INTERNATIONAL FOOD MARKETS

1. Economics of international food trade Trade policy International brand building Product adaptation State and Federal trade support INTERNATIONAL FOOD MARKETS

2. Types of Food Exports • Providing what cannot efficiently be grown in import market • High value/value added • Low value

3. Types of Food Exports • Stop-gap measure to compensate for reduced local harvest

4. Types of Food Exports • Providing diversity in food supply • Niche products • Country reputation deSpaChocolatier brings perfection to the art of Chocolate with more than seventy sumptuous varieties superbly hand-crafted and lavished with luxury.....

5. Measuring Country Wealth • Exchange rates • Floating (supply and demand) • Fixed Currencies may be pegged to other currency (Argentinian currency is guaranteed in terms of a composite of currencies i.e. US$+ Jap. Yen+ Mexico Peso + Euro) • Fixed rate produce stability and predictability

6. VERY BRIEF REVIEW OF ECONOMICS • Trade balances and their impact on exchange rates if the US imports more from Japan the exports there, there will be less demand for $ and more demand for Japanese yen- thus the price of the yen, in $ will increase, so you get fewer yen for a $

7. Philippines: 56% India: 51% Mexico: 25% (modest incomes, relatively high prices) South Africa: 28% Japan: 18% (very expensive food but high incomes) West Germany: 17% Denmark: 15% (25% sales tax!) France: 15% Netherlands: 11% U.K.: 11% Canada: 10% Comparative Food Spending Percentages, 1994 Percentages of total expenditures—includes non-consumer spending such as government and industry. U.S. figure: 7%

8. Measuring the Wealth: Nominal vs. Purchase Parity Adjusted GNPs—Examples (2001) Source: World Bank (http://siteresources.worldbank.org/ICPINT/Resources/GNIPC.pdf)

9. Measuring the Wealth: Nominal vs. Purchase Parity Adjusted GNP Nominal GDP is the value of goods and services produced per person in a country were to be exchanged into dollars. Purchase Parities of GPD GDP and GNP are almost identical GNP include income made aboard

10. Cautions on Interpreting Per Capita Figures • Averages are not very meaningful! • Regional variations • Socio-economic differences • Comparison to U.S. dollar and U.S. costs is arbitrary

11. Differing interests of consumers and manufacturers Benefits of trade tend to be more diffused than benefits to specific groups of protectionism U.S. Protectionism Import limitations on some crops (e.g., sugar) Subsidies of others—e.g., chickens Protectionism

12. Approaches to Protectionism • Tariffs “ a duty or tax or fee, is put on products imported

13. Approaches to Protectionism • Quotas : A Country can export only a certain number of goods to the importing country

14. Approaches to Protectionism • “Voluntary” export restrictions: involve agreements made by countries to limit amount of goods they export to an importing country

15. Approaches to Protectionism • subsidies to domestic producers/exporters US chicken have received subsidies for chickens exported

16. Approaches to Protectionism • Non-tariff barriers Different standards in testing foreign and domestic products for safety, disclosure of less information to foreign manufactures needed to get products approved, slow processing of imports at port of entry, or arbitrary laws which favor domestic manufacturers. For perishable food products, a significant danger is having a shipment held up waiting for customs clearance

17. Justifications for Food Market Protection • Protection of an infant industry” not applicable to food products

18. Justifications for Food Market Protection • Resist “unfair” or inappropriate competition: US sugar industry contends that most foreign manufactures subsidize their sugar production, so the US must follow to remain competitive “dos’t go well with WTO”

19. Justifications for Food Market Protection • Maintain domestic living standards Preserve jobs Can temporarily protect domestic jobs “Hawaii sugar workers” • HILO -- Hawaii County Council Chairwoman Keiko Bonk-Abramson is criticizing a Hamakua coast land deal

20. Justifications for Food Market Protection WTO to allow retaliation for U.S. anti-dumping law • Bargaining power/retaliation: The proper way to address trade disputes is now through WTO. In the past, where enforcement was less available, this might have been a reasonable argument. • The World Trade Organization (WTO) yesterday authorized the European Union (EU) and seven other nations to impose more than $140 million in punitive duties on U.S. goods, on the grounds that Congress has failed to repeal a controversial anti-dumping law. • That law, which Congress approved four years ago, provides that when foreign manufacturers are found to be dumping goods in the U.S. market — that is, selling at unfairly low prices — any anti-dumping duties that are imposed can be handed over to the U.S. companies that brought the dumping case, rather than to the U.S. Treasury.

21. Variations in Food Taste Preferences • Often “learned” early in life. It is likely that we will continue to prefer the kind of food we ate growing up.

22. Variations in Food Taste Preferences • Preferred foods often tied toward availability and local conditions

23. Variations in Food Taste Preferences • Ties to occasions

24. Variations in Food Taste Preferences • Impact of religion Kosher Law clearly specifies that kosher meat comes from animals with split hooves that chew their cud.

25. Taste Variations: Some Favorites • Raw fish (Japan) • Snails (France) • Insects (Africa) • Fermented herring (Sweden) • Blood sausage (Denmark) • Various animal organs How strange could this be to others?

26. Culture and Food Expectations • Attractiveness of prepared foods • Occasions for eating out

27. Culture and Food Expectations • Rituals Food is essential to existence, and to the religious experience as well. Every religion has rituals where food is offered to the worshipped, shared, eaten, or even tabooed • Tolerance for individual differences in taste

28. Food Entry and Diffusion PROMOTION USAGE BY IMMIGRANTS/ VISITORS ADOPTION BY LIMITED GROUP INCREASING ADOPTION/ ADAPTATION WORD OF MOUTH OBSERVATION WHEN TOURISTS GO ABROAD MEDIA COVERAGE MARKET DEVELOPMENT

29. Food Positioning • Positioning strategies A country of origin may affect the image of food products either favorably or unfavorably. • Emphasis for congruent products (e.g., Russian Vodka, Belgian chocolate, German beer) • De-emphasis (e.g., French beer, German wine) • Attitudes among consumers in new market toward country of origin

30. Food Adaptation Decisions • Positioning decision: to adapt or not to adapt… • Optimizing food for local taste • Maintenance of product mystique • Partial adaptation • Position relative to competitors • Research needed for adaptations

31. Serving size Legal constraints Taste—e.g., sweetness, spiciness Labeling Packaging Health issues (e.g., lactose intolerance among Asians) Positioning Price range Usage occasion Purpose served Branding Some Adaptation Issues

32. Favorites that Became Other Countries’ Treats • Sushi • Chinese food • French food • Italian food • Indian food • Middle Eastern Food

33. Some Diffusion Examples • Chinese food • In the U.S. • In Denmark • Pizza • Sushi • McDonald’s across the World

34. Some Other Issues • Promotional options and choices • Availability • Cost effectiveness • Reach of appropriate target market

35. State and Federal Export support • Federal programs • Subsidies • Foreign market development/market research • Export assistance • State programs • Promotion of products from within the state