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INTERNATIONAL FOOD MARKETS

Economics of international food trade Trade policy International brand building Product adaptation State and Federal trade support. INTERNATIONAL FOOD MARKETS. Types of Food Exports. Providing what cannot efficiently be grown in import market High value/value added Low value

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INTERNATIONAL FOOD MARKETS

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  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 • Stop-gap measure to compensate for reduced local harvest • Providing diversity in food supply • Niche products • Country reputation

  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. 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%

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

  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. 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

  8. Approaches to Protectionism • Tariffs • Quotas • “Voluntary” export restrictions • Subsidies to domestic producers/exporters • Non-tariff barriers • legal obstacles • differential treatment

  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. Food Tastes • Often “learned” early in life • Preferred foods often tied toward availability and local conditions • Ties to occasions • Impact of religion

  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. Culture and Food Expectations • Attractiveness of prepared foods • Occasions for eating out • Rituals • Tolerance for individual differences in taste

  13. 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

  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. 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. 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

  17. Favorites that Became Other Countries’ Treats • Sushi • Chinese food • French food • Italian food • Indian food

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

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

  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

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