Changing the China game

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

Luxon said in the previous year (2014) Air New Zealand had its best year ever for travel to China; it has been flying there since 2006. Luxon said visitor arrivals were up 35 per cent in the year to June 2015 and the total spend was up 61 per cent.

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

He said one challenge Fonterra faced was that European competitors were gaining market share in the key ingredients and infant nutrition sectors. It was an important reminder that China had many choices other than New Zealand and that we needed to stay front of mind.

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