Exploration essential in South East Asia’s emerging markets


Tony Martin

By Tony Martin

New Zealand food and beverage producers and technologists can look confidently to South East Asia for growth as the region’s markets emerge.

Loosely speaking, there are three tiers of markets that exist within the South East Asia group of countries. At the developed end of the spectrum there is Singapore, which you read about in last month’s NZ FOODtechnology, with its wealthy population supported by the financial and services sector. The development and sophistication of the supply chain, warehousing and logistics infrastructure and the channels to market are amongst the best in the world. The market is also open so this provides intensive competition from small, medium and large players all seeking a share of the lucrative (but relatively small) market.

Malaysia and Brunei could also fit in the top tier markets with higher developed supply and channel structures as compared to their neighbours.

In the second tier of markets we start to talk of a combination of developing and emerging markets. Thailand for instance is a well-established destination for food and beverage products and quality brands, and Indonesia also offers a rewarding opportunity due to share scale and pace of development. Vietnam and the Philippines are also in this segment with relatively poorer but still large populations.

The third tier is the true emerging market frontier – where the countries of Myanmar, Laos, Cambodia and Timor Leste offer much promise but will require long-term commitment and investment to secure a return on business development effort in the current period.

There are two fields of opportunity for New Zealand exporting businesses. The first is the export of ingredients used for manufacturing in lower-cost production environments that may be found in Vietnam or Myanmar; the second is quality food and beverage products – especially in the areas of higher-value safe and nutritious packaged goods – which will appeal to the higher end socio-economic grouping (perhaps the top five-10 percent of the population). More importantly, it provides an opportunity to develop and grow a brand as being credible, high quality and aspirational as the middle classes grow in these emerging states.

NZTE has programmes in place such as New Zealand Food Connection events, held in recent months around the region, which is a format that provides an opportunity for suppliers of great products to showcase them to an invited group of influential buyers, chefs, distributors and importers in key markets.

In 2014 these events were held in Jakarta, Ho Chi Minh City and Manila – all key Tier 2 developing and emerging markets for New Zealand food and beverage product.

New Zealand has good market access across the spectrum of countries aided by the AANZFTA agreement which provides tariff reductions and gradual elimination of 99 percent of goods by 2016 across the ASEAN markets.

There are however still many non-tariff barriers to entry to consider, such as additional packaging and formulation regulation requirements as well as some difficulties in transitioning to local business and cultural conditions.

Transparency is not always easy to find in establishing new business partnerships – there’s often far more than meets the eye in initiating a new opportunity in an emerging market.

Understanding market opportunities through macro research is essential initially, but a visit to the market you’re interested in – to understand the channel, supply chain and logistics structure – should be compulsory.

Exporting businesses should not fall in to the trap of popping the champagne corks when the container leaves the wharf in New Zealand. The hard work at that point has only just begun and this is especially true for emerging markets. Business should be prepared to be able to build a relationship with local partners over time so that the difficult questions around how, when and where product is being stored and sold can be answered with accuracy and honesty.

Trying to manage this by e-mail from in office in New Zealand will likely provide the answers that the business owner wants to hear, but this may not marry up with the reality of what is actually happening in market.

These markets are developing very fast. With that speed come many enterprising people who want to develop their business ahead of the market growth. Inevitably that means a fair cross-section of people with various talents and experience. An exporter cannot afford to underestimate the value in spending time to compare potential partners’ credentials, get to understand their business well and then be prepared to ask the tough questions and expect honest answers in return.

Emerging markets provide great opportunities but any high-yielding return likely carries much higher risks.

Tony Martin is New Zealand’s Trade Commissioner based in Ho Chi Minh City, Vietnam. NZTE is New Zealand’s international business development agency. Its role is to help New Zealand businesses grow into international markets.

For more information visit: www.nzte.govt.nz

Photo: Tony Martin