Case Studies of Australian Businesses in China
Bonlac Foods (draft)
Bonlac Foods Limited, one of Australia's largest manufacturers of dairy products and ingredients, has been exporting dairy ingredient products to China since the early 1990s. In 2001, its world-wide sales revenues exceeded A$1 billion, with half its sales coming from its exports to more than 50 countries. China purchases about 10 000 tonnes of Bonlac's total annual overseas sales of about 120 000 tonnes of dairy products.
Bonlac established its China business through trade enquiries following a management expansion decision. Its main exports to China are wholesale dairy ingredients to produce biscuits and bakery products. The bulk of its sales are conducted through the offices of other multinationals and individual sales intermediaries, with recent Bonlac restructuring broadening available sales outlets.
While Bonlac's business relationship with China is successful, it considers China a challenging market to understand and continue thriving in. It is crucial for exporters to gain a strong knowledge of the market and likely competitors prior to entry. Connections and relationship building are vital. Securing prompt payment of outstanding debts is an ongoing challenge; Bonlac has tried to shift some of this payment risk from itself to its distributors, requiring them to deal with this issue. Repatriation of funds, while improving, also remains an occasional problem. A good understanding of the regulations and bodies involved in trade financing is very important, as meeting requirements can be difficult.
Despite these challenges, Bonlac is positive about its future in China. Falling tariffs over recent years and further cuts now promised under WTO will boost Chinese demand for higher quality produce in the years ahead. Longer term improvements in Chinese incomes will likely begin to boost demand for quality retail products also.
Source: Bonlac Foods Limited, 2002.
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