By notice dated July 11, 2017, the Department of Homeland Security (DHS) has delayed the effective date of the International Entrepreneur Rule to March 14, 2018, and will seek comments on whether or not to rescind the rule altogether. The International Entrepreneur Rule (IER), which was issued in the waning days of the Obama Presidency and was to go into effect on July 17, 2017, would have granted foreign entrepreneurs with parole (i.e., the ability to enter the United States) for the purpose of operating and growing his or her start-up entity in the United States. The IER was praised by many as a critical step to revising an antiquated U.S. immigration system that provides few options for immigrant entrepreneurs.
Companies we partner with are highly aware of the fact that international markets can provide their food brands with steady growth potential. However, the challenge is, how do companies unlock that growth potential without experiencing problems that can cost a lot of time and money? Often times we see food businesses begin exporting by accident. Exciting opportunities will present themselves through inbound website leads or at large domestic trade shows, and naturally sales staff and owners alike become energized about the opportunity to make it big overseas! Within weeks, sales staff start responding to every international order and your operations team begins the cycle of chaotically trying to keep up.
Sound familiar? If so, you are not alone – numerous food businesses have walked that same painful path of going global. The good news is your company can begin to unlock new market growth potential and avoid such international woes by developing and implementing an International Strategic Plan. Below is Athena Marketing International’s 5 step process to developing just that:
- Step 1: Find Your HS Code & Begin Active Research Conducting thorough market research is the foundation of your international strategic plan. Start off by researching your food product’s 6 or 10 digit (if available) HS number. The HS number, known as the Harmonized System classification, is a six-digit standard that uniformly classifies traded products across the globe. Once your product HS code has been identified, you can then begin to search for annual exports to specific countries under that product heading category.
- Step 2: Choose 2 or 3 Priority International Markets (go ahead, pick the low hanging fruit) After you have researched numerous markets by your HS product category, pick out the top markets that indicate the largest volume potential for your products. Analyze each market and determine the competitive landscape, product demand, market size, growth rates, consumer demographics, and barriers to entry. Through this search and learn process, you will discover that some markets will have fewer barriers to entry. These will be the markets you’ll want to focus on and prioritize as they will provide large, quick sales opportunities without spending large amounts of resources or time on. Keep in mind too that your priority markets will possess a good infrastructure for distribution.
- Step 3: Develop Profile of Ideal Customer in Priority Markets Now that you have your top two or three markets to focus on, it is important to understand the type of importer and/or distributor you want to work with. Prior to choosing the right one to work with, you’ll want to ask such questions as- What sales channels are they strongest in? Who are their main customers? How many sales representatives do they have? What other food products do they sell? All of these questions and many more should be asked prior to choosing a master importer/distributor.
- Step 4: Establish Pricing for Product(s) Just like your domestic business, pricing is a critical component of your strategic plan. Export pricing should be the same or slightly lower than the discounted price available domestically. The reason for this is to avoid situations where international customers can bypass your importer and buy from a U.S. distributor at pricing that is lower than your pricing. Pricing should be developed in a systematic way so that your importer will have no difficulty in selling.
- Step 5: Develop a Platinum Product Launch Plan When launching a new product overseas, it is important to approach with the same strategic care as you would in the domestic market. Plan and budget for tasting samples, trade shows, point of sales materials for importer and other sound marketing activities that are both a good fit for your brand and the new market.
Now that you have gone through all 5 steps of the International Strategic Plan, it is imperative that your management team and key employees possess a clear understanding of the plan and their role in it. Revisit the plan every time a new international inquiry presents itself and be sure to review it before attending any domestic trade show, such as Fancy Food or Natural Products Expo West.
Athena Marketing International is passionate about seeing agricultural products thrive in foreign markets. If you want to implement a strategic plan for your business and would like more hands on strategic assistance, please be sure to reach out.
It’s normal to have hesitations when determining whether or not to export your food products. In fact, we would be slightly worried if companies had no concerns and proceeded to make the leap of entering into a new market without meticulous planning or research. Unfortunately, the more common reality is that we see companies lose out on safe opportunities to expand internationally due to a four letter word – FEAR.
When business owners think of exporting, the fear of the unknown sinks in and becomes a roadblock, which can lead to no action or movement on the topic. Don’t let your company fall victim to inaction. Below are three common export fears we hear, and tips for how to overcome them, so that your company can begin to leave shore and soar to new markets.
- Cultural Understanding and Language Proficiency
Being acutely aware of your target market’s culture, values, beliefs, perceptions, and food preferences is important. However, don’t let not knowing a foreign language hold your company back from developing a good opportunity. Most distributors and importers are fluent in English and are there to help you navigate cultural customs.We recommend finding similar topics of interest with your new market customers. We live in the information age now, and as a result more similar interests exist between cultures. From the music we enjoy to the types of food we can’t get enough of, common ground does exist. For example, did you know millennials in Bangkok love American BBQ and ice cream? It is a fun factoid and according to TripAdvisor, the #4 best restaurant to eat at in Bangkok is an American BBQ placed called the Smokin Pug BBQ restaurant.¹
- Shipping and Document Requirements
Determining how to ship your food, beverage or nutrition products to a new market can be overwhelming. Although you don’t have to do the shipping and documentation alone. We always recommend working with a Freight Forwarder. They will help you determine how to ship your products via air, sea, rail or a combination of the three. Your Freight Forwarder will also help you determine what documents are required for the country to which you are exporting. Common documents required to export food products include; Certificate of Health, Certificate of Origin and Certificate of Free Sale. Remember, let the experts help with the shipping and the documentation.
- Determining Export Product Pricing
It is important to understand the price per unit of your food product for the end foreign consumer. Once you know this price, you can determine if your company can compete on the grocery store shelf. When determining the landed consumer price, you will evaluate your total manufacturing costs and the added importer expenses, such as tariffs and value added taxes. Determining the right price for your product does require strategic expertise. That is why we at Athena Marketing International have developed a proprietary formulation to help food companies quickly determine their custom export product price. Upon determining the right price for the product, further market research on competition and market demand can also be provided.
The overall theme in regards to fear of exporting boils down to a company’s lack of knowledge and expertise in new markets. International expansion does require a methodical strategic approach, but keep in mind that success can be achieved with appropriate planning and the assistance of those who have substantial international experience.
When seeking international expert assistance, be sure to ask that entity what their hands on experience is in garnering export sales in your target market. Choosing the right expert to work with is vital to your international success!
- “10 Best Restaurants in Bangkok.” TripAdvisor, 02 Sept. 2016, https://www.tripadvisor.com/Restaurants-g293916-Bangkok.html
Toosum is exhibiting at the ANUGA trade show in Cologne, Germany. ANUGA is the world’s largest food and beverage trade show and is being held from October 10th to October 14th. This event showcases products in the Food & Beverage, Bakery, Beverage & Confectionery industries. Over 7,000 exhibitors from 100 countries bring the largest trading platform of the international Food and Beverage industry to life.
Toosum set out to create a 100-calorie, gluten-free, satisfying snack that tastes great and gives you all the healthy benefits you expect from the good foods you put in your body. Say “hello” to your new favorite snack! Each of Toosum’s delicious 100-calorie gluten-free oatmeal bars is made with nutrient-dense (and certified gluten-free!) rolled oats, chia seeds, and other delicious ingredients straight from nature, all with benefits that go way beyond their good taste.
Toosum develops and markets 100-calorie, Gluten-Free oatmeal bars made in the USA. Our healthy oatmeal bars are also Non-GMO, low sugar, low fat and delicious tasting! Flavors include Blueberry/Greek Yogurt, Cranberry/Acai, Coconut/Banana, and Cherry/Plum. Our 100-calorie gluten-free oatmeal bars are packed with anti-oxidants and fiber, preventing hunger and promoting weight loss. Visit us at ANUGA in Hall 02.2 Stand # B017!
The Asia-Pacific region will account for two-thirds of the world’s middle class by 2030. Chinese will be the majority of this massive consumption. Today China’s urban middle-class population alone, if considered as a country, is larger than the total U.S. population. Rapid economic growth and a huge migration to urban centers is creating a middle-class with huge spending power. China’s middle class will consume US $3.4 trillion of goods and services by 2022, about one-quarter of China’s GDP. 1
These middle-class, urban consumers are more willing to pay a premium for quality products, have a high level of trust in well-known brands and are more likely to spend more of their income on discretionary products such as food and beverages. They are more global in their outlook and receptive to – even eager for – international brands. As these consumers become more mainstream, China will bear a remarkably similar resemblance to other developed international markets.
Another factor contributing to opportunities for U.S. food and beverage suppliers is China’s middle-class consumers born after the mid-1980’s (now younger than 30 years old). These consumers were probably the only child in their families due to China’s one-child policy. They are now more confident than their parents, happier to try new products, and regard expensive (imported) products as better products. By 2020, 35% of total consumption in China is expected to come from these young consumers.
Another trend impacting food and beverage imports in China is the growth of the internet. The online share of retail in China is now 8%, higher than it is in the United States.2 Internet users in China spend five to six times more hours online per week than Americans do.3 Food and beverage products purchased online are often delivered to Chinese homes the same day. These “e-tailers” often accept cash payment, since credit cards are used infrequently in China.
Nonetheless, for U.S. food and beverage suppliers operating in China, there are significant barriers to entry and challenges. China has fierce competition not only from maturing domestic companies but also competitors from nearly every other developed market. There is also an opaque supply chain and a complex, inconsistent and ever-changing regulatory environment. Food safety issues caused by supply chain problems is a huge risk to foreign food and beverage suppliers.
However, doing your homework in terms of market research and understanding the regulatory environment, willing to invest, and being persistent, can yield excellent results. From 2009 to 2011, supermarket sales value in China rose 32.3% while sales of food, beverage and tobacco retailers rose 61.8%.4 Both internet and brick-and-mortar retailers are beginning to import directly from the U.S. Some sales channels in China do not require labeling imported products in Chinese, so suppliers can sell the same packaged products they sell in the U.S.
Most small- to medium-sized food and beverage suppliers need a China strategy, not simply for China but for the global market, as well. Selling in the world’s largest consumer market provides U.S. food and beverage suppliers with profits to use developing other markets, keen market insight, credibility, and internal expertise.
- The Rise of the Middle Class in China and its Impact on the Chinese and World Economies, Chapter 7, Dominic Barton ↩
- A Pocket Guide to Doing Business in China, Gordon Orr, McKinsey & Co., October 2014 ↩
- All You Need to Know About Business in China, Jeffrey Towson and Jonathan Woetzel, McKinsey & Co., April 2014 ↩
- The Ever-Challenging Chinese Landscape for Food and Beverage Firms, Kreab & Gavin Anderson, Hong Kong ↩
U.S. Processed Food Historical Export Growth
Processed food exports set another record in 2014 with a 2% growth rate and sales exceeding $46 billion. It was the 5th straight year of record growth. Some food categories grew very rapidly, such as prepared dairy products at 232% growth. Not only the processed food industry, but also companies in the Standard & Poor’s 500 index are getting more global. Last year foreign sales grew faster than U.S. sales for these companies.
While Canada and Mexico are the largest buyers of U.S. processed food, with $13.4 and $6.2 billion worth of imports in 2014, respectively, Japan was close behind with $6.2 billion. China imports $2 billion of U.S. processed food, followed by Korea with $1.8 billion.
Although U.S. processed food exports are high and growing rapidly, the European Union (EU) is the world’s leading food exporter with sales of $91 billion, twice as high as the U.S. In fact, U.S. market share of total processed food exports has declined in the past 10 years due to strong EU growth and new entrants to food exports such as China, Thailand and Vietnam.
Trends Contributing to Export Growth
The main factors responsible for the fast growth of processed food exports are several, namely:
- Higher global demand
- High commodity prices lead to increased value
- Middle-class growth, particularly in emerging markets
In developing economies the rapid urbanization of workers from rural areas has been a boon for processed food exporters. China’s urbanized population, only 40% a decade ago, is now 52%. Japan’s city-slickers are now a staggering 92%. These urbanized middle class will continue to stimulate demand for premium imported processed foods.
Rising incomes in developing economies is the main reason that the population of “middle class” consumers will increase from 1.8 billion in 2010 to 3.2 billion by 2020. Of this projected growth, 85% will come from Asia. While middle class households in developed countries such as the U.S. and Europe will grow 8% by 2020, they will grow 54% in developing markets in Asia, the Middle East and Africa.
The megatrends highlighted above will continue to propel U.S. exports of processed foods for decades. In addition, modernization of distribution channels, enhanced supply chain capabilities (including fresh/perishable and frozen), and improved market access such as lower import taxes, will all be favorable to U.S. processed food exporters. Finally, the emergence of e-commerce has created significant opportunities for cross-border trade of U.S. processed foods. Of the 600 million Internet users in China, half of them purchase goods on-line. Many Chinese “e-tailers,” such as T-Mall and Yihaodian, sell U.S. processed foods on their websites. Similar e-grocery platforms exist in Japan, the U.K., Brazil and other markets, making it easier for smaller U.S. food processors to compete against multi-nationals.
Euromonitor estimates the retail value of packaged foods will increase from $2.3 to $2.6 trillion over the next five years. Much of this $316 billion increase will come in cross-border trade, resulting in greater opportunities for U.S. food processors with innovative products offering high value. Now is an ideal time to develop or assess your company’s strategic export plans.
1 Food Export, March/April 2015 ⤴
2 USDA, International Agriculture Trade Report, May 2014 ⤴
3 Seattle Times, March 15, 2015, D3 ⤴
4 “The Emerging Middle Class in Developing Countries,” OECD, Working Paper no. 285, January 2010 ⤴
5 IHS Global insight ⤴
6 “Packaged Food,” Euromonitor International, 2015 ⤴
Peter Guyer was recently interviewed by Anderson Partners Advertising where he provided 7 tips for successful food product exporting:
- Comply with packaging regulations: Research the country’s packaging requirements that you are targeting.
- Write ingredients in the appropriate foreign language.
- Comply with import regulations: Make sure there are no ingredients that are prohibited—a lot of preservatives used in the US are prohibited in foreign countries. For more information, read the recently revised country requirements from the USDA.
- Best selling products include mass market items: potato chips, snack foods and meat products—products that are well-known in foreign countries.
- Products that are novel, innovative and new do well: The markets are smaller, therefore sales are lower but the growth rate is high.
- Europe is hot: They are just getting out of a lengthy recession and their buying power is coming back to where it was five years ago.
- Attend/Exhibit major international trade shows: Particularly in Europe—ANUGA Cologne and SIAL Paris. Guyer said Gulfood in the Middle East is a trade show you can’t miss. And, Asia has many major trade shows, but they are more segmented by categories within food and beverage.
View the full article at the Anderson Partners Advertising Blog »