1. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 1 INTERNATIONAL FOOD MARKETS Economics of international food trade Trade policy International brand building Product adaptation State and Federal trade support

2. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 2 Types of Food Exports Providing what cannot efficiently be grown in import market –High value/value added –Low value Stop-gap measure to compensate for reduced local harvest Providing diversity in food supply –Niche products –Country reputation

3. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 3 VERY BRIEF REVIEW OF ECONOMICS Exchange rates –Floating (supply and demand) –fixed Trade balances and their impact on exchange rates Measuring country wealth –gross domestic product –“purchase parity” vs. nominal

4. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 4 Comparative Food Spending Percentages, 1994 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% Percentages of total expenditures—includes non-consumer spending such as government and industry. U.S. figure: 7%

5. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 5 Nominal vs. Purchase Parity Adjusted GNPs—Examples (2001) Source: World Bank (http://siteresources.worldbank.org/ICPINT/Resources/GNIPC.pdf )

6. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 6 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

7. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 7 Protectionism 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

8. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 8 Approaches to Protectionism Tariffs Quotas “Voluntary” export restrictions Subsidies to domestic producers/exporters Non-tariff barriers –legal obstacles –differential treatment

9. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 9 Justifications for Food Market Protection Resist “unfair” or inappropriate competition Maintain domestic living standards Preserve jobs Bargaining power/retaliation (Super-301 provision in U.S.)

10. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 10 Food Tastes Often “learned” early in life Preferred foods often tied toward availability and local conditions Ties to occasions Impact of religion

11. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 11 Taste Variations: Some Favorites Raw fish (Japan) Snails (France) Insects (Middle East) Fermented herring (Sweden) Blood sausage (Denmark) Various animal organs How strange could this be to others?

12. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 12 Culture and Food Expectations Attractiveness of prepared foods Occasions for eating out Rituals Tolerance for individual differences in taste

13. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 13 Food Entry and Diffusion USAGE BY IMMIGRANTS/ VISITORS OBSERVATION WHEN TOURISTS GO ABROAD MARKET DEVELOPMENT ADOPTION BY LIMITED GROUP MEDIA COVERAGE INCREASING ADOPTION/ ADAPTATION PROMOTION WORD OF MOUTH

14. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 14 Country of Origin Effects Positioning strategies –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

15. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 15 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

16. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 16 Some Adaptation Issues 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

17. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 17 Favorites that Became Other Countries’ Treats Sushi Chinese food French food Italian food Indian food

18. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 18 Some Diffusion Examples Chinese food –In the U.S. –In Denmark Pizza Sushi McDonald’s across the World

19. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 19 Some Other Issues Promotional options and choices –Availability –Cost effectiveness –Reach of appropriate target market

20. MKTG 442 INTERNATIONAL FOOD TRADE Lars Perner, Instructor 20 State and Federal Export support Federal programs –Subsidies –Foreign market development/market research –Export assistance State programs –Promotion of products from within the state