A "Top 10 Mistakes Made by Food Exporters"
Q: We just attended the Midwest Buyer’s Mission in July. We were thankful for the preparation assistance we received from Food Export in advance including the links to webinars like “Preparing to Meet Foreign Buyer’s”. Many buyers took samples of our sauces and we have followed up with a few. But we still know we have a lot to learn to be able to fortify our position. Is there a list, like a “Top 10 Mistakes Made by Food Exporters” that you can share? Knowing what to avoid in advance of these pursuits would be ideal.
A: Although there are a number of “Top 10’s” in pop culture overall and the international trade sector created by various public and private entities, they typically aren’t specific to one sector. In the high value-added processed food sector, we often have our own particular challenges when it comes to succeeding in the export business. What follows is the most recent version of the “top 10” mistakes most value-added processed food exporters make, based on overall experience in the last few years, pandemic aside since it was temporary. Most the mistakes suppliers make are the same as they were years ago, nearly all which could be easily avoided by proper export counseling, education, and training.
1. Thinking Exporting is Easy or Too Hard: It is neither really, and it is accurate to say it depends on what an individual company makes of their opportunities and challenges. It most often depends on the type of products, e.g., perishable, ingredients, liquids, meat, or dairy, etc. It also depends on your markets: There are distinct levels of regulations and tariffs on the same product between countries, for countries the U.S. has more challenges with there may be quotas, bans, or embargoes in effect. The market could also be wide open with high potential. Some quality export counseling and a good bit of market research should help clarify the opportunities and challenges. There should be no inadvertent surprises with proper preparation.
One particular challenge to succeeding in the food export business is when the company or individual within tries to control the immediate external environment instead of joining it. One must understand that although domestically that might be a little easier to do, international trade is not going to change to suit your needs and you must work within its parameters. In other words, and to use a food pun, a little “Humble Pie” might be in order as there are numerous issues you cannot control, but you can adapt to them and do well just the same.
2. Your Window of Opportunity Too Short – & Expectations Too High: Developing export business requires patience and some “bridge building” into foreign markets. Although there are some incidences of immediate business reported from some companies, in most cases the proper approvals, communications and negotiations take months—and that is only if things are progressing without incident. It is often not the potential importer who is moving slowly, but the equivalent of their FDA or USDA gathering details about the product (label, ingredients, etc.), especially the first time it is being imported.
There are also a number of other reasons why the importer moves at a different pace than you might prefer. For example, the importers could be carefully studying the market for the product and getting a sense of whether it would succeed or not based on its platform and its price. Their concept of time can be far different that yours. Furthermore, U.S. companies that have a “Fast Food” mentality in this business—to use another food pun—typically do not enjoy the immediate success they desire. These kinds of sentiments are often a sign that a company may only be involved in developing export business for a short period of time before backing away from it. Lack of commitment to export development usually results in lack of success. Take the Wholistic approach and be patient and you should do well.
3. Misinformation & the Rumor Mill: Let’s face it, today we live in a world of potential misinformation and the overly opinionated everywhere we turn, and that is no different for our industry. It’s easy for all of us to believe what we hear from people about their experiences in exporting, whether negative or positive for that matter. However, you will learn that you also need to qualify everything you hear for yourself based on your own circumstances.
So again, this would include the “Easy or Hard” part of the uniqueness of every company and an individual’s perception and realities. Believing a couple of isolated incidents from someone with a negative perception of exporting food may not in your best interests. That is because upon further review you may find it was often the fault of the individual or company that lead to the problem. Lack of export readiness, failure to read instructions carefully and ask professionals in the industry for assistance is often the case.
4. Confusion from Training/Opportunities Outside the Value-Added Processed Food Industry: One of the things unique to the food industry is its educational component. Education and training for the export of food and agricultural products is very specific as far as regulations, marketing, logistics channels of distribution and consumer tastes and preferences. While some aspects of exporting overlap despite the type of product, many food exporters have noted that the export seminars/webinars/conferences they have attended rarely if ever cover food and agricultural products and specific questions cannot be answered. Your best opportunity for export education will be staying vertically integrated with organizations that focus specifically on OUR industry.
At FoodExport.org, you will see options for education and training specific to the food and agricultural industry under “Learn to Export.” You can also check with your state agricultural promotion agency regarding other educational opportunities at the state level. Organizations and individuals that are not in the food exporting business cannot teach you how to export food, and if they try, the information could be hazardous to your success as it is likely not correct or current.
5. Inability to Target Markets/Segments: It is still common for suppliers of food products to mention they are targeting “Latin America,” “Asia” or “Europe. Some have even indicated they want to target only “English-speaking countries.” This is what is known as the cookie-cutter approach. Those geographic regions are far different from each other, in addition to being huge parts of the globe. Opportunities will vary greatly even within the same country, especially larger ones. For example, companies are often interested in targeting English-speaking countries because they think regulations will be easier or they will not have to adapt a label, but these assumptions are often not accurate. Nearly all buyers of value-added processed food products speak English very well. That is how they do business.
The truth is markets for food products —especially high-value, processed food products—are truly “Global” in nature now that geography is not nearly as important as people are. You target for example people with disposable income, those with little time to prepare foods, those with interests in “super foods” or “portion control” or food processors looking for specific ingredients, or hotels with a high percentage of guests from one or a few specific countries. In other words, your market opportunities may be nearly everywhere, perhaps sometimes in niches but often in abundance.
6. Reactive Exporting: One of the biggest challenges facing new-to-export firms is being in the awkward position of having to learn how to export after getting an order—which can and should be easily avoided. If you are not export ready or working to become so, your chances of success may be diminished by the fact that you are now rushing and pressed to find resources to help you, unsure of the vocabulary, terms of sale or regulations. Outside of the Food Export Network, many of these approaches may be fraudulent though so you have to be cautious in vetting them.
When unprepared suppliers dive into transactions from these kinds of leads, it can lead to loss of business opportunity. And legitimate buyers may look elsewhere if they feel you are not going to be a reliable supplier into their operations. Often it is the result of lack of proper communications between buyer and seller because of the lack of supplier knowledge, often leading to shipments being stuck in foreign customs due to the lack of one key document or a prohibited ingredient that was not researched carefully enough. If you are at all interested in exporting food, it is strongly suggested you balance your marketing efforts with becoming export ready.
7. Too Much Emphasis on “Selling”: The U.S. is more than likely the most sales-driven country in the world and probably the best at it. However, the term is not used as much outside North America, and it is not nearly as important as the relationship building that is required for successful international business. There are indeed “Culture’s Consequences” to pay for using a cookie-cutter approach for sales strategies across foreign markets. This often leads to ineffective correspondence between parties, which could cause problems with transactions. Consider the following excerpt of a message between a U.S. supplier and an importer from Singapore who met at a Buyer’s Mission.
The buyer requested a quotation for flat breads, and this was the response: “Hey Chen, I got your order ready! The product is $8500.00 and customs fees: $787.00. Let me know how you want to pay and also ship it.”
Even in today’s global market, this response is way too informal and includes several other key errors and oversights:
– Chen was the buyer’s last name, so it should have read Mr. Chen, or if allowed, Frank. – There was no proforma invoice and there were no product specifics, weights, or measures.
– There should not be any customs fees applied to this quote since it was Cost Insurance & Freight (CIF). Because Singapore is duty free, the only fees paid for customs clearance would be on the importer.
– All the freight, documentation and insurance should be line itemed on a pro forma invoice to show the details of various costs.
– The supplier should already have known how to ship, since it was CIF and already had a price.
– Fortunately, in this case the transaction eventually took place, as Mr. Chen was not only very interested in the product, but also very patient. With other importers, however, that would most certainly not always be the case.
8. Difficulty Appreciating Cultural Nuances: Another impediment to exporting success can also result from failing to understand the various business practices and decision-making styles around the world. Too much emphasis on selling and the “Hey Chen” scenario discussed above are a cause and a symptom of this problem, which is compounded by lack of export readiness. There are of course numerous ways to study and appreciate global cultures, including (and in our case, especially) business culture.
One of the foundations with which to comprehend cultures is the use of “Context.” Context is defined as “part of a text or statement that surrounds a particular word or passage and determines its meaning,” and also “The circumstances in which an event occurs; a setting.” What this means between cultures is that understanding the context of what a foreign importer says to you—including when it was said and who is or is not present—can often be more important that the words that are spoken. Lower context cultures (“Hey Chen” again) are more direct and understanding is usually clearer. Higher context cultures can be a little more difficult to comprehend as they may seem a bit nuanced, even vague on some topics.
9. Difficulty Coming to Terms with Export Price Escalation: This challenge is frequently the result of companies’ failure to remove domestic costs from the export price, which is crucial to develop a competitive export price. This means removing all of the domestic overhead that does not apply to products leaving the country, such as brokerage and distribution fees, royalties and commissions, etc. It usually costs importers far more to bring the product in than it does in domestic transactions. When buyers tell you your price is too high, they do the math and back the products into the purchase or usage area. The more competitive your price to them, the more likely the product will be able to absorb all the additional costs to market. Margins are usually higher in the U.S. than they are overseas as well, which makes a cost comparison more difficult. Again, as a result of another Buyer’s Mission we recently saw photos of some BBQ sauce selling in Indonesia for the same price it sells in the U.S. That tells us that it was priced properly for export at the origin.
10. Failure to Delegate Responsibility: As mentioned above, the U.S. is a highly individualistic country that thrives on innovation; in the food industry this includes things like recipes, packaging, and food processing. Often, especially with small businesses, the founder or owner of the company also tries to take full responsibility for their export development. This can lead to what is known as the “Rainmaker Effect,” meaning that person is responsible for whatever happens (makes it rain) and has difficulty absorbing the extra time and effort it takes to enter into the export market. It then becomes a challenge of time and resources—both human and financial. One symptom is tending to collect loads of information they cannot process and asking for more in the meantime. The opposite would be saying “just tell me what I need to know,” which often only they can determine.
So, it is important to pace yourself. It is ok to be picky about your markets and customers, and the activities you utilize to develop them. It remains vital, however, to take the time to read information, especially at the startup of export. Take advantage of staff members who are eager to learn and read, and have the analytical mind required for much of export development. You also should get all the help you can since there is plenty of it available. “Know before you go” is the best advice.
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