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The European Union: Mega-Market for U.S. Consumer Foods
By Holly Higgins
From Spain to Sweden, from Ireland to Austria, U.S. agricultural exporters are racking up new export sales records to the Old World at a rapid pace.
Many U.S. agricultural exporters are already street-smart, having learned over the past five years to take European economic unity seriously. They note that, in 1996, the United States sold a record $2.6 billion in consumer-oriented agricultural products to the European Union (EU), an increase of almost 40 percent over 1992 trade levels.
This makes the 15-nation EU the fourth largest export destination in value for U.S. foods. Nine out of the top 20 most important export destinations for U.S. consumer foods were EU countries.
Unlike superstar markets elsewhere on the globe, sales to the EU over the past five years have not grown explosively. Nor, on the whole, have they swung erratically. Rather, growth can be characterized as steady and strong, even in the face of a European recession.
Many consumer food exporters already know the EU well. Roughly one-fifth of all U.S. export trade in consumer food products is currently destined for its ports, and half of that is sold to three countries: Germany, the United Kingdom and the Netherlands.
As seems to be universally true in regional markets, certain categories of U.S. exports are standouts. Leading the pack are snack foods, processed fruits and vegetables, sugars, sweeteners and beverage bases, nuts, pet food, wine, beer, fresh meat and fruits.
What kind of European market awaits the U.S. exporter? In a few words, mature, high-income and niche-oriented. In fact, one that's like the U.S. domestic market in many respects. For example, today's European consumers maintain the same interest in healthy food that U.S. citizens express concern about.
It's a market that's experiencing transition. Virtually everywhere in the EU, lifestyle changes are evident as traditional eating habits give way to what's perceived as more modern ("American") fare. Retail outlets like food courts, price clubs and ethnic restaurants are a big part of the nontraditional consumption patterns seen in today's Europe.
Loosely United They Stand
The driving principle behind the EU political structure is that of strong member states and weak central authority. As a consequence, the 15 member countries, with a combined population of over 380 million people, remain politically and culturally diverse.
Each member state has its own set of national laws governing store hours, retail zoning, import licenses, food safety and labeling. Nevertheless, EU legislation has, to a great extent, harmonized the differences between member states that concern ingredient and labeling laws.
Transshipment is a key concept for exporters to master. A rule of thumb: If a U.S. product can, for example, be exported to the United Kingdom, then the same product can be transported within the EU and sold in any member state.
In general, EU import or customs tariffs are identical in every member state. Notable exceptions occur in legal territories of these countries. Thus, U.S. exports can sometimes enter such territories as the Canary Islands (Spain), Martinique (France) and Antilles (the Netherlands) fairly easily and often at lower tariffs.
U.S. businesses often express concern about Europe's drawn-out recession and high unemployment rates, and rightfully so. In the face of these uncertainties, many European consumers have cut back on luxury food expenditures and put something of a lid on their spending. On the whole, though, the recession has hurt non-food sectors more than consumer foods.
Europe's food marketing sectors are in the midst of consolidation at all levels: processing, wholesaling and retailing. With the recession, more and more suppliers are demanding up-front payment prior to shipping. And smaller firms are experiencing market pressure; many are being bought out or actually going out of business.
Amid all this change lies opportunity for market efficiencies and expanding sales. Many U.S. food exporters are well positioned to move in with creativity, market research and commitment.
Know Your EU Customer
Demographically, the EU is similar to the United States, especially in terms of a maturing populace. By the year 2001, roughly one in three EU consumers will be over 60 years of age, although a year later, when new member states from comparatively younger Eastern Europe are expected to be admitted, the average age is expected to drop slightly.
Europeans have relatively high per capita incomes and spend more of their disposable income on food than do U.S. citizens. Generally, citizens of northern countries enjoy higher incomes than those in southern Europe and spend more per capita on food.
Younger consumers tend to be the taste-makers. As in the United States, EU "Generation X" consumers demand innovative, international foods, ethnic foods and healthy, environmentally conscious consumer goods. Eco-consciousness has made its market presence felt, especially in northern Europe.
Despite the abundant similarities, there are notable lifestyle differences between the United States and the EU. For example, over two-thirds of U.S. women hold a job outside the home, but only 44 percent of European women do.
Develop a Strategy
In tailoring a market plan for the EU, exporters are encouraged to think regionally, to know the regulations and to be ready to adapt as necessary. Bear in mind that margins are thin and slotting fees tend to be high, just like in the United States.
Savvy traders report that finding a good agent, importer or distributer is a crucial consideration in Europe. And don't rule out joint import/export ventures--they are widely recommended as an effective way to extend distribution options.
Right from the start, every beginner should plan to be a reliable supplier; Europe should not be treated as a residual market. And factor in the need for sophisticated, specific trade servicing and market development.
Don't neglect the people aspects of doing business in Europe. Often, personal relationships have spelled the difference between success and failure. And experience demonstrates that trade shows help: attending several can have real market impact on sales in Europe.
Niche Markets Proliferate in Europe
Wondering what sells today in the EU? Perhaps our short list of trendsetters can help bulk up a malnourished spreadsheet:
10 Ways That European Markets Are Alike
1. Tariff and customs duties are the same.
2. Phytosanitary/labeling laws are usually the same.
3. English is the language of business.
4. Eco-consumerism is strong, particularly in the north.
5. Economic recession hurts food sales in all markets. (But the
hotel and restaurant industry is an exception.)
6. Supermarkets are becoming "hypermarkets."
Hard discount growth is stagnant. Price clubs and food malls are
trendy.
7. Retailers and wholesalers have thin margins. Quality and
service count more than ever.
8. Consolidation is the norm in processing, wholesaling and
retailing.
9. Consumers are getting older. Families are getting smaller.
More women are working.
10. Snacks, convenience foods are stronger than ever. Eating out
is on the rise. And home delivery is seen as the ultimate
convenience.
Did you know?
Spain has the world's fastest growing hotel and restaurant industry in the world.
The author is a Foreign Service Officer with the Foreign Agricultural Service. For further information, contact the USDA-FAS Trade Assistance and Promotion Office. Tel. (202) 720-7420; fax (202) 720-9728.
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