Changing the China game

After years of high-speed economic growth, China moved down a gear. This has created concern in some circles, yet as session moderator Minter Ellison Rudd Watts chair Cathy Quinn notes: both Air New Zealand CEO Christopher Luxon and Fonterra CEO Theo Spierings think any negativity is overdone. Instead, they are tuning their strategies to meet the challenge of a shift from high growth to medium-high growth.

Luxon says last year Air New Zealand had its best year ever for travel to China; it has been flying there since 2006. Luxon says visitor arrivals were up 35 percent in the year to June 2015 and the total spend was up 61 percent.

He says there are huge opportunities ahead despite slowing growth. “We don’t need high economic growth; our business is a tiny fraction of the total going to China. We’ve moved to focusing on the high-value customers who are recession proof. We’re prioritising value over volume”.

Air New Zealand has moved from promoting shopping trips to family holidays and romantic breaks for thirty-year-olds. There’s more to come. Luxon says there are plans to broaden the travel season beyond the summer months. He says this will reduce the pressure on existing tourism infrastructure.

Fonterra has seen considerable growth in the last five years. The company’s ingredients business in China has gone from $1 billion a year during that time to over $4 billion. Spierings says the food services industry in China continues to show strong growth. During that time Fonterra has successfully launched three brands in the Chinese market and has moved from owning a single Chinese dairy farm to owning ten. This last move is important as China is demanding fresh milk and that means local production.

He says one challenge Fonterra faces is that European competitors are gaining market share in the key ingredients and infant nutrition sectors. It’s an important reminder that China has many choices other than New Zealand and that we need to stay front of mind.

Spierings draws on a proverb: “when the winds of change blow: some build walls, others build windmills”. He worries that New Zealand is building walls by placing barriers on Chinese investment in New Zealand. He wants to see more incoming investment from China as that helps build New Zealand’s quality brand in China.