Food and Beverage Industry News Q&A

Posted on February 19, 2019

Export Connect  – Najib Lawand

1)    What are some of the most common mistakes that Australian food & beverage makers make when they decide to start exporting?

Many suppliers are time-poor, and don’t invest the time to carefully consider the market they want to enter before making their final selection. Too often, businesses start their market journey solely because they’ve attended a subsidised trade show that government agencies may have run. But these markets (such as China), might not be the best market in which to launch their export journey. Another common mistake suppliers make is applying a cost-plus-pricing strategy for export markets without really considering what the recommended retail price should be, and then working backwards from there. This can result in profit left on the table that could otherwise have been reinvested in promotions.

2)    What factors do businesses looking to export need to consider before choosing the right overseas market or markets?

Businesses looking to export need to consider each country’s demographics. For example: How many of their consumers will be locals, and how many will be expats? What are the likely value chains? Are there any market access issues (e.g. Halal certification, organic accreditation)? And can that market support a premium product (especially if it’s chilled or frozen)?

The business’ market entry strategy may also change over time. For example, the business may initially enter a market through an Australian-based trader who sells directly to a supermarket chain (this may be the best way to test a product). But after twelve months of growth, a review may show that it’s now best to have the product distributed to multiple retailers and into food service channels. This means that pricing needs to be considered from the very start, to ensure there aren’t any increases in price when distributors are introduced into the value chain.

3)    What factors are involved in formulating a market entry strategy?

After you have selected your market, your entry strategy should start with your consumer: Who are your target consumers, and where do they shop? Who are your target retailers, and what are they looking for? Which are your target food service channels (for example, restaurants, hotels, cafes, duty-free, gyms, and hospitals)? And how will you get product to them? What are the likely price points for each channel? Does your product fit within that range? You also need to think about compliance with ingredient and labelling requirements in each market; and efficient and safe transit options (including consideration for the shelf-life of the product).

4)    How can businesses ensure they set the correct prices for their food products?

Businesses can only set correct prices by conducting online and in-store competitor price analysis. This research will reveal the business’ direct and indirect competitor product prices; their product claims; pack sizes; and which countries they come from, among other data to create a thorough competitor product profile. Ideally, businesses have the opportunity to conduct on-shelf product analysis by visiting the market themselves or having access to resources that can do this on-site research for them.

It is important that suppliers understand the margins of their product throughout the value chain. Armed with what they believe their product should retail for, they can then work backwards and determine their export price. In this process, it is critical that an allowance is made for a promotional program, as marketing their brand is fundamental to long-term growth and success.

5)    Can doing business in unfamiliar cultures be difficult for food and beverage makers? How can they overcome this problem?

Buyers from different cultures and in different markets do have their nuances. In markets where their buyers are from family-run businesses, for example, it is important to establish your connection through shared family values. Working with corporates, on the other hand, the conversations are often short, sharp, black-and-white and to the point. So understanding your buyer’s background and work habits is important. From a good-to-know perspective, understanding your markets’ festivals and celebrations can be important when building your promotional program and even for making a market visit. For example, we wouldn’t set appointments for meetings in Australia on Christmas day!

6)    Do you have any tips on marketing to overseas markets?

Each market needs to be assessed on a case-by-case basis. As a general rule, in-store promotions and product placed on cash counters or shelf-ends raises brand awareness extremely effectively. In an e-commerce landscape, influencers and champions are a great strategy. Depending on the client, an effective way of providing this promotional support is to offer free-of-charge stock through a shipment (as opposed to giving them cash).

7)    Do you have any tips on how to form business relationships in foreign countries?

The key to forming business relationships in foreign countries is to understand your buyers’ background and key performance indicators; and throughout the negotiation process, to continue to be observant and respectful of your buyers’ behaviours and requests. Most important is that you deliver on your promises. As they are on the other side of the world, trust is key to keeping this connection strong. A savvy exporter will establish trust from the beginning, and maintain it throughout the entire relationship.

8)    Which export markets should first-time exporters consider? Which should they avoid?

There are a few common characteristics among the markets most likely to deliver success for first-time exporters. These markets are both easy to deal with and hungry for our products. Often, they will have a sophisticated channel structure on the ground, and simple and clear regulations to follow. Their consumers will generally be affluent, with a high disposable income, and a large proportion of expats. As a wealthy city or nation, they are usually the economic hub in their region. Markets such as Dubai, Singapore and Hong Kong all fall neatly within this description.

Other markets, such as the USA and China, while alluring at first, can tie up first-timers in knots if their entry strategies are not well-considered. China, for example, features varied and inconsistent import regulations, complicating the benefits of any openings in that market. Though it may be worthwhile, we advise against it for those who are still new to the game.  

9)    Anything else you would like to add?

This is a great time to be an Australian food and beverage exporter. There is definite interest and demand for Australian-manufactured food products from many markets and regions around the world – the Australian dollar is competitive compared to the USD and Euro; food exports from Australia have been trending up for the past five years; and Australian supplier culture is becoming more internationally-focused, as the need to diversify away from the domestic market intensifies. And to support this growth in export opportunities, government agencies across all levels are providing support to the food and agribusiness sector in many ways. The most important thing is that Australian suppliers select the right markets, connect with the right buyers and support available, and integrate an export strategy in their business growth plans.

Edited version appeared in Food Mag early 2018 https://foodmag.com.au/looking-abroad-the-path-to-export-success-for-food-makers/