Nuts and Bolts of Dairy Exporting

By Priscilla B. Glynn

As with any enterprise, firms considering getting into dairy export business can benefit from doing their homework and developing a basic blueprint before wading into the trade arena.

Exporting requires a huge investment of time, patience, energy and imagination. Today's successful exporter must be an analyst, a sales representative and a master of cultural differences and tastes.

Research the market, the culture, the import barriers and, most important, the demand for your product in the particular country or region where you want to export.

Remember that it pays to "test the waters," as the saying goes. Export companies that skip or skimp on the research phase before plunging into new markets risk making costly mistakes.

The Best Laid Plans

Although there's no one right way to formulate a marketing plan, here are some items the savvy prospective exporter will want to include:

• a definition of the market, including data on customers, users and their needs, as well as the market's size and segments;
• situation analysis, including the exporter's internal capabilities and market position, competition for the market, and the market's economic conditions and forecasts, regulatory climate and accessibility; and
• short- and long-term goals for the share, growth rate and image the exporter hopes to achieve in the market.

The exporter can use this information to determine which market segments to target; which products or product lines to promote in them; how to anticipate and respond to the competition; how to distribute products; and how to price and support products.

Understanding the characteristics and features of a company's product line is the starting point of any export marketing plan. It's unlikely that an exporter can take a product from the domestic market and sell that exact item in the international marketplace. Each market has its own set of rules and preferences, so the exporter must consider what buyers need, not just what the exporter has to sell.

Exporters also need to set up the proper infrastructure to ship products to foreign markets. Export regulations and requirements change frequently, so keeping the rules for market entry straight is like hitting a moving target. An exporter needs to know and effectively apply relevant tariffs and quotas; sanitary standards; and documentation, packaging, storage and labeling requirements.

The performance of overseas sales agents of course has a great impact on a company's export sales. Before selecting an agent or agents, spend time in your target market evaluating it and developing some preliminary strategies. Although these steps may seem excessive or premature, the answers will pay off in the long run.

Developing sound relationships with reliable agents and distributors is essential. Talk face-to-face with these contacts and check all references thoroughly.

The exporter will have to rely on many parties along the way to ensure the product reaches its destination in good condition. When transporting U.S. agricultural products and commodities overseas, exporters will want to select the fastest mode of transport that permits the delivery of the shipment in the best condition at the lowest cost.

Methods of delivery may be specified by the buyer or selected by the exporter, taking into consideration the buyer's requirements, the terms of the sale, the date needed and the types of transportation and storage available.

Looking Out for the Bottom Line

After gathering and analyzing information about the product, the potential market, and channels available to ship the product, the exporter must gauge the market's profit potential. Determining a pricing structure can be a complex task, especially if there are no similar products in the target market.

Many factors must be considered in setting prices: production costs; profit margin; commissions; banking fees; freight forwarding, documentation and inspection fees; transportation and handling costs; and insurance.

Establishing a foreign sales program entails a greater degree of financial risk than that typically faced in domestic sales. Exporters must therefore select their markets carefully and choose from among several different methods to protect themselves and ensure that they'll get paid.

The type of payment mechanism an exporter selects depends largely on the exporter's relationship with the importer. Typical payment mechanisms include cash in advance, documentary collection, documentary letter of credit, standby letter of credit and open account.

It helps to keep in mind that, just as a domestic business develops over time, so must an export endeavor -- through phases of research, testing, expansion and improvement. Exporters should expect periods of trial-and-error problem solving as they gather and evaluate information, visit potential markets, meet buyers and lay the groundwork for shipping dairy products to foreign markets.

FAS: U.S. Agriculture's Export Assistance Arm

The Foreign Agricultural Service (FAS) -- the USDA agency responsible for assisting agricultural export efforts -- can help firms interested in exporting U.S. dairy products. FAS works closely with organizations such as the U.S. Dairy Export Council to develop and expand export markets for U.S. dairy products.

Through its Washington-based staff of analysts and agricultural attachés and trade officers located in U.S. embassies, consulates and trade offices throughout the world, FAS provides a variety of services to help U.S. exporters.

Food market overviews and market focus briefs from the overseas offices provide in-depth analysis of consumer food markets around the world and specific products or sectors within markets.

FAS maintains a home page on the Internet's World Wide Web to make it easier to use its services and information: trade data, commodity reports, trade policy developments and regulations, to name a few. It also provides direct links to sites of other agencies on the World Wide Web that have useful information for exporters. The FAS home page address is: http://www.fas.usda.gov.

Many FAS publications are also available by subscription from the National Technical Information Service by calling (703) 605-6060.

FAS regularly publishes reports on the latest dairy trade data and analysis:

• Dairy, Livestock, and Poultry: U.S. Trade and Prospects provides U.S. trade information and analysis for dairy, livestock, and poultry products.
• Dairy Monthly Imports covers imports of cheese and other quota dairy products subject to licensing, and imports under the quota not subject to licensing.
• Dairy: World Markets and Trade provides information on U.S. and world production, use and trade for dairy products. It also covers trade policy developments and export markets.

FAS maintains a list of over 15,000 prospective foreign buyers of U.S. food, farm and forest products. Foreign buyer lists can be ordered by commodity or by country. This means that an exporter can request a list of buyers of all commodities in a specific country or a list of buyers of a specific commodity in all countries. Each list costs $15.

Buyer Alert is another cost-effective FAS service. This biweekly newsletter, distributed by FAS' overseas offices, can introduce your product to more than 15,000 importers in nearly 60 countries. There is a $15 charge for each product announcement placed in Buyer Alert. For details about Foreign buyer lists and Buyer Alert, contact USDA/FAS, AgExport Services Division, AgExport Connections, 1400 Independence Ave., SW, STOP 1052, Washington, DC 20250-1052; tel. (202) 690-3416.

For more information about FAS programs and services, contact USDA/FAS, Information Division, 1400 Independence Ave., SW, STOP 1004, Washington, DC 20250-1004; tel.: (202) 720-7115; fax: (202) 720-1727.

Last modified: Thursday, October 14, 2004 PM