Food Basket: Working together to get closer to consumers in China
New Zealand food collective reaches Tmall milestone
A group of Kiwi businesses have banded together to sell directly to consumers in China, sharing the cost, risk and experience of getting their products in front of 700 million people.
New Zealand Food Basket Ltd, which was created with support from New Zealand Trade & Enterprise (NZTE), began selling on Alibaba’s Tmall Fresh e-commerce platform in April 2019.
Just over a year later, in June 2020, the collective reached a milestone – their best month yet for sales where they clocked over $50,000.
“It doesn’t sound big but that was big for us,” Kevin Parish, of Food Basket, says. “It starts to prove that the model really does work.”
Now made up of 17 suppliers, including some Te Hono alumni companies such as Alliance, Oha Honey, Sanford and Sealord, Food Basket has around 100 products listed on the Tmall platform – from meat and dairy to wine and beverages to seafood.
Alibaba is the world's largest retail e-commerce company, and its Tmall platform is China's largest online marketplace with 700 million users.
“It’s been a big learning curve year for the directors and for all of us as we’ve got on board and tried to take it from start up to success story,” Kevin says.
Kevin attended the Te Hono Stanford Bootcamps V and VI in 2016 and 2017 and one of the biggest insights was the ability to scale through collaboration and the immense opportunity to focus on high value products.
“I can see [Food Basket] adding value to brands, both in the sense of margin but also in insights into consumer behaviour and I think that’s very powerful for New Zealand to pursue.”
“New Zealand is generally good at coming together and we understand that in the global market we are pretty small. I’ve been involved with collaborative approaches for a while now and it certainly helps if we band together to be successful offshore.”
Kevin was the Chief Executive of Primary Collaboration New Zealand, based in Shanghai, and previously the Trade Commissioner for NZTE, based in Hong Kong.
“China is a complex market, there’s no doubt about it, it’s not easy, so you’ve got to understand it and get into a position where you can roll with it in some ways. During the week there’s always something that we find out that’s new and different, and we need to be able to react and adapt.
“As a collective group of businesses, that’s the beauty of it, we actually get a lot more opportunities come our way. It’s not just that they’re coming to a brand, they’re coming to a collection of brands. Some may see [Food Basket] as a little bit of a supermarket type approach, so we can offer a lot more to the consumers.”
Consumer insights drive changes at Food Basket
In his current role as Chief Executive of China Connections Ltd, Kevin was asked to review the Food Basket business model.
“In the last six months, we’ve engaged with new partners in China, we’ve reduced cost structures, and we’ve hired a person in Auckland to be our key liaison between partners in market and our supplier base back here. During that process we’ve also learnt a lot more about online in China and particularly the Tmall environment.”
The concept behind Food Basket was initially to be direct to consumer, both from a sales perspective and trying to earn more margin than what you would normally through other channels.
The other important objective was to get closer to customers and learn about and understand consumer behaviours.
“One of our insights was that a lot of females between 20-35 were leaving the platform and it was because we didn’t have a lot of products at a lower price point. That de-risks it for the consumers.
“My experience with Te Hono reminded me about the customer-centric methodology. What do they think about us? What do they expect from us? What can we be doing to meet their needs now and in the future?”
As a result, Food Basket has been seeking out products at a lower price point. In November 2019 they launched the Lewis Road Creamery chocolate and strawberry milks. These retail for CNY28 (NZ$6) and are a perfect fit for this demographic.
“Consumers in China generally want seven or eight trust points before they purchase. Tmall is a very strong point around that, particularly the Tmall Fresh store – they know that Tmall have done the validation and authentication of the brand and the product and all that, and that the bar is very high. They know when they go in and purchase, it’s a trusted product from New Zealand.”
New Zealand was the first Country Flagship Store on Tmall. Since then, stores for Russia, Singapore and Chile have been set up.
Oha Honey Chief Executive Officer Nadine Tunley (Bootcamp VII) says: “There is a lot of strength when brands can come together and present a united country of origin story and for that reason we saw Food Basket as a great platform to develop from.”
While Food Basket has great potential, Nadine says the experience hasn’t been without its challenges.
“The China market is complicated and fast moving – something New Zealand companies are still adapting to. The China market is also very discount/price oriented, when New Zealand and specifically these brands are about premium, high quality products – so there is a natural tension there. Chinese consumers are also far more tech savvy and research aware, therefore want and expect bargain opportunities.”
She says one of the key successes has been getting the Kiwi brands together in the first place, “especially in a few categories, like seafood, where there are competitors and they have worked well together”.
Bright future ahead for Food Basket
Looking ahead, Kevin says there is a “bright future” for Food Basket.
“We still have some tweaking to do around the business model and how it works and operates, I think there has to be a little bit more flexibility around the model.
In terms of the commercial aspect, I can see we could broaden out, we could double the number of suppliers from New Zealand in the next year. This will result in more products on the platform and will make it more enticing and engaging for consumers. We are focused on more products that consumers in China are looking for.”
One of those products is nutritional, functional foods, which Kevin says is a result of Covid-19.
“In China there’s an advantage there now for that – you’re seeing honey, fresh produce and dairy sales go particularly well in 2020.
“If you look at Zespri’s season this year, they have had a bumper season in China, based around the fact that Zespri don’t see themselves as a fruit necessarily – it’s a nutritional product wrapped up in a fruit. The vitamin C content, particularly in gold kiwifruit, is very high, the Chinese understand that and know that it builds immunity. Therefore they want to buy that for not just themselves but their children and parents and grandparents, so they can build more resilience to these sorts of diseases and pandemics in the future.”
Food Basket will also continue to take advantage of marketing opportunities and “super level promotions”, such as Singles’ Day on 11 November – an enormous shopping holiday in China, which this year hit a record $USD74 billion in sales over the two-week period starting on 1 November.
“We start to warm up our customer base from September and look to get products that they can put in their shopping cart, so that when we get to the 11/11 promotion we can start making sales,” Kevin says. “It ebbs and flows in the revenue but what we’re trying to do is lift our base.”
Working together means the Food Basket suppliers can trial opportunities, such as live streaming with key opinion leaders or consumers, at a lower cost than if they were doing it individually. From September until Singles’ Day, Food Basket had planned 10 livestreaming sessions per month for its brands.
While Covid-19 has had a huge impact on the world, it has also presented new possibilities, Kevin says. “China is almost back to business as usual and that quick economic recovery will help New Zealand exporters.”
The companies in Food Basket are Fonterra, Pāmu, Oha Honey, Zespri, Sanford, Sealord, Pure South (Alliance Group), Rockit Global, Smartfoods, Pic's, Babich Wines, Future Cuisine, Fiordland Lobster, Kapiti, Lewis Road Creamery, Shott Beverages, New Zealand Wild Catch and Cherri.
For more information on the NZ Food Basket please contact Kevin directly at firstname.lastname@example.org or on 029 1266 795.