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N.B. This article was originally published in the magazine L'actualité ALIMENTAIRE (Volume 11, Number 2) and has been reproduced with permission.
In the current climate of slow population growth and an aging population, with a corresponding decrease in consumption, businesses in the food & beverage manufacturing sector must not only adapt their product to this new reality, but also turn to other markets if they hope to see significant growth in revenue.
More than ever, businesses looking for growth have to do business internationally. To promote trade, Canada has already signed nine free trade agreements, including one with Europe and more recently, South Korea. About a dozen more are under negotiation1. By reducing customs duties in particular, these agreements are most timely. By making it possible for businesses to be more competitive, they will clearly facilitate business development.
Historically, the United States and the rest of Canada have been natural development targets for most businesses. The choice was justified by the advantages of proximity, market size and similarities in terms of consumption and business culture. Things are no different today and the improvement in the American economic climate is currently raising a lot of hopes. On the other hand, to find other markets that are already very large or are experiencing the strongest growth, we need to look to the East. Europe has 500 million people, the population of Africa is expected to triple over the next 50 years, and that of China should increase from 1.2 to 1.5 billion people. The new agreement with South Korea is therefore strategic, as that country often serves as the port of entry for Asian markets totalling 4 billion people. A good understanding is needed to take advantage of emerging markets. Even big companies get caught by not focussing enough on properly identifying customer attitudes and consumer needs. But they can change direction without sustaining much damage as they have room to manoeuvre, which is not the case for SMEs.
“Understanding the marketplace remains the HARDEST step.”
McDonald's tried to expand to India before discovering that 40% of East Indians are vegetarian, that most of them have an aversion to beef and pork, that they are very resistant to frozen products and that they have a particular liking for strongly flavoured foods. The company therefore had to adapt its products. Tesco, a U.K. company and the second largest food retailer in the world, operating in 12 countries, struggled in mainland China for nine years – a very costly venture – before signing an agreement with a local company that had in-depth knowledge of the market and the infrastructure across the country. In addition to failing in the United States and Japan, Tesco lost market share in its domestic market as a result of concentrating its efforts in other markets.
If the industry hopes to experience growth and generate wealth, it must turn its attention to foreign markets and make the most of them. An analysis of the external environment must be undertaken to mitigate the risks. That analysis must provide an overview of all the factors listed in the diagram below. Often neglected factors such as an extensive knowledge of consumer behaviour and a thorough understanding of industry dynamics deserve our utmost attention. To manage these challenges, you have to carry out on-site visits, observe, analyse, ask questions, try things out, substantiate your understanding and develop a broad base of knowledge of the target clientele's needs, leaving nothing to chance.
Understanding the marketplace remains the hardest step because the specific information needed is not written down since it varies by product. All this may seem tedious to an entrepreneur in search of results, but it is definitely the best way forward for those who cannot afford to burn through large sums of money and, in the end, waste time and other good opportunities.
1 For more information, please visit the Department of Foreign Affairs and International Trade website at: www.international.gc.ca/trade-agreements-accords-commerciaux
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