Export Digest: Exporting to the US - Challenges and Rewards
The last two Export Digest articles dwelt on the technical challenges involved in exporting to the US. In this edition, Export Digest adds a more practical dimension to the discussion by talking to Mr. Selva Pillay of GLX Solutions, a US-based food products importer.
Export Digest (ED): Who is GLX Solutions?
Selva Pillay (SP): GLX Solutions (www.glxsolutions.com) is a California-based (US) company that works exclusively with Southern African companies in the packaged food industry. GLX has worked in a number of retail channels in the US and would be happy to further share its experience and knowledge with potential exporters from Southern Africa to ensure their success.
Exporting of packaged food products from the Southern African region into the US can be very profitable. Companies based in Southern Africa often have an advantage in exporting to the American market based on the uniqueness of their products, availability of raw materials and lower labour costs. However, successfully exporting from Africa to the US requires a long term commitment, a well-structured action plan and adequate funding for a minimum of two years.
ED: So, long term commitment is part of the export equation?
SP: Yes, planning entry into the US should begin long before any product is shipped. Both market and product research must be done well before a decision is made to export. Conducting business in the US can be expensive and challenging due to the market’s competitive landscape, with companies from around the world vying for a share of a US$500 billion/year supermarket industry.
ED: At what stage should an exporter consider the US market?
SP: While African companies should consider exporting to the US to increase production, to expand their market share and to create an international footprint for their products, they should do so only after they have achieved success in their local markets. Once ready to export to the US market, companies might want to access support being provided by programs which actively work with African exporters to help market their products in the US.
Different countries have different programs meant to stimulate exports, such as South Africa’s Export Marketing Investment Assistance (EMIA) facility of the Department of Trade and Industry (DTI). The Western Cape Fine Food Initiative can be a very useful resource and can provide a wealth of information to new exporters.
It can also prove extremely beneficial to utilize resources provided by local governmental agencies like the Zambia Development Agency (ZDA), SA’s Wesgro or Trade and Investment Kwa-Zulu Natal (TIKZN), or Botswana Investment and Trade Centre (BITC) to present products at international trade shows and use the feedback received from buyers to better the marketability of products in the US, especially where packaging, nutritional information, package size and unit of measurements are concerned.
ED: Can you share some experiences with our readers interested in the US market?
SP: Before I first successfully exported from South Africa to the US, I spent a number of months conducting local market research and exploring various niches in the market place. After identifying a product that I determined was not properly being catered for, I began comparing that particular product with the local competition and evaluated what made it stand apart from the competition. The next hurdle
was to present the product to buyers representing various big box store chains like Nugget and Molly Stones. Due to the large scale of these organizations, they expect the exporter to have a proper distribution channel in place before meeting with them.
I also found it vital to engage the services of a broker to handle sales of products. It is mandatory for these different structures to be considered in any business plan, as they are integral in the movement of product from storage to store shelf and have a direct impact on the price point. To successfully get product on store shelves, the trader would expect various promotional deals such as free fills, introductory deals, coupons and contributing to their advertising programs. Buyers will not carry a product if there is no active and on-going in-store sampling or demonstrations program.
ED: The US is a massive market. How does one decide which market or geographic area to start with?
SP: It is one of the questions we had to deal with during our research phase. Our product was a vegan offering and research pointed us to California which had the highest concentration of vegetarians to any other states. One needs to understand that most states, if separated from the rest of the US, will still have larger economies than most countries. California, for example, would be the ninth largest economy in the world. So you need to plan your entry into the market. There is no way one can do all 50 states at the same time. So we decided to enter California and provide customers in other states an online option. In this way we can provide some service outside California without entering the other markets.
ED: You have identified your market, how do you get the product to the market?
SP: We introduced the product in mom and pop stores and gradually moved to specialty food stores. Buyers will only look at new product once they see it doing well in other stores. Space is always a problem, because there are always more products in the market place than available store space. I also did a lot of work in ethnic stores, and other stores started to recognize the product. From mom and pop stores, I started calling large independents like Rainbow grocery in San Francisco and Berkeley Bowl in Berkeley. I then secured appointments with small chains of 7 to 13 stores like Nugget market, Molly Stones, Bristol Farms and Mothers Market. Once we had a commitment from these stores, we presented to Whole Food Markets using the other stores as leverage. Getting into Whole Food Market is expensive so you need to control your expansion.
They expect one case for each stock-keeping unit (SKU). So in our case it is three cases per store. They also want us to support our product with demonstrations and this can cost US$125.00 for a 4 hour demo.
ED: What else do you think the African exporter should be aware of when it comes to the U.S. market?
SP: African companies need to be prepared to engage in the slow pace at which the industry moves; most buyers will not make a decision immediately. Additionally, most retail stores have a structured product review calendar and will only look at adding new product during the review period. Usually samples, documentation and supporting paper work need to be submitted by certain deadlines for review. There is never any guarantee of success.
Although introducing a new product into US market involves a lot of hard work and can be very expensive, it can also be extremely rewarding. Once all the markets and systems are in place, the export/import becomes almost automatic and can help ensure a lucrative source of revenue for years to come.
ED: Thank you, Selva, for agreeing to share your experience and advice with potential exporters from Southern Africa. We believe they will find this useful, and add on to what they know in their endeavours to become successful exporters.
Cos is an international trade specialist with more than 12 years’ experience promoting international trade between Africa and the U.S. and intra-regional trade within Southern Africa. His work has involved working with SMEs and large firms, women-owned enterprises, importers, exporters, trade support institutions as well as government departments. Cos holds a MBA and has studied International Trade Management.
Opinions expressed in this column are not necessarily those of USAID or the Southern Africa Trade Hub.
Next Article:SATH has come across firms whose products are African Growth and Opportunity Act (AGOA)-eligible but are not taking advantage of AGOA. This is because they do not know how to and where to start from. EXPORT DIGEST will provide snapshot guidelines/procedure on how to take advantage of AGOA, from registering with local authorities to declaring the products on the US side. We invite you to join us again, and to continue sharing your experiences.
Quick Facts: US Specialty Food Industry:
- The Specialty Food Industry is a vibrant part of the American food scene, fuelled by new flavors, new products and growing consumer interest in artisanal and natural foods.
- Total sales of specialty foods in 2011 were US$75.14 billion, with US$59.74 billion retail sales.
- 2009 – 2011: sales of specialty foods rocketed by 19.1%. Sales at retail grew 9.2% between 2010 and 2011.
- Specialty foods represent 13.7 percent of all food sales at retail.
- The leading claim for new specialty food products is Kosher, followed by All Natural.
- Natural food stores are the fastest growing retail channel, boasting a sales increase of 19.8 percent between 2009 and 2011.
- Manufacturers say that specialty food stores and natural supermarkets are the fastest growing retail channels for specialty foods.