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Agency takes risk out of operating in China

Strategy

You're a company feeling its way in China when you get a call that a shipment of seafood is held up at the border.

You don't speak Chinese and don't know your way around customs regulations.

It's the sort of potential calamity that confronts many companies, and the reason why some have grouped themselves within a Kiwi agency that is saving them a lot of the pain and risk of entering the Chinese market.

"A shipment of seafood came in and local customs people were saying it was a US$40,000 issue. We sent a staff member down to have a look, he got into the containers, and sorted it out," Primary Collaboration New Zealand (PCNZ) chief executive Kevin Parish said.

"In the end it cost $8000 but we were able to mitigate the problem because we had people on the ground representing the company's interests as opposed to them having to get someone up from New Zealand".

The concept of PCNZ was born in 2012 during a Te Hono Stanford University boot camp. Each year the gathering of business leaders thrashes out ways to add value to the primary sector.

Parish said the agency now has a full roster of some of the country's largest exporters who use it as a beachhead to help market their products and lessen risks.

Companies belonging to PCNZ are either shareholders or clients. Shareholders include Sealord, Silver Fern Farms, Synlait Milk, Villa Maria Estate and Pacific Pace. Clients are New Zealand King Salmon, Anzco, K9 Natural Food Group, Rockit, Taharoa and Pamu.

Two companies with a large presence in China not in the group are Fonterra and Zespri, who manage their own China business.

PCNZ occupies an office in downtown Shanghai with staff representing the different companies working on non-glamorous but vital issues such as compliance and tax.

"If you are going to go down the path of establishing your own WFOE (wholly foreign-owned enterprise) structure, it's a big commitment and people underestimate it. It's a serious step for businesses so we mitigate some of the difficulties," Parish said.

PCNZ helps companies get a foot in the door, and support them in promotions to get more continuity of sales.

But how different is its work to that of New Zealand Trade and Enterprise?

"The main point is focus, NZTE has a much bigger mandate around who they should be serving in this market. The other aspect is we can get closer to the commercial nature of business in China, NZTE because of its status can't be involved in that process whereas us as a commercial entity can be," Parish said.

General manager marketing NZ King Salmon, Jemma McCowan, said PCNZ had assisted with the recruitment of a market manager with seafood experience and chef networks.

"This has really contributed to working towards our main goal – targeting top chefs in the Shanghai region and branding Ora King on the menu. Other sales have been to leading premium supermarket chain Olé, as well as 5-star hotel chains."

The collaborative approach that PCNZ promotes was also attractive, with the market manager able to network with colleagues working with similar customers and challenges.

A Synlait spokesman said there were benefits to being part of a wider group of organisations.

"It's allowed us to share learnings, represent New Zealand collectively and bolster other trade initiatives from the likes of NZTE. Importantly, the PCNZ model allows each partner to tailor their activity towards their individual priorities and goals."

Villa Maria chief operating officer Richard Thomas said PCNZ had enabled Villa Maria to have a year round, on-the-ground presence in China, establishing relationships, building knowledge and trust.

"The PCNZ Villa Maria team member is able to explore opportunities for distribution and lead our consumer marketing efforts through digital channels and tastings on the ground. Overall we have grown our business."

Parish said PCNZ's strategy had been around opening up more tier two and three cities, outside the hot spots of Beijing, Shanghai and Guangzhou.

"Trying to get 'mind share' of a chef in Shanghai is more difficult, every man and his dog is in this town whereas we've done a lot of chef events in second tier cities, and the distributors come in after and start actioning sales.

"It's a perfect storm for us, we don't get involved in the transactions but we are there supporting them and their products."

PCNZ works on social media to promote New Zealand generally. Parish said it was tough to come up with something new to say about apples or other products, but it had developed a marketing campaign depicting a Chinese national living in New Zealand who engages with brands along the way.

"It shows what life is like to live in a foreign country. As we go through the journey, we introduce aspects like nature, scenery, food, and maybe wine and different things. It gives a richer content platform - you can talk about Rockit apples for a couple of weeks but how deep does that go."

At some point a company might "graduate" from PCNZ, when they create their own trading business, or WFOE, take more control of the cross border aspects, become an importer of record, hold stock in market and act as a master distributor.

This article was first published by Stuff.