Trends, disasters, war and political unrest
Changing trends and consumer behaviour
- Trends are sustained shifts in what people want, and they are the change most likely to be permanent.
- Trends that currently move New Zealand exporters:
- Health and wellbeing — demand for lower sugar, higher protein, natural ingredients, provenance and traceability.
- Plant-based and alternative products, which both threaten and create markets for food exporters.
- Environmental concern, expressed as demand for lower-impact packaging, production and freight.
- Ethical sourcing — customers wanting to know who made the product and under what conditions.
- Convenience and format change — smaller households, single-serve, subscription and delivery.
- Ageing populations in several major markets, changing what and how much is bought.
- Responses: reformulating products, launching into the new segment, repositioning existing products, exiting a declining category, or acquiring a business already in the growing one.
- The judgement is always the same: is this a trend or a fashion? Responding to a fashion with a multi-year strategic commitment is how businesses lose money.
Natural disasters
- Natural disasters — earthquakes, floods, cyclones, droughts, volcanic events, disease outbreaks — hit a global business in three ways:
- Production. Damaged sites, lost crops, staff unable to work.
- Supply. An input from an affected region stops arriving.
- Distribution. Ports, roads and airports closed, so finished product cannot move.
- New Zealand is exposed on all three: it is seismically active, weather-dependent for its largest export sector, and reliant on a small number of ports.
- Responses:
- Multiple sites and multiple suppliers, so no single event stops everything.
- Higher inventory held closer to customers — expensive, but it buys time.
- Business continuity planning and insurance.
- Diversifying growing regions or supply countries.
- Flexible freight arrangements so a closed port has an alternative.
- The trade-off is always resilience against efficiency. A single supplier and low stock is the cheapest way to run, right up to the moment it fails.
War and political unrest
- War, sanctions, political instability and civil unrest can close a market with no notice.
- The effects on a business:
- A market disappears, taking its revenue with it, and any stock or assets in it may be unrecoverable.
- Payment fails — sanctions and banking restrictions can make it impossible to be paid for goods already shipped.
- Supply routes close or become dangerous and expensive, and insurance rises or is withdrawn.
- Input prices spike, particularly energy and freight, and those effects reach businesses with no connection to the conflict.
- Reputational pressure to withdraw from a market, from customers, staff and governments.
- Responses:
- Market diversification, again — the single most reliable protection against political risk.
- Assessing political risk before entry, and structuring the entry so exposure is limited.
- Payment protection — letters of credit, credit insurance, payment in advance.
- Limiting fixed assets in high-risk markets, using agents and distributors instead of owned operations.
- Planned withdrawal, executed deliberately rather than in a panic.
Other political change
- Trade policy. New tariffs, quotas or a new free trade agreement change an exporter's landed cost overnight.
- Regulation. Product standards, labelling rules and import requirements differ by country and change.
- Government stability. Rules that shift with each administration make long-term investment hard to justify.