Kingfisher Patisseries Goes International Kingfisher Patisseries is a small business run by Patrick Stanthorpe and his wife in a regional city of Victoria, Australia. The business employs less than 20 people and is typical of most small micro‐businesses which are time and resource poor. Kingfisher’s decision making and planning processes are informal, unsophisticated and reactive as might be expected with small owner‐managed firms. Kingfisher competes in the premium quality dessert segment of the Australian food service and hospitality industry and holds about 10% of that segment valued at AUD 15 million. Kingfisher offers a wide range of frozen dessert lines: cheesecakes, gateaux, roulades, pies and strudels made from high quality natural ingredients to organisational buyers, which include larger restaurants, clubs, large scale professional caterers, first class hotels (4 to 5 stars), domestic and international airlines, either directly or via a network of food wholesalers. Since its inception some three years ago, Patrick has expanded Kingfisher’s geographic scope by building a national network of agents and presently covers most Australian capital cities with limited distribution within rural Australia, except in its home State of Victoria. He is now considering overseas expansion as a result of receiving an unsolicited enquiry from a Japanese company, called Denzo Gato. However, prior to this enquiry Patrick dismissed other expressions of interest from Korean and Singaporean businesses because of concerns about foods regulations, trade restrictions and more importantly taste and efficacy differences between nations. He was also intent on continuing to intensify his marketing efforts in Australia, and consolidate his business into new premises, and establish some much needed management and accounting controls to a business that was rapidly growing. Even so, he felt this was an opportunity not to be missed, as it had come through the Australian Chamber of Manufacturers which was sponsoring the Export Access program which provided assistance to new exporters. Patrick also realised that Australia’s reputation of being a ‘clean country’ was at the heart of these enquiries and the desire of overseas importing businesses to get access to fresh, natural tasting dairy‐based product in a frozen form. (Most frozen diary‐based products have additives and emulsifiers added to overcome

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problems with freezing and thawing, which slightly alter the taste. However, to the discerning palate the change is most noticeable and unacceptable in high class food and restaurant businesses. Kingfisher had developed recipes using only natural ingredients that when thawed looked and tasted as though the product was freshly prepared.) These factors made the prospect of the enquiry more inviting and Patrick thought the prestige associated with exporting products to Japan would assist his reputation in the Australian market. Patrick knew something about Japanese consumer preferences and their fastidiousness in relation to food products and their presentation, and had some knowledge of the lengthy nature of Japanese distribution channels. However, he knew little about how the Japanese market operated, the regulations governing the entry of food product into Japan, and alternative distribution possibilities. Furthermore, Patrick knowledge of Denzo Gato was negligible. All he knew was that they were a Japanese business interested in Kingfisher cheesecakes because of their ability to use natural dairy ingredients that after being frozen tasted as if they were freshly prepared on premise at restaurants by the chef. Despite these gaps in his understanding and knowledge Patrick committed Kingfisher to accepting the order and attempted to meet Denzo Gato’s demands for taste and efficacy in accordance with Japanese standards and preferences. These demands became increasingly difficult to achieve requiring the purchase and application of new equipment and methods, which weighed heavily on Patrick and Kingfisher’s limited financial and managerial capabilities. However, through his perseverance and advice from Denzo Gato, Kingfisher’s product finally met the specifications stipulated by Denzo Gato and full production begun immediately, three months after committing to the order. There were several important issues that remained largely obscured to Patrick because of his eagerness to pursue further growth by committing his business to accepting this order and directly exporting to an international buyer. Unbeknown to him at the time he accepted the order, was the fact that Denzo Gato were the second largest supermarket company in Japan. They were also engaged in the food service and hospitality industry through a chain of four star hotels and restaurants across the main islands of Japan, and at that time had a turnover of AUD 19 billion and a profit of AUD 275 million. Furthermore, the Japanese government © Peter Lamb 2008 2

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was in the process of lowering the butter fat content in the category which included cheesecakes. Consequently, if a product’s butter fat content exceeded the minimum level importers, such as Denzo Gato, needed to have an import quota to gain entry to Japan. When Kingfisher finally sent its first container to Denzo Gato the shipment was rejected by Japanese customs because Denzo Gato did not have the prescribed import quota. The shipment was returned to Australia. Fortunately, Denzo Gato honoured the transaction and made the payment to Kingfisher. Nevertheless, Kingfisher lost money; Patrick retreated from entertaining unsolicited orders from overseas enquirers and concentrated on his domestic business. After a three year self‐imposed exile from international markets Patrick is now considering entering the Singaporean and/or Malaysian markets prompted by a personal enquiry from a Singaporean importer and interest being shown by other wholesalers to the burgeoning four and five star hotels both countries. As a minimum, students should address the following questions: In hindsight, would you have advised Kingfisher to accept the order from Denzo Gato? If so why, and if not, why not? Justify your response. Do you believe Denzo Gato was a good choice for Kingfisher in terms of compatibility? Discuss. What other choices of distribution channels might Patrick have considered prior to committing Kingfisher to Denzo Gato and the Japanese market? In light of the Denzo Gato experience, should Patrick re‐internationalise by trying to find prospective clients and/or agents in Singapore or Malaysia? If so, how would you advise him to proceed in his attempt to understand the market, and seek out prospective agents? What government agencies, domestic and foreign, should he approach for assistance, and what questions should he ask them? Should Patrick develop a wish‐list of desirable and necessary qualities of prospective agents and their resources prior to seeking out potential agents in Singapore and/or Malaysia from which to assess their compatibility? If so, perhaps you could prepare a list for him to consider and rank the importance of each criterion. Be prepared for Patrick to question your reasoning behind the list and their ranking.

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