Made in NZ to win Chinese hearts(1)
Down the escalators from Gucci and Prada, past the amazing French brie, is a supermarket fridge filled with Pitango soup.
Each pouch is made and packed in New Zealand, a fact that adds a certain cachet here at Great supermarket Hong Kong, where wealthy locals come to shop with even wealthier mainland Chinese.
Nearby, a carton of six organic Aotearoa eggs sells for the equivalent of about NZ$10 – more than a packet of South Island smoked salmon.
These well-heeled shoppers, invariably slim and immaculately turned out, want to buy the kind of Kiwi products that bring smiles to the faces of seasoned economists like BNZ's Tony Alexander.
If we don't turn our vegetables into organic soup and our milk into premium baby formula, they say, China will be just another place to sell low-value commodities.
"China will be our biggest export destination within six or seven years [yet] we're not seeing much advantage being taken by the non-bulk primary producers," Alexander says.
"Although our exports to China and Hong Kong over the past three years have grown 120 per cent, our non-primary exports have only grown 9 per cent."
The brie and salmon shoppers are changing. Not long ago Hong Kong locals would have been noticeably wealthier than the mainlanders.
Now China is set to overtake Japan as the world's largest luxury market.
Throughout, Hong Kong has been cementing itself as China's banker-cum-translator with the West, and, more recently, its currency trader. Last year Hong Kong handled more than 80 per cent of offshore trade settlement in Renminbi. Instead of speaking Cantonese and English at high school, Hong Kong schoolchildren now learn Cantonese, English and Mandarin.
Hong Kong's potential as a gateway to China could be about to gain interest for New Zealand. The Government plans to double two-way goods trade with China to $20 billion by 2015, and many companies treat Hong Kong as the default starting point.
Exporters and their advisers disagree on whether Hong Kong is the best launching pad, although most agree that a toehold in the city at least is useful.
Sharon-May McCrostie, New Zealand's Hong Kong trade commissioner for the past four years, says many businesses forget that Hong Kong is a decent-sized market itself – New Zealand's 12th biggest export market, with some great Kiwi success stories. There is a low tax rate and sometimes useful connections between Hong Kong and mainland businesses.
Pitango soup, for example, may soon get a crack at the mainland because Great's sister company – supermarket chain Park n Shop – is launching supermarkets in China using the same buying team as Hong Kong.
In the other direction, 20 million or so tourists from the mainland visit Hong Kong each year, many on shopping trips.
McCrostie sees opportunity in the status that is fast becoming attached to products from "quality" destinations – not just wine and handbags but food, drink, and beauty products too. She recalls being in a shop with a woman who lost interest in a pair of shoes after realising they were from Malaysia.
"She was obviously after something made in France," says McCrostie.
When it comes to products that go in and on people's bodies, New Zealand could be France. At least that's what Arran Boote and David Yu think.
Arran Boote, a consultant on Chinese trade, has so much melamine in his system he wonders he doesn't rattle. The product of a decade eating icecream on regular visits to China, his levels are above normal but thankfully not toxic, he says.
New Zealanders tend to know about melamine because Fonterra was embroiled in a contaminated baby formula scandal with Chinese joint venture partner Sanlu, which claimed the lives of four infants and left many others sick.
But there have also been scandals involving lead in toothpaste, arsenic in coffee and lead in toy paint, says Boote, a director and tax expert at a firm of accountants and business advisers called William Buck.
More than anything, he says, this explains why those who can afford it might be willing to pay more for food, vitamins and skincare products made as far away as possible – possibly in clean, safe New Zealand.
Alexander, ever the economist, says companies should draw a line graph to work out whether the premium they can charge makes it worth the extra expense of manufacturing here.
But this might be a rare time when doing everything on-shore actually stacks up.
After years of food scandals, Boote says many Chinese "will not eat or consume produce that is even re-packaged in China". He has been urging Kiwi companies to go there for ages, especially ones making milk powder, mussels, salmon, fruit, colostrum and health products, though he doesn't pretend it is easy.
"There is no question New Zealand has an excellent reputation in China for food but you've got to be careful about how you do it," he says. New Zealand companies "have all struggled early on and then got re-established and done quite well, some of them extremely well."
Boote is firmly of the view that every business should go through Hong Kong.
He says it is possible to structure a business to "piggyback off" Hong Kong's preferential trade access to China through the Closer Economic Partnership Arrangement (CEPA). Since New Zealand also has free trade agreements with Hong Kong and China "we are in a very unique position" he says.
Boote likes the certainty that comes with writing contracts and trademarks in English and knowing they can be enforced under a common law legal system, a legacy of the old British rule.
In China "you are landing in a place where English is definitely marginal. [And] if you haven't been in the last three or four months it will have changed."
Hong Kong's banks and newspapers act as a kind of translation service for foreigners trying to keep up with the mainland, he says.
"You might think you understand [the Chinese rules] but then officials will come along and say `Beijing has given us an oral requirement to do it this way'," says Boote.
And, like smaller Chinese cities, Boote says Hong Kong can act as a test case for pricing and marketing strategies before hitting Shanghai or Beijing.
"You can make a mistake there and it's not going
