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Passion drives success for SME exporters

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Australian SME exporters are showing more optimism in 2015, with a survey by the Export Finance and Insurance Corporation (Efic) showing 39 per cent expected higher export sales over the next 12 months. With Australian SMEs accounting for more than 38 per cent of the nation’s total exports, how can smaller firms win bigger deals in the global market?

Two Queensland SMEs with a track record of success in international markets have expanded globally by staying true to their values and focusing on the customer – something all businesses can learn from.

At a recent presentation at the Queensland Japan Chamber of Commerce and Industry (QJCCI) in Brisbane, Gordon Edwards, managing director of Ayr-based functional foods maker KFSU, told the audience that small businesses could succeed in export markets by “putting the hard yards in.”

Australia’s second-largest trading partner, Japan has been the biggest export market for the company’s products, but Edwards said it had taken perseverance and commitment to build his business overseas.

“We’ve been involved with Japan since 2006 and we’re just starting now to get serious traction. We were there when we were supposed to be, and when things went quiet we went back,” he said.

“One of the things with any market and especially Japan is you’ve got to turn up every year, or ideally every quarter. They’ve had every Tom, Dick and Jill turn up and say they’re going to give them the next big thing, and they don’t. They need to see you’re going to put in the hard yards.”

Since its founding in 2006, KFSU has increased annual production to 1,500 tonnes, with wholesale distribution established in Japan, the United States, South America, Australia and New Zealand.

Focusing on innovation, the company has attracted some large customers, including Japanese hamburger chain Lotteria for its Phytocel wholesale brand, a natural functional food which offers “significant cost savings to customers.” It is targeting the global healthy foods market, worth an estimated $1 trillion by 2017.

KFSU’s retail brand, Kfibre is expected to be in around “2,000 pharmacies in the next 18 months” in Australia, with benefits for medical conditions including constipation and reflux, a US$60 billion market in the United States. Edwards said the company was also evaluating a sugarcane juice product among other expansion plans focused on markets in Japan, the United States and elsewhere.

“We’ve gone from producing 100 tonnes a year to now doing 1,500 tonnes,” he said. “We’ve got a good product, good distributors and we’ve spent a lot on protecting our product – we want to become big, as what’s the point of staying small?”

Edwards also pointed to the value of leveraging relationships, including his firm’s involvement with the QJCCI’s 2012 Japan business mission and support from government, investors and accountants, among others. The company has raised over $12 million to support its growth, spending $5 million on its state-of-the-art production line in Ayr, and aims to grow EBIT from an estimated $7 million in 2016 to $50 million by 2018 as it continues its expansion.KFSU retail brand in pharmacies

Perfect values?

Another SME exporter which has found success by staying true to its values is Brisbane-based cosmetics company Perfect Potion.

With a tagline of “how would you like to feel today?”, the family owned company has grown since its founding in 1991 to have 12 stores in Australia and nine in Japan, with distribution in Europe, Macau, New Zealand, Singapore, South Korea and Taiwan. The company has also grown its staff to 130, maintaining its own manufacturing facility in Brisbane.

Managing Director Salvatore Battaglia told the QJCCI in an August presentation that the company is focused on growing its business in Australia, Japan and other international markets. But despite the hype, one market it does not plan on entering is China, due to Chinese regulations requiring animal testing of imported cosmetics.

“We have very strong ethics and values and we’re strongly against any form of animal testing, being a proud member of Cruelty Free Australia. Unlike our competitors, we have stood our ground and said no to animal testing, and for that we have won a lot of support and respect from our Japanese and Australian customers. But we still have bold ambitions, including entering the North American market,” he said.

Having sent its first export container to Japan in 1998, Perfect Potion has grown its Japan business from its base in the ancient capital of Kyoto, being one of the first Australian companies to establish a retail chain in Japan.

Battaglia pointed to Japan’s sophisticated retail environment, appreciation of the “Perfect Potion experience” offered by its concept stores and Japanese consumer awareness of the company’s values as organic, natural and LOHAS as reasons for its success in the world’s third-biggest economy, including having the right business partner – in Perfect Potion’s case, a 30-something Japanese single mother with a passion for the business.

According to Battaglia, businesses can succeed in Japan by maintaining their values, instilling the right operating, training and recruiting systems and developing a team culture, despite challenges such as obtaining bank finance and rental guarantees.

“In business, you need to know who you are marketing to – the customer demographic we have in Australia is the same in Japan,” he said.

Battaglia stressed the importance of developing the same global corporate culture, with staff from his company’s Japanese outlets and Australian outlets doing regular exchanges to ensure regardless of location, customers have the same Perfect Potion experience.

For Australian SMEs, the lesson appears to be that it is possible to succeed in overseas markets by maintaining the same values, demonstrating commitment and building a global corporate culture, despite the challenge of operating in different environments. The results may not occur overnight, but as shown by these two SMEs the investment should ultimately prove highly rewarding.

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