An interview with Samir Kumar ‘93
General Manager of Hong Kong Operations
Frontier Foods Ltd.
Frontier Foods, based in Sydney, entered the China market in 1998, selling imported cheese. They have become one of the leading international suppliers of cheese to mainland China, nearly doubling their revenues last year, mostly on the success of their China business strategy.
Q. Did you find that you relied on conventional marketing principles to tap this market, or did you create new rules?
KUMAR: In our opinion, getting to market in China is the most important challenge, rather than following the rules of conventional marketing. Some of the world’s largest companies have squandered large sums of money in the China market, then complained bitterly, blaming the system, regulations, and corruption, when it all fell apart. The fact is China is an emerging market and challenges are very basic–getting product to shelves first in good condition, then maintaining steady pricing and supply; above all going slowly and watching your wallet to be able to endure for the long haul. One must realize that eating habits of a billion people built over thousands of years do not change overnight irrespective of the amount of money you throw at it.
Q. What do potential importers need to know about China?
KUMAR: Opportunities abound but China is still a developing country with low GDP per capita. It’s important to select products the Chinese really need. Everything in the western supermarkets may not necessarily be marketable there. Attend and exhibit at trade fairs and above all EXECUTE. Don’t spend too much time researching. The most important cultural lesson is don’t get caught up in the “you need ‘guanxi’ connections to succeed in China” hype. Do not spend a fortune wining and dining the guanxi-peddling gate keepers. Spend the money on the business instead.
Q. What was your major challenge in bringing a new product to China?
KUMAR: Importation, as duty structures are still high, although they are decreasing because of WTO guidelines. Labeling laws are very stringent, and there is a lack of nationwide distribution and logistics service providers.
Q. Besides pricing, how have you targeted the middle class population?
KUMAR: We used in-store tastings, seminars on the health benefits of cheese, especially for children, tie-ups with local Chinese dairies, and free samples at trade fairs.
Q. How much has training of your distributors played a role in your business success?
KUMAR: They are the key to our success. Most are first generation entrepreneurs brought up in the "to get rich is glorious” maxim perpetuated by Deng Xiaoping. They are keen for success and greatly appreciate being introduced to new opportunities. Cheese, being a new business, meant training them on the proper storage and transportation as well as basics such as how to deal with retailers such as Walmart, which was unknown to them.
Q. Have you encountered language and/or cultural barriers?
KUMAR: The cultural barriers are highly overplayed. Sound business principles are universal. The Chinese have been fast learners of the art of capitalism and today are amongst the most adept in conducting business. We do have local managers who keep in touch with ground realities and really run the show on our behalf as it’s their terrain eventually.
We also have a multilingual website which has helped tremendously in generating sales. In addition, all our brochures are in Chinese too with product usage and description information.
Q. What other opportunities does China offer, especially with its entry in the WTO?
KUMAR: There are great opportunities to supply raw materials for industry and specialized products such as specialty chemicals, paints and floorings for world class manufacturing facilities. Because of the 2008 Olympics in Beijing, there is also demand for Olympic-related contracts in areas such as lighting, design, security systems, and basic supplies and catering for Olympic officals and athletes.
Q. What is the next big market for new food products?
KUMAR: We have had an office in Vietnam for the past 7 years and that is the next market that would have tremendous upside potential for western style food products, as it’s still largely untapped.
Samir Kumar, an Indian native residing in Hong Kong since 1994, has been with Frontier Foods since 1996, where he is also a shareholder and director. Frontier Foods Ltd. (www.frontierfoodsonline.com) is based in Sydney, Australia. For more information, contact the author at samir_13@yahoo.com.
Are guanxi connections necessary to doing business in China? Send your opinions and experiences to globalvista@thunderbird.edu.
