By Brian Dunn
With an opportunity to tap the European market under the Comprehensive Economic Trade Agreement (CETA), coupled with the uncertain future of NAFTA, more and more Canadian companies are looking for export markets outside North America. But how does one get into those markets?
“It takes good partners and a unique product, but the key is your employees and suppliers,” according to Martin Plante, General Director, Citadelle, Quebec’s largest cooperative of sugar maple growers and maple syrup producers. Mr. Plante made the remarks during a Food, Beverage and Logistics Conference at the Port of Montreal Building on Nov. 29. The conference was organized by MNP, a national accounting, tax and business consulting firm, in conjunction with Port of Montreal, Montreal Gateway Terminals, La Coop Fédérée, the largest agri-food cooperative in Quebec and Agri-Food Export Group.
Even with a mass international marketing initiative, potential clients are looking for strong partnerships and want to know the history behind a product. Another way to break into a new market is through a business group or an association. But human to human contact is still important, Mr. Plante added. “Complexities will always be part of the equation. It will never get any easier. To build partnerships takes time. It might be an idea to have financial partners on your side.”
Even if you have the best product in the world, you have to find clients willing to pay a competitive price for it, suggested Eric de Franciosi, Executive Vice-President, Agro-Haribec, which exports almost all of its bean products around the globe. High quality is important, especially for a product like beans that are consumed daily in many countries. But the key to success is to start studying the market two or three years before you’re ready to launch which also helps reduce development costs.
Is using a broker a good idea? Yes, according Daniel Rivest, Vice-President, Olymel, which sells meat products under the Flamingo and Lafleur labels. The company has bureaus in China and Japan, but uses brokers because they know the market and this reduces the risks, he said. “But there are a lot of fly-by-night brokers, so you have to do your homework. “We’ve been distributing in South Korea for 12 years with the help of a middleman. Our company is ready to make the necessary investment and have the resources for the long term. You can also piggyback with another company or another product.”
Olymel brought its product people to Japan where it offers a private label program to differentiate itself from the competition. The result was the doubling of sales in one year. The company is doing private label in China as well.
A manufacturer who might do well in the domestic market needs to understand the legislation of the export country if they hope to succeed, suggested export broker Pierre Laurence. “Go live in a country to understand the local culture to determine if your product which sells well in North America, will sell well in another country. Go through a check list before you decide to invest in a new market.”
You need to have a plan, but you also need to be flexible, said David Jarry, International Tax Services, MNP. “Do you use a broker or develop your own network of contacts? You have to analyze the market. Make sure your data makes sense before diving into the export market and figure out where your product will be well received.”
In terms of Europe, there are 24 official languages which will affect packaging and 28 countries which will each want a piece of the sales tax. “There are lots of opportunities in China, but it’s an extremely controlled economy. It’s difficult to get into and difficult to get out. You don’t want to necessarily be the first in a certain industry or region, but you also don’t want to be too far behind the industry leaders,” said Jarry.
China is a growth market for La Coop Fédérée and will continue to grow despite what happens with NAFTA, said CEO Gaétan Desroches. “And since we’re in the commodities business, maritime transportation is very important to our members as it is very affordable.” Mr. Desroches is concerned about American punitive initiatives like the 20 per cent tariff on Canadian softwood lumber and 300 per cent tariff slapped on Bombardier aircraft and how similar actions might affect his members. He’s also concerned about biosecurity. In 2016, La Coop imported and exported over a million tonnes of food and hardware products through its joint venture partner CanEst Transit.
Canada has a huge trade deficit with Europe and one reason why the food industry hopes CETA will help level the playing field, according to André Coutu, CEO, Agri-Food Export Group. The group has $11 billion in sales in the rest of Canada and $8.3 billion internationally. “The U.S. market is not a true mature market and we’re just touching the tip of the iceberg there. And it will be in specialized foods and not things like crackers where we’ll succeed in Europe,” said Mr. Coutu.
On the transport side, trucking and distribution company Groupe Robert tries to leverage all supply chain synergies through 3PL (third-party logistics, which is a provider of outsourced logistics services) to optimize operations to save time and costs, explained company COO Daniel Ménard. Through its 41 distribution centres in Quebec and Ontario totalling 3.5 million sq. ft. of warehousing space, the company specializes in the transportation of bulk and liquid cargo, hazmat and oversize and overweight loads. “Retail and food services is our DNA, representing 47 per cent of our business.”
Apart from a potential shortage of drivers due to retirements and a lack of new entrants, the industry is facing another concern. Since Dec. 18, 2017, every carrier operating in the U.S. needs to have an approved electronic log system to monitor the cargo and number of hours a driver has been working. Without the log, trucks are limited to 100 miles that they can travel into the U.S. or cross border to other states. It is estimated that 20 per cent of truck volume in the U.S. will be affected by this law. “What it means is that some carriers will say we cannot do your route tomorrow morning. And as far as driverless trucks go, we are at least 10 years away from that reality,” said Mr. Ménard.
Montreal Gateway Terminals handle 6,000 trucks a week and a lot of them contain food products, said CEO Michael Fratianni, noting the transport and food sectors are very important sectors of the Canadian economy. “Although the port of Montreal is 1,600 kilometres away from the Atlantic Ocean, there is a tremendous opportunity for the agro food industry to export from here.”
The port is also unique as its import-export business is roughly 50-50, said Toni Boemi, Vice-President of Growth and Development, Montreal Port Authority. While the port can only handle 4,000-5,000 TEU vessels, it’s completely discharged and recharged, whereas an 8,000 TEU vessel operating elsewhere may make several stops to completely discharge its entire load.
About $55 million is being spent to upgrade the port’s rail network and increase capacity by 15 per cent between 2017-2020, Mr. Boemi added. “We’re working hard with the province and city to improve rail access and improve fluidity. Trucks come in one end of the port and leave at another end. Our four terminals are equipped with mobile apps that give truck drivers real time waiting times so they can decide if they can pick up or drop off elsewhere beforehand.”