Sunday 15 September, 2013

NZ Exporter: Chinese consumers don’t want to taste NZ products

A New Zealand exporter of fresh milk to China has told TV One’s Q+A programme that Chinese consumers won’t try a supermarket promotion sample of her dairy products once they find out they’re from New Zealand.

Julia Xu, co-founder of Oravida Ltd, an exporter of NZ dairy, meat, wines and fruit into China, says Chinese consumers have not forgotten the recent DCD or botulism milk powder scares.

“We ask consumers to come, customers to come and taste our milk, and we have found that even today a lot of consumers will pick up the cup, and they will ask, ‘Where is the milk from?’ And when we say it’s from NZ, they won’t even want to taste it. They will just put it back down. I think that even today when Fonterra came out and said it was really a mistake; it wasn’t really a contamination, people still remembered and remembered that as a contamination, not necessarily knowing what exactly had happened thereafter,” Ms Xu says.

And she says NZ dairy’s reputation as delivering the best products in the world has been damaged.

“There’s a loss of confidence that Chinese have always viewed NZ dairy products as one of the best products in the world. And yet continuously there are problems after problems. We have had DCD in February, and then again we had the Fonterra incident in August, and then a couple of weeks later, we had another Westland problem. So there seems to be the frequency at which the problems are happening a little bit too often, and that seems to be constantly reminding the consumers that NZ dairy products are really not as safe or trustworthy as they appear to be, and that is very damaging.”

Ms Xu says the Government could do more by engaging in bi-lateral talks to remove some of the strict testing regimes instigated by China following the recent scare, which is taking its toll on her business in terms of cost and delays in delivering her products to the China markets.

Ms Xu says Oravida is the first company to export fresh milk to China, a country which typically relies on milk powder.

Q+A, 11-midday Sundays on TV ONE and one hour later on TV ONE plus 1. Streamed live at www.tvnz.co.nz

Thanks to the support from NZ On Air.

Q+A is on Facebook, http://www.facebook.com/NZQandA#!/NZQandA and on Twitter, http://twitter.com/#!/NZQandA

Q+A

SUSAN WOOD INTERVIEWS JULIA XU

SUSAN WOOD
Good morning, Julia. Just tell us the impact that this [botulism] scare has had on your business there.

JULIA XU - Co-founder Oravida Ltd
Good morning, Susan. Now, about a month and a half into the incident, people are still remembering. We do quite a bit of supermarket promotions, and by that I mean that we ask consumers to come, customers to come and taste our milk, and we have found that even today a lot of consumers will pick up the cup, and they will ask, ‘Where is the milk from?’ And when we say it’s from NZ, they won’t even want to taste it. They will just put it back down. I think that even today when Fonterra came out and said it was really a mistake; it wasn’t really a contamination, people still remembered and remembered that as a contamination, not necessarily knowing what exactly had happened thereafter.

SUSAN So that is your experience, and other dairy exporters, smaller exporters like yourself, that’s the experience - that the brand has been very seriously damaged?

JULIA Excuse me?

SUSAN So your experience lines up with other people who are importing milk into China? The NZ brand has been seriously damaged there?

JULIA Yeah, I think so. I haven’t talked to a lot of other exporters, but I think because since the incident, we are being asked by CIQ [China Inspection & Quarantine Services] to give the government more assurance from the product that we ship. Particularly, we have to give them what test results. So I’d imagine that is applied across the board to a lot of other NZ products as well. And just by providing more lab tests results, that in itself adds number one - cost, and number two - a lot of time delay.

SUSAN Do you know what the scare has cost your business in terms of lost sales and those extra costs?

JULIA Um, that is a little bit difficult to quantify because, as you mentioned, we’re the first company to pioneer this product. So at the moment, our sales volume is still relatively small, but as a percentage, that is quite significant, and as a percentage of an investment, that is also quite significant. Just to give you an example, about a month ago just around the week when the Fonterra incident happened, we had sent about 300,000 leaflets, pamphlets to ICBC (Industrial and Commercial Bank of China) gold card members in Shanghai, and we only had about 50 enquiries. And out of 50 enquiries, we only had about 15 orders. So that is an extremely low turnout which is much, much lower than what we had anticipated.

SUSAN Julia, what do you think of the way Fonterra have handled this scare and the aftermath of the scare from a Chinese perspective, from what the Chinese consumer is seeing and hearing?

JULIA Um, I think there is a little bit of a loss of confidence. There’s a loss of confidence that Chinese have always viewed NZ dairy products as one of the best products in the world. And yet continuously there are problems after problems. We have had DCD in February, and then again we had the Fonterra incident in August, and then a couple of weeks later, we had another Westland problem. So there seems to be the frequency at which the problems are happening a little bit too often, and that seems to be constantly reminding the consumers that NZ dairy products are really not as safe or trustworthy as they appear to be, and that is very damaging.

SUSAN What does Fonterra need to do to get people drinking NZ milk again, so they do actually want to taste it when you’re, for example, having it at the supermarket?

JULIA Um, I think from Fonterra’s perspective or from NZ’s - any company’s perspective - they need to come here and explain a little more of their process and really letting the customers understand what had happened and what precautions that they’re taking in the future to prevent things as such from happening. They need to come here and educate consumers a little bit more, which is what we are doing. How wonderful NZ dairy products are and why are they wonderful is from the clean environment where they come from and also from the very strict processing processes that the companies have put in place. So the companies, as well as NZ, needs to come here and again demonstrate that and allow the consumers here to really differentiate NZ products and really re-establish their confidence that it is indeed really the best dairy products you can get from the world.

SUSAN Julia, does it need more government intervention as well? Does it need ministers coming to China?

JULIA Yes, I think the Foreign Minister, Murray McCully, had come, and I believe the Trade Minister, Mr Groser, had also expressed a lot of help to businesses on the ground. In a sense, but from businesses’ perspective, what we have seen is that, for example, Fonterra has come out and cleared that the clostridium incident was really a mistake. However, we as on operator, are still needing to provide lab tests for each batch of milk that we ship into China to CIQ that our milk is free of contamination. So any of the precautions and new tests that the Chinese Government have put on since the accident, that has not been removed. I think the government, perhaps, could do a little more to engage in more bilateral talks to remove some of the tests or measures the Chinese Government have put on because of this false mistake.

SUSAN The NZ Government has come out this week with a $2 million fund to help smaller exporters like yourself. Do you think it will make any difference?

JULIA Um, yes, it definitely will. It will give NZ exporters some relief financially and also allowing them to come to China and to understand what is going on on the ground. However, I always firmly believe that if you wanted to build a market in China, you need to have a local presence. You need to really understand what is going on day to day, and I think taking one or two trips a year is really not going to let you understand this market very well, and you need to have local presence. You need to be in constant dialogue with the people on the ground to see what’s changing, what customers are wanting to have, so that your products are really tailor-made and suited for the consumer market in China.

SUSAN Finally, Julia, do you think that brand NZ, the damage is repairable given time and the hope that there are no more of these scares?

JULIA Oh, I definitely think so, because now, a month and a half into the incident, I think a lot of customers are now saying, ‘Oh, that NZ dairy products, it was the products that had a problem before.’ So people are now already putting it into a frame that this is what’s in the past. So I think consumers definitely move on, but the key thing is really not to have another reminder that this had happened.

SUSAN Exactly. Thank you very much for your time this morning. Julia Xu there from Shanghai.

ENDS

© Scoop Media