How to make it in America
As the US economy bounces back, Kiwi firms are finding opportunities Stateside. In part one of our three part US feature, Unlimited talks to Marta Mager at NZTE about the tricks to trading in America, and we look at how having US-based technicians has helped fruit packing company Compac find success.
Marta Mager is buoyant about the US. She admits she's biased, given she's been New Zealand Trade and Enterprise's North America regional director, based in Los Angeles, for the past four years. But she believes things are looking up in the world's richest economy, and if you're a Kiwi company in a niche technology market then all the better.
The US is New Zealand's third largest export market. Exports of goods and services there slipped following the global financial crisis, but are back up around $6 billion annually.
Businesses such as fruit sorting systems firm Compac (see case study below) are good examples of niche technologies driving efficiencies, Mager says.
''Anything that can help get a better quality outcome for an industry and sector that demonstrates flexibility and efficiency gains has a good standing in the (US) market,'' she says.
''It's not that they would deliberately go out and say 'I'm wanting to target Kiwi technology to help me with this'. It's more that they've got an issue and 'who are the trusted partners?'.''
New Zealand has built up a reputation for high quality, technology and integrity, and don't underestimate the role of the Hobbit movies and the America's Cup campaign in that, Mager says.
The flexibility of Kiwi firms is another key selling point. Most of our businesses are small, which has its own challenges, but the advantage of that is they can be nimble and adapt quickly to their customers' needs.
''That kind of impresses them, the Americans.''
Like any other, the US market comes with unique challenges. Things move incredibly fast there, and immediate responses to requests are expected.
The Americans are also sharp communicators, Mager says.
''When you give your pitch you've got to be really able to very quickly articulate your value proposition, so there's not that much willingness to hear you out.''
NZTE is still seeing Kiwi companies that are not as prepared as they could be to enter the US market, but the agency is doing its best to catch them before they go over, the regional director says.
And with more New Zealand firms entering the market and reaching out to their fellow Kiwi business people, the key messages are getting through, she says.
The great Californian frost of '99 was just the disaster Compac Sorting Equipment needed to break into the lucrative American fruit and vegetable market.
Frost struck hard in the middle of California's citrus harvest that year, squeezing the density out of its prime oranges and lemons. So fruit packers Golden Valley Citrus made a crisis call to the Auckland-based Compac, which had a growing reputation for developing and manufacturing high-performance produce sorting and packing machinery.
"We had a machine that could accurately take measurements to calculate the fruit's density," says Compac's marketing executive Nathan Soich.
"It was built quickly here and flown to California, so they could salvage the good fruit from their crop rather than throwing it all away."
Word spread, and 15 years later, the United States is Compac's largest market. It has two offices on the ground - one with 20 staff in California, the largest producer of lemons in the US, and a six-person operation in Florida, the nation's orange capital, which produces around 134 million boxes of the juicy fruit a year.
A healthy segment of Compac's success in the US has also come from having a distribution partnership with a sales company in Washington State, primarily dealing with the massive apple and cherry markets.
"You can gain a certain amount of momentum selling into the market by travelling there alone, but customers really want local support and that's the clincher that makes you commit to the market," Soich says.
"Once you do that, you find a whole lot of doors open to you. People like to see that you have some skin in the game."
South America has been another success story for Compac, establishing a manufacturing plant in Uruguay to service the apple, stone fruit and avocado growers of Chile, Brazil, Argentina and Peru. But the machinery for sorting and packing lines sold to US customers is made at Compac's Onehunga plant.
Compac's R & D is based in Auckland (it recently received a three-year $5.5m grant from Callaghan Innovation), and the United States tends to be a "high-feature, high-technology" market, which demands the latest versions of machinery.
There have been challenges for the wholly New Zealand-owned company, which have generally been overcome by having people on the ground, Soich says.
Technicians in Michigan and New York take care of customers in the north-east.
"It's a nice story to be a New Zealand company, and people find that interesting, but their question is 'who will support me after the sale?' The hardest thing is the chicken-and-egg scenario of having a customer base that's large enough to warrant that," says Soich.
"The US is a very demanding, very competitive market. Standards there are often much higher than what companies in other parts of the world demand. But it forces us to cast a more critical eye over the whole business."
Winner of the NZ Hi-Tech Company of the Year in 2012, Compac has come a long way from the original sorting line invented by electrical engineering student Hamish Kennedy for his family's Kerikeri kiwifruit farm in 1984.
The company now boasts 30 international markets, including Australia, Asia and an increasing presence in Europe. And Soich sees the scope for expansion - especially in the US sector - as vast, especially with the increasing need to reduce labour costs and meet traceability compliance, ensuring produce has good documentation and labelling right through the supply chain.
"It's about getting the right piece of fruit in the right box as efficiently as we can for our customers, and recording that data as well," Soich says.
"We're looking at other commodity types where we can take our optical sorting technology and use it for a different type of vegetable or fruit. It's definitely a market where there's going to be a lot of growth."