This lesson provides only an overview on exporting — the reader is encouraged to read the longer discussions on the many aspects of exporting in the CTAHR book, This Hawaiʻi Product Went to Market (http://www.ctahr.hawaii.edu/ctahr2001/PIO/ForSalePubs.asp)
Why is this important?
Exporting is a great way to expose your product to a larger market. In a one-island market you might reach a level where your customers will not buy any more of your product because their customers won’t buy any more. The only way to sell more of your product is to find additional customers – exporting does that for you.
Where to start
The first thing to do when you want to expand is to take care of the customers you already have. Your present customers provide you with a solid, although smaller, market, and if your export ventures do not turn out well, you still need these loyal business partners.
The next step is to think carefully about whether you have the production capacity, skills and time it takes to develop and maintain even more business relationships.
Let’s assume that you have the ability to produce and sell 5, 10, 20% more product if you just had the market.
Find new customers
Business is a match of supply and demand. You are the supplier and someone else is the “demander” or customer. To export, you need to identify new customers in new markets. If you have an exotic product, such as an herb or spice, your first step in finding new markets might be to identify what else is being imported into the U.S. (for other countries the import data may not be easily accessible). The U.S. Department of Agriculture has a wealth of data on imports to the U.S.: http://www.marketnews.usda.gov/portal/fv
For Hawaiʻi import data, go to: http://hawaii.gov/hdoa/add/man/mktnews/market-news-reports
To identify specific customers (including wholesalers, retailers, and/or restaurateurs) in a given marketplace, try the following to make initial contacts:
- Attend trade shows such as the annual Produce Marketing Association’s trade show, or your industry’s particular trade show.
- Look for customers on the internet or in the yellow pages.
- Talk to other friends in the business and see if they would be willing to share their contacts with you.
Promise only what you can deliver
It is important to know what it will cost you to get your product to a new market and how much of a high quality product you can produce. Once you have a good idea of those numbers, then you need to determine what it will cost you to get your product to market. You will need to add that cost to the cost of production for your product to arrive at a price you can offer to a buyer. UHM-CTAHR has a poster that could help you with your cost of production calculations (see Easy Profit Estimator): http://www.ctahr.hawaii.edu/ctahr2001/PIO/
While the U.S. Postal System may be a shipping option in some cases, you will typically need to get your perishable agricultural product to market faster than the USPS can deliver. Global air shipping companies such as FedEx, DHL, and UPS handle many Hawaiʻi products. Products may also be shipped using airlines either directly or through local freight-forwarders. Similarly, when shipping on the ocean, there are large and small companies. Get on the phone and/or visit these service providers with a sample of your product before you make contact with your prospective buyers. Make sure you understand the shipper’s ability to keep your product cool, protected from the sun, protected from theft, and their insurance policies just in case your product is damaged in transit. Determine your shipping cost and add that to your cost of production.
Once you have your total cost (cost of production plus all costs of shipping and handling) and have determined how much you will charge, it is time to make first contact with potential buyers. Call wholesalers in your desired target market and talk to them about the possibility of carrying your Hawaiʻi product. Sell them on your product by explaining its qualities. Sending them a product sample (plus a nice box of Hawaiʻi Macadamia nut chocolates!), brochure, a business card, and a price list can help them understand if there is potential in your product. In your initial discussions with your potential new buyer, ask how much they think they can sell in a week/month/season/year and if they can meet your price (with all the shipping costs included). Be prepared to negotiate a bit on price, thus you should have a little “padding” in your price so that even if you accepted a few cents less per pound or unit, your total revenues would still be more than your costs and you would make a profit.
Getting your product ready for market
Dressing up your product in a nice package (attractive and stable enough to arrive at its destination in good shape) is important to catching the eye of your customers (refer to the lesson Branding). Not only is it important to impress the final customer, but your wholesaler as well. The wholesaler typically handles hundreds of products so make it easy for the wholesaler to handle your product. Be sure product boxes can stack so that they can store and sell more of your products to their customers. There are many designers in Hawaiʻi who can help you with your package design.
One of the things you need to be aware of is product labeling requirements. There are a number of U.S. and Hawaiʻi (and other state and international) labeling requirements. For example, since September 2008, U.S. agricultural products must be labeled according to Country of Origin Labeling (COOL) regulations. For a listing of current labeling guidelines, contact both the Hawaiʻi Department of Agriculture’s Commodities Branch (http://hawaii.gov/hdoa/qad/comm/comm/ (808)832-0700) for raw agricultural products, and the Hawaiʻi Department of Health’s Food and Drug Branch (http://hawaii.gov/health/environmental/food_drug/about.html/ (808)586-4725) for processed products.
Some states might also have unique labeling laws to which you must comply (for example when there is a bottle deposit), talk to your buyer about this before you start shipping any product. For international exporting, it is important to work with the U.S. embassies through the USDA Foreign Agriculture Service (http://www.fas.usda.gov/agx/exporter_assistance.asp). Each country might have laws on labeling, package size, types of materials and the like, so it is best to do your homework before sending your products overseas. The Hawaiʻi Department of Agriculture’s Market Development division can also help get you ready to sell beyond the reef with advice, access to tradeshows, and other valuable services (http://hawaii.gov/hdoa/add/md/ (808)973-9595).
One of the best things in working with the Foreign Agricultural Service is that they have offices in most U.S. embassies in the world and they have local employees as well as U.S. citizens working for them. Thus, you can have easy access to people who know about local customs and language, business practices, and money exchange.
Don’t pack a pest
The reputation of your product and company is one of the most valuable aspects of your business. One area where producers often make a critical mistake is when they ship products that have not been sufficiently screened or treated for pests. Whole shipments of products have been destroyed in distant markets because they have ants or other pests on or in their product. Destruction of your shipment can cost you a lot of money, a loss of a client, and can damage your reputation.
To determine phytosanitary and general export requirements for your product, get some advice from the Hawaiʻi Department of Agriculture’s Plant Industry Division (http://hawaii.gov/hdoa/pi/ (808)832-0566) and the USDA’s Animal Plant Health Inspection Service (http://www.aphis.usda.gov/import_export/index.shtml/ (808)861-8494). See also the APHIS document: Regulation and Clearance from Hawaii to Other Parts of the United States
Decide how much of the work you want to do
Now that you have lined-up a buyer and agree on a price and volume, you know about the product labeling and phytosanitary requirements, you have to decide how much of the exporting paperwork and legwork you want to do to get your agricultural product on a boat or airplane and safely to your buyer.
Clearly, with enough time you can do all the tasks required to get your product to a distant market. But, is it worth doing everything? Most producers are faced with the question: Do I want to do everything, or do I want to focus on what I do best and what brings me the most satisfaction and let others keep some of my revenue in exchange for a service they provide me? What is the answer for you?
If you don’t want to do it all, look for a distributor and/or a freight forwarder. Both have years of experience getting other peoples’ products to market so they can bring that knowledge very quickly.
Prepare for take off
Just like running a good farming operation where you sell locally, when you add exporting to your daily routine there is a lot to think about and do well. CTAHR prepared a “pre-flight” checklist for exporting that can give you a solid understanding of all the details that go into exporting. Download it at this link: (http://www.ctahr.hawaii.edu/oc/freepubs/pdf/ET-1.pdf)