Samir Kumar of Frontier Foods with some of the products the Australian company widely distributes in China

When Samir Kumar receives a mixed consignment of food products in Hong Kong, he has no worries about dispatching them onwards to his distribution chain in the Chinese mainland.

There may be olive oil for hotels in Hangzhou, wine for shops in Xiamen, specialised baking oil destined for a school for professional chefs in Guangzhou, cheese packed in Melbourne with Chinese-printed labels aimed for the largest dairy firm in China, and pickled olives for supermarkets throughout the country.

"One of the great advantages of using Hong Kong as a base for expansion into China is the very efficient customs service," says the Indian-born, American-educated general manager of Sydney-based Frontier Foods Pty Ltd.

He contends it's much easier, simpler, swifter and more cost-effective to receive shipments in Hong Kong, then to distribute into the mainland, rather than try to ship directly. Indeed, Mr Kumar says, "Hong Kong has the best customs department in the world."

That is why a conscious decision was made by Frontier in 1999 to establish headquarters for its Chinese operation in Hong Kong. It's a strategy that has paid dividends.

A Hong Kong presence 'critical'

"Setting up in Hong Kong has been critical in terms of information flow, market intelligence, trade opportunities, and also logistics and banking advantages," he maintains.

Low tax rates and transparent legal and business systems are other reasons the MBA graduate likes the Hong Kong investment climate.

"The great transport links to China help oil the wheels," he said. "Our major distribution centre is in Guangzhou, southern China. I can get on a bus, ferry, plane or train and be there in the morning and home again that night. Anywhere else in the country, there are flights every day.

"At the same time, we've got Hong Kong's integration with the world and the free flow of capital, news, people and information."

Their products are on the shelves of Walmart, Makro, Carrefour and Park'n'Shops.

"We pioneered packing cheeses in Australia with Chinese labels under famous Chinese brands," he said. "This is now one of our fastest growing sectors."

There's also wine, milk and olive oil. In Guangzhou, Frontier's Purol oil, specially designed for baking, is used in the Success Baking School, where personal appearances in baking seminars are conducted by Frontier's manager, Cao Y. Liang.

"It's important to our success having local staff on the ground managing and running our business, developing relationships and bridging the cultural divide which is so critical to doing business in China," Mr Kumar said.

"Mr Cao teaches professional chefs of the mysteries of pastry and bread. We educate as well as sell."

Part of that includes personal appearances he makes, speaking both to customers and the retail industry. In January, Mr Kumar will be addressing professionals at China Dairy Marketing 2003 trade show, speaking about competitive assessment in the supermarket supply chain now that China is in the WTO.

He points out that a lot of buying decisions, especially for perishables and foods, are now made in air-conditioned supermarkets rather than the traditional street food bazaars.

And items which are not a traditional feature on the Chinese home table are now popular, things like cheese and milk and bread.

Related links:
Frontier Foods www.frontierfoodsonline.com
Australian Chamber of Commerce www.austcham.com.hk
Walmart www.walmart.com
Carrefour www.carrefour.com
Park'n'Shop www.parknshop.com