NZ-China trade relations fertile ground for Kiwi firms, with NZ New Milk eyeing export growth
The firm is among 16 Kiwi manufacturers that approval from China's Certification and Accreditation Administration after authorities implemented stricter food safety regulations.
Its China sales have seen an annual increase of 50% since it first entered the market in 2014, and it expects to export over two million cans of formula next year.
Currently, it exports three types of infant formula to China.
Quality a priority
CEO David Spurway told NutraIngredients-Asia: "We're still a relatively young company. We've been exporting since around 2010 and 2011, and registered our infant formula products in China in 2014.
"We have made the choice to be in the super-premium end of the market in China, so we have to meet consumer demand for high-quality imported products."
"There are also some differences in the regulatory and compositional requirements between China and New Zealand, so we do have to offer a somewhat different formulation (when selling in China).
"The products we export to China have a higher level of active ingredients, which we feel is helpful for Chinese infants. Certainly, that also means a slightly higher cost, but we make sure to justify that with our product quality."
More products, more potential
NZ New Milk is planning to increase its product offering beyond just infant formula to include formula products for pregnant women, and seniors.
Spurway acknowledged, however, that China's strict controls on formula registration would pose a challenge when it comes to exporting these new products to the country.
Still, he maintained: "We have a lot of technological and formulation skills, and highly qualified people working in R&D. I think it'd be a shame not to use those skills to bring new products to the market."
He added that there tended to be an overlap in the scientific research behind infant and aged nutrition, especially in the area of muscle development and support, while many of the vitamins and minerals pregnant women require are usually present in infant formula.
As such, the firm would not be "starting from ground zero" when developing non-infant formula products.
Spurway said, "We're also in the process of building another line of (non-formula milk) products at the moment, dedicated to adult health.
"We see this as a long-term proposition as opposed to a short-term gain — we want to develop top-class, scientifically supported products for the market.
"If you look at the price point in China, the products are expensive, and we need to make sure we match their quality to their prices. That requires careful and extensive R&D."
Time and tradition
Interestingly, the majority of NZ New Milk's China sales happen offline, despite e-commerce being a vastly popular sales channel for Chinese buyers.
Spurway said: "We tend not to do a lot of e-commerce or even supermarket sales. Most of our products are sold in Mother & Baby stores. They do have their own e-commerce platforms, which our products are on, but there are always potential changes with the e-commerce route.
"We'd rather develop our brand through a trusted platform (like Mother & Baby). That's not to say that if our brand grows, we won't consider more e-commerce platforms, but at this stage, we find the most efficient way to interact with our consumers is through Mother & Baby stores."
Apart from China, the firm also exports to Australia, South America, and the US. It expects to begin exporting both infant and adult nutrition products to Vietnam within the next two years.
Spurway revealed: "We are looking at more international markets, but we do see the APAC region as one that's full of opportunity, because there's a real understanding of the quality of food and supplements that come out of New Zealand.”
He also explained why NZ New Milk prefers to take its time entering new markets, instead of expanding as quickly as possible.
"One thing we want to do is make sure we have the right in-market services for our consumers. This is particularly important when selling infant nutrition products.
"Features such as a consumer hotline are really important, because you want to not only reach consumers, but provide a way for them to reach back so they feel comfortable with you.
"That's something we've learnt from being in China. We've really enjoyed building a team there and having that level of control over the market chain. We won't move into a market unless we have maximum control and real dedication to it."
Going both ways
The Chinese infant formula market is worth an estimated US$20bn, and analysts have predicted growth of over 20% by end-2018.
This means plenty of business opportunities for companies from New Zealand, one of the world's leading dairy producers.
Two-way trade between New Zealand and China has been growing steadily since both countries signed the landmark Free Trade Agreement (FTA) in October 2008, having more than tripled to US$17.4bn within the last 10 years.
This places both countries in good stead to meet the target of US$19.5bn by 2020.
At the same time, government officials have also been negotiating the terms of an update to the FTA, which New Zealand China Council executive director Stephen Jacobi said will "show that New Zealand and China are also leaders in trade liberalisation and advancing globalisation".