Foreign markets can be minefield for exporters

Creating markets for his processing and exporting company wasn’t easy

for Gary Schweitzer when he started Schweitzer Enterprises 14 years ago

in Eston, Sask.

He remembers one day in particular when he phoned 100 companies trying

to drum up markets for his spices and special crops.

“Not one bit of business came out of that.”

While that example shows perseverance to be paramount when stepping

into the world of exports, what else is needed to remain a player in

those markets?

There are no hard and fast rules, but some common themes emerge from

the experiences of three prairie companies that export agricultural

products.

Schweitzer listed price, service and quality as three things important

to attracting customers and keeping them. That can be important in any

business, but it’s especially important in the high stakes game of

international trade.

“Good news spreads fast,” Schweitzer said. “Bad news spreads even

faster.”

Real Tetrault, whose Emerson Milling Inc. of Emerson, Man., supplies

oat groats for the North American bird food market, emphasized the need

for a reliable track record of consistent quality and timely delivery.

That means knowing the customers and their expectations. It means

ensuring there is adequate product to export, taking into account the

risk of crop failure due to things like drought, crop disease and

insects. It also means the paperwork must be in order so there are no

glitches when a shipment leaves Canada for markets as far away as Asia

and the Middle East.

It can be a juggling act between keeping farmers satisfied and meeting

the needs of buyers, especially when their demands are written into

contracts.

“We try to put the farmer first, but you cannot jeopardize your buyer

at the other end, either,” said Vickie Dutton, whose Saskatchewan

business, Western Grain Cleaning and Processing, processes and exports

prairie crops.

Each of the three companies has gradually assembled a range of

expertise to help manage things like marketing, the logistics of moving

a crop from farmers’ fields to foreign buyers, and ensuring payment

once shipments are delivered.

Tetrault used to wear many hats, but now he has a collection of

specialists, and he values their insights.

“I don’t look at myself as the decision maker. We do this as a group.

You have to give people a certain amount of discretion in their jobs.”

The Duttons recently hired their daughter, Heidi, to help with

marketing. Heidi, a university graduate in agricultural economics,

works as a trader in Western Grain’s Saskatoon office.

“It’s quite often cheaper to hire more people than to try to do

everything yourself,” Dutton said, citing the headaches avoided and

business gained by employing specialists.

And what about the risk of non-payment? What do exporters do to hedge

against that risk?

There are a variety of tools available, including things like export

insurance and letters of credit.

Export Development Canada is among the agencies providing protection

for export receivables. EDC insurance can cover up to 90 percent of

losses incurred when a foreign buyer doesn’t pay.

A letter of credit typically is an arrangement where payment is held in

an agreed-upon bank account and released to the exporter once the

shipment is received and meets the importer’s expectations. The

documents have to be painstakingly precise, since even a misspelled

name can become a premise for the buyer to renege on a deal.

Payment in advance is another option, if the importer will agree.

Perhaps just as important is thorough detective work on the part of the

exporters.

Tetrault emphasized due diligence, which means determining a customer’s

reliability for making payments before sending shipments. He considers

the market for oat groats an honourable one.

The Canadian Trade Commission has offices around the globe and can

provide information on marketing organizations and companies importing

from Canada.

The commission can also offer advice on doing business in a particular

country, including an indication of potential barriers, as well as the

regulations and certifications needed to tap that market.

Exporters are reluctant to discuss in detail which tools they use to

guard against the risk of non-payment. Each of the tools has its

strengths and limitations and no one should assume they are all

foolproof.

With so many pieces to fit together, it’s not surprising that Dutton

draws parallels between exporting and assembling a jigsaw puzzle.

“It’s like having a puzzle on your desk every day.”

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