Trade agreements are opening doors for food exports, but as Joe Parkes finds, there’s still room to improve the way for food exports between local ports and destinations overseas.
When Steven Millard changed his mind about Australian food exports, somewhere along the road to the Barossa Valley, it bore the hallmark of true conversion. Representing the world’s largest retailer of natural and organic foods—America’s Whole Foods Market—he had long held the view that exporting Australian food was too much of a challenge for United States retailers.
"It is difficult to support a product that has to traverse the globe to get to our shelves," Millard once said. That was before he joined a group of American food buyers on a recent, nine-day Austrade tour of Victoria, Tasmania, South Australia and New South Wales. "This trip has made a convert of me," he declared. "I will be aggressively pursuing many of the product lines I was presented with."
Whole Foods Market now carries a range of Australian products on its shelves and, according to Austrade’s New York-based Beth Goslin, the number and quantity of Australian specialty foods now on the American market has increased significantly in the past few years. "Dozens of Australian products are being brought into America," she says. "In fact, there are so many that Austrade is publishing the Australian Food Buyer’s Guide in July to help American retailers and restaurateurs source products from Australia."
It’s an indication of what’s being achieved by Australian food exporters. But it isn’t the whole story. Several chapters of that chronicle are devoted to issues like export permits, foreign language labelling, complex freight forwarding and transport mishaps.
Free Markets
Food and beverages account for around 19 percent of total Australian merchandise exports. According to the Australian Bureau of Statistics, in the 12 months to March 2006, food exports were worth $22.9 billion FOB (free on board)—a little down on the previous 12-month period total of $24.4 billion. Food’s natural export companions—Australian wines and other beverages—were worth $2.9 billion.
The industry buzz is that Australia’s signing of free trade agreements (FTAs) will create even more growth in markets like the US, Singapore and Thailand, with China a distant possibility.
But will the FTAs really ease the path for export growth? "Absolutely," says Simone Tully, general manager of OBE Beef, based in Hendra, Queensland, which supplies fully traceable, ‘paddock to plate’, certified organic beef products to global consumers. "The US–Australian FTA has removed the 10 percent tariff on our beef, making it easier to get our value-added products on the shelf at a competitive price," Tully says.
"Our clean-green image also helps, and so I doubt there’s been a better time for us to export our products to the United States." (Australia’s total meat exports in the 12 months to March 2006 were worth $6.7 billion.)
Another enthusiast for the US–Australian agreement is Steve Allen, director of Riversun Export, a non-profit service company that sells citrus fruit to the US for citrus growers and packers in South Australia’s Riverland and the Mildura Fruit Company in Victoria. He says the FTA has cut American tariffs on citrus, saving the company US$600,000 last year—though, overall savings had been cut by price increases in production and shipping materials and the rising cost of ocean freight.
But not everyone finds the American market irresistible. Tony Wilson, director of Tasmanian live abalone and lobster exporter Finson, says the cost of freight in delivering live seafood to North America and Europe makes it unviable. Instead, it’s markets like China and Taiwan that keep the company’s average 10 employees busy, exporting round 280 tonnes of various seafood species a year.
The Australian Quarantine and Inspection Service (AQIS) is particularly interested in procedures used to pack and ship live seafood cargoes, and all exporters must follow stringent health regulations and inspections. AQIS must also issue an export licence, with most of this paperwork now done online.
Flying the seafood from Tasmania to Melbourne for trans-shipment to international aircraft can be a fraught enterprise. "We’ve had product left on the tarmac for up to seven hours with a 70 percent mortality rate, and you can’t do a single thing about it," he laments. "The Chinese say they are paying for live fish and that’s all they will pay for."
Australia’s seafood exports in the year to March were worth $1.2 million FOB and Wilson wants the Tasmanian Government to use some of the "huge royalties" it gets from the abalone industry to charter weekly flights to China to avoid the "airline screw-ups" now faced by the industry.
At the other end of the country, in Cairns, Sim Hayward’s Asian Foods Australia finds Australian standards are a positive advantage when marketing its range of chilli sauces, curry pastes and Indian-style condiments to clients in Singapore, Hong Kong, Taiwan and Noumea.
"We push Australia’s fresh, clean, green image," Hayward explains. But it is detail, not image, that excites customs and health bureaucracies in foreign markets. "We have to provide specific details of the contents. Nutritional panels on products for Asia are not as complicated as those demanded in the United States, and we’ve found Australian standards are accepted in all our markets."
Detailed demands by Japanese officialdom and potential buyers—everything from health checks to packaging—has made that market too difficult to deal with.
With just 18 staff members in the business, Asian Foods Australia prefers to keep its involvement in freight to a minimum, using established freight consolidators instead. "Our consolidators even had our packaging labels translated into French for Noumea, and Chinese for Taiwan," she says. "The one thing you have to be constantly aware of is that there are very strict deadlines when you use consolidators."
Export Needs
Other exporters use commodity brokers working on behalf of overseas buyers. Don Iddamalgoda runs a one-man export operation, selling lentils, chick peas and split peas to India, Pakistan and Sri Lanka, and he describes the brokers as "a life-saver".
Iddamalgoda arrived in Australia four years ago from Sri Lanka and is now director of Aus Grain Exports in Caroline Springs, Victoria, where he is a fervent supporter of the idea of outsourcing—using agents to buy from growers, packers in Horsham to prepare the pulses for export, and a commodity broker with a string of overseas clients to negotiate prices and ship products.
But even delegation doesn’t save him from export hassles. "Because I am a newcomer to this country and new to exporting, its almost impossible to get assistance from banks or insurers," he complains. "Right now I have about 10 containers going out each month but insurers won’t deal with you until you show them an extended performance record. If you’ve got no insurance, the banks won’t deal with you either."
Melbourne-based Ballantyne Foods has had a different experience. Long established in the export business, its Golden Churn butter has been sold in Singapore for 107 years. The 10 employees in its export division have helped turn it into the world’s largest exporter of canned and mini-tub butter.
Australia’s total earnings from dairy products and associated products from February 2005 to March 2006 were $2.4 billion FOB, and Ballantyne says 45 percent of its turnover comes from offshore sales.
Chris
Motton, Ballantyne’s export director, says official requirements are straight forward: regular AQIS audits and some basic requirements for label details in the markets it serves—the Middle East, Asia, Asia Pacific, and the Americas.
"In the United States, the Food and Drug Administration (FDA) tightly controls the detail it requires for labelling," he says. "The Americans also like their butter wrapped in parchment and contained in a cardboard box—total over-packaging. Other markets go for parchment or foil and plastic tubs are a pricey alternative.
"In Indonesia, we simply use the Bahasa word for butter, mentega, on the label, and in Thailand you need a printed registration number. China has a workable system which concentrates on Chinese language labelling."
Because of Japan’s ‘massive’ tariffs—300 percent duty on butter and milk powder—Ballantyne concentrates there on the bonded airline sector. "Once you get into the system, exporting dairy products is pretty simple, though it can be a horror for people just starting out," he says.
Some demands, however, seem too much like hard work for almost everyone. Jewish kosher dietary requirements appear to preclude most Australian suppliers from competing in that market. But Muslim halal requirements are another matter. A broad cross-section of Australian food exporters opt for halal accreditation, for a number of reasons. Many bulk food items sent to New Zealand, for example, are halal because they are used in re-exports to markets like Indonesia where all food items must be halal. This means the food must be certified to conform with strict Islamic dietary conditions, basically not being contaminated by alcohol or pork.
Motton says many Australians "throw their arms up when you mention halal", but in reality the procedures are relatively simple. "One problem is that there are too many halal accreditation authorities in Australia," he says. "Countries like Malaysia only recognise certain halal certifiers, while others demand you use different ones.
"Indonesia recently said full containers must carry specific halal certificates for each shipment—previously, you could get a certificate that lasted one year. At $200 a time it’s just one more thing you could do without. But it’s worth it."
Whether it has been the example of AWB and Australia’s suffering wheat export trade with Iraq, or something quite unrelated, no food exporters interviewed for this story were keen on establishing ‘single desk’ marketing for their products. "We almost had it with the Australian Dairy Board," Motton explains. "God forbid we should do that again."
Australian Quarantine and Inspection Service
(AQIS) Rules
No less than nine separate pieces of federal legislation control the export of ‘prescribed’ Australian food products: dairy, fish, plants, eggs, meat, grain, organic produce, fresh fruit and vegetables, dried fruit, and live animals.
Exporters have to get approval from AQIS to export any of these items and, depending on their nature, requirements frequently vary.
All premises preparing food for export have to undergo some form of AQIS inspection to ensure product quality safety, that they are accurately described and labelled, and that they meet Australian and foreign market standards.
Instead of regular product inspection, AQIS opts for Quality Assurance that makes exporters responsible for maintaining quality of their products.
All products have to carry an export clearance number (ECN) for clearance through Australian Customs’ EXIT system and may also need a certificate enabling their entry into an importing country.
For meat, fish, dairy, horticulture, grains, hides and skins, documentation is processed electronically with AQIS via its EXDOC system, for which exporters must register (http://www.aqis.gov.au/exdoc). A team of specially trained AQIS export facilitators can provide information about all these requirements, as well as fees and charges.
For a more detailed look at quarantine requirements, check out our feature Coping With Quarantine.
Food Exports Case Study
Persistence Pays Off
Vic Cherikoff has been slogging away for more than 20 years to get the world—let alone Australians—to use and enjoy this country’s native fruits, vegetables, herbs and spices. And now it’s paying off.
Cherikoff exports 65 percent of his products, compared with 20 percent just three years ago, to 18 countries (with representative distributors in 13 of them) and he supplies several manufacturers in five countries with ingredients—an aspect of the business he thinks is bound to grow.
Yet his companies, using product suppliers in remote Aboriginal communities as well as non-Aboriginal foragers, growers and farmers, employs only seven full-time (and one part-time) staff.
"I guess the first piece of advice I would offer food exporters is, start out with your end result in mind," he says. "Plan exactly which markets you want to play, who you want to deal with and how best to reach the end users in that market.
"Most entrepreneurs are in love with their product and can’t understand why new groups of consumers can’t see all its benefits."
Cherikoff cites as an example his own responses to American chefs who may opt to buy black salt from Hawaii rather than his Australian Alpine pepper, despite the fact the former contributes to nutritional problems while the Alpine pepper could cure them. "Some of this [kind of thing] is just an emotional spur of the moment response and any marketer has to intimately understand his target market and solve their greatest problems," he counsels.
"How are small exporters going to educate a saturated, highly competitive market and keep on there long enough to make their brands a household name? Interestingly, most success stories are with a single product, like Kikkoman soy, Tabasco and Coke. Yet new exporters take a range of products [to the market] and expect to be able to support them all. It will take persistence, money, and 10 times the number of years predicted."
Cherikoff says his main frustration with government is that not all its assistance is qualified, motivated, or capable. "Certainly there is little vision, dedication or solid networking available, and the fear of breaching confidentialities (or being seen to play favourites) are major impediments [to using government assistance]. Government organisations continue to align themselves with chefs who do little to present Australian cuisine as different and interesting—just more of the same pub food they cooked in the 1980s or pedestrian food from the publicity chefs who only promote themselves and do little or nothing for the Australian food industry."
Cherikoff hastens to add, however, that there are "a few gems" in government who do their jobs extremely well. "The others leave a lot to be desired, which is frustrating as we are, in effect, doing their jobs for them," he complains. "However, we have had reports that they do help other exporters so I guess it might involve other issues. Who knows?"
