WITH a free trade agreement between South Korea and Australia likely to be signed within the next two years, now is the time for Brisbane exporters to find their markets in a population of almost 50 million people. Brisbane Business News speaks with three companies about the reception of ‘brand Queensland’ in the Korean food industry, while a Trade Queensland officer gives insight into the state’s third-largest trading partner.
When Rutian Mi from Trisco Foods went on a business trip to Japan three years ago he decided on a one-day stopover in South Korea. In those 24 hours he planted the seeds for what is now his biggest export market.
The international business development manager may be Chinese-born but when everyone else tried to make their mark in the Middle Kingdom, Mi found opportunity elsewhere.
“Everybody goes to China and we did too, but we thought it better to look at other markets and decided Japan and Korea could be a second project,” he says.
“Marketing is like The Art of War by Sun Tzu. You need to attack the weaknesses, so seeing that China was all set-up and Korea is much less competitive for the donut fillings we produce, that was where we’d go.
“I only had one day in Seoul but the Queensland trade representative there Andrew McCarrol organised meetings with seven companies, so it was a very tight schedule – we picked up a partner that was not a very big company but they were very cooperative and they’ve been dedicated to our product.”
Trisco entered the market as part of the Grow Korea initiative and found clients with Dunkin’ Donuts and the country’s largest bakery Paris Baguette.
“For Dunkin’ Donuts Korea we develop a new product every season which works as a promotional product and that’s been successful. It started out with a mango donut filling two years ago for summer and we’ve since developed blueberry and raspberry fillings too,” says Mi.
“In Korea they don’t like sweetness, so we’ve reduced that and we’ve become very good and making supply for them that suits their tastes. There’s also a health concern, they don’t like artificial colouring or artificial flavours – they want something natural like fruits, which is why they like Australia and why our mango filling has gone so well.
“Every month we export a container of filling to Korea and the average per container is about 15 tonnes – that’s a lot of donuts when you think each donut has a filling of about 50 to 100 grams.
“From the start it was very slow because it was a new account for them and a new market as well for us, but once you’re set up and have good relationships with businesses, it’s very stable, we’ve grown very quickly and now Korea has become our biggest export market.”
Trisco exports all around Asia to China, Hong Kong, Taiwan, Malaysia, Singapore, Philippines, Thailand and even the Maldives.
But competitors are hot on the heels of Trisco and the Carole Park-based manufacturer is not winning contracts with Dunkin’ Donuts every season, so Mi plans to expand into other areas.
“Our next target is to diversify into some other food industries like coffee shops, restaurants, quick service restaurants, and we have products we can supply to industrial users too like the dairy companies,” he says.
“We’re currently working on a cafe latte and there’s other drinks we can do too like milkshakes and smoothies, while we’re also working on a maple syrup – you can’t put all your eggs in one basket.”
Mi highlights that Trade Queensland’s assistance to organise one-on-one meetings with partners gave the sort of support that trade shows do not, as well as providing information about local demand and tastes which are different in Korea.
A not-so-soft serve
Frosty Boy international marketing CEO André van Rooyen says Koreans have tastebuds that are ‘par excellence’, but that’s not just because they like his product.
“For instance, with our frozen yoghurt it took 47 formulations before we could get the Koreans to say ‘ah yes, that one we like’. I don’t think anyone can taste as well as they can,” he says.
“Koreans have got the most unbelievable acute taste sense, they will taste things you and I will never sense – we sell our powder to specialty frozen yoghurt stores where our product is very popular because of its extra sourness reminiscent of kimchi, which is a cabbage-based dish that Koreans eat at least once a day.”
Frosty Boy has been in Korea eight years but since the Grow Korea initiative began in 2007 its exports there have doubled, which equates to around 9.6 million servings of frozen yoghurt each year.
“It’s been a long battle, it doesn’t come easy in Korea and they won’t do any business with you until they learn to trust you and build confidence in your relationship,” says van Rooyen.
“It’s all about branding and we always start with brand Australia, and the second thing is brand Queensland which is doing very well in Korea because of the work of their trade office in Seoul. Once you have their support you are likely to sell your own brand.
“I think the current base load of exports to Korea can only grow. I hope it grows exponentially but we can’t be that cheeky. Conservatively I’d say it’ll grow 5 per cent this year and optimistically 10 per cent.”
With the powder produced in its Loganholme plant, Frosty Boy’s 25 staff put together a product that competes with five big Italian companies that had the first-mover advantage in Korea, but it is gaining market share.
“If you look at the market we’re really tiny, like a poodle in a pen with a huge bulldog, but we have to be strong and we have to be careful,” he says.
“We export to just over 30 countries and Korea is just one of those, so as a percentage of our total exports it’s not going to look huge, but if you look at Korea itself at what’s happened in the last three years our exports have doubled, which is quite significant.”
Korea has its fair share of manufacturing and is in close proximity to China, so Frosty Boy is always striving to maintain the edge with its quality, leveraged off of ‘brand Queensland’, while looking for ways to keep efficiency.
“We’ve got to be competitive because there are people manufacturing outside Australia where the cost is much cheaper – you need a semblance of competition and to do that efficiently, which is a never-ending quest,” says van Rooyen.
Van Rooyen says critics of governmental representatives in key export markets are short-sighted, because without them there would be no ‘brand Australia’ or ‘brand Queensland’, which would have seriously damaging effects on exports.
“You read about Queensland Government and how they’ve got export and trade offices around the world and you have people who are critical of that, trying to measure the amount paid with the extra dollars brought in this year,” he says.
“People who look at it that way are very short-sighted. A trade officer in Korea for example might work his heart out in the first few years, and then in the fourth or fifth year the revenue from companies grows exponentially, but that revenue should be traced back to that initial year of effort.”
Queensland’s iconic Weis Frozen Foods also maintained a degree of success in Korea, but the company pulled out last year to focus on the domestic market, says export manager Ben Crothers.
“It was really a capacity issue as our market had grown substantially in Australia and we were building the new factory, so we decided to look after the domestic market and had to sacrifice Korea,” he says.
“We were quite successful there, we were disappointed to pull out, but we plan to go back to Korea once the factory is finished – I’m not involved with the factory, but that should be a minimum of two years away.”
The state’s merchandise exports to South Korea were valued at $6.2 billion in FY09, which makes the Asian nation Queensland’s third-largest trading partner, with 11 per cent of total merchandise exports.
With a free trade agreement in the works these figures are likely to grow.
Not enough land to grow
Department of Employment, Economic Development and Innovation (DEEPI) principal trade officer Andrew McCarrol, says Korea is an interesting case because it has many opportunities for exporters but doesn’t market itself very well to the rest of the world.
“Korea has opportunities in a lot of things and they’ve done a tremendous job in the technology they export, but they don’t market themselves very well overseas,” he says.
“In some respects they’re insular but they do have the ability to do a lot, associated services for businesses in Korea are very quick and we have seen the Korean IT sector open right up.
“The biggest areas where Queensland exports are resources, beef, dairy, wheat and racehorses, while in other food areas Australia is also seen as a very good place to be.”
McCarrol says the Australian dollar will continue to be an issue for exporters, but it will be ‘sooner rather than later’ that Korea signs a free trade agreement (FTA) with Australia.
“They’ve put up a number of artificial barriers, ingredient lists can be difficult to navigate through, but they don’t produce a lot of food and they don’t have enough land to, so they’d have to open up eventually,” he says.
“There are opportunities to be found for those who can wait and have patience to find their markets – you should try to show understanding of the culture, the history and what’s going on, read the Korean news sites in English before going, because in a business meeting you want to be remembered.
“That’s not necessarily knowing about world events relating to Korea but something more detailed and local. They’ll think it’s fantastic and there’s a sublime effect that can have.”
McCarrol says the sheer size of the Korean market makes it quite clear what opportunities Brisbane and Queensland-based businesses can find there.
“It’s a country of 48.8 million people of which around 11 million live in Seoul and if you include the surrounding providence of Gyeonggi that’s 22 million, so about half the country’s people are in an area a fifth the size of Brisbane. It’s kind of a large market.”
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