Five Tips for Organic Trade Success
By Jill Lee
The U.S. organic food industry netted $5.5 billion in sales in 1998. In 1999, sales sprang forward 15 to 20 percent, and industry estimates suggest that they will perform similarly this year.
Certain overseas markets are experiencing similar growth rates. It is a crucial time of market placement. Demand overseas for organic goods often exceeds supply. But smart producers will start building lasting business relationships now to assure future market share.
This will be especially important if domestic demand expands to its full potential and stops growing. To continue building strong companies, producers will have to seize the initiative in overseas markets.
The professionals at the organic export game have already played out that scenario and realize what it takes to capture the world market. Here are five points they recommend you consider when planning your organic overseas invasion.
Tip #1: Do Your Homework
Remember that great line from The Wizard of Oz: "Toto, I dont think were in Kansas anymore..."? It should be the mantra of novice organic exporters.
Just because youve created an organic product that wows consumers in Memphis, Tennessee, dont assume youll bowl them over in Memphis, Egypt.
"We have been searching for organically grown processed pears for Europe," Loren Morr, president of Beta Pure Foods, said almost wistfully. "But U.S. farmers are unaware that European pear varieties have their own signature flavor and texture. To Europeans, some U.S. varieties taste unusual. Just because consumers prefer organic doesnt mean they want to give up the flavor they know and like."
Selling organic products overseas comes naturally to Morr, whose company specializes in bulk processed fruits and vegetableseverything from banana pulp to apple juice. Beta Pure Foods has over 280 customers, and sales reaching over $10 million. Roughly 20 percent of his business is overseas.
If farmers and producers can gain sales by studying markets, they can also lose by not doing so.
SunRich, Inc., in Hope, Minn., is an international supplier of organic food ingredients, including whole grains and soy products. Kate Leavitt, with the companys International Division, has a record of success selling organically grown soybeans to Japan. She has targeted Europe for her next winning strategy. But a trade show trip tipped her off to a potential problem.
"At Bio Fach in Germany, one of the biggest natural product shows in Europe, we met with end-use organic food companies we had expected to sell product to," she said. "That is, until it became clear that these people ordered such small amounts of ingredients that we realized wed never recoup our freight costs."
Disappointed but wiser, Leavitt still plans to conquer Europe. She will do it with an exclusive distributor who can bring in larger shipments, and sell them to multiple end-use buyers.
Tip # 2: Get Certification Reciprocity
To be labeled "organic," a product must meet exacting standardsand these vary among nations and even states.
There are almost 50 private and public organic certification entities in the United States. Morr says less than a third of them are broadly accepted overseas. Many organic companies have to be certified more than onceor twice. Each certification costs money.
"Vendors can really help us, and themselves, by asking their inspector if their certification has reciprocity with countries overseas. If the answer is yes, find out which ones," said Morr. "Why waste time and money with re-certification if you dont have to?"
Another problem U.S. organic exporters face is multiple definitions of what "organic" is. The USDA received 275,000 comments on its first draft of national standards (see p. 2). USDA released a proposed revision on March 13, designed to accommodate as many of those suggestions as possible.
"The USDA cannot finalize their national standards on organic foods fast enough, as far as I am concerned," said Leavitt. "Japan is talking about barring organic food exports unless they have been nationally certified. Without a final standard, the United States risks surrendering their customers to organic food producers in South America and Canada."
Tip # 3: Deal With Duties
New exporters may be discouraged by the way duties sometimes cause an international sale to evaporate. A duty is the fee a country charges when a buyer imports, and it may be quite high.
"We talk about free trade, but in many regions it just isnt happening," Morr said ruefully. "Duties can add anything from 10 to 100 percent of the product price."
Morr recalls a case in point: a buyer in Europe was ready to purchase some frozen fruit, but just wanted to check the duties. Less than 15 minutes later, the sale was dead. Cause of death: duties.
"Its just one of the hard facts of international sales," said Morr. "All you can do to protect yourself is to study your target country in advance."
Leavitt tells new organic exporters to take heart, however. This is one instance where all food producers feel the same pain. "The one good thing is, whether your soy flour is organic or not, the tariffs will not be any higher," she said.
Tip # 4: Tell It Like It Is
Beta Pure Foods also represents organic processors from around the world. Is this disloyalty to their U.S. vendors?
Not at all! Rather, its a matter of survival. Betas clients in Japan and Europe expect a steady supply of organic produceand they dont care that the typical U.S. growing season is three months long.
Thanks to overseas connections, the fruit keeps rolling until summer swings the U.S. farmers back into action.
Vendors need to be honest about how much product they can supply and for how long. Their reputations are on the line with brokers, just as brokers are with clients overseas.
Even if you dont work through a broker, make sure you and your suppliers are thinking a least a year in advance in terms of keeping the customer happy. It pays for vendors to have alternate suppliersjust in case things go wrong.
Tip # 5: Know Your Trends
By the time the newspapers report on an organic trade trend, its just too late, said Leavitt.
"You need to be working one or two growing seasons in advancea farmer cant replant his crops in mid-season to adjust for changing customer needs," she said. "Give them both a breakgo to trade shows and meetings. Dont wait for your customers to tell you what they want."
Some trends, however, may be longer lasting than others. Organic animal feeds have been doing well domestically ever since USDA allowed the organic label to be used on meats last year.
"Animal feeds are very hot right now, both domestically and in Japan. We have had several clients who raise livestock and buy corn from us in that region," said Morr. "As for human trends, think convenience foods like organic frozen dinners and pre-packaged cereals."
Both Leavitt and Morr caution that many hot trends are spoiled when too many people try to capitalize on them at once, creating a market glut.
"The organic food industry favors creativity," said Morr. "Youll get better results by not following the crowd."
The author is a public affairs specialist with the FAS Information Division, USDA, Washington, D.C. Tel.: (202) 720-7939; Fax: (202) 720-1727; E-mail: firstname.lastname@example.org