Export Success Stories:
How Three U.S. Companies Found Markets in Foreign Lands

By Sarah Fister Gale


Organic sales in the U.S. soared to nearly $12 billion in 2003, and while it continues to be the leader in global organic sales, Europe, Japan and other nations are increasing demand for organic products, creating export opportunities for U.S. companies.

The majority of organic products exported to these nations from the U.S. are processed foods and beverages, including juices, cereals and grains, snack bars, cookies, non-dairy drinks, pasta and sauces, according to Amarjit Sahota director of Organic Monitor. “The export of organic fruits and vegetables is limited by the short shelf-life of these products, and organic meat and dairy exports are restricted because of trade disputes with regions like the European Union.”

This means organic processors of goods with long shelf lives have an excellent opportunity to expand their market share—if they can manage the red tape that goes along with exporting organic foods. “Deciding to export is a big decision that shouldn’t be taken lightly,” advises Sheldon Weinberg, principal of Weinberg and Associates, a business consultancy focusing on international organic trade in Anacortes, Washington, and a member of the World Board of the International Federation of Organic Agriculture Movements (IFOAM). “It’s a time and resource intensive process, especially in the beginning.”

Experts agree that the first steps toward establishing an export business are the most difficult for small organic companies. The challenges of completing foreign certification paperwork, learning the ropes of shipping, and securing clients in countries where language and culture issues present extraordinary hurdles can sometimes be too confusing or costly to bear.

It sounds overwhelming, but there are plenty of resources available to companies that need advice or subsidies to launch organic export initiatives. The U.S. Department of Agriculture (USDA) provides export assistance and advice through its Market Access Program; individual state governments offer market research and funding to local food growers and producers interested in exporting; the Organic Trade Association (OTA) is an ongoing source for information and assistance for all organic business needs, and certifying agencies such as Quality Assurance International (QAI) and California Certified Organic Farmers (CCOF) offer extensive educational opportunities and subsidies to attend trade shows and manage foreign certification requirements.

QAI, which is accredited by IFOAM, the International Organization for Standardization (ISO) and the Quebec Agri-food Designation Board (CAAQ), as well as registered with Japanese Agricultural Standards (JAS), works directly with its clients to identify markets and secure the necessary certification documentation, says Ellen Holton, QAI’s Director of Marketing. Along with helping organic companies navigate the mechanics of exporting, QAI reviews their material lists, fertilizers and processing aids to be sure they aren’t using any substances that are prohibited in other markets. “This is especially critical when you are exporting to Japan,” Holton notes. “JAS can be very prohibitive.”

CCOF’s Certified Organic Product Export Strategy (COPES) program, for example, offers organic growers and producers educational seminars, reports on what foreign markets are interested in, and sponsorship to tradeshows, such as BioFach in Germany, Natural Products Expo in Anaheim, CA, and Food Ex in Japan, where they can meet international buyers and learn to market goods abroad, says Jake Lewin, COPES marketing manager and CCOF Director of Marketing and International Relations. “Sometimes, the only way to get started is to just get out there and meet people. We give them a way to get their feet wet without blowing the whole marketing budget.”

COPES, which is funded through a state grant, is intended to support California growers and processors, however, anyone can take part in the seminars and research assistance. “Our goal is to help organic companies understand the requirements and regulations of the export process,” Lewin says. “We understand that it’s challenging, especially for smaller companies that find it tough to get the visibility.”

The educational and financial support of many organic certifier’s programs make it possible for small companies to land new foreign clients and to avoid common mistakes made by novices to the exporting process, such as not completing the proper certification paperwork necessary to get products through customs, or agreeing to “pay on delivery” scenarios that make them vulnerable to shipping mishaps or unscrupulous handlers.

But even with guidance from exporting experts, there are still risks, and any company interested in pursuing export opportunities should go into it with their eyes open.

Establishing a brand presence in another country can often take years of due diligence and up front investment, but with patience, dedication, and a willingness to embrace cultural expectations and requirements, many U.S. companies, like those profiled below, have found exporting to be a profitable and exciting way to expand their businesses.

Daughter’s Letter Lands Japanese Clients
Company: Dixon Ridge Farms
Products: Organic Walnuts, Organic Dried Prunes and Organic Walnut Oil
Export Success: Selling to Japanese Clients Since 1993
www.dixonridgefarms.com

Russ Lester’s 13-year-old daughter landed him his first foreign client through a precocious letter writing campaign, paving the way for a lucrative export business to Japan. Lester is the owner of Dixon Ridge Farms, a third-generation family owned business, farming since 1863. The Winters, CA-based walnut grower raises, processes, packages and sells organic walnuts, walnut oil and dried prunes. It has 20 full-time, year-round employees, with an additional six part-time employees to sort and package the walnuts and to help during harvest.

The company’s organic walnut production and sales have increased by about 40 percent annually since 1992, in part because of his daughter’s efforts to land her father clients overseas. The company had been processing and selling the organic walnuts for about a year, when Lester’s daughter decided they would be a big hit in Japan, so she got a journal of worldwide organic providers, found six names of Japanese companies and wrote them letters. She introduced herself and the company, shared the family’s business philosophy and described the products in detail, says Lester.

Remarkably, it worked. “We got an immediate response from one of the companies who we’ve done business with ever since,” he marvels. Two others responded shortly after and Lester was able to sell products to all of them.

It wasn’t the most traditional way to establish an export business for organic products and, as Lester points out, exporting organic products to Japan in the early ’90s was much easier than it is today. “Japan was in flux at the time. There were no strong laws about organic requirements, which was good and bad.” It made it easier for him to ship his products without completing piles of paperwork, but it was more difficult to prove the quality and safety standards of the nuts because there were no standards in place.

Since that time, Japanese standards for exported organic product have become much stricter, requiring companies to go to great lengths to meet Japanese Agricultural Standards. For Lester, it means facing strong restrictions regarding the cleanliness of the walnuts, proving they haven’t been fumigated and that they are free of coddling moths, which could devastate Japan’s apple industry. There is also extensive paperwork required to get products through customs, including proof of certification, export documents, and bills of lading. If anything is missing or out of order, the shipment won’t get out of its U.S. port.

“Fortunately,” says Lester, “the company we work with has been very helpful from the beginning.” As a novice exporter, Lester was embarking on new territory in preparing and shipping products overseas. Luckily, his new client was reputable and well established. It always covered its bills, paying Lester in advance of his shipments, which provided a valuable safety net as he learned the ropes of the exporting business. He faced one mishap early on with a freight company that mishandled his product, but otherwise it’s gone smoothly, he says, thanks in part to his client’s support.

In exchange for that loyalty and help, Lester has always provided only the highest quality products, which he says is the reason he’s retained his Japanese customers for more than a decade. “In Japan, customers will pay for excellent products and service. If you follow through on claims of quality, the Japanese are great loyal customers who pay promptly, but if you throw in low quality products even once, they will be gone.”

He also discovered how important it is to respect the Japanese culture and approach to business, and not to expect clients to conform to his style. “In Japan, the way you do business is considered a reflection of your products, and vice versa,” he says. “The ‘customer is always right’ mentality is very strong there.”

Unfortunately, Lester’s success with his Japanese clients has been harder to replicate in European markets. He secured a few clients in Germany in the mid-1990s, but lost them to lower priced Indian producers, whose organic walnuts were subsidized. “We struggle to compete against processors from Moldavia, Ukraine and the Soviet Republics,” he says. “Their quality is not as good but their prices are really low.”

That’s a common roadblock for organic companies trying to tap into European markets. They are often less inclined to pay top dollar if cheaper products are available. They also prefer to support EU grown and processed goods whenever possible. “Europeans take care of their own,” Lester says. “They have a strong sense of support, which makes it difficult for U.S. companies to find a niche.”

Lester continues to try, however. He went to the BioFach trade show in Germany last year, which cost him about $7,000 on top of the subsidies from COPES–and still hasn’t made a sale. His additional expenses included investments in shipping products overseas, developing brochures in the language of the country and travel expenses. On top of that there is the expense of getting certified in the foreign country, marketing efforts to establish the brand and additional travel to build personal relationships with potential clients. “It’s expensive to try to sell products in Europe,” he says. “You have to be willing to spend money on this process knowing there’s a chance you won’t make a sale, or that it will take two to three years to secure a client.”

Lester went into the trip with his eyes open, and even though he hasn’t secured business yet, he doesn’t consider it a loss. “Being at BioFach allowed me to get clarification on an IFOAM regulation that would have prevented me from selling to Europe,” he says. He’s also in negotiations with a German company to secure a major sale that could eventually pave the way for a longer business relationship.

He was somewhat more successful at FoodEx in Japan. He attended the show in 1997 with an organic consortium of 12 companies sponsored by COPES to find new clients. His was one of only two companies to secure new business, and that relationship took years to solidify, only recently landing Dixon Farm products in grocery chains around the country. “It takes a long time for the Japanese to get to know you and get comfortable with your products,” he warns. “You have to go in with a long relationship in mind.”

The Pros and Cons of Exporting
Company: Sunridge Farms, a brand of Falcon Trading Company
Products: Organic granola, cereal, candy, nuts and trail mix
Export Success: Sells products in 10 foreign countries
www.sunridgefarms.com

Sunridge Farms made its debut as a U.S. organic exporter by selling products in bulk through exporters who repackaged the goods under foreign brand names. Sunridge Farms manufactures natural and organic foods including granolas, candies, nuts, trail mixes and other products. The company sells its bulk and packaged products globally in supermarkets, specialty foods retailers, and through its website.

It’s first export sale came when an exporter contacted the company looking to supply bulk products to Pacific Rim countries. The company hadn’t planned to market through exporters but the opportunity presented itself and Sunridge embraced it, Stacey Ogo, international sales director for Sunridge Farms. “It turned out to be a great way to get started exporting,” she says. The exporter made all the arrangements to ship and market the product, requiring Sunridge to invest little money or risk in the process. Sunridge provided paperwork establishing that is products were USDA certified organic, and the exporter handled the rest. “It was definitely a less expensive way to start.”

There are drawbacks, however, to using exporters, she says. While it’s easier and there is less of a commitment, the profit margins are less because there are so many cost layers. “It’s not the most direct way to handle a sale, especially for high quality products that cost more,” Ogo says. “By the time the exporter, importer, retailer and distributor take their cut, there is not a lot left over.”

By working with exporters, you also don’t establish your name in the foreign market, because products are typically repackaged before they are sold. “You can sell a lot of volume and not create an international brand,” she warns. “After years of selling our products in bulk, no one knew who we were.”

These days, Sunridge doesn’t turn away offers from exporters, but focuses its efforts on developing itself as a brand name in Europe and Canada. Now, Ogo studies new markets extensively before investing in marketing efforts to land clients. She attends tradeshows and began exhibiting at BioFach in 2000 to network with foreign retailers and establish a familiarity with European buyers.

The company has had success in European markets, but she says, there have been many hurdles. “It’s a whole different set of requirements for importing. You have to be able to document everything or you won’t be granted a license to sell organic.” That means every ingredient supplier has to complete U.S. and European organic certification documents because currently there is no reciprocity.

Ogo strongly urges any company planning to export to Europe to complete the foreign certification paperwork before they start marketing. “Otherwise, you can end up gridlocked,” she says. “If you can’t provide all the documents to prove your products are organic you’ll get held up in shipping and you may lose your investment.”

Once the upfront research and paperwork is completed, she also advises them to thoroughly investigate their distributors and to enter those relationships with careful consideration. “It’s a big commitment on the part of a distributor to market your brand, and most won’t do it if they don’t have an exclusive,” she says. “But before you give that away, you have to be sure they can perform.” That means determining that the company is large enough to invest in the marketing and distribution efforts necessary to successfully establish your brand, but not so big that you won’t get the time and attention you expect.
Whether you want to sell through an exporter or market direct, Ogo says it is important to have realistic expectations for how long it will take. “Getting started and finding clients can be a lengthy process.”

Wine Exporter Deals with Japanese Trends
Company: Frey Vineyards Ltd.
Product: premium organic wines
Export Success: Up to 12 Percent of Production Sold in Japan
www.freywine.com

Because of Europe’s long tradition of producing fine organic wines, it’s tough to establish a market for U.S. brands, says Katrina Frey, marketing director for Frey Vineyards, a small-sized family owned winery nestled on the slopes of the Mendocino County at the headwaters of the Russian River in California. Frey Vineyards has been producing organic wines since 1980, and today is the largest purely organic winery in the U.S. Like all U.S. certified organic wines, Frey Vineyard wines are free of sulfites, the pungent preservatives that can induce headaches, sniffles and other allergic reactions in some people.

Frey has been trying to sell products in Europe for years, but has been stymied by the Eurocentric attitude toward foreign organic wines and the cynicism toward wines made without sulfites. “Unlike U.S. standards, European organic standards don’t ban sulfites,” she says. Even though Frey believes the lack of sulfites enhances the natural taste of the grapes, Europeans are skeptical. “There’s a bias against sulfite-free wines in Europe. Some palettes actually miss the taste.”

Because consumer demand for sulfite-free, U.S.-made wines isn’t strong in Europe, distributors are hesitant to invest much effort marketing the wines, but that doesn’t stop Frey from trying to establish clients in Europe and other nations. The vineyard has had much better luck in countries, such as Japan, where at one point Frey was selling 12% of the 62,000 cases of wine it produces annually.

Frey started exporting in 1990 after meeting potential Japanese clients at the Expo West trade show in the U.S. “We started with modest orders to Japan, and even then we couldn’t secure the business until we answered a huge number of questions about our process and ingredients,” she says. “Some of the questions didn’t even apply to us, but we answered them.”

Over time, Frey built a relationship with the buyers. The Japanese clients visited the vineyard several times to get to know her family and “put a face on the business.” Once they started selling larger quantities, Frey and her husband spent time in Japan, learning about the buyers’ needs and paying respect to their growing relationship.

Sales quickly grew and were booming until the mid-1990s when the yen crashed. Fluxuating currency and the whimsical tastes of foreign markets increases the risk of building an export business, she warns. “The Japanese market can be very faddish.” Japanese tastes changed, and demand for the products fell away. Since then, Frey has rebuilt the company’s marketing efforts, focusing more on local buyers where the company “feels more secure.”

That’s not to say the vineyard gave up its export goals. It still sells five percent of its production to Japan and is trying to land clients in England and Iceland. Frey went to the BioFach tradeshow in Germany last year, and while she still hasn’t landed a deal she’s confident one is brewing. “The most promising is a contact from Iceland that I’m quite sure will result in a sale,” she says. She’s also working with a German company that might relable the Frey wines under its own brand and a French distributor that sells wines in England, Switzerland and Scandinavia.

“Europe is a difficult market to tap into unless you sell products not produced by EU countries,” she says. “You have to know there’s demand for your product.” For example, it would be easier to export organic rice cakes to Europe than chocolate or wine, which Europe is famous for producing.

“For us, I’m not sure the European market is worth it,” she says, noting that the time and effort she’s spent trying to build relationships as a result of the BioFach tradeshow opened her eyes to the challenges of exporting wine to Europe. “Overall, I understand the realities of the European market much more clearly then I did before.”

Sarah Fister Gale is Editor of Organic Processing Magazine. She can be reached at sarah@organicprocessing.com.