Opinion

Fonterra's problem lies mainly in how it communicates with the Chinese

By RJ Whitehead

- Last updated on GMT

Fonterra's problem lies mainly in how it communicates with the Chinese

Related tags: New zealand

The longstanding dairy relationship between China and New Zealand ought not to have worked so well, but it has, and will continue to, in spite of two substantial safety scares this year alone.

What began generations ago as genuine appreciation from a closed and industrially inefficient country towards a first-world nation at a time when China was being shunned by the rest of the world has since flourished into a bizarre, mutually symbiotic relationship.

In China, New Zealand today has one of its most important trading partners, with Fonterra the single biggest part of that relationship. In return, the dragon nation is reliant on the smaller kiwi for 70% of its infant formula supplies - a massively important commodity at a time when its demographics are shifting so substantially while there is such little confidence in homegrown products.

Relationship of trust

Recent generations of Chinese have put their trust in New Zealand’s biggest company, and it is because of this that so many groups in the country, from politicians and administrators to importers, mothers and the media, have felt slighted first by the dicyandiamide (DCD) scare, and now by this month’s botulism panic.

Of course, China will get over it, if not only because the alternatives are so unappealing. In a country where the 2008 melamine scandal is still at the front of people’s memories, the belief that such contaminations will be picked up early (even if such knowledge is not then widely communicated to the broader industry), and then followed by recalls, is vital for consumer confidence.

Their affection is towards New Zealand, not Fonterra. Chinese authorities idolise a country that has developed as an agricultural power while eating at the top table of Western industrialised countries.

They appreciate the way they can communicate with the country’s authorities on both political and regulatory levels, and to reward the government’s willingness to meet China’s processes, the vastly larger country has issued is diminutive friend with a diplomatic hall pass - the gold standard in this climate of shifting trade when nations are striving for ever bigger chunks of the Brics market.

Unwitting villain of the piece

Fonterra, on the other hand, is tolerated at best. The latest incident was greeted in China with surprise and disappointment for a company that plays such an important role in family life among an influential segment of the country's society.

While most of those who are familiar with recent events will concede that Fonterra acted in each step of the crisis in a textbook manner, Chinese consumers will not be placated. They will still feel slighted in spite of the comments made by Fonterra chief executive Theo Spierings during his firefighting visits to China over the last month.

As the Chinese see it, Fonterra does not speak to them the way New Zealand does as a whole. Rather, its approach has been to bumble through its second scare in just several months. 

China’s patience with New Zealand is not infinite, however. That the authorities took quick and decisive action to detain milk powder shipments at the country’s ports this month will have been well received by consumers, but it will also concern Kiwi trade envoys who understand how the move has opened up a small hole in New Zealand’s diplomatic armour.

Time to take action

It now falls on Fonterra to move to repair this breach, and it can do so by looking at how it communicates to its Chinese market, and finding ways to convey that it is not just another bumbling multinational. It has to repay the trust shown in it by its Chinese customers by speaking to them as mothers and fathers, not as numbers on a graph.

Fonterra has done well in China in so many ways, but it still has much to learn about how to communicate with this most complex of markets. 

It must move quickly to convince the Chinese that it is as Kiwi and clear-thinking as the visionary New Zealand politicians that forged the special relationship on which it thrives.

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