Why the Australian food industry needs Alibaba

Being employee number 48 in one of the biggest online retail channels on the planet that employees more than 100,000 people worldwide, means people sit up and listen when you have something to say. And Maggie Zhou has a lot of interesting things to say when it comes to China-based Alibaba making inroads into the Australian food market.

With revenue of $57 billion and climbing, the Zhejiang-based company knows that Australia and New Zealand both play an important part in the future of Asian food supply, thus sending big hitter Zhou to set up the Australasian operation in early 2017.

Zhou is quick to point out that Alibaba has more than 654 million active consumers in China and that number is growing year by year. To put things in perspective, when current Alibaba CEO, Daniel Zhang, was running Tmall, the largest B2C platform in China, he created the 11.11 Global Shopping Festival. This annual sales event ended up having three times the gross sales of Black Friday and Cyber Monday combined.

It is these types of numbers that should make Australasian farmers, food processors, food and beverage packaging specialists, and other interested third parties stand up and take notice. While hosting a lunch table at the Global Food Forum, Zhou made it clear that Alibaba’s ambitions, along with those of the Australian food and beverage sector, are similar.

“Alibaba sees great opportunities for Australian products and food that it produces,” she said. “Events like the Global Food Forum are very important [so we can] share knowledge and work together to work out the challenges that we come across in the industry.”

The Chinese Consumer Equation
Founded in 1999 by Jack Ma and his 17 co-founders, Alibaba has transformed the way how business is conducted by empowering small to medium enterprises with the technology infrastructure and marketing reach they might not otherwise have if left to their own devices.

“Ninety-five per cent of Chinese businesses are SMEs,” said Zhou. “Our mission has never changed from the beginning, which is; to make doing business easy, anywhere. We still believe that – to make business easy anywhere – but now, over the past 10 years, this includes in the digital arena.”

So, what are Chinese consumers looking for in Australian goods when it comes to the food and beverage industry?

“Australia has a very strong image as clean and safe. When Jack (Alibaba founder Jack Ma) was in Australia and New Zealand two years ago, he mentioned the clean and green image,” said Zhou. “Clean water. Clean air and clean soil. While mining may be big business, it is those three things – the environment – that is our treasure. All the things that are related to eating, drinking, what you put on your skin – there is a huge demand for these things from the Chinese consumer. We can see big and potential growth for food. The market for baby formula and vitamins is also very strong.”

Within the beverage sector, Zhou is seeing huge growth for Chinese citizens wanting Australian wines.

“Year on year growth for wine is 33 per cent compared with the French wine,” she said. “This growth is due to the Chinese middle-class consumer, which now number more than 300 million and is still growing. It’s an amazing opportunity for Australian exporters.

Australian wine going to China has zero duty due to the International Trade Agreement between the two countries.”

Alibaba knows that the Chinese demand for such products means they have had to invest in brick and mortar stores on the Chinese mainland, as well as distribution centres. The company has also invested in the RTMart Fresh supermarket chain. As the name suggests, fresh produce is also big on the Chinese consumer’s “must-have” list. “Today, in China, many Chinese love Australian food, especially fresh food,” Zhou said.

The importance of traceability
As well as Australian food standards being a beacon of light when it comes to trustworthiness of a product, traceability is something that Chinese consumers take seriously. In March 2017, Alibaba signed an MoU with vitamin supplier Blackmores, and Australian Post, to establish a pilot program that uses blockchain technology in an attempt to curb food fraud. While visiting New Zealand and Australia in 2018, CEO Zhang announced that the world’s biggest dairy exporter, New Zealand’s Fonterra, and Blackmores and launched a pilot order through Alibaba’s Food Trust Framework. This was done via Tmall Global, a cross-border trade platform under Alibaba’s Tmall, which was sponsoring an initiative that, again, uses blockchain technology to improve supply chain traceability.

While all these initiatives put the Australian food and beverage products in a good light, there are some common mistakes made when dealing with China – easily avoidable ones. One being, that just because from an economies of scale point of view the Chinese market is huge, don’t bet on getting even a small slice of the pie if you haven’t done your homework. Because, even though a minute piece of China’s ever-increasing 300 million middle-class can have financial benefits for a SME trying to make headway, it will come to nothing if you don’t do the research.

“Some of the mistakes the brand owner might think, ‘oh, Alibaba is big enough to launch my product’. You need team work,” said Zhou. “You need that to work in China. You also need to have a strong commitment to the Chinese market. You need to find a partner in China, but you also have to have your own team to work in China as well as Alibaba.”

The other thing a potential exporter needs to realise that just because a brand is strong in Australia, doesn’t mean it will be good in China. Chinese consumers have tastes that are completely different from the mainly European-dominated taste palettes from Australia.
They need to understand the market better and decide what kind of products might be suitable for the Chinese market. Maybe find out about Chinese consumer habits before going into the market. Also, packaging is very important

“Australians sometimes think ‘I’ll send a food gift to my friend’, and give it ugly packaging,” said Zhou. “Packaging is very important. When people start working with us, they already think in terms of great packaging.”

The future of digital retail
Unsurprisingly, Alibaba takes a collective approach when it comes to measuring success.
“I was just back from our top management meeting,” said Zhou. “This year, we decided we’d go from our synergy mantra to one of unity. That we are all in it together – like one brain; thinking in terms of strategy and execution. We want to bring more power to the suppliers and producers outside of China into our ecosystem.”

Just how important can Alibaba be to the Australasian food and beverage industry? Its long-term strategic plan says it all – “Alibaba’s long-term goal is to serve two billion consumers around the world and support 10 million businesses to operate profitably”.
The company intends to do this by using three key initiatives: globalisation of its brand; giving China’s 590 million rural citizens greater access to high-quality goods; and a data strategy that incorporates data technology as opposed to information technology. In other words, embracing Big Data and cloud computing. Zhou said there is a sizable sector of Chinese consumers who are embracing prepacked meals. Besides vitamins, Chinese consumers want cereals, snacks and healthy foods, she said.

“They want to try things, so they want products in small packages initially,” said Zhou. “Chinese consumers want to experience the taste first. Many people might follow a trend, maybe they don’t know much about a particular product, but their colleague might tell them it is very good. Then the whole team will follow their advice.”

One reason Alibaba is part of a lot of Expos both in Australia and overseas is to incubate SMEs in order to get brand awareness out in the marketplace. These Expos expose the brands to Chinese merchandisers. Zhou is explicit in the term, merchandiser, not “daigou”, who are the Australian-based personal shoppers for Chinese clients.

“That is why we had expos in Melbourne and Sydney,” she said. “We had over 150 exhibitors – mainly small- to medium-sized brands. That is why expos are important. When it comes to vitamins for example, even companies like Blackmores and Suisse need to get their new products into the expo. The Chinese community that live here – we call them merchandisers, not daigou. We think of daigou as those who simply deliver products from Australia to China. A merchandiser, however, is more professional. They tell the story behind the brand and can reach the Chinese consumer better.”

Zhou believes there are still many different digital strategies that need to be explored. Its Taobao Global platform is but one.

“Taobao Global is a portal for those merchandisers who are doing live streaming and tells the story behind a brand,” she said. “One live streaming product – in just one hour – attracted 2.4 million viewers. This is very helpful in incubating the brand awareness and working in local ecosystems.” And if brands, SMEs and anybody else is trying to figure out the end-game of where Alibaba is heading, a paragraph in its corporate overview sums it up.

“The consumer retail industry is experiencing radical disruption driven by digital technology. We believe e-commerce will be replaced by New Retail where the distinction between online and offline retail becomes obsolete. We have been driving the development of New Retail with the vision of delivering true convergence of the online and offline consumer experience through mobile and enterprise technology.”

In other words, Alibaba is at the cutting edge, and not only intends on staying there, but leading the way.

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