Expanding Your New Zealand Food Business into Australia’s Food and Grocery Sector.
Nick Hogendijk Managing Partner Hexis Quadrant
OPINION | The walls have kept closing in for many New Zealand food and grocery suppliers over the past few years. The Foodstuffs and Woolworths New Zealand duopoly has a clear stranglehold on the Kiwi grocery consumer. The post-Covid reality, for many, is the past few years have only made business more difficult. Suppliers have been faced with aggressive changes to their customer’s operating and trading models, retail media has become yet another grab for cash by the retailers who want even more of your hard-earned funds, and the retailers themselves have embarked on a clear multi-channel strategy ranging from store formats to ecommerce offerings, home delivery, click and collect, dark stores, and the list goes on.
So, with the two leading retailers working hard to consolidate their positions in a highly uncompetitive market as they employ their diverse strategies, why don't their suppliers?
Expanding customers beyond the duopoly should be a priority.
If reducing dependency on the duopoly isn’t top of mind for many suppliers, then it should be. A diverse customer portfolio is critical to any business’ stability. Having less of a “need” to do business with customers perceived to have a balance of power is a fundamental necessity in any modern marketplace.
The vast Australian food and grocery market presents an enticing proposition for New Zealand food growers, producers, and manufacturers seeking growth opportunities beyond their borders. With shared geographical proximity and similar consumer preferences, tapping into the Australian market seems logical for businesses looking to expand offshore. However, while the potential rewards are significant, there are essential considerations, potential risks, and costs that demand careful evaluation before taking the leap.
Australia’s thriving food and grocery sector offers diverse opportunities for New Zealand businesses. Some key advantages include the geographic proximity between New Zealand and Australia, making it easier to navigate supply chain logistics and transportation. Both countries share many cultural similarities, including a preference for high-quality, natural, and sustainably sourced food products.
There is a growing demand for organic and specialty products as Australian consumers are increasingly conscious of their food choices, seeking organic, artisanal, and specialty food items. New Zealand food growers and producers, known for their commitment to sustainable practices and unique offerings, can cater to this emerging demand.
Retail and online distribution channels with well-established retail and e-commerce infrastructure are another advantage. Australian food retailers, specialty stores, and online platforms provide ample opportunities to reach a broad customer base.
Australia’s thriving food service industry, encompassing restaurants, cafes, and hotels, offers a significant market for New Zealand businesses to supply bulk quantities of high-quality produce and food products while potentially gaining efficiencies.
Australia’s population density and market size are advantageous, resulting in a more substantial domestic market. This higher population density drives higher demand for food products, influencing the scale of production and distribution networks.
A New Zealand food grower, producer, or manufacturer looking to expand their business into Australia has several customer channels they could consider. Some potential avenues include wholesale distribution, as Australian wholesale distributors connect with thousands of customers across many channels. Partnering with Australian wholesalers allows the producer to supply their products to a vast network of customers. This channel is ideal for large-scale distribution and reaching a broad customer base over time.
Utilising retail chains as for many New Zealand suppliers, the first thought may be selling products directly to major retail chains in Australia, such as Coles, Woolworths, Aldi, or IGA. This can provide significant exposure and access to many consumers; however, only some retail chains can be accessed in Australia.
There are several other retail chains beyond the Australian grocers, including Australia’s $10 billion convenience store sector and other retail channels such as hardware, pharmacy, liquor, department stores, and more.
Utilising popular Australian online marketplaces like Amazon Australia, eBay Australia, or local food-focused platforms can help reach customers nationwide without needing a physical presence.
Additionally, the evolution of social commerce continues to gain traction through social media platforms.
According to Australia Post, “One in six adults say they've purchased a product from a social media platform, but this number jumps to one in four among women aged 18 to 39. Facebook was the most popular platform for purchasing, followed by Instagram, then TikTok, and those buying socially.”
According to one major foodservice distributor, the Australian foodservice sector is estimated to represent approximately $12-$13 billion in wholesale sales value.
Targeting the food service sector, including restaurants, cafes, hotels, and catering companies, can provide opportunities to supply bulk products for commercial use.
While these are significant opportunities for the well-prepared supplier looking to expand, there are also other avenues to expand in Australia, including specialty stores, as approaching specialty food stores and gourmet markets focusing on high-quality and unique products can be an excellent way to target niche markets and customers who appreciate artisanal offerings.
Participating in farmers' markets allows direct interaction with consumers, enabling them to showcase their products' freshness, quality, and uniqueness. This approach can also help build brand loyalty.
Collaborating with Australian sales, marketing and distribution companies or hiring sales agents already established in the market can effectively navigate local regulations, preferences, and supply chain logistics.
Partnering with Australian food importers who specialise in bringing foreign products to the Australian market can simplify the process and provide access to an established distribution network.
Building an online store specifically for the Australian market or partnering with local e-commerce platforms can offer a direct channel to consumers.
Finally, participation in food fairs and trade shows in Australia allows for direct engagement with potential buyers, distributors, and other industry professionals.
It should be noted that when entering the Australian market, it’s essential to research and comply with relevant regulations, labelling requirements, and consumer preferences in Australia. Additionally, understanding the competitive landscape and conducting market research will be crucial for a successful expansion.
The Australian food market is highly competitive, with local and international players vying for consumer attention. New Zealand businesses must differentiate their offerings and establish strong branding to stand out in this crowded landscape.
While proximity is advantageous, transportation and logistics costs must be managed, especially for perishable goods, to ensure market competitiveness.
Currency fluctuations between the New Zealand Dollar (NZD) and the Australian Dollar (AUD) can impact profit margins, making it essential to implement risk management strategies. This can be mitigated in part by using strategies like Ex-Works pricing.
Brand recognition can also be challenging as launching a brand in a new market can never be as simple as ‘set and forget’. Building brand awareness and trust in a new market is challenging. Brands should be prepared for the time and resources needed to establish a solid presence in Australia.
While there are similarities between New Zealand and Australian consumers, there are also nuanced differences in taste and preferences. In some instances, adapting products to cater to the Australian palate may be necessary.
Food security and self-sufficiency is another significant challenge. Due to Australia’s larger land area and agricultural diversity, it has higher levels of self-sufficiency in food production compared to New Zealand.
Conducting thorough market research to understand consumer preferences, trends, and competitors is an upfront cost.
Meeting Australian food regulations and labelling requirements might involve additional testing, certifications, and compliance documentation expenses.
Establishing or partnering with a reliable distribution network in Australia involves transportation, warehousing, and logistics costs, and building brand recognition in a new market necessitates investment in marketing, advertising, and promotional activities.
Expanding a New Zealand food business into the Australian food and grocery sector presents a promising opportunity for growth. While the cultural similarities and market proximity provide a favourable starting point, careful consideration of the potential risks and costs is essential.
By approaching the Australian market with a well-informed and objective outlook, New Zealand food growers, producers, and manufacturers can position themselves for a successful and sustainable expansion into Australia’s flourishing food industry. I
When you are looking to expand into the Australian marketplace, set a strategy, identify the proper channels and customers for your brand, identify and understand your risks, and know your financials.
Want help? Call Hexis Quadrant’s consulting services for personalised guidance and support to help you navigate this vibrant market’s unique challenges and opportunities.
