Given the limited size of our local market, it makes sense for Australian food and beverage makers to export. However, according to Export Connect’s Najib Lawand, success in this endeavour is no certainty and there are some common mistakes that potential exporters should avoid.
The stars are starting to align for Australian food and beverage exporters. A range of factors including free trade deals, an attractively-valued Australian dollar, and the emergence of an ever- expanding Chinese middle class have created plenty of optimism.
However, export success is far from assured for Australian food makers. As Najib Lawand, director of Export Connect told Food & Beverage Industry News, potential exporters still need to do plenty of homework before setting out on an export path.
Export Connect works with businesses, suppliers, governments, and industry bodies to help grow Australian exports.
The organisation tailors its export advisory services to meet the needs of individual businesses. In his time at the organisation, Lawand has identified some common mistakes that first-time exporters typically make. The first, he said, is not putting enough effort into choosing the right market to enter.
“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,” he said.
Likewise, he said that the US is not the best choices for new exporters. These large markets can tie 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.”
According to Lawand, 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,” he said.
“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.”
According to Lawand, choosing the right market should involve considering each country’s demographics. This includes whether the target consumers are locals or expats, as well as market access issues like halal certification or organic accreditation.
“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 12 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,” said Lawand.
“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.”
Lawand said 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.
By doing this, he said, first-time exporters often sell themselves short. It means that valuable profit, that could otherwise have been reinvested in promotions, is often left on the table.
“Businesses can only set correct prices by conducting online and in-store competitor price analysis,” said Lawand. “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,” said Lawand.
A thoroughly planned market entry strategy is crucial for new exporters. According to Lawand, it should start with questions about consumers – who are they and where do they shop? Then, the strategy should consider possible food service channels – restaurants, hotels, cafes, duty-free, gyms, hospitals, and so on.
“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,” said Lawand.
Doing business in foreign countries
When travelling overseas to do business, it is important to remember that you are a guest. Being respectful to your hosts and their culture is a top priority.
“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,” explained Lawand. “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.”
Then there are the practicalities that all travelers, regardless of whether they are doing business or not, need to keep on top of.
“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,” said Lawand.
Importance of marketing
According to Lawand, marketing needs to be assessed on a case-by- case basis. However, 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,” he said.
Lawand emphasised the importance of establishing good business relationships. He said that the key to this is understanding buyers’ backgrounds and key performance indicators; and throughout the negotiation process, continuing to be observant and respectful of 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,” he said.