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A New Zealander doing great business in Peru

Nick FitzpatrickAn interview with Nick Fitzpatrick CEO for Delica Peru

Who is Delica?
We are a trading company specializing in Fresh Produce (Fruit and Vegetables) that is 70% owned by Turners and Growers (T+G/ENZA) and 30% owned by Key Staff. Delica began in 1994 with a couple of mates from Massey University who started exporting Citrus and Asparagus from Australia to Japan,and then NZ Fruits from 1997.

They continued to add products, markets and staff every year. The company is based in Auckland, NZ, with overseas offices in Australia, Nth America, South America and South Africa. We also have staff based in key markets – Japan and China. We currently have a total of 68 staff as of May 2013 and Global Sales of NZD 200 million approx. for 2012 year.

Background:
In 2007 I moved to Lima, Peru with my wife in order to establish a permanent office for our group in South America and pursue opportunities related to our business the export and marketing of fresh fruit and vegetables. Our company had been trading remotely since 2003 ex our NZ office, but it was becoming increasingly challenging to manage growth and opportunities from afar so it was agreed amongst management to a two year trial in establishing a physical presence in South America.

Why Peru and not Chile or Argentina??
Chile and Argentina were the established fresh produce hubs when we were looking at countries in which to live and set up an office. We had some good contacts in all three countries but eventually we decided on Peru, for the following key reasons:

 Peru had more growth opportunities, new plantings and a lot of energy in new agribusiness
 Lower set up and running costs in Peru
 Backing of key suppliers in Peru + customers showed more interest
 Peruvian government encouraged foreign direct investment + pro agriculture policy (neutral in Chile but negative in Argentina)
 Easier to manage Chile and Argentina from Peru rather than the other way around – this has proven to be correct, in particular in the case of Chile where suppliers are more professional and respect programs and agreements as a rule. In Peru, if one is not on the ground, then opportunities invariably do not get realised.
 A point of difference to our competitors, many of whom have trading offices in Chile.

Lessons Learnt
From a Business point of view having strong links to Asian market is very attractive for Peruvian suppliers. Peru had traditional channels of USA and Europe established but less so Asia. So we were coming with the right pitch in terms of markets. NZ enjoys a positive image in Peru and this certainly helped us open doors and get meetings – we are seen as trustworthy, developed and having a strong agricultural -horticultural heritage. Also having the backing of a large, listed company (T+G/ENZA) meant that suppliers felt secure in terms of getting paid – very important in a country where trust is low and people appear to get burnt easily…….

We found it easy to establish contacts although not always so easy to follow through into concrete business. Peruvians are very positive in meetings, but don’t like to say no, even if there is a low chance of actually doing business together. On many occasions after seemingly positive meetings, emails and follow up was sent but replies not received.

This was initially frustrating as I think in NZ Business culture we expect replies and some kind of follow up – even if it is politely saying “No thanks”. We also found this on a personal level. We would often receive RSVP’s for functions we hosted from say 50 people but only 25 would turn up – seen as better to RSVP and not turn up rather than politely decline!

One of the other areas that is very different to NZ is the make-up of companies – many of the senior staff in the suppliers we worked with were family or friends of the owners – this is particularly evident in the agricultural sector where it is probably less professional than some other major industries such as mining or construction. It was frustrating for me to have to deal with a Manager who really wasn’t qualified to do what he was doing, but obviously the owner felt that having a ‘trusted’ person in the role was as or more important than a capable person; Our experience in terms of Hiring staff was and continues to be very positive. Peru has a young and energetic workforce with increasingly mobile labour market, and skilled young people entering the workforce.

There is a distinct lack of ‘professionals’ at middle management/sales level in our industry compared with say NZ, Chile or Argentina, but that is growing. We have tended to employ young people with quite little experience and then train them up. One of the weak areas is lack of critical thinking and problem solving, areas which are key in our business – we have had to work very hard to get our staff to understand the dynamics of the business, and make decisions fast.

My wife and I initially found it hard to meet expat friends as most of the expats tended to be concentrated in the Teaching and Mining industries, but in turn this meant we spent a lot of our first couple of years socialising with Peruvians which in retrospect was excellent for our Spanish and understanding of the people and culture. There are now many opportunities for foreign people looking for work in Peru – the mining, construction and service industries are booming in Peru, as is Tourism.

Qualified professionals are in short supply in Peru and the Expatriate community in Peru has boomed since we arrived in early 2007 (Lima in particular). #adp02

Key Advice
A few key points for working and living in Peru:
 MUST speak some Spanish. Initial meetings can be had in English and most well educated Peruvians speak good English, but you will only scratch the surface without Spanish.
 Be patient. Everything takes longer and bureaucracy is rampant. Getting something as simple as a Peruvian Driver’s license (obligatory after 3 months) can take up to a week even with an International License!
 Seek good legal advice on arrival and use services like NZTE, community groups etc. As Delica we were constantly recommended lawyers of friends and associates however they really were not qualified to advise us on our business structure. We eventually worked with PWC and quickly got very good results.
 Go with an open mind. Be prepared to change your business plan. Obvious stuff I know, but if you are too rigid in your thinking and trying to follow a set plan, it will very often lead you down the wrong path.
 Be prepared for conflicting opinions, bureaucracy that doesn’t make sense. My wife spent 5 years
getting conflicting advice on whether she could legally work and be a salaried employee in Peru as spouse of somebody with a work permit – to this day there is still no clear legal framework!
 Corruption is still entrenched in many areas of Peruvian society and government. Police in particular will find any reason to ask you for a “way to work out a problem.” Try to avoid it at all costs, although there can be a fine line between ‘corruption’ and what may be called ‘lobbying’ in developed countries as anyone who has worked in a developing country will know.
 Local Management must have responsibility. Get good people and be prepared to pay good $$$. If local managers constantly have to report back to Head Office for decisions, you will lose your competitiveness and the advantage of having a local office.

Delica South America in 2013
We currently have an office with nine permanent staff members in Peru plus two in Chile; comprising sales, procurement, quality control and accounts/administration. The main products we work with are: Table Grapes Asparagus, Citrus, Berries, Cherries and Apples. Total sales in 2012 of USD32.2 million. We continue to grow and are investigating JV opportunities for growing and packing in Peru.
http://delicaglobal.com/

Reprinted from the NZ Latin Business Council

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