Rick Carmont: A front-seat view of international trade

Growing up on a farm in Pukemoremore near Cambridge, Rick Carmont, a member of the Institute of Directors, never thought he would one day be the global head for one of the businesses of dairy giant Fonterra. But it happened. The role gave Rick a front seat view in the international trade arena. He has since specialised in exporting organic products and has taken on the role of executive director of the Organic Exporters Association of New Zealand (OEANZ), the largest organic trade body in the country. We spoke with Rick recently and he shares his experiences and insights on international trade.

Background

I was raised on a modest 70-cow dairy farm at Pukemoremore. I joined Bruntwood Cheese Factory in 1979 and gained a New Zealand Dairy Board scholarship to Massey University. I moved around the country with the dairy industry to gain promotions and in 1995 commenced a seven-year service as CEO of New Zealand’s 5th largest dairy company immediately prior to the formation of Fonterra. I was the global head of Fonterra’s Organic, US Milks and Super Kosher businesses from 2002 to 2011. These were all start-up businesses that grew to operating a range of dairy products and traded around 10,000 metric tonnes over 12 markets. I am the executive director of the OEANZ, the largest organic trade body in New Zealand serving about 140 organic food and beverage exporters with export receipts of about $400 million. I also consult for dozens of national and foreign organic food and beverage companies.

Tell us about a challenging trade-related experience you’ve had? How did you resolve it and what did you learn from it?

One of the members of OEANZ was under investigation by the Singapore authorities regarding their organic status.The difficulty included the fact that the Singapore food regulations do not stipulate a definition or specify standards for ‘organic food’, according to the Agri-Food & Veterinary Authority (AVA). Food products which are labelled as ‘organic food’, ‘organically produced’ or carry words or logos of similar meanings have to be certified by a recognised certification authority. Importers and retailers of organic food products have to produce the original organic certificate when required by AVA officers for verification.

We were able to act as an independent advocate on behalf of our member and provide a letter of credibility and confirm the validations they supplied. A key learning was to be ready to give an account of your credentials to local authorities as there are often competitors who will do whatever they can to ensure you do not have easy access to what they may consider their market – whether they are domiciled there or not.In a highly regulated market like organics, regulation can be your best friend.

Another learning is to strategically balance your markets.To have more than 25% of your business moving to a single market or customer can put undue risk on your business. Organic products are regulated in over 90 markets.These regulations can change to meet local conditions. The New Zealand government has specific organic agreements with five markets and effective organic arrangements with about 35 countries. New Zealand trades with about 90 countries so that leaves about two thirds of the markets vulnerable to change. I have witnessed great companies collapse by placing more than half their business in a single market or customer only to have that product fail some regulatory aspect.

Directors of exporting companies need to ensure they have on their company radar any proposed and actual changes in their respective markets due to regulation. The risk is significantly reduced where bilateral agreements are in place as these agreements give time for transition (sometimes measured in years) to adjust for any changes. The agreements also require each party to notify the other of any changes in law so as to ensure there are no surprises. Where no bilateral arrangements are in place, the regulatory landscape can change any time. I have witnessed this too and its effect on some of our largest companies, usually causing urgent action on behalf of trade officials.

What do you think is the biggest challenge for NZ businesses in the trade sector?

From an organic industry’s perspective, our biggest challenge is the lack of organic regulation in New Zealand.This has been acknowledged by government in 2017 and they are now progressing a new act supporting regulation of organics. The current state has created difficulties in reaching bilateral trade agreements with some of the biggest organic markets.Other challenges are more generic like the small size of the New Zealand market.

What advice will you give to directors who are starting out in the trade space?

Utilise the expertise that exists within the New Zealand Trade & Enterprise (NZTE).NZTE has an extensive range of self-help materials for those taking the leap into exporting. They also have a number of workshops around the country that are like gold to the hungry first-time exporter. Other resources include the New Zealand School of Export based in Palmerston North. This training facility is focused on exporting out of New Zealand. It trains New Zealand-based students who are working with businesses who are, or are planning, to export.

What skills/knowledge do you think should directors have given the changing operating environment?

A key skill for directors is the ability to determine what talent and expertise lies around the table and what does not. This doesn’t necessarily require changes to the board composition but it may require a willingness and a continuous desire to bring in advisors and experts in fields where the board may be a little light. For example, if a business is seeking to enter a certain market, there are metrics they can find on the web. There are other facts that may need NZTE support. I think a key resource that businesses tend to overlook are from trade associations.Is the business considering exporting to India?Then invite key executives from the New Zealand-India Trade Alliance to meet with the board. This association only has one objective – to increase trade between New Zealand and India. There is no more focused resource available.

How do you keep yourself on top of your game?

Plenty of reading always helps. As someone with a home office, I make solid plans to get out and about the country meeting various members, engaging with staff from the Ministry for Primary Industries and taking development courses. Listening to seasoned experts and successful directors helps me retain knowledge more than if I simply read their book. This is why IoD branch events are one of my favourite engagements.

What are you passionate about outside work?

I love travel and flying. I climbed Mount Taranaki, have visited 38 countries, and taken over 1,700 recorded flights. I met Barrack Obama while piloting a plane at Midway Airport two years before his presidency.

Who/what inspires you?

Those who serve on boards of charities. I also sit on two not-for-profit (NFP) boards as a trustee, one as Chair for 11 years. I see real benefits of going back to help the community and it’s humbling to see the hundreds of volunteers who keep the fabric of our society functioning.

What do you believe are New Zealand exporters’ strengths and weaknesses?

From an organic food and beverage standpoint, New Zealand exports more of its production than any other country. So right from the conception of production, exporting or being able to leverage your product/brand in foreign markets is usually considered. I do not believe this is the case for most of our foreign competitors who often move into exporting after meeting domestic demand. This mindset sits right through the value chain and growth of many New Zealand food and beverage companies. In the US, most organic products are produced to meet the USDA National Organic Program rules. In New Zealand, most organic products are produced to meet the organic rules of about 90 countries. This gives our exporters great strength, confidence and credibility in the marketplace. It also allows foreign purchasers of ingredients the ability to on-sell their final products to more markets. Our weaknesses include our inability to scale up and our distance to markets. Our small economy means most transactions are conducted in US dollars and companies are wise to have hedging arrangements in place.

How has your membership of IoD helped you as a director?

I joined the IoD about six years ago. I completed the governance essentials day course and in 2016, I completed the week long company directors’ course. During this time, I also regularly attend local events. This year, I completed and passed the Chartered Member assessment and will apply to become a Chartered Member later in the year. Membership helps me by giving me access to resources and most importantly networking opportunities during local events. The one-day courses assist with keeping up-to-date with my governance skills and ongoing investment in my development. Every month, I like to scan through the vacancies and find those that connect with my passion.