Contents 1. Company Description...............................................1 1.1 Experience exporting...........................................1 1.2 Percentage of sales and profits to be contributed by exporting activities..........................................................1 2 Product Description...............................................1 2.1 Unique selling attributes or competitive advantages of the product.............................................................1 2.2 Seasonality and life cycle of your product.....................2 3 Rationale for Selected Foreign Market.............................2 4 Logistics related risks...........................................5 4.1 Infrastructure and geographical conditions.....................6 4.2 Currency and Price Risk........................................7 5 Customers.........................................................8 5.1 Market trends.................................................10 6 Competitive Analysis.............................................11 6.1 Overall competitive conditions................................11 6.2 Who are the main existing competitors?........................11 6.2.1 Countries................................................. 11 6.2.2 Companies................................................. 12 6.3 Unique selling attributes or competitive advantages of each...12 i
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Contents
1. Company Description..........................................................................................................................1
8.11 Packing and marking requirements...........................................................................................23
8.12 Currency of payment and exchange rate...................................................................................24
8.13 Method of payment...................................................................................................................24
8.14 Warrantees, after sales services, etc.........................................................................................25
9 References............................................................................................................................................ i
10 APPENDIX:............................................................................................................................................ ii
ii
1. Company Description
1.1 Experience exporting
The company was founded 1990. During the first 6 years the company only grew and sold unprocessed
coffee beans to a local customer. As the company acquired more fields to grow coffee they gradually
started taking a larger role in the value chain. They invested in a facility which processes and packages
coffee beans in such a way that the product is ready to be transported. The company is taking pride in
being fair trade certified and meeting requirements to export to North America and therefore having an
opportunity to sell in larger quantities.
Sales in Mexico and Central America are given less attention, since the market is highly competitive and
the profit margin is lesser than what in USA and Canada. The company strategy is to expand its markets
outside Latin America where the potential for a greater profit margin is larger. The successful strategy of
expanding exports to USA and Canada in the late 1990´s has been what has given the company most of
the profit during the last 10 years. Now the company is looking to expand its operation to Europe were
the customers have started to pay more attention to quality coffee products by showing a preference
toward certified, organic and special coffees. In Europe, there is a market for a broad spectrum of
coffees. The company takes pride in being a producer of high-quality certified coffee. How does the
exporting activity contribute to achieving company goals and objectives?.
1.2 Percentage of sales and profits to be contributed by exporting activities
Only a fraction of the coffee is sold to domestic markets. The international business is the core of
success representing more than 90% of overall sales volume. The strategy is to increase international
business with entering the German markets and from there the rest of Europe.
2 Product Description
2.1 Unique selling attributes or competitive advantages of the product
Mexico produces coffee beans among the best quality in the world thanks to the specificity of the
climate, the soil, the altitude and others physical characteristics of Mexican coffee plantations. In 2001,
Mexico was the 5th producer of coffee worldwide.
1
Nowadays people is increasingly aware of the danger of pesticides and other chemical products farmers
use to speed the growth and optimize the harvest of coffee beans. Consequently the consumption of
certified coffee is growing very quickly, particularly in Europe and North America, as this product is
healthier.
Mexico produces organic and certified coffee of excellent quality, mainly in the state of Chiapas which is
very mountainous: organic coffee plantations are located on mountainous slopes where the soil is
particularly fertile. In addition, the production of coffee has been deeply rooted in Mexican culture for
thousands of years; growers of organic coffee, who are mainly indigenous communities, have a wide and
strong knowledge about the traditional coffee-growing focused on quality. This knowledge is very
important to preserve the authenticity of the product and biodiversity and it is an important competitive
advantage.
Our company takes pride in offering a high quality product which benefits from the competitive
advantages of Mexican fair trade certified coffee.
2.2 Seasonality and life cycle of your product
Selected coffee beans are sown and between three and four years later the coffee plants can produce
fruits. The red coffee cherries are harvested manually between the months of October and March from
the plantations in Mexico. The day of the harvest, the fruits are transformed through a process which
consists in cleaning the fruit, eliminating its superior layers and drying it to finally obtain the green
coffee bean. It is important to proceed this transformation the same day in order to conserve the quality
and the weight of the product. The beans are sorted by size and weight and then they are put in sacs to
be exported. The product is roasted in Germany, then one part is dedicated to local consumers and
another is re-exported to European countries or USA.
3 Rationale for Selected Foreign Market
Germany is the largest coffee consumer in Europe, with a market share of 22 % (ICO, 2007), and largest
importer of coffee in the world, barring the USA. Total coffee consumption amounted to 512.000 tons in
2007 and in 2010, per capita consumption of coffee increased to 150 liters in total volume terms.
The main reasons why we have picked Germany as host country are the following:
2
a. Germany is a coffee nation: Coffee is the favorite drink of Germans
As we can see in the chart, Germans
drink 15 % more coffee than water and
40% more coffee than beer. This
implicates that there is a steady
demand for our product and little risk
not to find buyers as long as we offer a
good cost-benefit ratio.
b. High volume of coffee imports
As we can see in the table below, green
coffee is the most important import
product in terms of volume.
Furthermore, the table illustrates how
Germany relies on the green coffee
imports – even though the production is
not mentioned, we can assume that the country-own production would not be enough to satisfy the
high demand of the German coffee drinkers.
Figure 2: Imports and exports of coffee to/from Germany
c. Geographic location: Important place for trading and processing
Germany is the first European country we decided to export to. But it is not meant to keep being the
only one forever. Nevertheless, we consider Germany to be a good country to start with, not only for
the reasons mentioned above, but also for its geographic location. With Hamburg being the second
3
Figure 1: Consumption of drinks in Germany
largest port in Europe, it is relatively easy to ship the coffee from Mexico to Germany. Important buyers
are also located in Hamburg (see “Customers”) which keeps transport costs relatively low.
The port of Hamburg has a central meaning in the world coffee trade as the biggest European harbor for
imports of green coffee, as a hub for shipments to Scandinavia, and as a gateway to and from Central
and Eastern Europe, Austria, and Switzerland.
Total coffee transshipments through the Port of Hamburg for 2008 amounted to around 1.21 million
tons, 847.000 of those being imported (3 % more than in 2007).
The attractiveness of Hamburg for the high number of coffee activities is a result of the long symbiosis
between trade, traffic and port. The combination of trading companies with innovative service concepts
and port- and storing companies with the most modern performance and intelligent logistics solutions
empower Hamburg’s leading position as centre of the international coffee trade.
d. Germany is a big market for organic food
Germany does not only represent a big market because of its high population and its high purchasing
power but also represents Europe´s biggest market for organic products with a constant growth. In just
11 years, from 2000 to 2011 the revenue for organic food in Germany tripled. The growth rate is a lot
higher than the one for “conventional” food: from 2010 to 2011 for example the revenue of organic
food in Germany increased by 10 percent whereas the revenue of “conventional” food decreased by 0.2
percent.
Figure 3: Revenue of organic food in Germany
4
Another good prospect the German market represents, are the increasing imports of organic food from
other countries because the German organic food production is too small to saturate the German
market. While other markets were hit by the economic crisis the last years, the market for organic
products was not affected negatively. This shows that the organic food market is a relatively stable and
safe one.
e. Future prospects
Coffee is expected to register good total volume sales growth over the forecast period. According to the
German Coffee Association, and other sources, coffee is a healthy drink. They claim that coffee
stimulates mental activity and positively aids sports activities, such as fitness, but also prevents diabetes
and Alzheimer’s disease and protects the liver. Such publicity usually has a significant influence on
consumer behavior and it may impact growth in volume and value sales of coffee. Organization of the
Coffee Day (which celebrated its 5-year anniversary in 2010) is also intended to stimulate coffee
consumption in Germany.
4 Logistics related risks
5
Figure 4: Route of sea travel
4.1 Infrastructure and geographical conditions
The merchandise will be transported in containers on trucks from Puebla to Veracruz. There the
merchandise will be loaded of freight ships and arrive in Hamburg approximately 17 days later. In
Hamburg the customer will take receive the merchandise and take full control.
The coffee will be packed in standardized sacks designed for transporting coffee. There sacks will be
loaded on ISO 42" x 42" pallets who in turn will be loaded into standard 20 inch containers. Only fully
loaded containers will be sold to increase efficacy of logistics operations. Hereafter the container will be
transported to the port in Veracruz by a logistics company. The road from Puebla to Veracruz is in
moderate condition compared with other roads in central parts of Mexico. The distance from the
processing unit in Puebla to the port in Veracruz is 305 kilometers. The lorry will have to pass the high
mountains of Mendoza. There is no need to be alarmed since the toll road is designed to support trucks
since the port in Veracruz is the most used one on Mexico. The toll road kept in fairly good conditions
and crime is low on these parts due to high surveillance. Delays on the road are common, but do not
cause any problems since the container is scheduled to wait at least one day in the port of Veracruz. The
port of Veracruz is the most advanced in Mexico and information will be sent to the company and the
customer as soon as the container is being handled in the port. The product is not subjected to any
actual danger in the port, since the surveillance is strict. Moreover, the only ones with permission to
open the container are the government licensed port companies which have been reliable in the past.
The sea transport is fairly safe. Only extreme weather conditions and human errors by staff can cause
loosing of cargo. Nevertheless, freight timers are subject to weather conditions. If the weather is
unfavorable the sea transportation can be delayed by days. In case of delays, the new estimated arrival
time will be informed to all parties by sophisticated and integrated information technology systems. As
with the road and sea transports, the company demands that the logistics company has insurance which
will cover damaged or lost property.
When the container is off-loaded in the port of Hamburg the company will be informed and all
responsibility of merchandise will be handed to the customer. The customer has the right to check the
merchandise in the port and report damaged or lost property.
6
Figure : USD/MXN and USD/BRL exchange rate during the last 10 years. Source xe.com
4.2 Currency and Price Risk
Coffee is traded in USD, causing risks related to the UDS/MXN exchange rate. The UDS/MXN exchange
rate has a volatile history and there is no suggestion that the risk will be smaller in the future. Due to the
high rate (over 80%) of Mexican exports are exported and paid in USD. Until Mexico succeeds to
diversify its export partners there will be a large currency risk.
The financial crisis has caused numerous rapid exchange rate fluctuations and there are no signs that the
future will be more stable. A low valued Mexican peso is good for export business, but as the economic
growth of Mexico increases a higher valued Mexican peso can be expected. In comparison with the
words biggest coffee exporter Brazil, Mexico has an advantage in risks related to currencies since the
Brazilian real has increased in value making their exports expensive.
Coffee prices are extremely volatile. The supply of coffee is dictated by weather conditions in coffee
harvesting countries. Hence, a
good harvest in other coffee
growing countries will increase
the supply of coffee and cause
the prices to fall. This volatile
price change will have a major
impact in the economic
profit/loss.
7
Figure 5: Price and stock of coffee
5 Customers
In order to identify direct customers, it is helpful to have a look at the whole supply chain:
Figure 6: Supply chain parts
The coffee market is characterized by a fierce competition at the processors, wholesale trader and
grocery level. On the following pages, we will have a short look on important players along the supply
chain with a main focus on our direct customer, the Neumann Coffee Group.
Our own position in the supply chain ranges from the production of the coffee plant to the position of
the export company. We are selling our product to the trader, which is represented by Neumann Coffee
Group. Neumann Kaffee Gruppe (NKG), the world's leading green Coffee service group. Neumann Kaffee
Gruppe is present in all important markets worldwide. The export companies and representative offices
have access to the entire world's coffee production. At the same time, the consuming markets are
served through import traders. Neumann Coffee Group meets the diverse demands of the clients with a
comprehensive range of semi-industrialized coffees as well as services and an almost limitless choice of
coffee varieties, preparations and cup profile. Below you can find a brief company profile on NKG. In
Germany, Bernhard Rothfos GmbH is in charge of the coffee import, which is a leading member of
Neumann Coffee Group. The company was founded in 1925 and is based in Hamburg. It takes a key role
within the world-wide green coffee supply chain and thus contributes to the group's strategic objective
of a long-term, sustainable and profitable growth. Among the key competences of Bernhard Rothfos
GmbH are Trade, Logistics, Pricing, and Quality.
8
In order to know the whole supply chain, which is important for understanding logistic issues, we also
have to have a look to the next party involved, the roaster.
Germany’s roaster industry is dominated by a handful of companies; Kraft and Tchibo are the main
players, competing with other roasters like Melitta, Aldi and Dalmayr.
Kraft Foods is the leading (non-private label) player in coffee in Germany, accounting for a 17% share of
off-trade value sales and a 15% share of off-trade volume sales in 2010. The company’s Jacobs brand
leads with a 12% share of retail value sales. As a result of intense competition and the penetration of
new products, Kraft Foods is slowly losing shares. The saturation in fresh ground coffee has also harmed
Kraft Foods.
Once roasted, the coffee finds its way to the consumer, delivered by either a caterer or a retailer. The
chart below illustrates, where the coffee is consumed. The chart only refers to the coffee which is
consumed out of home (in our supply chain the part that goes via the caterer).
9
Figure 7: Company description of Neumann Kaffee Gruppe (NKG)
Figure 8: Sales of coffee outside homes in Germany
5.1 Market trends
Consumption of fair trade coffee is growing fast as figure 10 illustrates, resulting in that current certified
coffee suppliers are unable to meet the demand of the market. Moreover barriers to enter the European
market are seen as to hard to overcome by numerous small business companies. Moreover, the
competition of low cost coffee is close to perfect competition the company cannot compete with price.
Therefore, the potential customer segment is coffee enthusiasts who are willing to pay more for a
premium coffee.
Figure 9: Source: Fairtrade deuchland
10
6 Competitive Analysis
6.1 Overall competitive conditions
The company is facing the same challenges as other coffee businesses. The total cost of delivering coffee
beans to Europe is large and it involves risks and the need to adapt to new regulations and laws. The
company sees this challenge as an opportunity to gain market share and increase profit. When
processes have been adapted to laws and regulation set by EU and reliable business partners have been
found the operational costs per unit will be approximately the same as before. Hereby, making a
successful export plan to Europe is in the core of the company’s success
As we can notice, the market is highly competitive in Central and Latin America as there are many
producers of organic and certified coffee in this area. This is the reason why the company aims to
expand his market to Europe and, more precisely, to Germany, where products are more varied and the
market is larger: Germany is the main consumer of organic products in the European Union. People are
more and more interested in organic and fair-trade coffees; the market is unsaturated so there are
possibilities for new companies to enter this market in order to face the growing demand.
Germany is currently importing certified coffee from Central and Latin America.
About the competing companies, we have to consider both Mexican companies exporting organic and
certified coffee to Germany and their Latin neighbors such as Peruvian and Vietnamese companies.
6.2 Who are the main existing competitors?
6.2.1 Countries
Peru is the primary producer and importer of organic coffee so it is a direct competitor of Mexico in the
exportation of organic coffee to Germany. The production and exportation of coffee in Peru have been
growing very quickly the last years and the quality has been improved in order to enter European and
North American markets. USA used to be the main buyer of Peruvian coffee but now Germany has
surpassed them by importing 32% of the Peruvian production. It is the main competitor of Mexico
because it exports organic coffee to Europe and it is an important provider of Germany.
Vietnam too is known for producing some of the world's best organic coffee and is one of the main
providers of Germany.
11
6.2.2 Companies
A powerful competitor is Exportadora de Café California (ECC), which is a Mexican company. It is one of
the largest green coffee exporting companies in Mexico. They are involved in both production and
exportation: they work in partnership with Mexican farmers who produce various types of coffee in the
states of Chiapas, Veracruz and Oaxaca. They also pack and send the green coffee beans to the
destination where they are roasted. ECC exports different coffees under 14 brands. This company is a
part of Neumann Kaffe Gruppe, a German group which is also the world's largest coffee trading group
that includes 15 coffee exporting companies from different parts of the world.
6.3 Unique selling attributes or competitive advantages of each
Peruvian companies have considerably improved the quality of their coffee in order to gain new markets
and they have been very successful those last years, especially with German importers. Just like Mexico,
Peru offers special climatic and geographic conditions which affect the quality of the coffee.
Microclimates and height of the coffee plantations in Peru contribute to obtain a coffee of good quality.
Another interesting point is the price of Peruvian organic coffee: it is currently the cheapest certified
organic coffee on the market.
ECC is an essential company in the market we aim to enter as they hold a 20% market share of the
Mexican coffee exporting business. They have a strong reputation and they are a part of a powerful
German coffee trading group, which is an advantage to enter a German market. In addition, ECC
propose two different organic coffees: Onix and Berilo, which is a superior quality organic coffee and
one of the best of organic coffees produced in Chiapas. In this way, they can have two different target
consumers and increase their chances of success in the market of organic coffee.
6.4 Existing sources of production and channels of distribution in the destination
market
Germany does not cultivate organic coffee itself: unfortunately, the climatic and conditions are not
suitable to implement coffee plantations in this country. However, Germany is the largest green coffee
importer in Europe and it is also the largest green coffee re-exporter: 31% of the volume imported is
directly re-exported to Europe and USA, mainly in Poland. As Germany has an important domestic
roasting industry, it is the biggest exporter of roasted coffee in Europe.
12
The main distributors of coffee in Germany are Tchibo (Maxingvest), Jacobs, Eduscho, and Idee Kaffee.
Those companies own coffee shops and provide coffee in large quantities to the supermarkets (mass
distribution).
7 Decisions
Specific product standards for exporting to EU are stated on http://exporthelp.europa.eu/. The most
important information is quoted from internet site exporthelp in respect to product code 09011100
(coffee not roasted):
Food containing a contaminant to an amount unacceptable from the public health viewpoint
and in particular at a toxicological level, shall not be placed on the EU market and will be
rejected
Contaminant levels shall be kept as low as can reasonably be achieved following recommended
good working practices
Maximum levels may be set for certain contaminants in order to protect public health
Compliance or equivalence: Imported food must comply with the relevant requirements of food
law or conditions recognized by the EU to be at least equivalent thereto.
Traceability: The Regulation defines traceability as the ability to trace and follow food and
ingredients through all stages of production, processing and distribution.
Responsibilities of food importers: Food business operators at all stages of production,
processing and distribution within the businesses under their control shall ensure that foods
satisfy the requirements of food law which are relevant to their activities and shall verify that
such requirements are met.
7.1 General rules on food labeling
Labels of foodstuffs must contain the following particulars:
The name under which the product is sold. No trademark, brand name or fancy name may
substitute the generic name but rather may be used in addition. Particulars as to the physical
condition of the foodstuff or the specific treatment it has undergone (powdered, freeze-dried,
deep-frozen, concentrated, smoked, irradiated or treated with ionizing radiation) must be
included where omission of such may confuse the purchaser.
6) Junta Nacional del Café (JNC) Perú: http://www.juntadelcafe.org.pe/?
r=pro_exp&ctg=pye&idn=0
7) Exportadora de Café California: http://www.eccmexico.com
8) Coffee in Germany , CBI Ministry of Foreign Affairs of Netherlands: www.cbi.eu
9) European Coffee Federation. (2002). European Contract for Coffee. Retrieved April 28, 2012, from http://www.ecf-coffee.org/images/stories/temporary/ECC%202002.pdf
10) European Union. (2008, September 19). The International Coffee Agreement 2007. Retrieved April 30, 2012, from http://europa.eu/legislation_summaries/external_trade/cx0002_en.htm
11) Fair trade international. (2012). Selling fair trade. Retrieved April 28, 2012, from http://www.fairtrade.net/selling_fairtrade.html#c4498
12) FedEx. (n.d.). Mexico Country Profile. Retrieved April 28, 2012, from http://www.fedex.com/us/international/irc/profiles/irc_mx_profile.html
13) GDV. (2012). Transport Information Service Coffee. Retrieved April 28, 2012, from http://www.tis-gdv.de/tis_e/ware/genuss/kaffee/kaffee.htm#verpackung
14) International Trade Centre. (2012). Coffee Guide. Retrieved April 28, 2012, from http://www.intracen.org/coffee-guide/world-coffee-trade/
15) Wiki Answers. (2012). Advantages of letter of credit. Retrieved April 30, 2012, from http://wiki.answers.com/Q/Advantages_of_letter_of_credit
The Shipment will be ready in the next 30 to 60 days.
EXPLANATION OF CHARGES
1FREIGHT: Refers to the port to port charges or rail ramp to port charges from origin city in the USA to destination excluding any pickup or drayage charges and delivery from destination port. The rental of container is included.
2BUNKER ADJUSTMENT FACTOR: Refers to a fuel adjustment. Bunker is the maritime terminology for fuel and is prone to fluctuation due to market conditions.
iv
3 WARFAGE: Refers to a USA port charge per metric ton i.e. every 2200 pounds.
4
BILL OF LADING: Refers to the maritime documents emitted by our firm so you can collect your cargo at destination. It is the ticket and proof of export. We emit express release bills of lading so you can collect them as originals at destination. Original Bill of Lading can be requested. Bill of Ladings are only sent after 10 days from departure from USA port when requested in original form, otherwise they are express release and are available at destination port when cargo is ready for customs.
5GRI CHARGES: General Rate Increase.Due to market conditions. All rates are confirmed in writing prior to cargo acceptance or payment thereof.
6
DRAYAGE FROM TERMINAL TO YOUR DOOR: Refers to taking the container to the loading address and back to the rail road ramp or the port where it will then load on the ship. LIVE LOAD 2hrs free with $100 per additional hour thereafter. Drop and pick charges are double drayage and will allow you to have the container for a maximum of 4 days. The loading area can be our warehouse located 1-10 miles from the port in case you need a warehouse to receive cargo you have purchased but 90% of the time cargo is loaded by shipper (YOU or YOUR SUPPLIER) at origin address. The container is on a chassis 4 to 4.5 feet off the ground depending on the chassis. No packing boxes are provided or any ramp access to the container. We can provide assistance for loading at an extra cost to you but we suggest http://www.uline.com for packing supplies and for manpower http://www.labourready.com
7 FUEL SURCHARGE: This is a percentage of the Drayage and varies from city to city.
8
LOADING CAR: We can receive and load vehicles for you at our many stations in the USA. You are not permitted to work inside our stations. We brace and strap down the vehicles so they can not move. We only load 2 vehicles per 40 foot container and 1 vehicle per 20 ft container as per our agreements with the Rail Road and Steam Ships. If you can fit 3 vehicles inside a container all wheels must be touching the floor of the container. We do not consolidate vehicles in containers. This means that your car will not share a container with another owner of another car. Your car will go in your container and not in a shared container.
9
CUSTOMS CLEARANCE FOR CAR EXPORT: We must clear the titles of each vehiclethrough US Customs minimum 3 days prior to loading on the ship. You must follow the guidelines on this link http://www.shipping-worldwide.com/vehicle-shipping-procedures.html and provide us an original Export Power of Attorney so we can act on your behalf when we present your original documents to US Customs at the Port of Loading.
10
INSURANCE : ALL RISK VERSUS CLAUSE C TYPE COVERAGE : Insurance provided for Industrial Cargo is quoted at ALL RISK. Insurance quote provided for CARS or HOUSEHOLD GOODS AND PERSONAL EFFECTS is quoted under CLAUSE C ONLY. Clause C coverage is en force, unless it is professionally packed. Clause C covers total loss at sea port to port. ALL RISK Insurance Coverage for Cars or Household Goods and Personal Effects is en force loss or damage and invoiced separately once we have proof of professional packing. Cars that are loaded by APX can be insured ALL RISK. All-Risk subject to 3% (minimum $250.00) is deductible. Itemized valued inventory and professional packing are required ... Watercraft/Yachts, New & Used (Not more than 3 model years old), Not Exceeding USD 50,000 in Value or in Excess of 30 Feet in Length. All-Risk is subject to a 3% (minimum $250 deductible). If you need FULL ALL RISK you must follow the insurance guidelines for professional packing.Insurance conditions are located at http://www.shipping-worldwide.com/insurance.htm .