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Where to Export?

Deciding which export markets to target your sales efforts is complicated business. So, the California Kiwifruit Commission opted to take a long, hard look before it leaps.

Today, one would be hard-pressed to find anyone involved in U.S. agriculture, even in the farthest reaches of the country, that hasn’t heard about the global agricultural marketplace and the need to expand U.S. exports of farm products. As a matter of fact, quite possibly one of American agriculture’s newest bumper crops is the abundance of "export experts" just returning from their first trip overseas!

This relatively new awareness and enthusiasm for exporting is certainly welcome, if not long overdue; but while American farmers are clambering aboard 747s bound for exotic destinations such as Kuala Lumpur, Bangkok, Moscow, or Beijing, a new issue emerges that is now giving pause to some grower groups as they consider their exporting programs. The issues involve money and where to spend it.

Simply stated, with a fixed amount of dollars available for promoting exports, either through the Targeted Export Assistance program, accumulated grower funds, or just an individual grower/shipper’s resources, and with many alluring travel destinations beckoning the novice exporter, the question arises of where do we go first? Or where do we get the biggest "bang" for our export buck?

Opinions of where best to target export monies and effort cover the globe and have rationales that are far reaching. Such rationales could include, "I met a Ugandan Minister of Agriculture while I was on the plane to Rome and he says that Uganda would be great place for our products," or "My Serbo-Crotian third cousin has a produce stand in Latvia and claims he can sell all the product we could ship him."

Seriously, all of U.S., and certainly California, agriculture needs to take an objective, poised and studied look at some of the world’s potential targets or they run the risk of scattering their fire in a rapidly maturing market filled with well organized and experienced global competitors.

California Kiwifruit Commission

The California Kiwifruit Commission, on behalf of California producers of kiwifruit, has been undertaking a program of marketing investigations and market development for kiwifruit in the Asia-Pacific region. To date, successful entry has been made into the consumer market of Japan and development continues there in an effort to maintain California’s share of the Japanese market. Further, successful entry has been made into Taiwan and it continues to be a strong market for California kiwifruit.

Late in 1988, the Commission expressed an interest in exporting opportunities in other Asia-Pacific markets. Anticipating possible aggressive marketing moves by other countries such as Italy, New Zealand and Chile, it was felt that the window of opportunity for successful entry into other potential target countries may be rapidly narrowing. Therefore, the Commission contacted the Agribusiness Department at California Polytechnic State University in San Luis Obispo.

Their desire was to have a study undertaken that would provide the Commission with information allowing it to focus further consumer and trade research on new target countries in the Asia-Pacific region where market entry in 1990 and beyond would be most likely to succeed. These markets would then be earmarked for further research by the Commission.

Objectives of the Study

Precisely stated, the study had the following objective: "To identify countries in the Asia-Pacific region with the highest probability of being successful export targets for California kiwifruit in 1990 and beyond."

In the spring of 1989, I, along with two student assistants, undertook to provide a ranking of countries that the Commission thought should be considered. Although there are many countries in the Asia-Pacific region, including countries considered to be in the "Pacific Rim" or "Pacific Basin", this project focused on those known to have emerging domestic economies, strong enough to have significant consumption potential for imported specialty produce such as kiwifruit. These countries included the remaining untargeted countries within the NICs (Newly Industrialized Countries): South Korea, Singapore and Hong Kong. Additionally, the focus included the selected Southeast Asian countries of Indonesia, Malaysia, the Philippines and Thailand. And, finally, the focus included India and the Peoples Republic of China.

It is well known that individual California producers of kiwifruit have already been shipping fresh kiwifruit to some of the countries in this study’s focus. Nevertheless, this study was not a specific marketing plan for market development in these countries, but rather a ranking of opportunities among these nine countries whereby the Commission could focus its energy and resources for the betterment of the entire California kiwifruit industry.

Methodology

It must be noted that this study was undertaken within the continental United States. The project team reviewed sources of data such as government reports, articles, university studies, private studies, industry trade publications, and trade agency data. For some countries, accurate consumption, import and tariff information was not available. Some countries do not keep as current a database as others. Additionally, not all countries are set up on the new Harmonized System of coding imported products.

The project team interviewed selected individuals with expertise in marketing to the focus countries, as well as experts concerned with the broad economic trends within the focus countries. The purpose of interviewing these people was to learn more about the details, customs and procedures not normally discussed in the literature and database but are, nevertheless, extremely important. These interviews were done both personally, over the phone and through a survey via FAX machine to agricultural attaches and agricultural counselors in the focus countries.

The project team travelled to Washington, D.C. to interview individuals in the Foreign Agricultural Service, Office of the U.S. Trade Representative, Department of Commerce, Import/Export Bank and various others. Additionally, interviews were held in the San Joaquin and Sacramento valleys with selected kiwifruit producers who are already engaged in export to the Asia-Pacific region.

Data Analysis

Once data was gathered from all these sources, it was compiled and subjectively analyzed in order to obtain a relative ranking of opportunities within the focus countries. Key factors which help to identify kiwifruit export opportunities in these countries were developed. These "opportunity indicators" were used to describe a country’s kiwifruit export potential. An opportunity indicator unto itself is not the sole determinant of a country’s export potential, but rather when considered an aggregate with other indicators, it can aid in determining countries for initial targeting and further research.

These "opportunity indicators" included population size, per capita gross domestic product and gross national product, income distribution, tourist and expatriate population, political stability, economic stability and growth, tariffs, non-tariff barriers, ocean freight costs, fresh fruit consumption, competitive position relative to substitute fruit, and regional marketing synergies.

The latter, regional marketing synergies, deals with the fact that although some countries may have just a fair potential unto themselves, the synergies they provide with other countries in their region for expanded marketing of kiwifruit can be an important reason to develop those markets. Therefore, an analysis of certain focus countries’ relationships to regional markets was considered.

Should it be found that one country is highly influential on another country’s consumers adopting the product, then the effective market potential of the influential country tends to be higher than its actual consumption numbers might indicate. This influence can be due to transhipping relationships or interregional travel and exchange.

Findings and Recommendations

The nine countries previously mentioned in the project’s focus were ranked into two broad groups. The first group was called "Viable Targets". These countries represent marketing opportunities for which strategies can be developed within the next 12 to 24 months. The next grouping, called "Dormant Targets", are those countries which, although not entirely without some opportunity, have essentially no viability in the next 24 months that would warrant industry efforts. This is due primarily to restrictive licensing requirements, effective bans or non-tariff barriers.

The ranking for the industry was:

Viable Targets

1. Hong Kong
2. Singapore
3. Republic of Korea
4. Malaysia
5. Thailand

Dormant Targets

6. Indonesia
7. Philippines
8. People’s Republic of China
9. India

In addition to the target market rankings, the study recommended a number of areas for the industry to consider relative to its export development program. These recommendations included: 1.) for the industry to develop a long-term global strategic plan; 2.) strategic marketing involving a premium position for California kiwifruit in the Asia-Pacific market; and 3.) for the industry to develop a mechanism for coordinating and managing the export program so as to maintain the consistency of that premium product and strategic markets.

As was brought out in the study, the global marketplace needs to be viewed by California agriculture from two perspectives: 1.) As to where many of our customers are located and to whom we want to be responsive; and 2.) As to where many of our competitors are located.

Many agricultural analogies can be made about the second situation. As every farm kid knows who has fitted a steer for showing in a county fair, one way to avoid getting severely kicked by the steer is to get as close to it as you can.

California agriculture needs to be in international markets, not only for the profit opportunity those customers might provide, but also for the strategic advantages that being in our competitor’s own markets afford. Marketing is not simply selling to today’s customer, it is planning for tomorrow’s.

The California Kiwifruit Commission should be complimented for its efforts in planning for tomorrow. While doing research in Washington, D.C., it was quite interesting to hear comments from several trade negotiators as to their familiarity with California kiwifruit and its visibility in trade barrier negotiations and efforts directed toward foreign market openings. Individuals in the Office of the United States Trade Representative and the Department of Commerce, who are not normally familiar with agricultural issues, were in fact aware of California kiwifruit.

From any global perspective, the Asia-Pacific region looms as an impressive area for business opportunity. Nevertheless, one must be careful not to exaggerate its importance relative to the North American and European trading blocs. The "Pacific Era" as it has been called, represents more a sharing of economic power amongst east and west as opposed to overwhelming dominance in the east. As one can see from the table on page 9, the U.S. kiwifruit industry functions in a global market dominated by other large competitors.

The message here seems to be that of developing not simply an Asia-Pacific strategy, but rather a global strategy that integrates the relationships of what are possibly emerging as the three major trading blocs in the world: Europe, North America and Asia. For a U.S. firm or an industry to look across the Pacific without casting an eye to Europe could be dangerous in terms of managing its Asia-Pacific export market and, equally important, managing its own domestic market.

It is anticipated this study will become part of the California Kiwifruit Commission’s global strategy – a strategy based on a poised study analysis of the strength and weakness of our global competitors and an understanding of the unique opportunities California agriculture has in the global marketplace.

About the author: Daniel W. Block is an associate professor in the Agribusiness Department at California Polytechnic State University in San Luis Obispo. He also does consulting work for international agribusiness companies and is presently doing postgraduate work in the field of international political economics at the University of Southern California.