We consider the success of both Xero and A2 Milk to be a positive wake up call for all NZ companies. Both companies have been absolute run-away success stories and have combined market capitalisations of over $25 billion now, compared to only c$200 million just 10 years ago!
Source: Factset, 10 years
Xero has spurred on an entire industry of growth tech companies
There is no shortage of tech companies trying to emulate Xero, with varying levels of success. It’s a great time to be a growth tech company in NZ with many private capital funders in the market and an active angel and high net worth investing scene. There is more to come, with the government announcing a further $300 million venture capital fund.
We see numerous companies in the consumer and primary products sectors
A2 Milk has managed to turn a simple generic variation in milk protein into one of the most valuable dairy brands in the world. Where are the innovation and IP focused companies looking to emulate their success? We see a lot of companies in the area, but few are really differentiated. There are certainly pockets of outstanding success, such as the Kiwifruit industry, but we believe there could be more.
NZ is ideally positioned to merge provenance with technology…
What we are seeing in markets around the world is consumers demanding ethical, authentic, sustainable products and brands which engage directly with consumers. This is a golden opportunity for NZ’s primary producers to be at the forefront of this movement. NZ has always suffered from the tyranny of distance to our markets, but technology has effectively ‘shrunk’ the world. We need to amplify what we do and how we do it to consumers directly to elicit the levels of engagement that an A2 Milk has with its brand. This will result in consumers willing to pay for the full inherent ‘benefits’ that come from consuming products which have been produced in the correct manner, by companies that care.
…and to amplify through social media and direct customer feedback
Historically, NZ would never have had the opportunity to engage directly with consumers in foreign countries. But with new social media and technology tools, this is now achievable in a cost-effective manner. Understanding how to navigate these areas is difficult and our productive sector must bring digital native millennials into old (and start-up) companies to enable direct relationships to be forged with consumers. The massive success of the online channels in China and the US mean NZ companies now have the potential to reach directly into those large consumer markets.
Allbirds is a great example a company exploiting technology and provenance
Allbirds, the NZ founded producer of woollen shoes, which initially only sold directly to consumers via the internet, is a great example of a company taking the best design and provenance of NZ raw materials, adding a sustainability angle, and telling a great authentic story about their product. It is then connected to consumers via social media and PR, rather than specific expensive marketing campaigns.
NZ companies are well placed to be more expansive
At Milford we see lots of growth companies every year. We’d like to see more that are blurring the lines between high value consumer products and amplifying their consumer interaction via new technologies.