Agribusiness Review - Vol. 10 - 2002

Paper 3
ISSN 1442-6951

Paving the Way for Food Exporters

Mr Paul Bourke

• Introduction
• Agri-food exports
• Supermarket to Asia Ltd
• Working Groups
• Major themes
• Quality and Safety
• Business Competitiveness
• Small to Medium Enterprises
• Market Access
• Transport and Logistics
• Research, Technology and Innovation
• Major themes
• Quality and Safety
• Electronic Commerce
• Quality Food Australia
• Small to Medium Enterprises
• Transport and Logistics
• Export culture
• Regional Export Forums
• Promotion in Asia
• Asia Market Bridge
• Networking Missions
• The Vision

Introduction

The Prime Minister's Supermarket to Asia Council (STAC) was established in September 1996 to provide the leadership and drive necessary to achieve success in export markets with a clear focus on Asia, where the opportunities are considerable.

The food industry and Asian markets are a vital part of Australia's future economic wealth. The total value of the food industry is estimated at around A$64 billion. It is conservatively estimated that Asian food consumption is growing at the rate of A$20 billion per year as a result of increasing income and population levels and changing tastes towards meat and dairy products, and fresh and convenience foods. Typical import growth rates in individual countries are around 10 per cent a year or higher.

The STAC is a facilitation body whose primary role is to provide the strategic direction and priority setting for the agri-food industry, allowing the difficult impediments to growth to be effectively addressed both domestically and in export markets. This is being achieved by harnessing the skills, energy and commitment of industry and government to improving competitiveness and effectively promoting the quality of Australian food in overseas markets.

The mission of the STAC is:

• To remove the barriers to export, to develop a much more aggressive export culture, and to promote the benefits of Australian agri-food products in Asian markets.
• To focus on the task of building exports of food products to Asia.
• To this end all of the STAC activities and programs are classified under one of the following headings:
• Impediments
• Culture
• Promotion in Asia

Agri-food exports

Over the period 1991/92 to 1995/96 Australian food exports to Asia grew at an annual rate of 19 per cent, more than doubling from A$4.9 billion to A$10.3 billion in the last five years. The major market is Japan, taking 38 per cent of food exports, with China emerging as the second largest market, taking just over 10 per cent of food exports in 1995/96. The other eight markets all have between 5 and 10 per cent of our exports and are experiencing strong growth. Asian markets have become increasingly important to Australian food exporters during this period. The share of food exports going to Asia has grown from 49 per cent to 64 per cent.

Advice from the agri-food industry sectors indicates that food exports to Asia could be expected to reach A$16 billion by the year 2001, given normal seasons and price expectations. This projection is based on the industry's expectation that market barriers will continue to fall steadily, and agricultural and horticultural production continuing to expand at 1 to 2 per cent per annum. Over this period however, grain production is projected to fall modestly and beef and dairy to expand.

A particular challenge for all of us will be the possibility of continuing El Nino effects. While irrigation will help protect the more intensive crop and animal production systems from droughts, competition for water will be intense, and how the irrigation system copes with this is somewhat unpredictable.

However, given the intensive focus on exports to Asia driven by the Council we are confident that these possible offsets will be overcome by the introduction of thousands of new food enterprises focusing on export.

Supermarket to Asia Ltd .

To service the working groups and the Council, an independent company called Supermarket to Asia Ltd. (STA) has been established, which has a contract with the Government to supply support services to the Prime Minister's Supermarket to Asia Council.

The company has a board of directors comprising seven industry members of the Council. The staff includes the CEO and five others. While the organization is lean, its strength comes from its independence and the ability to draw resources from across the agri-food industry. Getting a good cross-section from all sectors of the agri-food industry is critical if consensus is to be achieved on the big issues.

The Board is continually evaluating the structure of the Council's networks to ensure that we are reaching the broad cross-section of our agri-food constituencies. Also a key challenge for the directors is to have the Council predominantly funded by industry within three years.

Working Groups

During the last six months, eight working groups, comprising over 130 people from industry and government, have been evaluating ways to enhance our export efforts.
Already a number of achievements have been made by the groups.

Quality and Safety

• Sign on by key industry and government players to the development and implementation of the national safe food system..
• Endorsement of a 'paddock to plate' approach to food safety and quality.
• Development of a national classification system for safety and quality certification

Business Competitiveness

• Reinforced the need for front-line management training in the food industry.
• Secured the agreement of the Australian Competition and Consumer Commission (ACCC) to develop and communicate merger guidelines for exporters.
• Identified priority, competitiveness and productivity reforms for industry competitiveness.
• Evaluated potential taxation reform for food industry competitiveness.

Small to Medium Enterprises

• Initiated development of 'Building Successful SME Exporters', training and video
• packages using successful case study materials from various government agencies.
• Development of the 'Delicatessen to Asia' program.
• Participation in the Agribusiness Association of Australia seminars in major capital cities.

Market Access

• The appointment of a dedicated Processed Food Market Access Facilitator.
• Placement of two AQIS Technical Access Counselors (Tokyo and Seoul).
• Publication and distribution of a practical market access guide.
• Key Council statement on the benefits of trade liberalization.

Transport and Logistics

• Development of a transport and logistics directory of key initiatives underway across Australia.
• Identified excess airfreight capacity to many Asian destinations during the year.
• Initiated a through chain logistics project for fresh produce to Indonesia.
• Identified opportunities to increase adoption of new technology in vehicle tracking, better packaging, and electronic commerce.

Research, Technology and Innovation

• Developed a framework to better integrate research and development with innovative business systems.
• Liaised with CSIRO on the development of a key issues paper on the management of gene technology, intellectual property, and the impact of global commerce on access to key enabling technologies.

Major themes

The working groups identified a number of major themes, and key initiatives are being developed along these lines for presentation to the Council in October.

Quality and Safety

Food poisoning, product contamination and other such food safety incidents can have a devastating impact on the food industry. In the short term, a failure to deal quickly and effectively with a food safety incident will often result in costly trade disruption and threaten the commercial viability of food suppliers. In the longer term, negative consumer perceptions arising from these incidents can damage the reputation of individual suppliers, food industries and Australia as a major food exporting country.

Australian food industries have developed a good reputation for supplying safe, wholesome food to domestic and overseas consumers, and have a sound record in dealing with food safety incidents. However, in an increasingly sensitive global food market, there is a need to ensure that our emergency management arrangements are sufficiently enhanced to maintain these high standards and protect our access to overseas markets.

Of particular importance is the need for effective management of the public relations aspects of an emergency situation and the role of the media. The proposed Action Plan is to develop comprehensive emergency response arrangements for each industry sector to effectively handle food safety incidents.

Electronic Commerce

Electronic commerce on the Internet is growing rapidly and the ability for our agri-food industries to trade electronically would strengthen their links to Asian markets, giving them an 'on-shelf' presence and enabling quality food products from Australia to be bought on line.

In addition, if participants were encouraged to use an integrated supply chain meeting quality, hygiene, labeling, and packaging standards, and ensuring on-time delivery, the reputation of Australia's agri-food industries would be greatly enhanced

Quality Food Australia

The Australian agri-food industry needs appropriate quality assurance systems to underpin its export marketing if it is to meet the increasing quality demands of Asian customers. The Quality Food Australia Logo will be licensed to exporters who have appropriate quality assurance systems in place. This will provide a third party certified quality mark for exporting without adding additional pressure on export businesses, providing they are ensuring safe quality food. The Logo will also create an umbrella image for Australian food, which will benefit many small to medium enterprises that do not have established brand names in Asia.

Small to Medium Enterprises

The lack of integrated electronic Customs and AQIS export declaration and clearance procedures imposes unnecessary costs on exporters and makes exporting much more complex. A proposal is being developed to integrate AQIS and Customs systems to allow simpler export clearance procedures.

Transport and Logistics

Investigations by the Transport and Logistics Working Group highlighted the issue of communication between all players in the export chain as being critical in establishing a cost effective value added transport and logistics chain.

The Working Group also recognized Australia's need to develop an export culture: exporters need to view the transport and logistics chain as a value added component of the exported product; the transport and logistics industry needs to appreciate the demands of consumers on exporters.

State governments, port authorities, airport lessees/authorities, transport providers, and exporters need to work more closely together to improve communication and overcome bottlenecks. The WA Airfreight Council provides an excellent model of what can be achieved at the practical level.

A proposal is being developed for the establishment of export councils in other states.

Export culture

To promote the Council and its work, a broad range communications program has been put in place, which includes regular press releases and media interviews with Council members and the STA Ltd. secretariat. A quarterly magazine, Supermarket to Asia, which has over 120 pages of profiles, case studies, export events and news was recently launched, and has been distributed broadly throughout Australia and Asia.

A series of ten Asian Market Country Profiles have been developed which are a resource document for use by rural producers and processors interested in getting more actively involved in Asian export markets. The market profiles provide a snapshot of the economy, the agricultural sector and domestic food production, food imports, and tariff and non-tariff barriers. All eight sectors of agri-food are covered in the profiles.

The Supermarket to Asia Council has established its own web site on the Internet which enables it to distribute and exchange information with the working groups and also provide data to exporters on a range of ics, including forthcoming events and statistics on Asian markets.

Regional Export Forums

These are held in conjunction with federal members of parliament, state government food authorities, regional economic development boards, and Austrade. A total of 32 forums are planned over the next few months covering all States and Territories. The aim is to take STA to regional areas and promote the concept of exporting agri-food products to Asia. The forums bring together existing exporters with potential exporters, highlighting local initiatives and enabling the Council to get first hand knowledge of impediments to export. A detailed report is being prepared on each regional forum, by RIRDC, which will be released at the completion of this phase of the program later in the year.

At this stage it is anticipated that phase two of the regional export forums program will commence in the middle of 1998. By then we can tailor the program to the particular needs of each area. Also, local export groups are being established amongst exporting companies as a consequence of some forums.

Promotion in Asia

In addition to the Quality Food Australia logo program, there are a number of other initiatives, which are planned to assist exporters to develop their businesses within the Asian region.

Asia Market Bridge

This program has been designed to deliver a hands-on, market informed, export support to promising Australian food exporters. Initially targeting two countries, Taiwan and Indonesia, up to 15 companies per market, which are willing to work intensively on getting it right, which are prepared to change their approach, and which have a high potential to succeed, will be invited to join the program.

The key elements are:

• Corporate strategic planning;
• Focused market research (matching corporate core capability directly with real market openings);
• Visits/introductions in targeted markets;
• Fine-tuning of product/market fit;
• Quality assurance accreditation;
• Reinforcing interface with other exporters sharing the challenge;
• Participation in a leading food show to seal the strategy.

This program will be spread over 12 to 18 months and will be conducted on behalf of STA by professional agencies. 'Asia Market Bridge' will be rolled out to other countries in the region on a demand basis.

Negotiating with Asian buyers
This is a three-phased program, which is designed to assist Australian export companies to enhance their market knowledge and business skills in the Asian market. Key elements of the program are as follows:

Relationship selling:
covering culture, language and developing patience.

Negotiation:
including fit with sales; what is important to an Asian buyer; and where a supplier can add value.

Presentation content:
covering new product launches, promotional programs, business reviews, and space management.

Planning to negotiate:
identifying negotiation issues, anticipating the buyers' agenda, and creating the right climate.

Presentation design:
covering key retailer benefits, building on your company's strengths, and presentation structure.

Making the presentation

Managing the environment:
modifying your style to best suit the customer, feedback.

Negotiating your proposal:
trading concessions, use of tactics, obtaining agreement and commitment.

Understanding the Asian response

Negotiating with Asian buyers
All of these elements are to be conducted by professionals on behalf of STA Ltd. and to be run in two or three capital cities commencing later this year.

Networking Missions

STA Ltd. is in the process of becoming affiliated with the various Australia-Asia Business Councils and Chambers of Commerce around the region. To assist Australian exporters to develop their Asian networks, a series of missions are planned which will be linked with either a major Australia-Asia business council forum or a major Asian food show.

The first networking mission will be conducted in September in Taiwan, to coincide with the Taiwan-Australia Business Council Forum in Taipei. A key theme during this mission will be the development of joint venture opportunities for Australia food companies. At this stage the second networking mission for 1997/98 is planned for Japan and Korea in March 1998 to coincide with Foodex and the Food and Hotel show hosted by Austrade in Seoul.

STA Ltd. networks

As a facilitation body, STAC's networks are a very important part of the program and considerable effort has been put in to developing them both within Australian and within Asia. Logically, the Council has a detailed network within Australia that covers not only the forums hosted by the Prime Minister and senior ministers, such as COAG (Council of Australian Governments), ARMCANZ (Agricultural Rural Ministers of Australia and New Zealand), plus forums hosted by the Federal Trade Minister and the Federal Transport Minister. Also, the Working Groups represent a considerable network with over 130 members from industry and government participating in wide-ranging discussions on agri-food issues.

Also the Agri-food Industry Alliance, which brings together five commonwealth government departments involved in the Council, plus all state and territory government departments of agriculture and state development, statutory marketing authorities, and Austrade, to share programs and ideas and to coordinate activities in Asia so that we can get maximum benefit from everyone's efforts.

In Asia, while it will take some time to fully develop our network of contacts, this is a vital area for the STAC if we are going to assist food exporters to get started in exporting. Naturally we have a close link in all our activities with the Australian Trade Commission, through Austrade, and the Australian embassies through our connections with the Department of Foreign Affairs. Both the embassies and the trade commissions are a critical element to any new exporters initiatives, as they provide a logical reference point and essential services critical in foreign markets.

I referred earlier to Supermarket to Asia Council's links with the Australia-Asia Business Councils and we are also developing our relationships with the respective Asian retailers associations in the ten markets on which we are focusing. In conjunction with Austrade we will be brokering visits from key retailers to Australia on an ongoing basis.

Another important network in Asia that we are keen to develop is a database of all the Australians who are working in Asia and are involved in our agri-food industry.
Our objective is not only to have these expatriates involved in our activities and events in Asia but also to encourage them to act as mentors to our new exporters.

Finally, we are keen to eventually establish Asian advisory boards to the STAC in North Asia and in South East Asia, comprising industry and government representatives, who can provide first-hand insights on the Council's programs and on the challenges faced by Australian exporters.

The Vision

The establishment of the STAC recognizes that exporting is tough, and that only the best achieve sustained sales and earnings in markets offshore. Around 20 per cent of our enterprises are already exporting and growing very rapidly. This is despite all of the impediments that are holding others back, or which have convinced them to put their export ambitions in the 'too hard' basket.

Supermarket to Asia's approach to promoting an export culture is to focus on the successes, the innovation, and the entrepreneurship of those enterprises that are already doing it, and to communicate these achievements broadly in the hope that the 30 per cent of agri-food enterprises that are thinking about export initiatives might be inspired to get started.

Our vision is that by the year 2001 Australia will have a dynamic and internationally competitive food industry with exports of food to Asian markets, having become significant in many food companies' business plans.

Thousands of small and medium sized agri-food companies will have become committed exporters, and Australian products will have achieved an outstanding reputation for reliability, quality and service, based on business strategies that deliver to customer expectations.

The Council's vision for growth in agri-food exports is expected to have generated thousands of new jobs, providing new and exciting career opportunities for many young Australians. Rural and regional Australia will be a major beneficiary of this export growth as the agri-food industry invests and expands.

The STAC is not a panacea for solving all the issues relating to exporting. However, by facilitating a more coordinated strategy for developing Australia's agri-food exports to Asia we are confident that all of our efforts will produce sufficient gains to ensure that our vision for the industry is clearly in range as we enter the new century.