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JOINT STANDING COMMITTEE ON FOREIGN AFFAIRS, DEFENCE AND TRADE Trade Subcommittee
21/05/2009
Australia's trade and investment relations with Asia, the Pacific and Latin America

ACTING CHAIR —Welcome. Thank you for coming along this afternoon. Do you have any comments on the capacity in which you appear in today’s hearing?

Mr Georgiades —I am co-founder of the company Merchantwise, which participates in the Export Market Development Grants Scheme.

ACTING CHAIR —We have a publication regarding your company. We will formally accept that as an exhibit. That is so moved by Senator O’Brien. That motion is carried. We prefer that all evidence be given in public, but if there is any particular matter that you wish to discuss in private at any time just make that request and we will consider it. We do not require you to give evidence on oath, but you should be aware that these hearings are legal proceedings of the parliament and therefore have the same standing as proceedings of the respective chambers. I now invite you to make some opening comments, and then we will proceed to questions and discussion.

Mr Georgiades —I will start by giving you a little bit of context as to my journey. I believe I am one of the smaller group of EMDG participants that export a service. I will give you an idea of how that came about, and that might lead to some questions. In the early nineties I started with the Walt Disney Company as a creative manager. In that time I worked in four or five different countries over a six-year period, and I guess I got the taste for international business and cultural sensitivities. In 1999, I left the Walt Disney Company with a couple of ex-Disney colleagues and started a company, Merchantwise. Our primary goal at that point was to provide services back to the Walt Disney Company. Within the first four or five years, we probably had about 40 per cent revenue from different arms of the Walt Disney Company. You probably do not know this, but there are quite a few aspects of the Walt Disney Company in this market, and we did provide services to them. At one stage, I noticed that there was a centralisation initiative started from the US, and, a lot of it was pulled back into two markets, the London and the US markets, so that dried up for us.

In 2006, I got on a plane and started to tee up some meetings with potential partners, ranging from the England and Wales Cricket Board to numerous Disney divisions. It was a bit of a stretch for them to seek services on the other side of the globe. I was trying to work out a competitive advantage and I was successful—as you can probably see in the exhibit—in that we won the contract to develop the branding for The Ashes series just about to come up. We also got a trial with Disneyland Paris to provide creative services. These guys generate enormous amounts of marketing collateral and advertising. It is a huge pie and trying to convince them that we could service them better than the French was not an easy task, but I managed to get a trial happening. There are definitely some advantages, and now they get better performance and pricing than they used to out of France.

We had a trial in 2006. Our revenue for 2006-07—our first year—was $273,000 just from that client alone. The year after, it grew to $331,000, and this year we are expecting half a million dollars worth of revenue from that one client. Disney you think of as one client, but actually it is 30 clients. They have 30 departments—they all make their own decisions and they all have their own budgets. We work with 12 of them, so we think there is definitely room to grow.

One thing you should know about this is that they have three to four other service providers, and all you get is on their vendor list; you do not get work given to you. Every job they do is open to all three or four—and I am not sure which number it is—to present for that job, if they know about it. We did 131 jobs for them this financial year to date and, I think, in the last three years we have grown from zero to 40 per cent of their entire business. To do this I had to put on a new business development manager, which comes at a very high cost. The French are very expensive people to hire. Their government system requires quite a lot of non-salary aspects to the remuneration. I recently put on a designer in London because there are a bunch of clients who needed changes done during their day, and a London designer can actually access our files and make changes during that day. So it has been quite a significant investment.

The first thing I started was with Austrade. A lot of well-intentioned people at Austrade were unable to provide me with any meaningful help. That was somewhat disappointing. I ended up needing to do that groundwork myself.

ACTING CHAIR —Was that Austrade here in Australia?

Mr Georgiades —Both.

ACTING CHAIR —Where were you utilising Austrade services overseas?

Mr Georgiades —France. I was trying to find out from Austrade what my liabilities would be in employing a French person, what my options were, how much would I have to pay if they got sick, would I be liable—these are the sorts of questions you want answered before you put your name on a dotted line. I was unable to get any of that information. I actually signed a contract with a person blindly because the opportunity was passing. But, needless to say, there is some merit in actually finding this stuff out yourself. It is part of the fact-finding mission and the due diligence you need to pursue to conduct a successful business. I have the same personnel on board today, and she is doing very well.

EMDG-wise, I put my first claim in probably in 2002, based on some small activities. I probably wish I did not do that, because I wasted one of my eight opportunities and got a couple of thousand dollars back. Now, it is a very beneficial program to me. If I knew I had to fund the whole process on something so speculative myself, when a large part of my business had dried up and my funds were highly limited, I suspect I may have played it more safely. So, as a big fan of the EMDG Scheme, knowing that my risk was mitigated probably encouraged me to go and try something that had a low chance of coming off. Fortunately, the results were very good.

In my first year of EMDG, I was audited by somebody who came and slashed my claim by 50 per cent, and that was due to this person not understanding my business. We can talk more about that—it is an interesting story that was found out later. I guess from my perspective the EMDG program is wonderful. Some of the personnel act as policemen, not facilitators. I would like someone to partner me in this program, to assist me to maximise the yield out of my grant and to encourage me to do more things, not to police and chop at it after the fact. But, needless to say, I am a big fan of the program. It has really helped our business.

Today I am only talking to you about our creative services. We also have a brand management and a research division, which I am not going to touch on because it messes the story. It is just the creative services at the moment that we are participating in. Does that give you a good idea of where I am at?

ACTING CHAIR —Yes. What year was it when you first applied?

Mr Georgiades —The very first year?

ACTING CHAIR —The one where you said you had it slashed by 50 per cent.

Mr Georgiades —That was 2006-07.

ACTING CHAIR —And that was your first application?

Mr Georgiades —Yes. I calculated the numbers on doing the business on 50 per cent. There was partial ignorance on my part—I probably should have put a contingency in there for this type of activity, but since then I have worked with an agent called Exportise, and they have gone back and assessed it and have determined that that was a wrong assessment.

ACTING CHAIR —Have you had any involvement with an exporters group? I think there is a small exporters group.

Mr Georgiades —No.

ACTING CHAIR —We have had some evidence from their representatives in regard to the EMDG Scheme.

Mr Georgiades —I guess I am here to be an advocate for the program. The scheme is valuable. It is necessary.

ACTING CHAIR —So are they, but they have drawn attention to certain issues of concern to them.

Mr Georgiades —I do not think anything is perfect. I do not expect perfection. The fact that this scheme is out there to encourage small businesses like mine to become medium businesses and hopefully one day big businesses is a great thing.

ACTING CHAIR —The Australian Institute of Export is the organisation that appeared.

Senator FERGUSON —Are you likely to be affected by any possible shortfall in funding?

Mr Georgiades —It is an interesting topic, because being capped at $40,000 means effectively that, if you spend $80,000 you can get your $40,000. I think this year I will be putting in $170,000, and for the difference between $80,000 and $170,000 I am likely to get a small percentage in the dollar. I had notes, but this is all up here. One of the areas for improvement from my point of view is that, firstly, once you have hit $80,000 and you receive your $40,000 back, where is the incentive after that? It does not help this country to do a lot of 80 grand deals or to spend $80,000.

It is what I do next that matters. The potential to service all theme parks around the world out of one studio and turn it into a $5 million yield is where I would like to go. I do not have the funds to start to pitch to all of these opportunities and the export grant is not going to help me do that, because I am likely to get 10 per cent, 20 per cent or 30 per cent in the dollar for anything over $80,000. So one of my suggestions is to have a different sort of calculation that rewards continual growth. The interesting thing is that I am the sort of person, as an entrepreneurial personality, who will go on and do things if I can.

Senator FERGUSON —Could you have got to where you are today without an export market development grant?

Mr Georgiades —In 2006 I got on a plane because the Australian market was not providing the sort of business growth that I was looking for and I did not have the money. I was in debt; my business was in debt. All businesses are in debt to some degree—it was how much debt I went into. I was starting a young family. There are a lot of factors in this. I probably would have taken a more conservative approach and might have tried to do it more by letter and email, but the reality is that most of these people are not going to do business with a stranger until they have seen your face. I was spending a fair bit on flights, wining and dining, creative directors—there are a lot of steps in winning these things over. You are an underdog. People cannot get over the time zone difference. The reality is it has turned out to be a great asset to them because they spend all their day trying to work out what their feedback and briefing is, and we work overnight so by the time they get back into work it is waiting for them, as opposed to a local company. There are clearly advantages; you just have to communicate them—it is not easy.

Senator FERGUSON —So do you think you would have got there or not?

Mr Georgiades —I always think I am going to get somewhere; I just think it would have taken a long time. I would have done it more slowly because I could not have funded it as quickly. I would not have put on a new business development manager. That business development manager costs me about $13,000 a month—big dollars for us. I could not afford to put her on.

Senator FERGUSON —On your comments about Austrade, is it because you think that Austrade did not have the expertise to give you the answers that you wanted or do you think that they simply did not think that was their role?

Mr Georgiades —I am not sure.

ACTING CHAIR —Or is it that you were not big enough?

Mr Georgiades —My initial thought—and it is purely speculative—is that there were probably some pretty serious people needing their time, talking multimillion-dollar opportunities, and at that point I was a zero-dollar opportunity. Prioritisation is necessary with limited resources, so I am certainly not bitter or angry about it.

Senator FERGUSON —But their job is to help the zero-dollar people. The ones with billions can help themselves.

Mr Georgiades —Yes. I was disappointed.

Mr HAWKER —Has there been any change since then?

Mr Georgiades —I have never tried to go back. I do not actually need them now. If I started on a new initiative—and I would love to start new initiatives; at the moment, my hands are pretty full capitalising on the initiatives that I have already started—

Senator FERGUSON —They would not be your first port of call?

Mr Georgiades —No.

ACTING CHAIR —Are there many other Australian companies that you are competing against overseas for this sort of work?

Mr Georgiades —No.

ACTING CHAIR —So you see it as fairly specialised and unique. Are you competing against much bigger enterprises or against small or medium sized businesses in this market?

Mr Georgiades —For the Disneyland Paris business specifically?

ACTING CHAIR —Maybe that, but presumably you are looking to grow your business. I am trying to get a sense of what sort of—

Mr Georgiades —Yes. It is pretty tough, because there are a million graphic design companies out there. London is very credible. Australia is very highly regarded in design. London has a plethora of really credible agencies, and I have learnt not to try to compete against them. I have learnt to try to find niche opportunities to leverage my Disney history. I was quite senior in the Disney organisation in Asia-Pacific. People know my name, so I have leveraged the Disney history. Disney is so broad; most people have no idea what Disney is into. They have got companies that do not even have Disney in the name. There is such a world out there that I could leverage just through my history—my resume, effectively—on the creative level that I have tried to go where they cannot. Companies like ECB—we have a consumer product expertise and now companies building brands are starting to think about how they can extend the revenue streams more broadly than the core opportunity, into maybe apparel or other types of consumer products or licensing their brand name. That is an expertise that Disney gave me. So I do not compete against those people.

Senator O’BRIEN —I was going to ask about how you leverage work. Obviously, you have partially answered that. How do you go beyond the Disney organisation on an international basis and what is the relevance of EMDG to that extension?

Mr Georgiades —Certainly the time zone is a problem. It is less of a problem than mentally people accept it as being. These days with electronic file transfer and email—people are emailing work to the building next door or even within an office—it becomes somewhat irrelevant. Educating people that it is not a problem means I have to do free work quite often: ‘Let me to do this work for you for a month for free.’ Most people are happy to take up the offer. That is something I would like to be doing—

Senator O’BRIEN —Are you pitching to the marketing arms and marketing consultants?

Mr Georgiades —Finding the right people is pretty tough. There is a lot of groundwork. I certainly do not get on a plane to Europe until I have really started a good dialogue by email. I try to ascertain that I have the right people. Even then I get it wrong. Some people think they have the influence but they don’t. That is a risk. You try 10 and probably three of them are actually in a position to make a decision.

Consumer products was the division I was in at Disney. There are plenty of companies like Hit Entertainment, Nickelodeon, Warner Bros. It is a subcreative field. If it were, as you were saying, just the general design field that would be different. It is just so big and competitive.

I did meet with an Austrade person in London. There was an Australian guy my consultant in London teed up a meeting with. He was a pretty serious player. I was pretty impressed that he made time to talk to us. He was not able to help by teeing up meetings with his contact bases, but he gave us good advice. Good advice is fantastic. I will take good advice any time I can get it. What would really be helpful is some groundwork: ‘Here are some people I have contacted. I am a credible person so they took my call and I have teed up a meeting.’ I am sure that happens at a higher level.

ACTING CHAIR —What you were seeking from Austrade in France was not—

Mr Georgiades —Initially?

ACTING CHAIR —Yes, it was not necessarily information that was specifically and unique to the French laws. It is disappointing. I have heard those reports from other parts of the world too. They often say they do not have the resources or the interest in a particular area with smaller business. I want to ask you about the Ashes.

Mr Georgiades —Please do. It is topical at the moment.

ACTING CHAIR —Tell us what that involved and how you got that.

Mr Georgiades —I have made subsequent trips and got other business. I just put those two examples in because they were good ones to win. I have been known to knock on doors with my folio under my arm. That is how I got my job at Disney in California. I do that today.

ACTING CHAIR —What were you actually doing for the Ashes?

Mr Georgiades —I walked in there—

ACTING CHAIR —To whom?

Mr Georgiades —I went to the England and Wales Cricket Board. I teed up an appointment. Somebody saw me and referred me to somebody else. I told them, ‘I do all this type of work.’ They said: ‘That is quite interesting because that is something we are not doing well at the moment. Would you like to tender?’ They put out a global tender for the business.

ACTING CHAIR —The business was specifically what—branding, you said?

Mr Georgiades —It is to develop the logo mark.

Senator O’BRIEN —It is the images for the Ashes series.

Mr Georgiades —The visual you see there came from my office. So they had nothing. They had the event and they had the name. What does this look like? It needs a mark of some kind to represent it in all its communications. They wanted advertising templates and television super graphics. They needed a consumer products program, an apparel program. What did the tickets look like? These events generate so many pieces. Just for the ticket I might be charging them $500 to produce the artwork. And once you have the business it is a 12-month exercise.

Senator FERGUSON —They are going to charge you that much to go to the cricket too.

Mr Georgiades —They have to pay me. I have an association with the Australian Cricket Board and they were aware of the work I was doing with them. It is interesting that the British are farming out the creative work to an Australian company when they are actually competing against the Australians.

Senator O’BRIEN —They engaged a Tasmanian bowling coach for a previous English Ashes, so they are pretty used to taking skills from here.

Mr Georgiades —So it is on par.

ACTING CHAIR —That was the problem, was it?

Senator O’BRIEN —It was. Troy Cooley is his name.

Senator FERGUSON —You mentioned the production of a style guide?

Mr Georgiades —Yes.

Senator FERGUSON —Can you give us an example of a style guide. What does it actually mean?

Mr Georgiades —I am a bit disappointed. I left in the car some examples because I did not know whether they would be appropriate. A style guide is a user’s manual. When you produce this stuff, generally it goes off to people in China, India and all over the world for some manifestation of this brand. It is effectively an instructional tool kit. They are quite thick manuals that say: ‘This is how you use it in this instance. If you want to generate apparel behind it, here are a bunch of design elements. They should be used with these colours, to these scales, for these applications.’ So it is an instructional tool kit.

Senator FERGUSON —How many people do you employ?

Mr Georgiades —I employ 30 people. I think I mentioned before that we now have a designer in London. We have our new business development in Paris. I have a consultant in New Zealand and a business consultant in London as well.

Senator FERGUSON —And the rest are here?

Mr Georgiades —And 28 are in this office. The beauty of growing an international business is that I can double my business, put on half the number of people again through economies of scale, do 95 per cent of it out of an office in Melbourne and probably put key people in local markets. The beauty of the electronic age is that data moves fast. You can get it around the country pretty fast.

ACTING CHAIR —Have you come across evidence of other schemes similar to EMDG in the countries that you are working in or trying to get work in, which are used there for their businesses?

Mr Georgiades —Generally, no.

ACTING CHAIR —We know, for instance, that some of these countries provide a lot of protection and a lot of support to a whole range of other industries. We were talking about some of them earlier: wine or agriculture. I was just interested in whether you had seen any in the services area.

Mr Georgiades —I have not personally. My father said to me last night actually that the French embassy had approached him and asked him if he would be willing to meet with a French product company that does the same type of stuff. Obviously, the embassy is doing some soliciting of relationships.

ACTING CHAIR —I was also interested from the perspective of how hard it is for you to break into the market. Obviously, it is a lot of hard work, as you said, but are their barriers that you are coming up against because of particular programs or protectionist policies?

Mr Georgiades —Not that I know of. The Walt Disney Company, being an American company, is quite internationalised. There are a lot of English speakers.

ACTING CHAIR —I understand.

Mr Georgiades —So it might be a bit different in that scenario.

ACTING CHAIR —So you will be applying for an EMDG grant. Have you applied for the current year, 2008-09?

Mr Georgiades —At the end of the financial year 2008-09 I will put in a submission. This year the new budget 100 per cent guarantee of the remainder made a huge difference for me. I think I spent $140,000. I was expecting $40 million minus my agent’s commission. That means there is suddenly a $30,000 upside for my bottom line and so that makes a huge difference for me.

ACTING CHAIR —It is good to hear that things are going well.

Senator O’BRIEN —If there are any additional ideas you have about improvements for Austrade that come to you then it may be that you want to send us email that we can put into evidence to supplement the evidence yet given here today.

Mr Georgiades —Do you mean specifically in regard to Austrade?

Senator O’BRIEN —Well, you said you had a problem with Austrade. You have made a not insignificant criticism of their capacity to assist you so at some stage no doubt we will be asking Austrade to address that. I am giving you the opportunity to elaborate further or come up with any suggestions you have. I think that is the fair thing to do.

Mr Georgiades —I would make one comment about the new EMDG system coming up. There is currently some sort of formula, and I do not fully understand it. I guess I just want to say that, as it has been explained to me, it seems like it is a sliding scale of weaning applicants or participants off the program. That makes complete sense to me—you do not want to get to your final application and have your business fall over. The thing that I wanted to make a comment about is that if I were to start a new initiative now—a big idea like trying to globalise this singular opportunity with France—I am going to be coming to the end of my scheme. So that helped me get that opportunity off the ground but there will be nothing left for me to do anything else. It is sort of a one-hit opportunity—unless you try to get it in your fourth year or something, but these things take quite a number of years. So somehow extending for legitimate opportunities is something that I would be interested in.

Senator O’BRIEN —I asked a question of a previous witness about whether we should suggest that after a time you should not get any more for a particular market and direct people to expand into other markets rather than continually promote the exchange with a market where they may have maturity.

Mr Georgiades —I would rather have three years. If I was getting weaned off my current opportunity now over the next 12 months then that is doable—you should be able to manage your business in such a way that you do not need that support. But then I would like it freed up to start again with something else—because that is how I grow my business: you capitalise on one opportunity and you move on to the next and then the next. That is how things grow in my business.

Senator FERGUSON —You may have heard our previous witness say that he would like a bit more flexibility. He needs the help at the back end of his approach not at the front.

Mr Georgiades —In later years?

Senator FERGUSON —Yes, it is about building up the relationship. This was the guy with wine in a can. I do not know whether you heard any of his evidence or not but he just said that he needs it at the back end not the front end.

Senator O’BRIEN —He knows you?

Mr Georgiades —So for him building the relationship is a small cost and actually—

Senator FERGUSON —Yes, it is once he gets to the fourth or fifth year that he actually needs the boost.

Mr Georgiades —With this new formula that will be very tough for him because it virtually gets tougher as go.

Senator FERGUSON —There is no flexibility to do that.

Mr Georgiades —I was thinking about the auditors as a resource that gets put into it. I would rather them be my partner and be empowered to say, ‘Here’s your opportunity. Let’s tailor this program.’ They could be authorised to submit it and get it endorsed or ratified or whatever. Certainly one size does not fit all. When I was listening to the other gentleman’s submission I realised his business is so different to mine. How do you have the same program to cover us both?

ACTING CHAIR —It may be as simple as the difference between the service industry and others.

Senator O’BRIEN —EMDG operates in the tourist sector.

ACTING CHAIR —Yes, but I am thinking about when it starts to taper and whether you front end load it or back-end load it.

Senator FERGUSON —It just seems that there is a rigid program with a set of criteria—and sometimes you need criteria that can be changed to adapt to certain circumstances in a different project.

ACTING CHAIR —I think it is something we can certainly follow up with the department and Austrade.

Senator FERGUSON —I think so.

ACTING CHAIR —Because we are dealing with two entirely different ends of the spectrum here. But the scheme clearly works for both.

Mr Georgiades —Any help is better than no help. Nothing is perfect and it is helpful. It could be more helpful, of course, like everything.

ACTING CHAIR —Without wanting to simplify it too much, it is designed to support industry with certain costs in terms of export marketing. A lot of those types of marketing costs are not dissimilar from one industry to another but they can occur at different times and have different impacts depending on how you grow your business. There being no further questions I thank you for appearing before us today. We wish you good luck. We will be watching the Ashes with more interest, particularly now that the team was picked yesterday. We appreciate you attending our hearing today.

Resolved (on motion by Senator O’Brien):

That this subcommittee authorises publication, including publication on the parliamentary database, of the transcript of the evidence given before it at public hearing this day.

Subcommittee adjourned at 4.31 pm