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Big Shipments to Small Countries

By: Greg Seminara,Export Solutions

Quiz:
1. Do USA branded Food companies export more product to Brazil or Puerto Rico ?
2. Do UK branded Food companies export more to Germany or Ireland ?
3. Do USA and UK Food companies export more branded food products to India or Hong Kong ?

Answers: 1. Puerto Rico 2. Ireland 3. Hong Kong

Senior executives appear absorbed with strategies focused on penetrating BRIC + M ( Brazil,Russia,India,China,& Mexico) countries. This is a valid approach for a handful of category leaders , with decades of experience penetrating emerging markets. The reality is that most North American and European companies have far greater export success selling to places like the Caribbean Islands, Middle East, Iceland ,Singapore, Hong Kong and Malta versus the population growth hot spots.

Why do companies deliver Big Shipments to Small Countries ?

Smaller Countries have Limited Manufacturing Capacity
This results in a level playing field where most products need to be imported. In larger countries such as Brazil, exporters need to compete with massive local companies with plenty of local infrastructure and factories. In a Commonwealth such as Puerto Rico, the brand competition is similar to the environment in the USA. All market entrants have the same added costs of freight from the mainland and the cost of a local distributor.

Lower Cost of Entry /Low Complexity
Millions are required to begin the effort to penetrate China, Russia, or Brazil, with little guarantee of shipment success. Investments are required to build a brand in all markets , but a $10,000 budget will go a long way in most Islands and $100,000 is still substantial investment for most Central American and Middle East countries. Additionally, many small countries accept Made in the USA or Europe packs, with little or no adjustment required in terms of labeling. In a some cases, a small distributor produced sticker will meet any local labeling laws.

Excellent Distributors in Small Countries
Some of the industries largest distributors are based in markets such as Puerto Rico, Ireland, and Denmark. Distributor capability is equally strong in mid size countries of the Middle East, Central America, Benelux, and Scandinavia. In large countries, leading multinationals tend to have direct sales forces, outsourcing only small brands or channels to distributors. In small and mid size countries, the distributor route is more efficient, as leading multinationals do not want to invest in local sales teams, warehouses etc. As a result, virtually every company uses a distributor in small countries, creating Best in Class distributors with capabilities honed over years of representing P & G, Kraft, Unilever and other global giants.

Tourism & Television
Mainland brands enjoy great acceptance in tourist destinations throughout the Caribbean. British brands sell well in tourist destinations in Spain, Portugal, & Greece. Travelers on vacation still yearn for a taste of home cooking. On the other hand, many people from the Middle East and Central America have travelled or studied in Europe or the Americas. This helps to develop an appreciation for those brands. Satellite television booms through the world featuring advertisements for international brands. TV also sheds insights into USA & European lifestyle habits including food preferences which may also contribute to the development of international brands.

Adjacency minimizes Freight Up-charges
USA's number one food export market is Canada and Canada's top export destination is the USA. The UK's top export partner is Ireland, followed by bilateral trade with France. France also maintains strong business ties with their neighbor in Belgium. Spain & Portugal etc. It is likely that neighboring countries may be familiar with your brand and the categories may have similar development levels and habits and practices.

Export Strategy: A mix of Large Countries and Small Countries
Small countries may appear as profitable," low hanging fruit" for export oriented companies. Mid size countries in the Middle East and Central America also offer meaningful opportunities. China, India, and Brazil may represent the grand prize, but you need to balance the resources required with the payback period. Companies celebrating international success today should think to the future and the large potential markets. Newer exporters may find short term rewards on their doorstep before venturing out to the battlefields of BRIC.