AMI was recently profiled in Northwest Gold Coast:
Located on the sixth floor of the venerable Fourth Avenue Building in Seattle’s historic business district is a high energy, contemporary office that is home to a local small business that helps other area small businesses succeed in international markets. Athena Marketing International (AMI) is a ten year old company that specializes in helping US based food producers and manufacturers expand into foreign markets. Working throughout the office are friendly young professionals who move with purpose and focus and on display in the office are samples of new and developing food products.
Erin Smith of AMI (center) promoted Oregon Fruit Products Company, an AMI branded client, at the Hotel & Food Exhibition (HOFEX) which started today in Hong Kong. HOFEX is one of the world's largest trade shows for the food and hospitality industry. This year about 35,000 food and beverage industry professionals from 85 countries are expected to visit the show. AMI is assisting Oregon Fruit Products to develop a Greater China market entry strategy and implementation plan.
Singapore has long been a frontrunner in retail trends and for good reason. As a relatively open port with 99% of imports entering duty-free1, the “Gateway to Southeast Asia” has been able to enjoy a host of innovative products from around the world. This demand is driven mainly by an affluent domestic population with additional support from a substantial expatriate population.
Though competition is strong, US brands and products are well-received in this wealthy city-state. In 2011, 10.8% of Singapore's imports came from the United States, more than any other country2. Over US$12.1 billion were food and beverage products. While it must be noted that some of these products are re-exported to neighboring countries, Singapore relies on imports because of its lack of domestic producers.
Singapore's government is preparing for a strong rise in population, expecting the city-state to be home to 6.9 million residents by 20303. This would be an increase of nearly 30% from the current population of 5.35 million. Since Singapore experiences one of the lowest birth rates in the world (224th according to the CIA World Fact Book), most of this growth is expected to come from foreign immigrants. With 2012 GDP per capita reported to be over US$60,0004, Singapore's residents are primed to open their wallets for new and exciting food and beverage products. In addition, the age of marriage has been slowly rising to 30 years for males and 28 for females5, translating to high-earning singles who are eager to enjoy the high life and associated products such as wines and spirits, fine cheeses and meats, and other exotic imported fare.
While other Southeast Asian nations such as Vietnam and Malaysia are quickly learning to provide Singapore with regional options that appeal to the value-oriented customer, there is still ample opportunity for US food and beverage to experience success in the market as well. US-branded products are seen as being high-quality and can be partially American expatriates. As 60% of the food and beverage retail market is controlled by modern retailers such as Fairprice and Cold Storage/Giant6, it is important to be prepared to fully invest in the Singaporean market such as commitment to promotional campaigns.
Singapore's trade-friendly economy and a young, single and well-financed population make the city-state an excellent candidate for US products such as snacks, breakfast cereals, fresh and dried fruits, ice cream, and processed meat.
What started with the influx of foreign workers and now the expansion of the Middle East, the Arabian Gulf has launched several western niche fast-food brands. Franchises such as Shake Shack from New York City, South St. Burger from Canada, Denver’s Smashburger and New Zealand’s Burgerfuel are among the few new restaurants that are seen throughout the region. As one of the first brands to open in the UAE, Kentucky Fried Chicken had the largest revenue of all fast-food outlets in a US$2.72bn market in 2011.1
This trending consumption and development of Western fast-food chains are directly correlated to the lifestyle changes over a generation where oil wealth and social life revolves around the region’s huge shopping malls. Many locals spend much of their evenings out, even on weekdays, spending time in the shopping malls and dining in the mall food courts. According to a survey by MasterCard, Arabian Gulf consumers were the top three spenders on restaurants worldwide — UAE diners spent an average of $229 per month, Qataris averaged $211 per month and Kuwaitis spent $196 per month. They also discovered that 88% of the population dined in shopping mall food courts last year.
The rise of Western Quick-service-restaurant chains in the Middle East is also a result of the current economic situation in the US. Andy Wiederhorn, chairman of Fatburger, stated, “Despite the recent downturn in the domestic economy, the international market is on fire. The Middle East and Asia Pacific are becoming exciting territories for us. Our current locations in these regions have been extremely well received.” With this type of response, the burger chain plans to open 17 restaurants in Saudi Arabia, 5 in Kuwait, 8 in the UAE, and has signed deals for 30 stores in Qatar, Egypt, Lebanon, Jordan, Syria and Oman over the next couple of years.
Many of these fast-food brands see Middle East expansion as a way to make up for softness in Western markets. In Saudi Arabia alone, Euromonitor analysts expect to develop into a US$4.5 billion fast food market over the next three years. “As companies look for growth in sales, it is natural for them to look to new markets,” says Wharton marketing professor Barbara Kahn. “Some retail products are more universal than others, and the ones that are, are more likely to go global. Also, if they have some kind of differential advantage relative to the local competition, you’ll see more global outreach. In this case, American cuisine is presumably the draw.”
Not only U.S. fast-food chain stores but also U.S. packaged food and beverage brands are in high demand in the Middle East. These brand owners would also do well to implement a strategy for market entry and development in the fast-growing Middle East consumer markets.
1 Knowledge@Wharton (2013, February 25). Fast-food brands bite into the region. The National Business, p. 07.
More than 2500 of world's thought leaders are currently in Davos-Klosters, Switzerland for the 43rd Annual Meeting of the World Economic Forum. Influential members of the global community are congregated there to present and discuss the top issues currently impacting the world's economy under the theme “Resilient Dynamism”- from how Europe can rebuild its competitiveness to the importance of healthcare and sustainability of the global food system.
Today it was reported that Africa is now the world's second fastest growing economy, with expected GDP growth of 5.3% this year. “We realize that intra-trade is not enough and are working hard on that.” stated Jacob G. Zuma, President of South Africa. He conveyed that the conflict in Africa is only one concern of the continent. “We are also dealing with the economic issues. We've just discussed and agreed to integrate three of the five economic regions, creating a free trade area of more than half a billion people.” With continued efforts to improve political stability and remove barriers to trade, AMI believes that Africa will become a rapid growth area for U.S. food and beverage exporters in the next 2-5 years. Despite the tumultuous consequences of the “Arab Spring,” North African markets such as Morocco and Egypt will become major importers of U.S. processed foods.
With a population of 1.2 billion people, India represents the largest democracy in the world, and one of the biggest emerging markets.
Despite the short-term decreasing growth rates that India and the other BRIC countries (Brazil-Russia-China) experienced in 2011-2012, India's medium-term growth outlook is positive due to a young population, healthy savings and investment rates, and increasing integration into the global economy.1 India's economy grew 7-9% annually between 2000 and 2009, reaching 10.1% GDP growth in 2010. However, in 2011, the country's GDP growth rate has slowed to a still-enviable 6.8%. The relative slowdown was due to little progress on economic reforms and persistently high inflation and interest rates, which decreased the value of the Indian rupee. India forecasts the economy will expand 5.7%-5.9% this fiscal year.2
In January 2012, the government of India approved 100% foreign direct investments (FDI) in single brand retail. This creates the opportunity for international retail chains such as Wal-Mart and Carrefour to enter the Indian market autonomously and without a local joint venture partner. Last year, Wal-Mart entered the Indian market in a JV with Bharti Enterprises Ltd, creating Bharti Wal-Mart Pvt. Ltd., which operates 20 retail stores in India.
FDI in retail chains will transform the Indian food and beverage market, which has already seen significant changes due to a strong increase in urban middle class consumers who are seeking new imported products. Currently more than 350 million Indians live in urban areas. These demographic changes lead to more focus on convenience and healthy foods. Among the urban population there are an increasing number of nuclear families and working women; this represents a shift from the traditional large extended families where women were responsible for cooking meals and buying groceries.
In 2011, Indian food retail sales were estimated to be US$270 billion, 60% of total retail sales (food and non-food). Per capita annual expenditures on food is approximately US$225, which represents a very high percentage considering that an estimated 800 million people live in rural areas and do not have access to retail stores.3
The Indian food retail industry has traditionally been defined as “unorganized” because of the severe segmentation of this category. The retail sector is dominated by kirana stores (small, usually family-owned shops which sell groceries and other sundries). Kirana stores will be the most affected by the new FDI in retail, even if their convenient locations (both urban and rural), lower real estate costs, and other services will help them remain competitive. For this reason, U.S. food and beverage brands seeking to export to India should not disregard this traditional “unorganized” sales channel.
The foodservice sector is also expanding in India, and estimated to be worth US$13.77 billion. According to a Franchise India report released at the Indian Restaurant Congress this year, the foodservice channel will continue to have a compound annual growth rate of 17% for the foreseeable future. The foodservice industry is expected to reach US$25.16 billion by 2015.4 India is fast becoming an important investment destination for U.S. foodservice chain companies who have recently entered the country, such as Starbucks and Dunkin’ Donuts, as well as quick service restaurant (QSR) brands that want to stabilize their presence there, such as McDonald's and Domino's.
India has been loosening its import restrictions and opening its market to food imports for the past 10 years. Tariffs are still high and import requirements very strict on several products. In 2011, American exports of processed food to India amounted to US$177.7 million. However, as the Indian society changes and the country experiences continual robust economic growth, India is increasingly becoming a very important market for US food and beverage products. As the middle class grows and experiences greater exposure to international cuisine, their demand for and ability to purchase imported products increases as well. Consumer-ready food products such as apples, grapes and fruit juices (tariff rates of 50%, 30%, and 30%, respectively) have high potential in the Indian market. Snack foods are also becoming a hot item as more of the population looks for on-the-go food items. Almonds and pistachios (tariff rates of 10%) are popular imported nuts while traditional items such as potato chips and cookies continue to be in strong demand. Other items such as chocolates, pastas, sauces and gourmet cheeses are also growing in favor by the 300 million Indians that compose the middle class.5
India's total food market is expected to reach US$330 billion in 2013 and nearly triple to US$900 billion by 2020. Processed foods currently make up just a fraction of the total food market at US$40 billion; however, 2020 projections show processed foods growing to one-third of the total food market: US$300 billion.6 At this rate, India is on course to be the 5th largest consumer food market in the world by 2025, providing a compelling reason for US food and beverage exporters to begin preparing for their market entry strategies.
Peter M. Guyer and Giulia Balzola
Athena Marketing International (AMI) is an export marketing, business development, and consulting firm serving U.S. food, beverage & consumer products manufacturers.
1 CME Group, BRIC Update, (2012) 2 Wall Street Journal, December 18, 2012 3 USDA Foreign Agricultural Service GAIN Report, India 2012 4 Indian Ministry of Processing Food Industry (http://mofpi.nic.in) 5 Food Export Northeast 6 India Brand Equity Foundation 2010; Fine Food India 2012; McKinsey Report : The Bird of Gold 2007
“Athena Marketing International (AMI) has represented Decas Cranberry Products and Decas Botanical Synergies since April 2007. The territory managed by AMI has been Asia, Middle East, and Australia/New Zealand.
During this time our international sales in these regions has grown significantly. Under the diligence and guidance of AMI, our core business (Sweetened Dried Cranberries) has increased +1,319%, +58% and +74% respectively from 2008 through 2010. In the 12 months ended June 2011, our base business has grown 71% vs. last year. This growth was accomplished in an extremely volatile market in which pricing reached its highest levels in nearly 20 years and then rapidly plummeted to unprecedented low pricing. Despite these market fluctuations, AMI continued to grow our business in the international markets.”
—Jeffrey L. Carlson, President & CEO Decas Cranberry Sales, Inc