INTERNATIONAL TRADE SERVICES March 2015
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SPEAKERS Paul O’Brien – Business Manager Nutraceuticals, Douglas Pharmaceuticals. Paul has experience in the pharmaceutical, natural health and FMCG sectors in New Zealand, Australia and China. His current role at Douglas Pharmaceuticals has him leading the Nutraceutical team with a focus on China and natural health export opportunities. Prior to this, Paul was the CEO of Easiyo where he worked with NZT&E to develop new markets in China where New Zealand dairy probiotics are highly sought after. Nathan Penny – ASB Rural Economist. Nathan’s expertise lies in commodity markets, trade economics and economic forecasting; in particular, he’s a leading global dairy trade commentator.
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By Paul O’Brien
Summary: 1. No contracts
6. Consumer research
2. Saving face
7. Multiple distributors
3. CoD, NZ$, LC
8. Make premium
4. Rebates
9. On line important
5. Just one city
10. NZ Inc. necessary
No Contracts They won’t honour them. The negotiation starts when the contract is signed!! Contracts my be valid for that day….not in a few months Almost impossible to enforce in Mainland China Threaten Government investigation if swindled MoU more useful “ you do this, we do that”
Saving Face Don’t believe anything from China, especially docs/certs Family take precedence before Kiwi businessman Relationships are important, but still family first Lies are not really lies, just saving face Protocol and etiquette still important, let them save face
Cash in Advance NZ $ transactions preferred over RMB or US if possible L/C’s are preferred as safer, TT ok too Never give credit…..the Chinese don't. If they can’t afford to pay up front be careful When travelling to China apply for an APEC card
Retro Rebates Give retrospective rebates instead of discounts, say 5% Link them to marketing spend Watch receipts closely ( get them translated ) OK to give rebate in stock, say 7.5% to 10% When visiting the distributor, check on their marketing
spend and go to their warehouse. Always visit your retailers when in market.
Just One City Just one city is big enough eg Wuxi, Nanjing, Tianjin,
Shenzhen, Qingdao, Hangzhou, Dalian. Many cities over 10 million people Tier 2 and 3 have great spending potential The further away from Beijing the more affluent Distributors are mostly regional focused (China = Eu)
Consumer Research Consumer research very important (this is not NZ) Route to market critical Sensory testing may be needed if F&B Packaging changes may be needed Do quant and qualitative ideally ( NZTE may co fund?) Tier 2 & 3 cities too Use social media to understand consumer needs
Multiple Distributors Get multiple distributors with some exclusivity, NOT ONE
DISTRIBUTOR. Many will ask for whole China exclusive Beijing and Shanghai are just so different Keep the relationships competitive Promote the best ones, stop supplying the worst ones Review 6 monthly
Make Premium Make your product or service PREMIUM ‘We are
expensive!’ Chinese love showing off brands ( conspicuous consumption) e.g. phones, cars, handbags, clothes etc. The most expensive product in a sector is desired Don’t discount, better to rebate later
On Line On line can be better than retail e.g. Taobao Get flagship on line mall for authenticity Courier transportation is cheap and efficient Watch web site stealing and non approved sites Blogging sites can be inexpensive PR e.g. 11/11 sales Auckland University Masters IB Dept. can help ( email
Susan: s.sum@auckland.ac.nz
NZ Inc. NZ Inc. is critical particularly F&B Build it around your USP. Use NZT&E where possible, e.g. video links, photo’s ( NZ
Story is essential to use, “open hearts, mind, spaces”) Subsidise distributor trips back to NZ to breathe culture See NZTE and Export NZ export ready survey? Join Export NZ and get mentor assistance
Conclusion Thanks for attending. If you get stuck in China call me. Paul O’Brien phone 027 591 7061 Questions/ comments??
Looking back to look forward Nathan Penny – ASB Rural Economist KPMG Exporter Seminar February 2016
Disclaimer This document is a private communication and is not intended for public circulation or for the use of any third party, without the approval of ASB. The information contained in this document is given with an express disclaimer of responsibility. No right of action shall arise against ASB or its employees either directly or indirectly as a result of this information. Those acting upon this information do so entirely at their own risk. This information does not purport to make any recommendation upon which you may reasonably rely without taking further and more specific advice.
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Outline • Look back at 2015 • What have we learned? • What can we take heading into 2016? • FX forecasts • ASB Kiwi Dollar Barometer
– Next time!
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looking at 2015 in the rear-view mirror Total exports By top 30 categories Year ended December Commodity / service
Milk pow der, butter, and cheese Business and other personal travel services Meat and edible offal Logs, w ood, and w ood articles Education travel services Fruit Air transport Mechanical machinery and equipment Wine Fish, crustaceans, and molluscs Casein and caseinates Confidential items (3) Electrical machinery and equipment Miscellaneous edible preparations Aluminium and aluminium articles Preparations of cereals, flour, and starch Telecommunications, computer, and information services Optical, medical, and measuring equipment Wool Precious metals, jew ellery, and coins Wood pulp and w aste paper Crude oil Financial services Iron and steel, and articles Textiles and textile articles Management fees Sea transport Other animal originated products Raw hides, skins, and leather Plastic and plastic articles
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1. Dairy 2. Oil 3. Forestry 4. Iron & Steel 5. Textiles 6. Hides, skins & leather 7. That’s it!!!
2015 export stars
Total, $1.9bn (3%) Tourism, $2.3bn (31%) Meat (beef), $900m (15%) Fruit, $500m (31%) Education, $300m (11%) Confidential items???
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2015 export stories
NZ Dollar - Dairy’s influence NZD/USD AND NZ USD COMMODITY PRICE INDEX
Index 1997=100
USD
300
1.00 Dairy Prices in USD (LHS)
250
0.90
200
0.80
150
0.70 NZD/USD (RHS)
100
0.60 Sources: ASB, Datastream
50
0.50 06
22
07
08
09
10
11
12
13
14
15
16
2015 export stories
ď‚Ť Mix of exports/markets SHARE OF NZ EXPORT VALUES 30%
30% Source: Stats NZ
Australia
20%
20% Asia (excluding China, Japan and Australia) China
US
Japan
10%
10% Europe
UK 0%
0% 99
23
01
03
05
07
09
11
13
15
Top 25 exports By commodity/service and destination country/econo Year ended December Commodity/service
Destination
Milk pow der, butter, and cheese
China, People's Republic of
Other personal travel
Australia
Meat and edible offal
United States of America
Other personal travel
European Union
Meat and edible offal
European Union
Logs, w ood, and w ood articles
China, People's Republic of
Other personal travel
China, People's Republic of
Meat and edible offal
China, People's Republic of
Other personal travel
United States of America
Other business services
Australia
Precious metals, jew ellery, and coins
Australia
Transportation services
Australia
Education travel services
China, People's Republic of
Crude oil
Australia
Milk pow der, butter, and cheese
United Arab Emirates
Fruit
European Union
Education travel services
India
Mechanical machinery and equipment
Australia
Milk pow der, butter, and cheese
United States of America
Milk pow der, butter, and cheese
Malaysia
Wine
European Union
Transportation services
United States of America
Aluminium and aluminium articles
Japan
Milk pow der, butter, and cheese
Algeria
Business travel services
Australia
2015 export stories
China’s mix of growth vs. level of growth CHINA GDP & INDUSTRIAL PRODUCTION
y oy
yoy
16
30
y oy
CHINA RETAIL TRADE & INDUSTRIAL PRODUCTION
yoy
30
30
Source: Bloomberg
Source: Bloomberg
14
25
25
25 Retail Trade (LHS)
GDP
12
20
20
20
10
15
15
15
8
10
10
10
6
5
5
5 Industrial Production (RHS)
Industrial Production (rhs) 4
0 94
24
96
98
00
02
04
06
08
10
12
14
16
0
0 00
02
04
06
08
10
12
14
16
2016: what can we learn from 2015? NZD/USD AND NZ USD COMMODITY PRICE INDEX
Index 1997=100
USD
OCR FORECASTS
%
(ASB vs pricing of overnight index swaps) %
1.00
4.0
4.0
250
0.90
3.5
3.5
200
0.80
3.0
300 Dairy Prices in USD (LHS)
3.0 Current market pricing
150
0.70
2.5
0.60
2.0
2.5
NZD/USD (RHS) 100 Sources: ASB, Datastream
Source: ASB
50
0.50 06
25
07
08
09
10
11
12
13
14
15
2.0
16
ASB Economics Forecast (peak of 3.5% in 2020)
1.5 1.5 Sep -13 Jun-14 Mar-15 Dec-15 Sep -16 Jun-17 Mar-18
FX forecasts ASB forei gn excha nge foreca s ts (end of quarter)
USD per NZD GBP per NZD AUD per NZD JPY per NZD EUR per NZD CNY per NZD TWI - 17 country
26
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
0.64 0.44 0.93 74 0.58 4.10 69.2
0.65 0.43 0.93 73 0.58 4.10 69.1
Mar-17 Mar-18
<< actual forecast >>
0.685 0.462 0.940 82.5 0.626 4.444 74.4
0.62 0.43 0.95 71 0.59 4.06 69.4
0.63 0.44 0.94 74 0.58 4.10 69.4
0.66 0.43 0.93 73 0.57 4.09 68.9
0.70 0.44 0.88 83 0.56 4.13 68.6
NZD has adjusted lower, slightly more to come USD
NZD/USD and NZD/AUD
AUD
1.00
EUR
JPY
NZD/EUR and NZD/JPY
1.00
120
NZD/USD (LHS) 0.90
0.95
NZD/EUR (lhs)
0.70
NZD/JPY (rhs)
0.80
0.90
0.70
0.85
100 (f)
0.60 80
0.60
0.80
0.50
0.75
0.50
60
(f) 0.40
0.70 NZD/AUD (RHS)
0.30 0.65 Mar-93 Mar-98 Mar-03 Mar-08 Mar-13 Mar-18
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0.40 Mar-93
40 Mar-98
Mar-03
Mar-08
Mar-13
Global picture & Volatility
28
Inflation (and wages) %
NZ CPI INFLATION
%
6 Source: Stats NZ, ASB
6
Annual %
5 5
NON-TRADABLE INFLATION & WAGE INFLATION Non-tradable inflation
% 4.5 f /c
4.0 3.5
4 4
3.0
3
2.5 3
2
2.0
1.0 0.5
quarterly change
29
LCI all sectors inflation (rhs)
1
0 -1 Jun-00
1.5
2
1
Jun-03
Jun-06
Jun-09
Jun-12
Source: Stats NZ, ASB estimates Jun-15
0 Jun-97
0.0 Jun-01
Jun-05
Jun-09
Jun-13
Jun-17
Interest rates low for a long time OCR FORECASTS
%
(ASB vs pricing of overnight index swaps) %
4.0
4.0
%
SWAP RATE FORECASTS
6.0 Source: ASB
5.5 3.5
3.5
3.0
3.0
10-year average
5.0 4.5
Current market pricing 2.5
2.5
4.0 3.5
Dec 2017 Current
3.0 2.0
2.0 Source: ASB
ASB Economics Forecast (peak of 3.5% in 2020)
1.5 1.5 Sep -13 Jun-14 Mar-15 Dec-15 Sep -16 Jun-17 Mar-18
30
2.5 Dec 2016
2.0 1.5 OCR
901235710day yea r yea r yea r yea r yea r yea r
Broad global outlook aapc
NZ TRADING PARTNER ANNUAL GDP GROWTH
8
NZ TRADING PARTNER GDP GROWTH
aapc
10
2016 & 2017: Forecasts
Asia ex-Japan 8
6 Av erage
6 Australia 4
4
2 US
2
0 -2
0
Euro area -4
-2
Source: Consensus Inc, Stats NZ, ASB
2015 - Estimate
85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17
Source: Consensus Inc, Stats NZ, ASB
-6 Dec-00
Dec-04
Dec-08
Dec-12
Dec-16
China: trend slowing of growth y oy
CHINA GDP & INDUSTRIAL PRODUCTION
16
CHINA RETAIL TRADE yoy 30
y oy
yoy
25
Source: Bloomberg
25
14
20 12
GDP
20
15 10
15
8
10
6
5
10
Industrial Production (rhs) 4 0 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15
32
5 Source: BloomberG
0 Jan-99
Jan-02
Jan-05
Jan-08
Jan-11
Jan-14
Economic forecasts ASB economi c foreca s ts
Jun-15
Sep-15 Dec-15 Mar-16 << actual forecast >>
Sep-16
Dec-16
Mar-17 Mar-18
2.9 2.4 7.8 4.9 7.5 5.7 2.3 0.9
2.3 2.3 5.7 2.0 7.1 3.5 1.7 0.4
2.2 2.3 5.9 1.9 6.2 1.6 2.2
2.2 2.2 6.5 1.9 5.0 -0.3 2.5
2.2 2.2 7.1 1.3 3.0 -0.3 2.4
2.5 2.3 6.9 2.6 1.8 0.4 2.7
2.7 2.6 6.7 2.5 1.4 1.5 3.0
3.5 3.5 4.4 5.9 2.7 4.1 3.5
Q%
3.3 2.7 8.6 7.4 5.7 6.6 2.4 0.3
NZ CPI
A%
0.4
0.4
0.1
0.5
0.5
0.9
1.6
1.7
1.7
NZ hous e pri ces (QV i ndex)
A%
10.5
14.2
11.2
8.8
5.8
1.4
2.2
1.9
1.4
5.9 1.8
6.0 1.7
5.3 1.6
5.8 1.8
6.0 1.7
6.0 1.8
6.1 1.8
6.1 1.8
5.6 1.9
-8.3 -3.4
-8.1 -3.3
-7.8 -3.2
-7.4 -3.0
-7.4 -3.0
-7.3 -2.9
-7.0 -2.8
-6.7 -2.6
-6.6 -2.4
NZ GDP real pri va te cons umpti on dwel l i ng cons tructi on other i nves tment exports i mports NZ GDP rea l NZ GDP rea l
NZ unempl oyment (s a %) NZ pri va te s ector wa ges (LCI) NZ current a ccount ($b) a s a % of GDP
AA% AA% AA% AA% AA% AA% A%
Qtr A% Yr Yr
A% = percentage change since same quarter the previous year AA% = percentage change for year ending quarter since the previous year
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Jun-16
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