From farm to fridge, give or take 8000km

“We need to be smart about our products and our marketing,” CEO Allan Hood told bluenotes.

“We can’t compete on the scale of the major players, so we need to add value – something unique for the market we are targeting.”

Hood recently joined a delegation of Australian businesses leaders in Shanghai and Singapore as part of trip with ANZ’s International Business Development Team, touring worksites and meeting industry leaders.  

“There’s such a huge appetite and interest for Australian products in Asia,” he says. “I think the quality of what we do, the history, the cleanliness, resonates with consumers in the market.

“It’s a great opportunity for us to take advantage of but it’s very daunting.”

Changing tastes

The ratification of China-Australia Free Trade Agreement (CHAFTA) has eliminated significant dairy tariffs over the last two years, placing Australian companies in a much-stronger position than New Zealand, which has enjoyed a competitive advantage with lower tariffs in China since 2008.

“The progressive elimination of tariffs means we’re able to compete more on pricing with New Zealand and the EU,” Hood says. “The quality, taste and reputation of Australian products is well regarded and continues to drive demand in the market for us.”

Demand in Asia and particularly in China for cheese, yogurt, cream and ice cream has increased in recent years. Middle-class consumers are open to trying more dairy products, and exporters have leveraged this trend with added value products.

A period of low prices for milk solids has translated into an attractive price point for processed products. Bulla made the most of that trend, but cautions against rushing into the market with an array of new products.

“We’ve had a wide variety of SKUs (stock keeping units) in Asia in the past and it’s been a challenge if there’s a regulation change or a new labelling requirement,” Hood says. “We’ve streamlined and simplified that now and we can supply a higher volume with less variation. That seems to be working well and we can differentiate more with the marketing.”

Urban lifestyle factors including congestion, public transport and car ownership are important to consider when investigating new markets in Asia. Consumer preference and taste testing in focus groups is not enough to understand how shoppers will ultimately buy the product.

In the West it is common for shoppers to drive to the supermarket, fill up their trolley with large bulk buys and head home to stack the shelves. This was not the case in metropolitan centres in China.

“A two-litre container just didn’t work, we struggled to sell them,” Hood says. “We looked into it and found that most households simply didn’t have a large enough freezer, so consumers were actively looking for smaller sizes.”

Field research

One of the important insights from the delegation, according to Hood, was the growing impact of ecommerce in China.

Many platforms are available in Shanghai and competing for market share including Tmall, JD and City Shop.

“We do the classic route to market here and in Shanghai and I think we’ve got to do something different to capture the trend of people buying groceries online,” Hood says.

“We have to ask; how do we make ecommerce a larger part of our international strategy?”

Home advantage

Bulla has made a large investment in technology at its Colac facility in Victoria, with milk separation and skim milk concentrate plants as well as a state of the art innovation centre. This allows the company to bring more product development in-house and increase production output to meet rising market demand.

There is now a unique opportunity for Australian companies to strengthen relationships in Asia, during a time when the UK, EU and United States remain conflicted around their international trade objectives.

Bulla has a dedicated team in Victoria who manages exports to Asia and Hood has seen the value of employing the right staff at Bulla.

“You’ve got to have people on the ground,” he says. “That’s been a big lesson for us.”

“We’ve brought more of that capability in house to handle export demand. You can’t just rely on an agent to do it for you in a new market. It shows commitment when you get in there with your own people.”

Guy Thompson is a bluenotes contributor