Wednesday, April 24, 2024

Door opens on Korean export opportunities

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A developed country market with an FTA whose favourable new tariffs are kicking in.
Stephen Blair, NZTE trade commissioner to Korea, right, with NZTE head of business development in Korea Nick Oh, sees the market as an exciting opportunity for New Zealand food exporters.
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Amid the enthusiasm in New Zealand about serving traditional Asian markets such as Japan and China, South Korea is a market that contains some good opportunities for New Zealand food exporters.

Stephen Blair, NZ Trade Commissioner for Korea, said the densely populated, single-language country has tended to fly below the radar for many over the years.

“But if you are thinking of Japan or Singapore, then Korea should definitely also be in that mix. This is especially so now that most of the tariffs previously in place are almost entirely wound down now under the free trade agreement [FTA].”

Signed back in 2015, the FTA contains a number of sunset clauses in it for tariffs to be wound down by 2030. Dairy, horticulture and red meat are the biggest winners, with each having borne punishingly high rates of 36-45% prior to the FTA signing.

Nick Oh, NZ Trade and Enterprise’s (NZTE) head of business development in Korea, said the market is an appealing one to diversify out of China to, sharing some similarities in logistic lines and culture. 

But it has the advantage of having almost 25 million people within only 50km of Seoul’s centre in a region half the size of Waikato, helping make in-country distribution fast and relatively cheap.

“And we are seeing more opportunities open up in the premium market. It is similar in this respect to what Japan used to be, but now it is the Japanese who tend to ask more about price first,” Oh said.  

In 2019 Korea was officially deemed a “developed country” by the United Nations, the first country in the UN’s history to be upgraded, and putting it in the same company as most European nations and Japan. 

Overall, the economy now ranks as the 11th largest globally in GDP, and  19th in the UN’s Human Development Index, an indicator of a country’s socio-economic capability.  At 19 it sits just ahead of the United States, and just below Japan and the United Kingdom.

Blair said NZTE’s staff in Seoul witnessed more than 150 potential exporters inquiring about the market over the covid period, and while not all were food and beverage, the increasingly sophisticated market offered some appealing opportunities.

“If you took wine for example, five years ago we were exporting $3 million here, that is now $20m, and it is commanding a strong premium here compared to competitors. NZ is now the fastest growing wine exporter to Korea.”

NZ’s exports are dominated by sauvignon blanc, an exception in a market dominated by red imports, with NZ sauvignon gaining a strong following among young Korean women.

As tariffs continue to taper away in coming years, Blair said, other areas to work on include certification proof.

“When we are making those ‘grass-fed’ or ‘organic’ claims, the ability to provide proof of these is important. For that reason, we are welcoming NZ’s recent passing of the Organic Products Act, which brings us in line with the rest of the world.”
He said exporters who can provide a value proposition that goes beyond the “clean green” claim are likely to do better, given that so many of NZ’s trade competitors are making a similar claim.

He said NZTE is running several initiatives to help exporters get traction in the intensely competitive and increasingly sophisticated market.

These include the “Goodness of New Zealand” project. Exporters have been invited to participate to help them understand three key points – what it is consumers want to hear, what NZ companies want to claim, and what can they claim legally to develop their value proposition.

An e-commerce project is also in play to help exporters understand how to best promote their products across e-commerce platforms, utilising influencers, real-time YouTube sales promotions and home shopping forums.

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