Building resilience in Kiwi businesses since COVID-19

Case study: New Zealand Trade and Enterprise

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Building resilience in New Zealand businesses following COVID-19

When New Zealand closed its borders and entered lockdown, and businesses braced themselves for the worst, it was New Zealand Trade and Enterprise (NZTE) that saw the urgent need to bring in strategic support to help New Zealand companies assess, and if required, adjust their businesses for the effects of COVID-19.

NZTE plays a crucial role in the fabric of our economy and to help Kiwi export businesses thrive. It reached out to business owners with a plan and partnered with PwC as a core provider to run the COVID-19 Export Business Continuity Service. This service was a NZTE- sponsored initiative to equip businesses with the tools they need to navigate the changing landscape.

Since April, PwC has delivered over 150 COVID-19 Business Continuity workshops to a variety of companies employing between five and 500 people, with turnover ranging from $200,000 to $200 million, and that export a range of goods including seafood, aircraft, wine, skin treatment, dairy food, professional services, industrial plant, digital products and baby clothes.

Craig Armstrong, Director – Customers at NZTE, and who established the service with PwC, said: “Around a quarter of all New Zealanders rely on the export sector for their jobs, so there was never a question that we needed to move fast to help export businesses survive this disruption. We also needed partners like PwC who could adapt their skills and knowledge on the fly: with everyone in lockdown, all the analysis and advice had to be via digital channels; and every business has its own specific challenges, so it was vital that we could establish a relationship of trust really quickly and provide the right advice for each person. The service has made a real difference for these businesses. It’s not a stretch to say it helped many make the right decisions to keep their businesses alive.”

Here we take a look at some of the ways participants of the workshops responded to the challenges of lockdown to continue trading, and build resilience into their businesses for the future and expand their digital capabilities into their businesses for the future.

Digital acceleration

The increasing adoption of e-commerce is something PwC has seen both here and abroad as consumers turn to online channels, in some cases for the first time. This is not simply a blip, it is the acceleration of trends already seen in online buying behaviour and one which will likely stick. Businesses are accelerating their own digital ambitions to meet demand, increase operating efficiency and build resilience in sales channels.

Jacob Faull, co-founder Nature Baby, a successful New Zealand business that designs and manufactures sustainable, natural, high quality children’s clothing says “being able to focus on our online channel, especially for the Australian market, enabled us to continue to do business. While we still suffered a significant downturn it would have been catastrophic without online sales.”

Adapting and building resilience

Technopak

designs and develops hygienic 25kg bag and bulk powder packing, conveying and handling equipment. They employ around 40 staff and are a world-leader in bag-filling machinery for powdered materials such as dried milk, infant formula, pharmaceutical and nutritional powders.

Technopak installs machines and systems all over the world, particularly the US, as well as supplying many New Zealand companies.

When the country went into Alert Level 4, General & Operations Manager Luke Holmes had to find a way of keeping the company going. Whilst no new equipment could be made, spare parts and systems support were still needed.

A payment plan for staff was arranged and, with help from the Government’s Wage Subsidy Scheme, most manufacturing staff went into isolation at home, whilst engineers, IT and customer support workers operated remotely. Key staff undertook manufacture and dispatch of critical spares on a limited schedule to maintain Food Production Sites. “We sought confirmation of the business plan at the NZTE workshop with PwC, which gave the company directors confidence that we were on the right track,” says Luke.

Technopak installs machinery abroad and, now that New Zealand is operating at Alert Level 1, international work has resumed. However, sending staff to the US and other countries that have high rates of COVID-19, poses an obvious risk.

“We were classed as an essential business by the Ministry of Business, Innovation and Employment, and US dairy factories, which enables us to install equipment at client sites in America, but the health risk is a big ask for our staff”. The managed isolation when staff return to New Zealand also puts people out of commission, which has a knock-on affect to business. “It’s hard to know now how to quote for a job that is a long way out as we have to compensate for the down time,” says Luke.

With the existence of COVID-19 in the world, businesses are seeking clarity from the Government on how to operate internationally in the new normal. New Zealand needs its manufacturers, exporters and services to grow for the security of the economy, however, travel for business raises important questions around the practicalities of managed isolation and who should pay for it, which will only become more relevant as time goes on.

Ecoware

Well-known plant-based packaging company, Ecoware, used the impact of COVID-19 to accelerate a diversification of their business that was already in play.

Pre-COVID-19, Ecoware had been growing quickly with a few thousand established customers across New Zealand’s food and beverage industry. Their award-winning food packaging products can be found at cafes and eateries, food trucks, stadiums, festivals, grocery stores and on airlines and ferries.

However, the shutdown of hospitality and tourism businesses during Alert Level 4 meant packaging orders all but ceased and adaptation was essential.

“We needed to act fast,” says James Calver, Co-founder and Director of Ecoware, “as around 90 per cent of revenue was down. There were immediate challenges to overcome, whilst also progressing our expansion plan that would build further durability in the business.” Ecoware quickly responded to the lockdown by increasing health and safety protocols for staff and suppliers, revising cash flow forecasts, taking advantage of available Government support initiatives such as the Wage Subsidy Scheme and actively engaging with its key financial stakeholders.

Through a NZTE workshop with PwC, Ecoware received advice on how best to engage with its lender to temporarily amend the structure of its working capital facilities to alleviate cash flow pinch points that were expected to occur as a result of the COVID-19 lockdown. By quickly resolving the short term liquidity challenges, Ecoware’s management team were able to focus on their diversification plan.

With supermarkets trading well, Ecoware saw the opportunity to focus its resources on gaining sales with food brands that supply the supermarket channel. 

Since the country began operating at Alert Level 1, trading with their core customers has resumed and the Company’s targeted growth strategy is continuing. “Ecoware made it through the dark days of lockdown and we’ve established ourselves as an even more resilient and flexible brand that is now years ahead of the original business plan,” concludes James.

Flexibility for the future 

Now that we’re operating at Level 1 some of these issues seem a long way behind us, but the reality is that we’ve moved irreversibly into a new operating paradigm. 

We are in recession in New Zealand, as are many other countries. No one knows just how deep and prolonged the recession will be nor the shape of the eventual recovery. The uncertainty over trading conditions and travel is still pervasive and businesses will need to get used to navigating through this uncertainty.

This means taking a fundamentally different approach to setting and monitoring strategy. Businesses will need to create a scenario- based strategy, incorporating multiple possible paths, understand the decisions needed for each, and then monitor market conditions and business performance to understand which one they are on.

This approach to business management and stewardship requires dynamic thinking and a leadership style that supports staff though ambiguity. On the plus side, businesses that are able to adapt to the new conditions will be able to build quickly from a solid core and thrive as the world recovers from COVID-19.

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Andrew Jamieson

Executive Director, Auckland, PwC New Zealand

+64 21 711 641

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Warrick Jackson

Executive Director, Auckland, PwC New Zealand

+64 27 504 8071

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Stephen White

Director, Auckland, PwC New Zealand

+64 27 801 4019

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