2014-05-05 09:12Shanghai DailyWeb Editor: Qin Dexing
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When it comes to the dairy industry, Howard Moore's experience is a long line straight up. But his attempts to shake up the Chinese dairy industry have been a learning curve.
In 2010, the 63-year-old New Zealand dairy expert decided to try his hand in China. To tap into northeastern grassland, Moore's Shanghai-based Taranaki Dairy Technologies teamed up with Chinese investment firm Fortune Link and the government of Aihui District in the city of Heihe in Heilongjiang Province.
The venture was granted 50,000 hectares of what Moore described as "highly fertile grasslands" at a low cost by the Aihui government. There, the company planned to implement a model that lowers feed costs, the most expensive element in dairy production, by growing alfalfa and other silage grasses on-site rather than importing and transporting feed to the farm.
Moore certainly brought strong credentials to the project. In work in the US and New Zealand since the 1970s, he championed biotechnology in the dairy industry. His research helped lead to the formation of global dairy giant Fonterra's on-farm research arm ViaLactia. He also helped pioneer innovative industry payment systems and managed large-scale milk production projects. He was a co-founder of Nasdaq-listed pharmaceuticals company Tercica.
But in a tale that will be familiar to many overseas investors, the optimism at the start of his China project soon faded.
As a minority investor, Taranaki Dairy found itself slowly estranged from the governance process, and the company's model was never fully implemented.
Moore described the breakdown in communications and involvement as heartbreaking on both a business and a personal level. But now he is looking to greener pastures.
Taranaki Dairy is taking a second swing at proving the benefits of its model, embarking on a project in Tangyuan County in Heilongjiang, with the support of the provincial government.
Moore sat down with Shanghai Daily to talk lessons he has learned, why he still finds China attractive and what advice he has to give other entrepreneurs.
Q: Why China at this point in your career?
A: I became aware of the opportunity to gain access to large areas of grassland in a part of China with highly fertile soils and good rainfall. It was too good to be ignored. The more I researched it, the greater the opportunity seemed. Not only because of what I could see, but also because of the direction the dairy industry has gone here. There's a failure to integrate forage and milk production, which is how dairy farming is done all around the world.
Q: Your first venture didn't work out as planned. What lessons are you taking into this new project?
A: For us to be able to bring our technology to China, we have to have partners who are willing to accept the technology as preferred or superior to what exists, and then are either prepared to implement it based on our recommendations or are prepared to delegate control to implement it. That runs against the way traditional businesses are managed here, where a minority shareholder might not typically dictate decisions.
Q: So the problem was rooted in cultural differences?
A: Companies here have been run on belief in key leaders and decision-makers, whom people tend to follow out of blind faith and obligation. That's the old way. The modern way is based on sound rational analysis and decision-making — good business practices. New China is adopting those, allowing companies here to operate as well anywhere in the world.
Q: What are you hoping to achieve with the new project?
A: This new project will allow us to demonstrate that our model really can deliver much lower feed costs and much higher profitability in terms of milk production. It will also make people realize there is a lot more value in those grasslands than is currently being utilized.
Q: How do you reply to those who are skeptical that the land on offer isn't right for growing feed?
A: Just watch this space. The skeptics are always there and, to be fair to them, others have tried this, but they have tried it badly. New Zealand farmers have demonstrated that they are probably the best in the world for using pastureland. We use it extremely well.
Q: The problems of the first project haven't made you hesitant?
A: In China, there are only the quick and the dead. While the opportunities are great here, there are so many potential competitors. If you don't seize the day, there is someone who is going to beat you to it. Sometimes you may not get it right, but at least you got there first.
Q: You've talked in the past about the importance of being on the ground in running a business. Has this been key factor for you?
A: Whether you are going to the US or China and trying to start up, the first thing you have to realize is that you are in competition with locals and starting with a handicap. The only chance of out-competing them is to be there. I see too many people trying to establish supply chains in China, but not putting enough people on the ground. I tried for a while to fly in and fly out, but it's only since living here in China that I have been able to get this business moving forward.
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