Tripartite Summit: High Value Foods – Mega Trends & Opportunity

  • The food industry is undergoing massive change. Farming systems and sources of food are being transformed around the world, new retail models are emerging in the food sector, and consumer demand is rapidly changing.
  • Reinvention of New Zealand’s food industry is critical to the country returning to the forefront of exporting and developing food and agribusiness products.
  • The global challenges in the food industry are so urgent that it is no longer alright to focus on research for research sake – there must be a connection between research and the adoption routines of the marketplace.

“It is a fast moving world and no longer alright to focus on research for research sake. The problems we face are so urgent that there must be a continuing connection between research and the adoption routines of the marketplace.” – Rohit Shukla

The challenge faced by New Zealand

Since the 1970s, New Zealand’s economic performance has drifted, and we are no longer at the forefront of exporting and developing food and agribusiness products. Over the last fifteen years, New Zealand has doubled exports in food and agribusiness – but that is largely down to increasing volumes of commodity products, which are currently more volatile than ever.

“What got us here will not get us there – reinvention is critical,” said Buckley, Executive Chairman of KPMG New Zealand. The New Zealand Government has set a target to double our exports in food and agribusiness through until 2025. “If we are going to succeed with that goal, the help of America and China is essential to make this happen,” he said.

New Zealand produces enough food to feed 20 million people – around five times its population. A real challenge for us is that we must not rush off to feed the first 20 million people we come across, said Buckley. “For New Zealand to get the best returns, we need to look at the top 800,000 affluent customers, and feed just a portion of their diet.”

The food industry is undergoing massive change. Farming systems and sources of food are being transformed around the world, new retail models are emerging in the food sector, and consumer demand is rapidly changing. New Zealand needs to be aware of this evolution in order to leverage it.

 

Changes in farming

  • The use of drones for precision agriculture has made crop management explode around the world. Drones can provide live data, with a range of sensors, to provide in-depth information.
  • The Climate Corporation was founded in 2006 by two former Google executives. It examines weather data to farmers, who can then gain insurance and lock in profits in the case of droughts and adverse weather conditions. Monsanto acquired this business in 2013 for US$930 million.
  • Farmers are using data for ‘smart farming’. Sensors are being integrated into irrigation systems that can provide ground water information.

Reinventing our food source

  • Wayback Burgers in the United States offered customers the chance to increase their protein intake by offering the Oral Mud Pie Cricket Protein milkshake, with 24 grams of protein – or 96 crickets.
  • Impossible Foods is producing plant matter that is made to look like beef, taste like beef, bleed like beef – but is not beef. The Impossible Burger is promoted as having the look, feel, smell, sizzle and taste of a great burger, but made from plants.
  • Fearlife provides milk products with superior nutrition, less sugar, more protein and calcium, and no lactose. It is owned 50 per cent by Coca-Cola.
  • SmartFish source their fish from Mexico, and deliver to top restaurants in California and Texas. The company places emphasis on quality, efficiency and responsibility, with a focus on sustainability and social, economic, and environmental returns.

Emergence of new retail models

  • Food wastage is a big issue worldwide. Wefood is a charity-based organisation operating in Denmark, and has opened the first ever food surplus food market. Although it is 30 – 50 per cent cheaper than normal supermarkets, it is not only aimed at low-income shoppers. A large number of shoppers are those who are concerned about the sheer amount of food waste. The charity hopes to reduce 700,000 tonnes of food that Denmark wastes each year.
  • MyFoodBag is a homegrown example from New Zealand, which was formed three years ago. Weekly dinners are ordered ahead of time, delivered on Sunday with innovative, healthy recipes. This business model avoids typical supermarket supply chains, and has already grown from $0 to $100 million in turnover.
  • Eat My Lunch is a great success in New Zealand. People order a healthy lunch for $12, and at the same time Eat My Lunch provide a free lunch to an underprivileged child who would have otherwise missed out.

Consumer demand

  • There is increasing consumer awareness, and demand for traceability and transparency of food and the way it is produced and distributed, and yet the frequency of food contamination is increasing. This is just as important for large economies as it is for those rapidly developing countries.
  • Consumers are becoming more aware of what they are eating and there is a growing trend for organic products. While the payout for dairy farmers is less than $4 per kilogram milk solids, Fonterra – New Zealand’s largest milk cooperative – has just offered $9.20 per kilogram of milk solids if farmers can provide organic milk.
  • Sugar levels in food is a big issue dominating headlines at the moment. As a result, people are changing their diets, and some economies are imposing sugar taxes. Nutritional facts is a trend nowadays. Consumers are spending considerable time looking at labels and nutrition levels before buying a product.
  • Driscoll’s is a very large producer of berries in the United States. Their supply chain innovation strategy is built around delighting their consumers. As soon as berries are packaged, a unique barcode is attached to each box that can be used by the consumer through a smartphone app to report on their level of delight with the berries. Through this, Driscoll’s can track the field the berries were grown in, and the time it took for the berries to go through every step of the supply chain before reaching the consumer. Driscoll’s has begun rewarding individual growers that produce the best berries and create delight for their customers. This simple connection with traceability of foods has reduced input costs by significant amounts, and an increased level of ‘delight’ for their consumers.

New Zealand must protect its natural resources, Buckley told the audience. He used Ireland’s ‘Origin Green’ as a model. Origin Green is a sustainability programme that operates on a national scale, and unites government, the private sector, and food producers through the Irish Food Board. It sets targets for farmers and food producers to meet on sustainability, resulting in a positive impact on the environment, local communities, and Ireland’s natural resources.

 

Rohit Shukla, chief executive of the Larta Institute in Los Angeles agreed with Buckley, and believes New Zealand could – and should – be a truly global player in the high-value nutrition sector.

“The great thing about New Zealand is that you can collaborate on a research basis,” he said. “New Zealand is a small country which allows for shared facilities and research. This is unlike in the US, where universities and research institutions tend to be very proprietary about what they develop, which stifles collaboration.”

Shukla threw down a challenge at the Summit. He urged the audience to consider what we could do as three world-class cities, and suggested the creation of a tripartite working group that would be dedicated to food safety, reliability, and innovation in high-value foods. “I imagine this would involve a combined research effort across the three cities, and must include the collaboration of universities, public health bodies, and regulatory agencies,” said Shukla.

“By creating a grand challenge for collaboration, the tripartite alliance could create high-value foods that are good for our economies, and good for our planet,” he said.

Shukla emphasised how important it is that the applications of research are understood and framed in the context of what is happening in the world.

“It is a fast moving world and no longer alright to focus on research for research sake,” he said. “The problems we face are so urgent that there must be a continuing connection between research and the adoption routines of the marketplace”.

Tripartite Summit: Innovation from cross-pollination

  • Cross-pollination between Auckland, Los Angeles, and Guangzhou brings the prospect of exciting innovation.
  • Erez Morag believes when culture, expertise, insights, and ranks come together and are cross-pollinated, it is then that truly successful innovation can happen.

“Cross-pollination between these three cities will bring exciting innovation,” said Dr Erez Morag, former Nike Innovation expert speaking at the Tripartite Economic Summit about Los Angeles, Auckland, and Guangzhou.

Morag studied bioinformatics at university because he liked the idea of solving human problems. Soon after presenting his PhD on the structure and function of the foot, he was recruited by Nike executives to join their team.

 

During Morag’s time at Nike, the company created the ‘Nike Maxims’ – 11 rules that all employees at Nike need to work to:

  1. It is in our nature to innovate
  2. Nike is a company
  3. Nike is a brand
  4. Simplify and go
  5. The consumer decides
  6. Be a sponge
  7. Evolve immediately
  8. Do the right thing
  9. Master the fundamentals
  10. We are on the offense – always
  11. Remember the man

Morag found eleven maxims difficult to remember, and decided to focus on just four:

  • It is our nature to innovate: Nike saw innovation as one of its core organisational competencies.
  • Simplify and go: Nike products have short life-cycles in terms of technology, and in fashion. The company believes that making quick, insightful decisions is the key to its success.
  • Do the right thing: Nike sees itself as a responsible global citizen and embraces the importance of corporate social responsibility.
  • Remember the man: The late Bill Bowerman – an Olympic track and field coach and co-founder of Nike – continues to be held in high regard at Nike for being a motivator, a dreamer, and an innovator. In 1962, Bowerman came to New Zealand to meet Arthur Lydiard, who is credited with inventing the concept of jogging. After meeting Lydiard, Bowerman published the book ‘Jogging’ in 1966 – popularising jogging in the United States. “Invented in New Zealand, commercialised in the United States, and a great example of cross-pollination,” said Morag.

During Morag’s keynote address, he shared his secrets to innovation success, and in particular focused on the importance of cross-pollination. “When culture, expertise, insights, and ranks come together and are cross-pollinated, that is when truly successful innovation can happen,” he said.

Good idea, act now

In general, life presents us with great ideas. They might be on the way to work, or when we’re going to sleep. Most often, it happens when we exercise. But Morag lamented that so many of us put those ideas out of our minds.

“We get a phone call, a text message, a tweet – and forget about the great idea,” he said. When Morag has a great idea, he forgets everything else until he has written it down.

Listen to everyone

Morag learnt this lesson from tennis great Roger Federer. He listens to everyone with the same level of attention – every opinion counts, and counts equally. This is true in science as well. Nike learnt that it is not just the major muscles that count in sport, but all muscles have a contribution to make to speed.

Morag has always given freedom to his employees to innovate. “So often,” he said, “the highest ranked officer speaks, and everyone else rephrases what was said.” Instead, Morag recommends that businesses encourage employees at all levels to share innovative ideas. When he is the highest ranked officer in the room but wants to get really great ideas, Morag speaks last. It is the cross-pollination of ideas across ranks that means that those teams who share the most ideas, produce the best results.

Control the ball – control the game

There is a ‘ball’ for every business, and for every individual. For Nike, the ball is running. Running is the biggest category that any sports and fitness business needs to protect.

Sulfur hexafluoride is an inorganic, colourless, odourless, non-flammable gas that was used extensively in the footwear industry for cushioning. In the 1990s it was recognised as a greenhouse gas. When this happened, Nike decided to control their ‘ball’ – remove sulfur hexafluoride from their product range, as well as change all their solvents to water-based.

Designers and biomechanics needed a cross-pollination of expertise to make sure the shoes would still function well without those harmful molecules. The work took five years to complete, but Nike has now become one of the global leaders in multinational sustainability due to the company’s ability to collaborate.

Chase the insights – not competition

Morag used the Cooper’s hawk as a metaphor. Most hawks hunt in open fields, but the Cooper’s hawk has carved out a market for itself, hunting in various types of mixed deciduous forests and woodlands. “In business, we need to follow our insights and not the competition,” said Morag. “Doing the same as everyone else isn’t necessarily the right thing to do – however hard that might be.”

Going into the 2006 Football World Cup, the two biggest football brands – Nike and Adidas – were facing their own battle. Nike was betting on speed and developed a 200-gram shoe that was considered to be faster than any other shoe available at the time. On the other hand, Adidas was developing shoes that were individually designed for players. Four years later, Adidas switched to lightweight football shoes, which proved to the industry that Nike was on the right track from the start.

Play bigger than your size

In 2008 Nike went through an organisational change and shifted from being operational-centric to consumer-centric. Morag was asked to join the football leadership team and was tasked with finding a way to cross the chasm and bring innovation to the mainstream consumer.

Morag and his team decided that instead of delivering a stand-alone product, they would create and deliver a product alongside a training programme. Bringing together digital marketing, brand, and product teams, he developed a shoe alongside a training programme – combining the physical world with the digital world. This meant that every consumer was able to buy shoes and receive a training programme from the best coaches in the world, free of charge.

Passing insights quickly and accurately from one person to another was the reason why Nike has succeeded where others have failed. During his time at Nike, Morag worked with over 80 of the world’s greatest athletes and is a true believer that the best innovation comes from cross-pollination.

“This Tripartite Economic Alliance can be a great tool to allow cross-pollination to occur, and bring exciting innovation to these three cities – if you take advantage of it,” said Morag.

Tripartite Summit: Māori economy – becoming a significant economic powerhouse

  • Several decades ago, there was a common perception that all Māori were factory workers, truck drivers, or cleaners – Maori success in business was only ever seen as the exception.
  • Māori are quickly becoming significant economic powerhouses, owning an estimated NZ$40 billion of assets in New Zealand.
  • Māori are spiritual people, and their motivation in business reflects their world view: that long-term sustainability is more important than profit.

“Māori are a people of the land, and everything we do relates to the environment around us. Though that said, we also have a significant interest in digital, IT, education, and tourism.” – Te Ururoa Flavell

“It is only several decades since there was a common perception that all Māori are factory workers, labourers, truck drivers, or cleaners,” said Paul Majurey, senior law partner and of Ngati Maru/Marutuahu descent at the Tripartite Economic Summit. “Success in Māori business was only ever seen as an exception.”

But for many centuries, Majurey explained, Māori flourished in New Zealand. In the 1850s, Māori still owned the majority of land in New Zealand. All of this changed in the 1860’s, and yet they continue to have the skills and the integrity to flourish in the industrial age.

Despite adversity, Māori are again becoming significant economic powerhouses. Majurey predicts that in another decade, Māori will be one of the cornerstones of the New Zealand economy.

Auckland Māori own more than $23 billion of assets, contributing more than NZ$4 billion to Auckland’s GDP. New Zealand Māori assets account for an estimated NZ$40 billion, including 40% of New Zealand’s export forest land, 40% of our fishing quota, 10% of kiwifruit, and a high percentage of land production. “As further settlements occur, the value of the combined Iwi asset portfolio is expected to grow significantly,” said Majurey.

Te Ururoa Flavell, co-leader of New Zealand’s Māori Party, spoke at the Summit about the legend of Māui fishing up the North Island with the jawbone of his grandmother.

“The fish that was pulled out of the ocean was a traveler and an entrepreneur. He may have made it to China and Los Angeles before his final destination of Auckland,” he said.

Flavell explained that to Māori, economic development translates to jobs, enterprise, land development, and infrastructure in cities and towns. While private enterprise is required to answer to shareholders, Māori business has to answer to Iwi and they must balance economic returns with social and environmental concerns, to ensure it remains in place for future generations.

Māori are not new to international markets, innovation, and enterprise, Flavell told attendees. “Māori can trace their DNA back to China over 6,000 years ago. This demonstrates that Māori people have historically been resourceful, resilient, and adaptable.”

“On the other side of the Pacific, some of our ancestors spread to the Americas. We have strong links to groups in North America, and Māori people are now seeking partners to unlock land productivity in that market,” he said.

Māori businesses have a strong desire to move up the value chain, participate in international markets, and use the tradition of storytelling to carve out a point of difference to global markets. The future will look different for Māori business as they differentiate into new sectors.

“Māori are a people of the land, and everything we do relates to the environment around us,” said Flavell. “Though that said, we also have a significant interest in digital, IT, education, and tourism.”

“Māori will never lose interest in the primary sector, but they are looking to diversity and form partnerships with government, private companies, and foreign investors all over the world in order to grow their asset base in New Zealand.” -Paul Majurey

Majurey agreed with Flavell – “Māori will never lose interest in the primary sector, but they are looking to diversity and form partnerships with government, private companies, and foreign investors all over the world in order to grow their asset base in New Zealand.”

Both Flavell and Majurey emphasised how important relationships are. For Māori, relationships are about mana, and of significant importance. Māori are spiritual people, and agreements are based on trust. Their motivation in business reflects their world view: that long-term sustainability is more important than profit.

“Māori want to hear your heart, not just slick words,” Flavell said. “If there is no connection to your heart, then there can be no deal – because it will be doomed from the start.”

Tripartite Summit: Liveable Cities – Britomart as a common ground

  • Until the early 1900s, rail in Auckland came right into the bottom of Queen Street. It has recently returned to Britomart – albeit underground – and has been integral to the evolution and revitalisation of Auckland’s CBD.
  • Britomart has become a gateway for Auckland and is helping to remove barriers and hurdles between cultures.

“Britomart creates bigger opportunities every day in front of our eyes… so don’t blink.” – Daijiang Tai

Jeremy Salmond, from Salmond Reed Architects provided context at the Tripartite Economic Summit on the history of Auckland’s Britomart precinct. Up until the early 1900s, rail in Auckland came right to the bottom of Queen Street, until the reclamation of land drove rail out of the city centre.

“The manner in which a community deals with historical remnants varies considerably,” he said. In Auckland, this has largely been an accident of timing. Britomart is one of a number of well-preserved precincts in New Zealand that has found a new use, and is now widely regarded as a historical asset with significant commercial potential.

The return of rail to Queen Street – albeit underground – could be seen as a virtuous circle. Britomart represents a remarkable tale of survival in Auckland. The structural and geopolitical history of Auckland’s streets and buildings remain relevant and integral to the evolving city of the future.

Daijiang Tai, from Cheshire Architects, spoke about the current function of Britomart in Auckland, and used its development as a case study about Auckland’s engagement not only with businesses and the local community, but with the world.

The values that New Zealand has been known for historically have been strongly recognised recently with Chinese audiences: clean water, fresh air, quality products, friendly people. The Chinese market is a recognised pathway for New Zealand businesses to grow, largely due to the sheer size of the market and ongoing growth and rapid urbanization in China.

Auckland – like many cities – has seen these two cultures living side-by-side for a long time. But the two worlds have only recently started to collide. It is important that Auckland curates the collision as it takes place, in order to ensure it comes together in the best possible way, maximising the opportunity.

Britomart was used as a good example of a ‘common ground’. Tai explains that hospitality is something that everyone can appreciate – regardless of their culture or the language they speak. When hospitality is delivered to the highest standard, it brings people together, and provides a solid base for engagement. “This is the foundation for Britomart, and was at the core of its transformation from a commercial wasteland to one of the city’s most successful precincts,” he said.

Tai hopes that people think of the Britomart precinct as a gateway – “it is an access point for the best resources and professionals in the city,” he said. “Britomart can help remove barriers and hurdles between cultures, which is critically important, as we must engage with the wider world and improve ourselves through healthy competition.”

On a higher level, Tai emphasised that we must deconstruct and rebuild our perceptions. China is growing at a massive speed, and so fast, that it is very hard to get a grasp on it. We have to look at the Chinese market with fresh eyes. It is changing so quickly, that we need to do that every day.

For the first time, said Tai, we can say the same thing about Auckland. The city provides much more than just clean water, fresh air, and quality products. Britomart is the most successful precinct in the city – because it is adaptive. It is ready to change and becomes something new every minute, constantly creating space for more to happen through old businesses and new courtyards. This mentality is shared by council, architects, and operators, and gives the precinct the speed and ability to collaborate across all disciplines and sectors.

As Auckland is so small, and at the same time culturally, technologically and socially adaptive, it can react and change faster than almost everywhere else. It is the perfect global test tube for urban change.

Britomart created a common ground before anyone realised it. The injection of different cultures will open opportunities the city never knew existed, which in turn allows us to become a complex and vibrant city. New spaces will create new forms of cultural entertainment and allow the cross-pollination of ideas to take place.

Tai’s closing statement to the Summit summed this notion up: “Britomart creates bigger opportunities every day in front of our eyes… so don’t blink.”

Tripartite Summit: Liveable Cities – good for the environment, good for business

  • Green buildings in Los Angeles are demonstrating a higher average occupancy level, increased occupant satisfaction over the general market, as well as higher rental rates.
  • Watt Companies was one of the first major property companies in Los Angeles to introduce sustainable practices in its properties.

“Ultimately, green buildings demonstrate a higher average occupancy level, and increased occupant satisfaction over the general market. They also show higher rental rates.” -Nadine Watt

Nadine Watt, President of Watt Companies, oversees the company’s commercial investment activities. This includes acquisitions, development, and asset management for a 6 million square-foot portfolio of industrial, office, and retail properties.

Through Watt’s 15 years at Watt Companies, one of her most notable achievements has been to transition the company to become a leader in sustainability. Watt persuaded her grandfather that if Watt Companies do sustainability – and do it well, by creating livable cities that leave the city better than how they were found, other companies would be forced to follow their lead.

This formed the basis for her talk at the Tripartite Economic Summit in Auckland – managing a successful business, without compromising the future of the environment.

Watt was responsible for a multi-million-dollar renovation program at Watt Plaza – a 920,000 square foot, Class-A office building in Century City Los Angeles, that was instrumental in securing the building’s Platinum LEED certification in 2013 and a TOBY (The Outstanding Building of the Year) award in 2011.

Some of the sustainable practices Watt Companies have implemented in its properties include:

  • Building management and contractors are continually tracking sustainable practices to ensure the best management practices are being maintained.
  • Integrated pest management programmes are being followed, where less toxic pesticides are used as a first line of prevention. When more toxic products must be used to maintain the health and safety of occupants, proper measures are taken to ensure chemicals have limited contact with building occupants.
  • Nearly 40% of occupants utilize an alternate mode of transportation (including carpooling, public transportation, green cars). To encourage the use of alternate fuels, Watt Plaza has installed four electric charging stations, and plans to install six dual charging stations over the next year.
  • Over 90% of car parking is under cover, which limits the amount of asphalt surfaces and lowers the ‘heat island’ effect in the surrounding area.
  • The roof is coated with a white polyurethane topcoat in order to limit the amount of heat gain, which lowers the urban ‘heat island’ effect and increases roof efficiency.
  • Watt Plaza uses a combination of 3M window film to prevent light emission from interior spaces and avoid up-lights on the exterior of the building to reduce light pollution that can cause human health and ecological problems.
  • Ongoing consumable waste inside Watt Plaza is separated on-site for recycling and disposal. By implementing a tenant and janitorial staff training programme, the building saw a 72% reduction in recyclable material being sent to landfill.
  • Electronics and durable goods are collected on a quarterly basis through qualified vendors, for proper disposal.

Watt explained that from energy savings alone, the average payback time for a green building is six years. The volatility of energy prices and the long-term trend of rising demand for finite and depleting fossil fuels means that creating green buildings has become a cost-effective risk-reduction strategy for the company. Green design not only reduces carbon dioxide emissions, at the same time it creates jobs, strengthens property values, and increases the health of those communities that live close by. Given the reality and severity of climate change, a national shift to green design is both financially and environmentally wise.

“Sustainability has been important in reducing the impact on the environment to ensure livable cities in the future and increase investment value,” said Watt. She concluded her address to the Summit by saying that “ultimately, green buildings demonstrate a higher average occupancy level, and increased occupant satisfaction over the general market. They also show higher rental rates.”

Watt was able to prove her hypothesis to her grandfather, that “doing good for the environment has been a great business decision.”

Tripartite Summit: tying it all together: timing, location, and people

  • The Chinese government is heavily promoting entrepreneurship and there is a natural drive towards innovation as the country’s economy moves into a new phase.
  • China is quickly becoming known for high-quality innovation, and the creation of new ideas and technology out of what already exists.
  • China’s history as a manufacturer of the world’s goods has allowed the country to expand on its history as a producer of low quality products made with cheap labour towards more specialised high-value products.

“It is easier to find skilled talent in China than anywhere else in the world. The quality of software engineers is equal to anywhere else, but the cost is one-third the price in China, compared to hiring staff in Silicon Valley.” – Derrick Xiong

Derrick Xiong from Ehang Inc. began his presentation at the Tripartite Economic Summit with an old Chinese saying – “timing, location, and people”.

Ehang Inc. launched the world’s first autonomous air vehicle earlier this year. The mega-drone can carry an individual for about 30 kilometres. Recently Ehang Inc. made an announcement with US company United Therapeutic – a public company with a US$5 billion valuation. The two companies are working together to develop a new system that will transport human organs for transplant patients.

Xiong referred back to the Chinese saying. “It is lucky,” he said, “that China has managed to tie all these things together.” Seemingly by sheer luck, China has got the mix of timing, location, and people right, which has allowed companies like Ehang Inc. to be part of the rapidly growing drone industry in China – the “new era of made in China”.

Timing

There is a national drive towards innovation in China and the Chinese government is heavily promoting entrepreneurship as the country’s economy moves into a new phase.

There are many startups emerging in China every day, and plenty of capital flowing around the China market to fund them. “It is very common now to see graduates exploring innovation as an opportunity,” said Xiong. “The most exciting part is that it’s no longer the best option for graduates to go and work in a big cooperation. Choosing an alternative route and working in a start-up or founding a company has become a great opportunity.”

Xiong admitted that when people think of ‘made in China’, they tend to think of low-quality products made with cheap labour. However, things are changing rapidly. The history of ‘made in China’ has given China a strong base to grow from, and allowed them to expand on their existing manufacturing facilities and skills.

Location

Xiong estimates that the amount of time his company spent prototyping their drones would be only one-third of the time spent by other drone companies based outside China.

“This is China’s big advantage,” he said. Companies in France and the United States are announcing they will shut down their consumer drone business, which Xiong attributes to how hard it has become to catch up and compete with the rapid pace of development in China.

People

Over the past decade, mobile internet has changed the way people live, work, connect, and trade. This hasn’t been ignored by China, and along with the many apps being created and launched from there, a huge pool and demand for talented software creators has been established.

Although hardware companies like Ehang Inc. focus on hardware, they also need to utilise the skills of software engineers. “It is easier to find skilled talent in China than anywhere else in the world,” said Xiong. “The quality of software engineers is equal to anywhere else, but the cost is one-third the price in China, compared to hiring staff in Silicon Valley.”

In the end, Xiong said, there will be a new definition for ‘made in China’. It will be about high-quality innovation, and the creation of new ideas and technology out of what already exists. “China’s combination of timing, location, and people will transform the way we all live in the world.”

Tripartite Summit: Sharing Culture through Animation

  • Cartoon and animation has proven to be an excellent medium to successfully integrate culture and characters with a global audience.
  • The Chinese animation and comic industry is worth US$15 billion, the Chinese gaming industry is worth over US$21 billion.
  • Collaborative productions such as KungFu Panda (created by a joint venture with Dreamworks Animation) are finding global success.

“No matter where you come from, how old you are, or the language you speak, cartoon can be a helpful language. A translator.” – Tuo Zuhai

Tuo Zuhai from the China Animation Comic Game Group begun his presentation at the Tripartite Economic Summit by asking the audience what they think of when they think of China. He has noticed that since the 2008 Summer Olympics, many people think of the five mascots that were associated with the Beijing Olympic games.

“No matter where you come from, how old you are, or the language you speak, cartoon can be a helpful language. A translator,” he said.

Cartoon is a great medium to tell Chinese stories, said Zuhai. Chinese history dates back thousands of years, and the Chinese government is now beginning to commission people to tell Chinese stories and share that history through the use of animation and cartoons.

Zuhai’s presentation gave three examples of how animation is helping to bring international cultures closer together: integrating Asian characters with world audiences, combining traditional culture with an innovative spirit, and local production combined with world production.

Integrating Asian characters with world audiences

Havoc in Heaven is a Chinese animated feature film that was created in the 1960s the height of the Chinese animation industry. The animation style, and drums and percussion soundtrack used in the film are heavily influenced by Peking opera traditions. Havoc in Heaven received many awards, and was warmly received by Chinese audiences, and also recognised internationally.

Gangham Style, a K-pop single by the South Korean musician Psy went viral worldwide in 2012. It became the first ever YouTube video to reach one billion views, and almost instantly became a household song around the world. The South Korean Ministry of Culture, Sports and Tourism commended Psy for “increasing the world’s interest in Korea.”

Zuhai gave Disneyland as an example of an American business integrating into China. With Disneyland opening in Shanghai in June, they have incorporated Chinese culture into their brand. The typical Disney characters that have come to be expected at Disneyland will be there – including Cinderella, Ariel, Mickey and Minnie Mouse.

But in addition to these, Shanghai Disneyland also includes a giant glass peony blossom, representing nobility and good fortune at the center of the famous fountain, the “lucky” cloud patterns have been painted on some spires of the iconic Disneyland castle, and a traditional dim sum restaurant is present in the Disneytown nightlife area.

Combining traditional culture with an innovative spirit

Monkey King, a film released in 2014, was based on a traditional Chinese classic novel ‘Journey to the West’, and tells the story of how the Monkey King rebels against the Jade Emperor of Heaven – a story about victory against hardships. The reason for the films box office success is because it created a new definition of the relationship between two leading characters. It demonstrated that in traditional Chinese culture, respect is essential – but it did this with a modern spin.

Local production combined with world production

Zuhai encouraged collaborative production. Dreamworks from the United States have a joint production with China on KungFu Panda.

“In 2012, DreamWorks Animation took a gamble and launched Oriental DreamWorks, a US$330 million joint venture that was the first of its kind,” said Zuhai. “What started with the launch of the original Kung Fu Panda film is paying off significantly, with the release of Kung Fu Panda 3 this year.”

The Chinese animation and comic industry is worth US$15 billion. The Chinese game industry is worth over US$21 billion. Every year, China produces more than 200 animation TV series, 50 animated films, and thousands of internet animation and comic products. Creative connections between Hollywood and China are growing, helping to spread culture internationally, and growing the economy of both nations.

http://nzh.tw/11633389

Tax and other changes have been made, but greater affluence and the rapid rise of e-commerce create more opportunities for New Zealand exporters to China, writes Tim McCready.

It used to be said that the biggest challenges to doing business in China were language, culture, and the sheer scale of the market. Now, throw in the rapid pace of change.

Over the past month, a raft of changes to regulations and tax have been introduced by the Chinese government. E-commerce is also evolving at a pace never seen before, and New Zealand’s access to online channels have never been easier.

Though some of these changes are likely to cause price increases, the premium customers New Zealand exporters target tend to make shopping decisions far less based on price and are prepared to pay for the safety and reassurance that comes with the New Zealand brand.

Research by The Boston Consulting Group and AliResearch, the research arm of Chinese e-commerce giant Alibaba, found the increasingly powerful role of e-commerce is rapidly reshaping China’s economy and consumer market.

China has now overtaken the United States to become the world’s largest e-commerce market. In 2010, online transactions made up only 3 per cent of Chinese private consumption. Since then, the number of online shoppers has nearly tripled, with online transactions now accounting for 9 per cent of private consumption.

This growth is expected to continue. China’s Ministry of Commerce expects the country’s cross border e-commerce trade to reach 6.5 trillion yuan (about NZ$1.5 trillion) this year.

Coupled with an increasing demand from Chinese consumers for quality and safe products, it is no surprise this transformation presents an enormous opportunity to New Zealand exporters.

The evolution of e-commerce products in China means that it has never been easier than now for exporters to take advantage of the platform.

This was highlighted last month during Prime Minister John Key’s visit to China. New Zealand Trade & Enterprise and Alibaba signed a memorandum of understanding aimed at developing opportunities for New Zealand businesses to enter China’s consumer market through e-commerce channels and potentially providing access to millions of new customers.

In 2014 New Zealand Post launched an online store for New Zealand products on Alibaba’s Tmall Global. Chinese banks operating in New Zealand also see the importance of e-commerce, and are beginning to introduce their own online shopping malls.

ICBC New Zealand, China Construction Bank, and Bank of China are all actively promoting their own e-platforms and e-commerce consulting services to their clients.

In the wake of the explosive growth of online shopping, China’s Ministry of Finance, the General Administration of Customs and the State Administration of Taxation introduced new tariffs on cross-border e-commerce, effective April 8, 2016.

Online purchases will no longer be eligible for the lower personal tax rate of 10 per cent on parcels worth less than 1000 yuan (NZ$224), or no tax on parcels worth less than 50 yuan (NZ$11.20). Instead, imported products purchased online will be treated as imported goods, and are required to include an 11.9 per cent tax.

Under the current system, many products have been entering China with minimal tax. Although some have reported this tax as a crackdown, others consider it the closing of a loophole in regulation.

Eliminating the tax advantage offshore sellers have over locals helps level the playing field, and makes up part of a pledge by the Chinese Government to protect domestic retailers.

On April 7 all major government bodies in China involved in food and drug control, customs and tax, and business trading, jointly published a cross-border e-commerce retail list of imported goods.

This so-called “positive list” outlines products that are allowed to enter the country via free trade zones. Running to 23 pages, the list initially included wine and infant formula, but omitted adult milk powder and long-life UHT milk – though it has since been revised to allow both.

In addition to the list of prescribed products, China has begun imposing tougher regulations on infant formula products sold online.

Forming part of China’s revision on food safety laws, all foreign infant formula companies will be required to apply for new product registration with the China Food and Drug Administration if they want to continue to sell through cross-border e-commerce platforms.

Companies have until January 1, 2018 to comply, but in the meantime can continue to sell without certification.

Speaking at The Global Food Forum held in Australia last month, Gary Helou, former managing director of Murray Goulburn (Australia’s largest processor of milk and largest exporter of processed food), said that although he is surprised at the “clunky way” regulatory changes are occurring in China, food companies must prepare themselves for more sudden regulatory changes.

Helou’s comments were made in light of media, stock market analysts and investors reacting quickly to the changes in China.

Company valuations – particularly those in the dairy or natural health sector – have recently climbed to new highs. This has been dubbed the “Blackmores effect” after its stock soared more than 500 per cent last year in response to the opportunity in China.

However, confusion over the impact regulatory changes on the bottom line of businesses has resulted in a sell-off in stocks.

Australian health supplements producer Blackmores fell as much as 19 per cent in one day. NZX-listed premium dairy and infant formula marketer, a2 Milk, fell 6.3 per cent.

“Daigou” is the Chinese term given to buying items overseas on behalf of others. Products are purchased by Chinese tourists, smuggled into the country through professional “personal shoppers” or bought through online channels – with international students often acting as the intermediary.

With prices of manuka honey running as high as 1789 renminbi (NZ$400) for a 500g jar in Shanghai, it is often much cheaper to buy products directly out of New Zealand.

Furthermore, there is still a deep concern in China about the safety of products – something that was already in place when the country experienced its melamine scandal a few years ago.

Instead, Chinese consumers seek out products directly from somewhere or somebody they trust.

The grey market is a multibillion-dollar business. It can be argued that daigou can help put innovative new products on the radar.

Some brands estimate daigou is responsible for a significant percentage of sales into China. Imported products can be personally promoted to friends and families, which is undeniably an excellent marketing method – particularly in China.

Recent changes, however, have seen authorities tighten up on the practice. A maximum value of 2000 yuan (NZ$450) per single cross-border transaction has been introduced, as well as an annual cap of 20,000 yuan (NZ$4500) per customer before paying an import duty.

To ensure this is monitored, logistics companies are requiring consumers to register online before they will deliver products.

Furthermore, Chinese authorities are tightening up on inspections of goods entering China through airports.

There have been reports of two-hour delays in Shanghai’s largest airport – and products being dumped at the border – as customs officials inspect luggage and charge tax on items worth more than 5000 yuan (NZ$1120).

China is evolving on a daily basis. Managing that, as well as the more traditional challenge of doing business in China is not easy. But greater affluence and the rapid rise of e-commerce is creating more opportunity than ever.

Assuming New Zealand companies continue to have patience, comply with changes as they occur, and get their products across the border, the opportunities in China for New Zealand businesses continue to be almost limitless.

http://nzh.tw/11595565

Cyber risk creates a real opportunity for New Zealand, Kordia chief executive Scott Bartlett tells Tim McCready

New Zealand businesses are starting to show a real mindset shift when it comes to cyber security, agrees Kordia’s chief executive Scott Bartlett.

“It’s in the papers a lot more, there is a real narrative going on in the business community around business obligations, endless surveys where CEOs say it is a top five issue — a real groundswell happening.”

But Bartlett admits that while this increased awareness is something to take notice of, it is just the beginning.

The next question companies must ask themselves is what they can do to make themselves safe. Businesses need to create a strategy — and then monitor it.

Bartlett sees organisations at different stages in addressing cyber security. “We have seen a lot of public sector departments and agencies jump on that maturity curve sooner than some others. And there are some standout examples among the business community.”

The challenge is that the issue, opportunity, and the subject of cyber security is universal — those instigating attacks don’t discriminate. “The reality is that you will get hacked, and you may not know that you have been,” says Bartlett.

“That is the attitude you must go into this with.”

Over the next year, Bartlett sees external threats increasing.

“We are going to see far more automation of attacks, and the tools are only getting better. Over the course of the next couple of years we are going to see the impact of these attacks worsen.”

One of the major challenges for businesses is legacy code that has been iteratively added to over the past 10 years.

“Find an organisation where all the web systems are new — they don’t exist,” Bartlett says.

“You are probably still vulnerable to things that came two years ago.” For external threats, raising the hygiene factor is critical. But they will always exist regardless of what a company does. Internal threats, on the other hand, depend on culture.

“There is a tendency to think of cyber security as a technical problem. But you can have all the policies, procedures, and firewalls in place you want, but if your people don’t understand the risk that comes with picking up a USB stick and throwing it into a computer, or doing commercially sensitive work on public hotel Wi-Fi, then the bad guys will get around your systems.”

Kordia’s mission is to be New Zealand’s leading business-critical technology company — “you can’t be in the business-critical game without cyber security.” In line with this, Kordia announced the expansion of its cyber security offering with the acquisition of Aura Information Security for $10.02 million in November last year.

Before the acquisition, Kordia already provided security products to customers, but Bartlett describes bringing Aura into the portfolio as Kordia’s “secret sauce”.

Fifty per cent of their business is in telecommunications, and roughly half of that in New Zealand is now security services.

Aura has about 300 customers, most of which are New Zealand’s largest organisations, including government departments, banks, and large insurers. They are also increasingly working with medium sized businesses.

Bartlett stresses that the biggest requirement in cyber security is to do a terrific job for customers — “if you drop the ball once, you are done”.

It is that requirement that makes Kordia acutely conscious of responsibly managing the growth of its cyber security consulting services. Although growth can be alluring, Bartlett insists that serving existing customers first is the priority.

“While we have experienced CIOs and technical folk in New Zealand, cyber security is specialist.

New Zealand’s pitch to attract people here isn’t bad, but Bartlett admits that the world is competing for the same talent. We need to have a combination of “grow our own” as well as attracting the best, he says.

For Kordia, this means making sure their cyber security team of 30 spends more than a fifth of their time on R&D — research that interests them. It’s a huge investment for Kordia, but things are changing rapidly — “if you’re not doing research, you’re falling behind.”

As opposed to Aura’s consultancy services, Kordia’s security product is very scalable.

RedShield provides defence for websites and web applications, and is currently shielding most of the Government and large businesses. It has the potential to go truly global, beyond current deployment in Australia and the UK.

It is obvious that Bartlett has a real passion for the opportunity cyber security can offer both Kordia and New Zealand.

“Exporting IP is fantastic and it is definitely part of the plan,” he says. “Products like RedShield will be key for New Zealand’s economic future — weightless and scalable. With fair wind and a lot of smart people it could become a big opportunity for New Zealand.”

Bartlett notes that the Government plays a leading role in informing and educating. The establishment of a CERT — a computer emergency response team — provides businesses a first port of call for advice, and allows knowledge sharing from the global community and within New Zealand.

This will ultimately help to lift awareness.

But the Government can’t do it alone.

Bartlett has been surprised at how much desire there has been across the spectrum to make the country safer, and how willing people are to contribute to it.

“We are a small country, and should be able to become a cyber security paradise,” he says. “If we can make New Zealand a cyber safe country — the world’s first — that would give New Zealand an enormous competitive advantage.”

http://nzh.tw/11481422

Tim McCready

Sheep milk products may become a Holy Grail as the agricultural industry continues to diversify, writes Tim McCready.
Dairy diversification is a very New Zealand preoccupation, and with good reason. Dairy prices are not becoming any more predictable, an uncertainty that feeds constant rhetoric about the need to diversify away from dairy.

It is true that diversification into technology and intellectual property exports offers New Zealand an exciting future, but it overlooks the potential for diversification within dairy. This can offer New Zealand significant opportunity, new markets and potentially less environmental damage.

Though dairy is still dominated by industry giants, this has not crowded out smaller innovative players. The “alternative dairy” industry has already had success in New Zealand.

Hamilton-based Dairy Goat Cooperative developed the world’s first goat milk-based infant products in 1988. Focusing only on the premium market, Dairy Goat’s turnover in 2014 exceeded $150 million. They show no signs of slowing, with a $70 million spray dryer opening last year.

Auckland-based health product provider New Image Group has partnered with Oete Farms, and plans to increase goat milk products, particularly due to a strong response from China, Southeast Asia and the Middle East. Even Hawke’s Bay’s regional economic development agency is spearheading a project to capture the value chain for the region’s goat industry — from breeding through to processing and exporting.

Yet it is New Zealand’s sheep that may provide the next exciting opportunity for diversification within the dairy industry.

The global market for sheep dairy is large and growing, driven largely by health, tradition, and fashion. Sheep milk has considerably more milk solids than cow’s milk, almost double the protein, more calcium, high levels of key vitamins, and a creamier texture. It is also reported to be more easily digested than cow’s milk, making it attractive to the Asian market.

The New Zealand government has recognised this potential. The Ministry of Business, Innovation & Employment, tasked with helping businesses to become more productive and internationally competitive, is running a six-year programme to boost exports of New Zealand’s emerging dairy sheep industry.

Their research, involving AgResearch scientists from across New Zealand, aims to grow our dairy sheep industry to become an international leader by better understanding sheep milk composition and function, boosting production and value, and ensuring the environmental footprint of the industry is sustainable.

New Zealand’s dairy sheep industry is already reasonably established, with five commercial operations, but there are signs it can expand and innovate further still.

AntaraAg, New Zealand’s largest producer, has around 20,000 stock units and produces cheese and milk powder, mostly for export. Earlier this year AntaraAg’s predecessor, Blue River Dairy, sold its processing plant and brand to Chinese company Blueriver Nutrition HK — a necessary step for expansion into Asia after a year of unsuccessful negotiation to have Blue River Dairy’s infant formula certified in China.

On top of this, New Zealand’s sixth commercial sheep dairy operation was announced last month. Spring Sheep Dairy is a 50/50 partnership of SLC Group and State-owned enterprise Landcorp, and has ambitions to lead this field.

The partners aim to make Spring Sheep a leading dairy operation in terms of innovation, on-farm best practice, sustainability, product safety and quality, and product and brand development.

Landcorp is one of New Zealand’s leading agribusiness organisations and aims to improve the productivity, profitability, and sustainability of farming. Besides holding New Zealand’s largest dairy cow herd, it is also considered a world leader in sheep farming, genetics and research.

SLC Group is a boutique investment company that provides strategic support to turn New Zealand’s small and medium enterprises into brands that are attractive to a global market and to multinationals, with particular expertise in selling high quality New Zealand products into Asia.

Spring Sheep’s initial operation will be based on 400ha of farmland at Reporoa in the Bay of Plenty. They are converting the farm to milk 3000 East Friesian ewes and ultimately expect to milk 3500 sheep and produce one million litres of milk annually.

Though sheep milk is typically associated with feta, Spring Sheep sees this as a European dominated product and not maximising New Zealand’s added value potential. Spring Sheep is also steering clear of infant formula, which has historically been difficult to capture value from. Instead, they expect to start with ice cream, with the aim to expand their product range into senior and sport nutrition products. They will initially target Taiwan and Korea.

Lucy Griffiths, a 2014 New Zealand Nuffield scholar, spent a significant amount of time last year travelling to meet and work with sheep milk farmers around the world, and has arguably become one of New Zealand’s leaders in the industry.

Her report provides a business plan for New Zealand sheep dairy to become a billion dollar industry in 10 years’ time.

Griffiths can see the sheep industry offering New Zealand massive opportunity. “When I met with leading industry experts in the Middle East, Afimilk, they pointed out that the return on investment for sheep dairy is five years on average, versus 20 years for dairy cows. Sheep dairy could also provide a more viable return for the land and reduce the environmental impact at the same time.”

But Griffiths noted: “If New Zealand wants to position itself as a leader, we must be market-led and offer a point of difference from other large global producers.”