Whittaker's expects huge growth from export focus

Chinese consumers are estimated to eat about 200g of chocolate each. That's 200g a year.

It would take your average Kiwi just two weeks to top that; per head, we get through about 5kg of chocolate annually.

But Asian markets are developing a sweet tooth, and that is creating opportunities for local chocolate maker Whittaker's.

Matt Whittaker, the head of international markets - and the fourth generation to work in the family-owned business - says Asia and the Middle East have been in the spotlight for the company since he took on the export-focused role several years ago.

In the past, Whittaker's had stuck with the New Zealand and Australian markets, and other areas were handled by a New Zealand consolidator who had overseas connections.

"Export was in the too-hard basket.

"We generated some sales from export but we had no understanding of where the product was in-market, at what price and no brand support, so it was really a little bit of icing on the cake but really off to the side." The Asian markets have high growth potential, admittedly off a low base, and free trade agreements mean those countries have low or no tariffs, Whittaker says.

Before powering up the overseas strategy, Whittaker's had to buy back its rights to export and "sort the wheat from the chaff" regarding its in-market distributors, he says.

It wasn't a scientific process, admits Whittaker, who says existing partners may be great in some areas but fall short in others, often making it harder to evolve from historic pricing and marketing structures.

Head of international markets Matt Whittaker says foreign sales had previously been put in the too-hard basket. Photo / Mark Mitchell

China offered the company a clean slate, with direct sales into 400 Walmart stores.

"We actually service it ourselves ... because it's only one account we don't need in-market resource currently.

"If we brought on additional retailers, which is certainly the plan, we would like to have an in-market resource so we'd ship direct to the retailer and have somebody up there." It's early days for what could be a big market for the company, but Whittaker says it is conscious that the brand is still growing strongly in New Zealand and Australia, and "flicking the switch" on China could create demand that outstrips the capacity of its Porirua factory.

Alongside China, the chocolatier has also expanded into Malaysia - which Whittaker says has been a roaring success, delivering far better than expectations - the Philippines, Vietnam, Hong Kong, Korea, the Middle East and Taiwan.

In the Middle East, things did not go so sweetly, thanks to assumptions made about the New Zealand dollar and commodity prices.

Both were expected to stay low, and when the dollar peaked against the US dollar at the same time as commodity prices soared, it sent the cost of launching sky high at the same time that profitability went south, Whittaker says.

The directors of the business - his father and uncle, Andrew and Brian Whittaker - questioned the continued push into the Middle East, but Whittaker says he fought to keep it going.

"It was tough and it made us really put more thought into the sensitivity of the business cases we were looking at."

Early results from the export push are starting to come in, and the company is forecasting 216 per cent growth in overseas sales between 2013 and the end of the current financial year, next March. This year alone is up 60 per cent on the last, he says.

Whittaker's recently took the title as the most trusted brand in New Zealand for the fourth year in a row.

It's a period that has also been marked by innovative tie-ups - the wildly popular Lewis Road Creamery chocolate milk, blocks laced with L&P, hundreds and thousands, or mimicking Jelly Tip ice creams, and a collaboration with cooking goddess Nigella Lawson.

Whittaker says it's "horses for courses" when it comes to taking that brand message to new markets.

In China, consumers are attracted to New Zealand's reputation for food safety, and blocks are labelled with little white stickers before leaving the Porirua factory to indicate that they are an imported product.

Other markets, such as Malaysia, are drawn to the heritage behind the 120-year-old firm.

"The cornerstone of our brand might change in different markets." And while Nigella Lawson fronts Whittaker's in New Zealand, there isn't yet the budget for big TV campaigns in new markets, where the emphasis instead goes on social media and local PR efforts.

Under the wrapper, translating its products into overseas markets means walking a fine line between catering to local tastes - Asians generally prefer a less sweet, darker chocolate and premium nuts - and the manufacturing plant's ability to cope without undermining efficiency.

"So developing a product that is consistent for Asia and for the Middle East that generates volume back here, not for any individual market but together, enables us to block out production so we can make it simple for those guys to produce.

"It's really about building the components of our brand initially.

"Innovation is certainly exciting for us because it means that's a second step.

"We can build that premium position and then start to innovate but it's not the first step for us.

1."What incentivised Whittaker's to branch out into international markets? Evaluate the benefits that Whittaker's has achieved by conducting international business. What are the potential risks it faces in an international environment?

2. Describe the options of international business strategy/ies (Entry mode) available to Whittaker's and critically evaluate the international business strategy/ies it has used.

3. Imagine you were part of the upper management team at Whittaker's, recommend your ideal international business strategy and justify your recommendation.