, and I think they actually did a pretty good job in terms of the lamb and the beef, and that sort of thing.  I thought that on the grocery side that it was mostly the products were a little higher priced and I'm not sure they effectively told their story as to what was different about the product than the other competitive products in the categories. 
 

NZTE Beachhead Advisor, Bob Burke:  

I think there's a really positive connotation of New Zealand in the States.  So whether it's the whole "clean and green", whether it's people who've seen Lord of the Rings, I just think it's considered a very desirable place, very positive connotations all around.  So I think there's that.  Secondly the fact that there are things like grass fed dairy and protein which is a huge trend in the States.  Strong interest in products that are non genetically modified, which is also a very strong trend in the States.  And then so many of the companies I've met so far have just fantastic back stories, and that's what branding's all about now right?  It's telling your story, who's passion bought these products to market.  It's not necessarily unique to New Zealand but there are so many great stories here.

Not really having a solid game plan.  In other words having a realistic set of expectations around how long things take to happen, around how much things cost, having a route to market.  A lot of times it's more reactive.  They might be a trade show, somebody shows up and says: we like it, we want it.  Bang, they're on a plane, they're shipping product over here, and they're kind of making it up as they go.  Secondly it's letting their distribution get ahead of their sell through.  So one of the most important steps is really understanding what does it take to sell off the shelf, see evidence that it's working before you expand your distribution too broadly.  And then I would say thirdly when they interact with outside resources, whether it be brokers such as food brokers, or contract sales organisations or others, agreeing on a set of objectives.  I can't tell you how many companies I've talked to who have been paying contract sales organisations or brokers monthly retainers for 6 months, 12 months, 18 months, with nothing to show for it.  And the conversation really needs to begin with: these are our objectives, this is what we have for resources to put against it, agreeing on a timeline, and getting agreement from these brokers and others that those are realistic objectives and they can do it.  And then holding them accountable and having some kind of a review process.

 It's very analogous to hiring a good sales person for your team.  You're going to network with people in the industry, you might talk to some of your customers, brokers, distributors and retailers to understand who they think is a good broker, who has experience in that category.  As you meet them you'll go through that process of talking about your objectives and your resources and understand who's excited about working with you.  Who might be able to share how they've been successful with other companies like yours?  And then like hiring your own person you'll check references, understand what kind of reputation they have, and what the rest of the industry thinks about them.