Why Agriculture and Agri-Food Companies Should Export
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Exporting is absolutely vital to the long-term success of most companies in Canada. The share of exporting in our economy has grown rapidly over the years, and is expected to continue.
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Why Agriculture and Agri-Food Companies Should Export
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- Exporting is absolutely vital to the long-term success of most companies in Canada. The share of exporting in our economy has grown rapidly over the years, and is expected to continue.
- If you’re not exporting, you’re missing out on a lot of growth potential – and you’re increasing the long-term risk to your business. Why? Because we’re in a global marketplace, and Canadian businesses – including those in the agri-food industry – are competing with sophisticated companies around the globe. Now is a great time, to get to know your potential international customers, to discover if there are new crops or commodities that might be of interest to them, for example, and learn how consumer tastes can help you position your business for future growth. Now is the time to start thinking about your plan to go global or to extend your reach if you’re already exporting.
- Many studies have confirmed that businesses that export do better than businesses that don’t. They experience 20% greater sales growth, are 30% more productive, and 25% more innovative. Exporting makes you better, stronger and bigger.
- Here’s another reason to believe exporting helps build business. Consider that the average 3-year cumulative returns following an initial public offering are just 15% for non-exporters, compared to 45% for exporters. That’s a big gap, and further evidence that exporting is good for business.
- And because exporters have less concentration risk - they’re not dependent on one market or one business cycle – they also have 20% lower volatility, or ups and downs in their business. Studies from numerous countries have clearly shown that exporting increases both business survival and longevity. In an increasingly connected global marketplace, exporting is vital to long-term growth and success. Agricultural and agri-food industry SME exporters like Monte Snow, General Manager, Fisherman’s Market International Inc.—have told us how important exporting is to their growth.
- As Monte points out, exporting broadens your potential market. While there is some perception that exporting can be risky, the fact is, it’s actually riskier not to export. Why? Again, it’s because your competitor is no longer just a company in the neighbourhood. Most businesses are facing domestic competition from multinational competitors whether they ‘stay put’ or not.
- Exporting is extremely important to Canada’s agriculture industry, which exports $55 billion a year. That represents almost 50% of the total industry in Canada. When it comes to agriculture in today’s global marketplace, Farm Credit Canada explains that, “Even small shifts in demand and populations in countries such as Africa, India, China or even the Pacific Rim, represent huge market opportunities.” Monte Snow’s insight that to increase your potential market, you take your business global, is well-supported and points to the need for Canadian SMEs to implement a successful global strategy to generate more revenue. And don’t underestimate how well Canadian companies are positioned to succeed. As Farm Credit Canada points out, “buyers prefer long-term relationships with guaranteed quality. The Canadian flag is an important marketing tool that can help initiate relationships.” Let’s take a look at Canada’s top exports.
- Canada is currently the fifth-largest exporter of agricultural and agri-food products in the world. Our top 5 agri-food exports (from 2015) are the following: Non-durum wheat (other than seed for sowing) Canola seed, low erucic acid Lentils, dried, shelled Soybeans (other than seed for sowing) Durum wheat (other than seed for sowing)
- Government of Canada statistics and market information demonstrate that agri-food and seafood exports are growing. Canadian exports in these areas to all countries grew by 8.79% in 2015 over 2014. Here are stats for export growth to 3 key markets: Exports to United States experienced growth of 10.44%, Exports to India experienced growth of 67.78%, Exports to China experienced growth of 19.41%. Now let’s talk about how exporting helped one of the smaller companies we worked with grow its business, and how EDC helped.
- When we ask businesses why they don’t export, or why they don’t export more, the reasons they give us are generally concerned with the need for making connections, understanding compliance and regulations, mitigating risks and financing. The good news is that EDC is here to help overcome all of these hurdles with products and services designed to help businesses reduce risk and expand their global business.
- Exporting has a very positive impact on Canadian companies and the Canadian economy – exports amount to more than 30 percent of Canadian GDP. In 2015, EDC supported business in 170 countries, facilitating $104 billion in global business transactions, contributing $66.8 million to the GDP and supporting 530,839 jobs across Canada. We have helped business all across Canada grow all over the world – and we can help you.
- There is an ecosystem of organizations that help exporters in Canada. They each have specific roles they play, and share others. ECD helps exporting businesses with insurance, bonding, investing in operations abroad and setting up affiliates. Working alongside the Trade Commissioner Service (TCS), EDC can offer help with market knowledge, making connections with partners and prospects, and assistance guiding you through government programs. TCS also provides more in-depth market intelligence. Both BDC and EDC can help with financing and finding international contacts. BDC also provides marketing and business planning and consulting. The Canadian Commercial Corporation manages contracts with international governments, plus they provide general support such as export planning, financing, and support going to market. EDC can help you get started and figure out which organization is best suited to your needs.
- EDC has helped over 800 exporters in the agriculture sector, facilitating over $8 billion in exports. We have provided: $7.4 Billion in accounts receivable insurance, helping businesses to minimize their risk, $166 Million in Contract Insurance & Bonding, protecting companies while freeing up working capital, and $300 Million in financing, allowing exporters to grow faster and provide customers with financing options
- We assist businesses from different sectors in all industries, all over the country, both big and small, although we focus on small to medium enterprises. And, we support businesses at different points throughout the entire exporting journey. That includes helping businesses that are ready to export start exporting, and helping occasional and established exporters expand into new markets all over the world. Our work with businesses has provided a first-hand demonstration of some of the challenges to exporting that you face, and we can help you overcome them.
- DeeBee’s develops and produces organic, tea-brewed frozen desserts from all-natural ingredients.
- Like any start- up, DeeBee’s needed patient capital during the ramp-up period to grow. The company had POs from several food distributors in the U.S., but needed working capital to fulfill the contracts. They asked EDC for help. EDC provided a $500,000 direct loan that they used for ingredients, manufacturers and packers. DeeBees’s revenue grew from $12,000 in 2013 to almost $500,000 since January 2015, and today is actively expanding in the United States and has secured placements with Sobey’s, Safeway and Whole Foods. There are a number of ways that EDC can help companies like DeeBees and businesses like yours. First, let me describe how EDC can help.
- One of the biggest hurdles exporters face is finding prospects and partners around the globe. EDC can help find those connections both in the United States and abroad. We have networking opportunities, matchmaking events, and you can utilize our foreign offices around the world. In addition, we partner with Enterprise Canada Network, an online business matchmaking site that can connect you instantly with partners and suppliers internationally. Another hurdle is related to understanding international markets.
- Once you’ve made connections, what should you know in order to work with international customers, or to work in the local shop you’ve set up in an overseas market? There are a lot of questions for which you’ll need answers, such as what are the local laws and regulations concerning compliance? What about taxes? Which markets are the most competitive, and how can you differentiate yourself? At EDC, we have experts on and in markets all over the world to help you answer these questions, or we can refer you to the proper sources when more information is necessary. Our Trade Advisory can also provide extensive understanding of global economic conditions, risks and opportunities. The more you know about these issues, the more you can grow – and realize your potential. Maintaining cash flow can also be a barrier to exporting. EDC provides solutions such as Foreign Buyer Financing and Direct Lending to maintain cash flow while you grow. Let’s hear one small business owner’s exporting experience and thoughts about understanding regulations:
- Tropical Link was started 10 years ago when the Fernando and Amarasinghe families immigrated to Canada from Sri Lanka with plans to establish an agrifood export business. “We started very small but had a big vision,” says Fernando. “We decided to settle in the Vancouver area to give us access to the port. Canada is rich in agricultural products and that was an area where we had some experience from our business in Sri Lanka. We developed our business plan to focus on organic products and on being an ethically and socially responsible company.” When Fernando and Madhava Amarasinghe considered local agricultural products they identified the large quantities of blueberries and cranberries being grown in B.C. and recognized that other companies were already exporting fresh and frozen berries. “To be competitive we knew we had to add value to the berries and take them out of the commodity market. We did that by focusing on dried berries and making sure we could find buyers.” According to the B.C. Ministry of Agriculture in 2014 B.C. agrifood exports reached $2.96 billion with blueberries alone accounting for $169 million in sales. In order to stay informed about export markets, Tropical Link attends major events and trade shows, and visits buyers in their own countries. The company’s number one piece of advice to new SMEs about export and trade? Compliance. CEO Sampath Fernando has this to say: “You have to be aware of regulations. It doesn’t matter if you like or dislike the regulations, you have to follow them. Regulations aren’t going to change for your business, you have to modify your business to meet the regulations. Do your due diligence on the regulations in every country [you export to] and know that regulations can change and it’s your responsibility to know about any changes.”
- With opportunity, of course, comes risk. For exporters, those risks could involve the possibility of not getting paid, or encountering local corruption, or having a foreign government suddenly nationalize domestic companies. Many of these risks are remote, but they are real and they can be mitigated with the insurances offered by EDC. Talk to EDC before you start exporting and we can not only help you understand and appraise the risks, but also offer insurance such as Credit Insurance, Political Risk Insurance, and Bonding so that you’ll be covered in the case of unforeseen circumstances.
- Exporting continues to grow in importance, both in Canada and around the world. And with the potential of even more major international trade agreements on the horizon, the pace of trade globally will escalate in the years ahead. For the agricultural sector, these trade agreements could greatly reduce tariff rates and provide new market access opportunities. So now is the time to start thinking about how your business fits within the global market, and figuring out what your global strategy is in order to grow your business. Keep in mind that, whether you need help making connections, or with financing or mitigating risk, EDC can help. Are there key points here we should add to this section on the future of agriculture/agri-food exporting in Canada as per EDC’s projections/research?
- EDC is here to help companies in all sectors, all across Canada, grow their exporting business. That includes yours. Please get in touch with us and find out how we can help expand your business all over the world. Thank you.