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Friday, 13 January 2012 09:49

Go where the stomachs are, but seller beware

Written by  Rod Kackley
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WEST MICHIGAN — For companies that want to export food products, the advice seems simple enough: Go where the stomachs are.

As Michigan State University Professor David Schweikhardt told a couple dozen people looking at the potential of agricultural exports, you have to look for “stomach share.”

Stomach share is not as flip as it might seem. Schweikhardt, a professor in the MSU department of agriculture, food and resource economics, told his audience at the “Why to Export Seminar” on Dec. 13 that they should figure out stomach share by studying a region’s population growth and income growth rates.

The seminar was sponsored by Grand Valley State University’s Van Andel Global Trade Center, Varnum LLP, Comerica Bank and MiBiz.

Luckily, Schweikhardt had already done the hard work for them. The best potential for increasing stomach share is not in the U.S., but rather in Asia, minus Japan.

“The only way you are going to grow stomach share in the U.S. is if you crowd a competitor out of someone’s stomach,” explained Schweikhardt. “Unless you hold a gun to someone’s head and tell them to eat more, you are not going to see more than 1.2-percent growth in U.S. stomach share.”

So the secret is going after the stomachs in Asia or, if you want to start on a smaller scale, finding your niche that will work in a smaller market, such as the European Union.

“That might be all it takes to be successful,” said Schweikhardt.

However, no matter what market you look at — but especially for Asia — the best advice now is: Let the seller beware.

“I have learned to extend the amount of time it takes to trust someone overseas,” said Zeeland Farm Services International Marketing Manager Darwin Rader. He also told the audience that there is often very little opportunity for legal recourse if the person you are trusting turns out to not be trustworthy.

A quick story from Rader proved that point. He explained how a ZFS overseas customer dumped a “dirty product” on top of ZFS’s shipment, took a picture and demanded a discount.

“Did you give them the discount?” asked an audience member. “Only once,” replied Rader.

Brian Klumpp, director of new market development at Cherry Central, added his own note of caution: A final decision about exporting has to be about more than just empty stomachs and mouths waiting to be fed.

“Sometimes, you think you have a great market, … but the cost of getting there can be prohibitive,” Klumpp said.

That prohibitive cost can, and usually does, involve the time it takes to get through customs, tariffs and problems with infrastructure. It can be hard to truck product if there are no roads.

Klumpp also advised the audience that “things will go wrong, you are never too old to learn a lesson and having good people on the ground is critical.”

Expanding a West Michigan-based agricultural operation into overseas exporting can seem “daunting” as Jamie Zmitko-Somers, international marketing program manager, Michigan Department of Agriculture and Rural Development, said when she opened the seminar.

But at the same time, “if you are not engaging globally, you are losing out to your competitors,” said G. Tomas M. Hult, Ph.D., Eli Broad Professor of International Business and Director of the Eli Broad International Business Center at MSU.

He pointed out that 90 percent of global demand is not being satisfied by local supply. So there are a lot of hungry mouths and empty stomachs waiting to be fed. But Hult was also the first to admit that the cost of getting to those customers can be a problem.

“You can get anywhere in the world in two days,” he told the seminar audience. “But while there are fewer operational barriers, there are more trade barriers.”

Help is available. As Zmitko-Somers and Hult pointed out, the Michigan Economic Development Corporation offers variety of assistance including the State Trade Export (STEP) program and four Regional Export Networks (Rens).

Hult also told the audience that resources are available on a dedicated MSU website, www.globaledge.msu.edu.

He said MSU, on a pro bono basis, helps dozens of companies every year through Global Edge. The university expects to increase that number in 2012.

The challenges of expanding an agricultural or food services business overseas are many. But the potential also seems enormous. As Hult said, “no company is too small to go global.”

“President Barack Obama has said he wants to double U.S. exports in five years,” said Hult. “At the time, that sounded ludicrous. But I am thinking now that it could be doable.”

Read 2269 times Last modified on Monday, 13 August 2012 13:41

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