China Business Strategy: “FOCUS!”… Don’t chase it all

Second post based on insights from an interview to David Caselli, CEO New Zealand China Direct Ltd, a New Zealand owned WFOE importing and distributing food and beverages into the Chinese market. In this post, Mr. Caselli explains how he took over a diverse business without a clear focus or scope and applied his business know-how and market insights to reformulate the strategy and establish a focused business model.

Key Message on Business Strategy:
This country is huge and there are a lot of business opportunities, but you need to focus on your best business opportunity (and sometimes on key markets) so that you can capitalize on all your business efforts, networking, channels, market insights…

Excerpts from the interview
From “Everything All Over to 3 Businesses/3 Markets”
“When I took over this project the business had been in China for 2 years. It was professing to do all type of products (timber, steel, fluffy slipers, food &beverages..) all over China. I looked at that business and saw we could not possibly succeed. So we went from everything all over the country to three businesses in three provinces.
We identified food & beverage, timber & construction and specialized manufacturing as key businesses. And we selected Shanghai, Suzhou & Hangzhou as our target markets.”
From “3 Businesses/3 Markets to 1 Business/1 Market”
“We worked the model for six months but very quickly concluded it was still too much. This is a huge country, very specialized. We narrowed from three to one business, food & beverages, and focused on one market, Shanghai.
Once you focus on that one business you start selling a lot more of food & beverages. This is a country where people create billion dollar businesses from just selling water.”
Key Lesson: Focus to Capitalize on Strengths, Efforts and Market Insights
“Focusing on one business enables us to play product by product to the strengths of the country. Some products will just be imported, bought and eaten as they are. Some products need to be imported and then processed (processed here so that they fit local taste), and then distributed. An example would be low end meat cuts (read more on this topic in his previous interview). Other products could even be imported, processed here and exported to other countries in the world.
So this focus on food &beverages allows us to do many things, and explore which ones are the winners for us to concentrate.

Seeing is Believing…. And I mean it!

Let’s admit it, a lot of the China stories we hear around are actually funny … Once the entrepreneurs that have gone through them stop being mad, they make quite entertaining stories to tell over dinner. So, today I will share a “tip” and a comic story to illustrate it.

Tip of the day: If something does not sound right, it probably isn’t. So go and check it with your own eyes (or somebody’s you trust).

Story Setting: Entrepreneur’s very first shipment arrives. All excitement. Lamb racks arrive from New Zealand and will be showcased at a very high profile event… in 3 weeks time. All good, they just have to travel extra 10 km to the chef.

Conversation with the custom clearance agent:
Day 1. “Yes, they’re here. We are repacking them from 100kg packs into 10kg packs, so they’re easy to move.
Day 2. “They’re coming, they’re coming…”
Day 19. “They’re coming, they’re coming…”

So, entrepreneur thinks “That’s it.  I’ve had enough, surely I can go there and if I yell and scream I will be able to get my chops.” And as he is driving down in the van, he rings the warehouse company and says “I’m coming up”.
– Oh, sorry, they’re not here. They’re somewhere else.
– Where are them? ‘Cause I’m coming over.

At the second warehouse …Another surprise. No chops to be seen … in fact, freezers full of pineapple juice… and it seems they have been full of pineapple juice for months. People at this warehouse mention to him:
– Ah, no, no, this is the busiest time of the year for pineapples and the fridges are always full of pineapple juice. We could not possibly hold lamb here!!!!

So what had happened to the chops? Well, there is a happy ending because they did not disappear but:
– They had never been repacked, as this entrepreneur had been told from day 1.
– They had been sitting in a freezer in a 3rd warehouse during the whole time…
And it was only when he actually got on a van a started creating pressure that all this was discovered.

Not that unusual, is it?

China Food Industry: “Give them the Guts”

Excerpt from an interview to David Caselli, CEO New Zealand China Direct Ltd, a New Zealand owned WFOE importing and distributing food and beverages into the Chinese market.

Key Message on the Opportunities in the Food Business in China:
Although there are undeniable opportunities in the high end segment, the real breakthrough will be accessing the mass market with meat/fish & seafood derivative products and low end cuts that do not create value back home but are processed here into highly appreciated products in China.

Excerpts from the interview
“The average wage in China keeps rising and consequently massive parts of the Chinese community will be able to switch into eating more protein. It does not mean they are going to eat caviar and lobster … what they will be doing is eating more fresh meat instead of cabbage. So the biggest opportunity for us is not to sell high end lamb cuts but to sell a lamb derivative product that fits the market for the 9$ /day people… It is relatively easy to sell lamb to Western restaurants. The real challenge for us is to find out how to create products that use New Zealand lamb in Chinese dishes in Chinese restaurants. There are 20 million people in Shanghai and 400.000 foreigners. I’d rather sell to the 20 million than to the half million.

New Zealand meat industry sells some 500 million dollars a year of low end lamb cuts to China. Here it goes to a couple of provinces where they create a lamb roll (press it, add some duck fat…) which the Chinese mass eats. We have a whole lot of protein types that we don’t extract value from so the real opportunity is to unlock the value that works in China out of them.

Same holds true for other products. Seafood, for example, is there an opportunity to sell what we do not use but is appreciated here? There is also a mass market for fish frames, just heads, tails and bones. They process it and convert that into something useful.

Back in New Zealand we don’t understand the Chinese well enough to be able to identify what those products are (both in meat and fish). We need producers to get into thinking what are the uses and applications of the whole animal in China. Don’t get me wrong, they’ve probably been thinking about this for decades… what they’ve probably not done is come here and stay long enough to find the answer.”

Do you share his views?