Pendleton Estate epitomises South Australian companies which have been quick off the mark to take advantage of China’s insatiable demand for high-quality, clean, safe food products – and at the same time has earned itself working capital to grow the business while maintaining control.
The family business, which turns 90 in 2019, specialises in premium quality farm produce grown in the State’s south east. Its product range includes Premium Extra Virgin Olive Oil, Flavoured Extra Virgin Olive Oil, Cooking oil, specialty vinegar, olives, dukkah and salad dressings.
Led by Managing Director Grant Wylie, Pendleton began exporting its flagship Extra Virgin Olive Oil to China in 2006, picking up valuable experience in working with Chinese companies and government customs while boosting its sales along the way.
But the major involvement with China had its beginnings two years ago, with the realisation that to continue its healthy growth the business needed cash to purchase assets and for working capital. The difficult decision was made to put its historic olive grove on the market, but at the same time Grant perceived there was growing interest in agricultural investment from China, so he made sure the marketing included that option.
“We marketed via appropriate Chinese newspapers; and we made use of our China distribution network and the resources of the Department of State Development.” Grant recalls.
It was through those contacts that Grant met the Chinese private investor who now holds a crucial stake in Pendleton’s future.
“This is his first Australian investment so he was naturally cautious – as we would be if we were making an investment in China. We were totally open and honest with each other from day one, and quickly found that we had a lot in common in the way we did business, and on a family and personality level too.
“This relationship is crucially important and it is impossible to overestimate the importance of mutual trust in working with Chinese investors. We very quickly found we had the same goals, the same commitment to safe food, the same family philosophy and approached the discussions in a thorough and businesslike way.
“During the due diligence process we talked about various options but eventually he took a minority position as his time is at a premium across various other investments and businesses in China.
“This gives us the cash and support we need to continue to grow and export, at the same time maintaining ownership, which is very important for a family business.
“The negotiations did take quite some time, but there were never any major disagreements and I think the time taken was not unreasonable as this is his first investment in Australia and there were a lot of new business and cultural components to contend with.
“I made a point of having all the documentation from our side translated into Mandarin here in Adelaide. It’s not something you hear a lot about, but I think it helped enormously and gave us the confidence that what was being sent to China accurately reflected our position at all times.
“Face-to-face discussions are also enormously important in building trust and an open relationship. He has visited us here a number of times and I have been to China to meet with him at key stages along the way.
“If I could summarise what made our negotiations successful, it comes down to three key things: mutual trust, mutual truthfulness, and taking time to do things properly.”
Grant says that a good starting point in developing a successful business relationship with China could be as simple as getting to know key people in the large Chinese community in Adelaide.
“Many of these people are looking for business opportunities, or know someone who is, and this can be very helpful,” he said.
“The Department of State Development also has an excellent network, and I take part in its trade missions to China at every opportunity to develop my knowledge and understanding, as well as to make contacts and grow my network. Regular visits to China are very important.
“And if you are exporting– fully understand the regulations, particularly if the product is food. Personally I would use Chinese freight forwarders in Adelaide (or Australia) as I’ve found they have the best working knowledge of Chinese regulations”.
Grant’s story is an ideal example of direct foreign investment helping a healthy business grow even faster and face the future with confidence.