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As U.S.-China Trade War Rages, Some Australian Farmers See an Opportunity As U.S.-China Trade War Rages, Some Australian Farmers See an Opportunity
(about 2 hours later)
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YARRAGON, Australia — There are some 2,000 goats at the Gippy Goat Cafe farm in Yarragon, two hours east of Melbourne and deep into the hinterland of the state of Victoria. The hills gleam a deep emerald here, the soil hugs the boots — and Chinese “key opinion leaders” line up to film the authentic source of goat milk formula that shoppers are buying for their infants back home.YARRAGON, Australia — There are some 2,000 goats at the Gippy Goat Cafe farm in Yarragon, two hours east of Melbourne and deep into the hinterland of the state of Victoria. The hills gleam a deep emerald here, the soil hugs the boots — and Chinese “key opinion leaders” line up to film the authentic source of goat milk formula that shoppers are buying for their infants back home.
“I’ve got them all standing here, live streaming,” said Kristy Carr, the chief executive of Bubs Australia, an organic baby food and milk formula company.“I’ve got them all standing here, live streaming,” said Kristy Carr, the chief executive of Bubs Australia, an organic baby food and milk formula company.
That interest from China presents an opportunity, one that could expand as the trade war between Washington and Beijing intensifies. Right now, the company competes in China against monoliths like Gerber of the United States and Danone of France that have a much greater share of the market.That interest from China presents an opportunity, one that could expand as the trade war between Washington and Beijing intensifies. Right now, the company competes in China against monoliths like Gerber of the United States and Danone of France that have a much greater share of the market.
But thanks to China’s retaliatory tariffs on American goods, imports from the United States are getting more expensive. That could make Australia more appealing as a source for products as varied as goat milk, nuts and aluminum.But thanks to China’s retaliatory tariffs on American goods, imports from the United States are getting more expensive. That could make Australia more appealing as a source for products as varied as goat milk, nuts and aluminum.
“Australia is one of the best-placed countries in the world to reap the gains of the trade war,” said Jason Aravanis, a senior industry analyst in Melbourne for IBISWorld, a market research company. “Over the long term, Australia is going to step in and replace a lot of these American exports.”“Australia is one of the best-placed countries in the world to reap the gains of the trade war,” said Jason Aravanis, a senior industry analyst in Melbourne for IBISWorld, a market research company. “Over the long term, Australia is going to step in and replace a lot of these American exports.”
There is one big caveat. Should the trade war hurt growth in China, its purchases of Australian iron ore, natural gas and other major imports could slow. That could damage an Australian economy that depends in large part on natural resources for growth.There is one big caveat. Should the trade war hurt growth in China, its purchases of Australian iron ore, natural gas and other major imports could slow. That could damage an Australian economy that depends in large part on natural resources for growth.
The United States and China have swapped tariffs on $250 billion worth of each other’s goods so far, with President Trump threatening more unless China lowers its trade barriers. China has heavily criticized the tariffs but shown little sign of backing down.The United States and China have swapped tariffs on $250 billion worth of each other’s goods so far, with President Trump threatening more unless China lowers its trade barriers. China has heavily criticized the tariffs but shown little sign of backing down.
It is too early in the trade war to determine winners and losers, but the global economic order is already changing. Global companies are exploring ways to shift manufacturing out of China, and both the United States and China are seeking to purchase more from elsewhere.It is too early in the trade war to determine winners and losers, but the global economic order is already changing. Global companies are exploring ways to shift manufacturing out of China, and both the United States and China are seeking to purchase more from elsewhere.
Some of that business could end up going to Australia. As Australia’s largest trade partner, China already receives about 40 percent of Australia’s fruit, making Australia the biggest competitor to American fruit exports there.Some of that business could end up going to Australia. As Australia’s largest trade partner, China already receives about 40 percent of Australia’s fruit, making Australia the biggest competitor to American fruit exports there.
And while China has raised tariffs on American goods, it has been reducing them on some Australian products, such as wine. Australia’s wine exports to greater China — an area that includes Hong Kong, a growing wine import hub — have surged in recent years.And while China has raised tariffs on American goods, it has been reducing them on some Australian products, such as wine. Australia’s wine exports to greater China — an area that includes Hong Kong, a growing wine import hub — have surged in recent years.
Companies like Bubs Australia and A2 Milk, a much larger dairy company that is listed on both the Australian and New Zealand stock exchanges, recognize the opportunities for their own growth in China.Companies like Bubs Australia and A2 Milk, a much larger dairy company that is listed on both the Australian and New Zealand stock exchanges, recognize the opportunities for their own growth in China.
Food scandals in China — including tainted infant formula, contaminated milk and industrial chemicals in candy and seafood — have stoked demand for overseas products that meet strict government safety standards, particularly when it comes to food and milk for children. That is something Bubs Australia is seeking to capitalize on.Food scandals in China — including tainted infant formula, contaminated milk and industrial chemicals in candy and seafood — have stoked demand for overseas products that meet strict government safety standards, particularly when it comes to food and milk for children. That is something Bubs Australia is seeking to capitalize on.
For the past few months, Ms. Carr and her partners have been flying Chinese influencers — online celebrities who tell their audiences what to buy — more than 5,000 miles to visit the farm. There, the Chinese guests watch the goats being milked as proof of the product’s authenticity. They may live stream the event or post selfies with the goats and the merchandise they produce.For the past few months, Ms. Carr and her partners have been flying Chinese influencers — online celebrities who tell their audiences what to buy — more than 5,000 miles to visit the farm. There, the Chinese guests watch the goats being milked as proof of the product’s authenticity. They may live stream the event or post selfies with the goats and the merchandise they produce.
“We’ve closed many a deal standing right here on this farm,” Ms. Carr said. “All the partners come here, we bring all the key opinion leaders. All the social noise happens through influencers, and a lot of that is done through live streaming — ‘This is where Bubs infant formula comes from’ — and it goes a long way for transparency.”“We’ve closed many a deal standing right here on this farm,” Ms. Carr said. “All the partners come here, we bring all the key opinion leaders. All the social noise happens through influencers, and a lot of that is done through live streaming — ‘This is where Bubs infant formula comes from’ — and it goes a long way for transparency.”
In the United States, the dairy industry is panicking. “We are deeply worried that the current trade situation threatens to upend the positive momentum not just this year, but also in the years to come,” Shawna Morris, vice president of trade policy at the United States Dairy Export Council, told American lawmakers in written comments in August.In the United States, the dairy industry is panicking. “We are deeply worried that the current trade situation threatens to upend the positive momentum not just this year, but also in the years to come,” Shawna Morris, vice president of trade policy at the United States Dairy Export Council, told American lawmakers in written comments in August.
Australia has its own trade issues with China. But the country has a long history of balancing its national security and geopolitical alliance with the United States against its economic need to sell to China. Regional proximity also helps.Australia has its own trade issues with China. But the country has a long history of balancing its national security and geopolitical alliance with the United States against its economic need to sell to China. Regional proximity also helps.
Though it is still early, there are signs of growing demand, said Albert Tse, a private equity fund manager and a board member of Bubs Australia.Though it is still early, there are signs of growing demand, said Albert Tse, a private equity fund manager and a board member of Bubs Australia.
“There’s been a lot of inquiries so far from Chinese traders and baby stores and distributors in the last few months,” he said.“There’s been a lot of inquiries so far from Chinese traders and baby stores and distributors in the last few months,” he said.
He said the surge in interest might be coming from people in China who distribute American products and are looking for different sources.He said the surge in interest might be coming from people in China who distribute American products and are looking for different sources.
Mr. Tse is married to Jessica Rudd, the daughter of former Prime Minister Kevin Rudd. Ms. Rudd founded the e-commerce site Jessica’s Suitcase, which runs on Alibaba’s Tmall Global online sales platform. It sells Bubs Australia products along with Australian wines, skin care products and organic dried foods.Mr. Tse is married to Jessica Rudd, the daughter of former Prime Minister Kevin Rudd. Ms. Rudd founded the e-commerce site Jessica’s Suitcase, which runs on Alibaba’s Tmall Global online sales platform. It sells Bubs Australia products along with Australian wines, skin care products and organic dried foods.
“Every time we might potentially experience economic downturn in our domestic economy, a nice big customer comes and wants something from us,” Mr. Tse said. “We saw that in the mining boom, and we’re seeing that now in the dining room.”“Every time we might potentially experience economic downturn in our domestic economy, a nice big customer comes and wants something from us,” Mr. Tse said. “We saw that in the mining boom, and we’re seeing that now in the dining room.”
When Bubs Australia first began producing formula and infant milk powder for the Australian market, it relied on goats farmed in the Netherlands.When Bubs Australia first began producing formula and infant milk powder for the Australian market, it relied on goats farmed in the Netherlands.
A year ago, Bubs Australia bought NuLac Foods in a deal that also gave the company a near 50 percent share in NuLac’s goat processing facilities. It gives Ms. Carr control over supply. With about 20,000 goats in its herd, and plans to increase the number to 50,000, Bubs intends to dominate the Australian goat milk industry.A year ago, Bubs Australia bought NuLac Foods in a deal that also gave the company a near 50 percent share in NuLac’s goat processing facilities. It gives Ms. Carr control over supply. With about 20,000 goats in its herd, and plans to increase the number to 50,000, Bubs intends to dominate the Australian goat milk industry.
The business world in China is constantly changing, Ms. Carr said, with e-commerce sites increasingly competing with traditional brick-and-mortar stores.The business world in China is constantly changing, Ms. Carr said, with e-commerce sites increasingly competing with traditional brick-and-mortar stores.
The key opinion leaders, or K.O.L.s, “are a thriving community, to the point where Chinese mums won’t do anything unless their favorite K.O.L. is doing it, too,” Ms. Carr said.The key opinion leaders, or K.O.L.s, “are a thriving community, to the point where Chinese mums won’t do anything unless their favorite K.O.L. is doing it, too,” Ms. Carr said.
She travels to Shanghai regularly to meet with Chinese partners who sell her products in stores and distributors who deal with cross-border trade.She travels to Shanghai regularly to meet with Chinese partners who sell her products in stores and distributors who deal with cross-border trade.
“My heart starts beating faster every time I land on the tarmac,” she said. “It’s China and it’s all consuming.”“My heart starts beating faster every time I land on the tarmac,” she said. “It’s China and it’s all consuming.”
Vicky Xiuzhong Xu contributed reporting from Sydney.Vicky Xiuzhong Xu contributed reporting from Sydney.
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