Export Food Small Business Start-up

This is why, in addition to my general small business international trade start-up courses I teach a a specific class on food export.  The information offered everywhere except from me is not only bad, it is downright harmful.  The harm in these articles is people contemplating export expansion say "If that is what it takes, then I cannot do it." Well, what is described in the article is not what it takes. What is described in the article is a whole lotta waste.  The way it is done worldwide is not at all like this article describes.

Someone has to present what really happens in small business international trade.

This article is an example, and start out with a claim that is rather wrong.

While food giants such as P&G, Nestle and Unilever have long operated with a global footprint, it’s only recently that small- to mid-sized companies have been able to effectively tackle these markets.

Small businesses have been exporting food from the United States all along, nothing has changed in recent years, the tools tactics and attitude necessary have been there all along.  Yet the story will tell us about a "pioneer" in this field.

One of those food retail pioneers is Kontos Foods, a mid-sized New Jersey-based manufacturer and distributor of traditional artisan breads and Mediterranean specialty foods. A little over three years ago Kontos began a vigorous overseas expansion program, and now ships its products globally, to a wide range of locations, including Singapore, Indonesia, the Caribbean, Panama, Bahrain, Saudi Arabia, and Dubai.

I've never heard of Kontos Foods, and I am sure they are a fine company.  But what bothers me with these perennial articles telling us about "pioneers" is they never mention cost/benefit...  I can get sales into all of those countries pretty quick too...  at a cost.  The trick is to have sales and maintain a profit, at least as good as what you would have if you expanded domestically.  If Kontos is New Jersey based, then export orders ought to be no more difficult (or costly to acquire) and every bit as profitable as a domestic sale.  And alongside testing the overseas market, one would be obliged to test expanding domestically to compare with the overseas opportunities.

Now, recall the opening false claim that biggies like Nestle and Unilever were the only possible players before.  And who is making this claim?

Before Kontos, I worked at Unilever and my colleague, Kontos Foods’ Global Sales Director Doug Werts, is formerly of Nestle. Combined, we’ve lived and worked in different markets around the world, including the Netherlands, Brazil, and the U.K.
At Unilever, for instance, I spent significant time and resources building market share in Europe and South America. Those experiences, along with our current Kontos research about consumer shopping habits, provided us with the deep consumer insight we needed to target the right products and packaging to shoppers.

So to help a small or mid-sized company break into export markets, the process is the same as for Unilever and Nestle?  This is an internal contradiction: "nothing has changed, things are now different."

Now notice the valentine-to-self slipped in there, "my experience and my time spent on the Kontos dime travelling gives ME deep consumer insights."  Bull$#!+.  Since valid and reliable market information costs tens of millions, any other "experience or insight" is mere anecdote, and the plural of anecdote is not science.  There is a way to test market with spending tens of millions, and getting solid results.  It is search and learn, a process where you discover customers not otherwise discoverable.  But the tool tactic and attitude is utterly contrary to all of the elements this article proffers.  In short:

1. The tool - LCL MOQ FOB ...  if you have specialty, overseas buyers are looking to test this in their market.  They want and need that smallest order rational, not the largest order possible.  They want a pallet load to test, not a 40' container. It is FOB because you will be prepaid before anything rolls out of your warehouse destined for overseas.

2. The tactic:  Your export offer is one-size fits the entire world.  You ship overseas what you ship domestically. All "localization" for the export market is up to the importer overseas.  No good deed goes unpunished, so you never help your buyer by doing localization.  Recall we are talking a one pallet load shipment, and as a tst possibly several of these in sequence.  Why would you foot the cost of "localization" for a test order, in which most test will come up nil?  Don' worry, your importer overseas knows how to localize on the spot if necessary.  I am also an importer, and have had to "localize' many shipments on the spot in which customs has found fault.  it's a small shipment, no sweat.

3.  The attitude:  I came here to sell, why are you here?  At the trade shows, every buyer ought to place an order for your LCL MOQ FOB.  If not, why not?  If the person you are speaking to is not a buyer, end the conversation and move on to a buyer.  If the buyer says no to your one-size-fits-all worldwide offer, then find out why not.  Start a matrix of objections to see if any changes wold be worthwhile in your offer.  This is science, something sorely lacking among those who go to trade shows happy to settle for "trade leads."

What exporting gets down to is a test of the product by the importer overseas to whom you sell.  This article has a lot of moving parts, but bottom line is you find an importer overseas who wants to test your product.  On the one hand all of the rigamarole laid out in this article nets no advantage, and on the other hand you can achieve the same results with none of the rigamarole.

Then on this this:

The problem, however, is that overseas research isn’t cheap: Attending one trade show could cost upwards of $15,000-$20,000. There are nonprofit and government programs to help assist with companies as a means of trying to boost overseas trade. We found FoodExport NorthEast, a non-profit organization that supports international commerce. The organization is designed to help American food and beverage manufacturers attendforeign trade shows, connect with potential customers and learn about consumer trends.

Sigh. It could cost that much, but you can achieve the same results at a fraction of the cost.  Here is the funny thing, it could cost that much if you take the help those orgs offer, because their help is in the form of rebating half your costs if you do things their way, which "could cost upwards of $15 -20K..."

OK, so you spend $15,000 on a trade show and get $7500 back.  And their way is not the optimal way.  And I can do an optimal version the same thing all in for about $5000.   Now what kind of leverage is it when you net net you spent too much to do largely the wrong thing?

With the assistance of FoodExport, we started hitting the global trade-show circuit. They provide exploratory tours to help retailers discover whether a particular market is right for them. These tours offer crucial learning time, where retailers, manufacturers and distributors can quickly learn which regions are worth pursuing. When you’re on one of these tours, I recommend maximizing every minute of your research gathering.
For instance, while in Shanghai for a trade show tour, I learned that people in Northern China prefer bread much more so than their southern countrymen. This helped steer Kontos’ sales efforts to the correct part of the country, saving time and money.  

Any any Chinese food importer would already know this.  Why not just find a competent Chinese importer and have them test your product and provide feedback?  If and when something developes, then you might go visit China.  All this travel and time is expensive.

The international export business is on an upward trajectory. If you plan to join in on an overseas expansion program, gather an experienced team, do your homework and get your passport ready. People are now enjoying Kontos flatbread in Bahrain, Singapore, South Korea, Saudi Arabia and Dubai. Who would have dreamed that three years ago?

As I started out this post asking, where is the cost benefit, I am pretty sure Kontos has gone well into the hole getting those export orders.  The question is when, if ever, it will proven to have been profitable.  For overseas expansion, you need no more talent than a good Freight Forwarder and a solid importer, who may be discovered without ever leaving your office.

Because these articles claiming "small businesses can export just like Nestle now" have been coming out the last 40 years, I offer a corrective course.  No nonsense, the tool, tactic and attitude to find export business no more difficult and every bit as profitable, from the first sale and onward.  You may read about the course here, and enroll now and pay later at the same site.

Tuesday 1/24 - 2/14/2017   Four Sessions

Section One ~ 6 PM to 7 PM Pacific Time

(This would be 7 PM to 8 PM Mountain, 8 PM to 9 PM Central, 9 PM to 10 PM Eastern)

This work can be done either as a proprietor producing food, or an agent representing a food producer.

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Start At The Top

In my book I address the specialized work in international trade of acting as an agent, giving the example of a friend who put together a deal between a Mexican manufacturer of a specialized device and a Japanese hospital group.  I point out this is in essence semi-retired work for people who have established themselves in business and are trusted by all the players to put the deal together.

Regardless of role in international trade, there are two things that are fundamental: relationships and taking no risk.  Since here is no recourse in international trade if and when things go wrong, everyone relies on the other party to do the right thing when things go wrong.  Insurance might help, but the bottom line is relationship.

The "taking no risk" is not a matter of somehow pawning risk off on a third party, it is a matter of pay as you go and at no step would failure be catastrophic.  For the semi-retired player, he knows what he is doing and manages the risk with experience and wisdom.

Long before there was ever an internet, there were trade leads and trade lead brokers.  They were to be ignored then as now, for they are people with no product talking to people with no customers. The best customers and suppliers with whom the start-up needs to work cannot be found there.  Alibaba is the most successful and worst. My analogy is Alibaba is a firehouse of waste water when you just need a sip of clean water. Great place to waste time and lose money.

To my regret, in my book I mention a clever tactic one of these semi-retired experts employed, and that is occasionally looking at old trade leads, and I explain why this was clever (although in the context, it should be clear it is inadvisable.)  Lord help me, occasionally someone will seize on that secondary tactic in an unlikely scenario and bet their life on it.

It is occurring to me way back then and to this day, those who want to work the "trade-lead" fantasy essentially want to start at the top.  You know, find a lead, a supplier, bring the two together, $100,000 deal, letter of credit to eliminate risk, make $5000 commission, next... sounds great but it cannot happen, will not happen in the real world.  It's all fantasy.  You know, someone has a great script, you get it in front of Spielberg, he contacts De Niro, they put a movie together, you make a $100,000 grand commission, you have passion for the deal, what could be more natural?  It ain't gonna happen.

(Some day I will catalog all the ways the delusion can go wrong.  Well, some week, since the problems are legion.)

Now as one of the participants this special session proceeds, I can see clearly the juxtaposition.  Continuing with the movie analogy, there are plenty of people today who contact Spielberg with a script, who then contacts De Niro, they put together a movie and the guy with script gets $100,000, etc.  That guy started at the bottom 30 years ago.  He was a messenger boy in a mailroom.  He worked his way up.  it wasn't the passion for the deal, the deal is easy, it was his passion for producing quality results within that medium, knowing everything there is to know.  All parties know and trust him.

Still with the analogy, what I teach in this export food class is how to start the only place you can start, in the mailroom as a messenger boy.  You take news you found and bring it to a seller, and then when you have permission you tell a buyer what the seller offers, again as a messenger boy.  The risk is mediated because the deal is so small, the lcl moq fob.  if the deal goes bad, expect both sides to expect you take the loss.  of course.  That is true no matter what.    But the deal is so small, and amelioration so easy, this risk is unlikely.  Frequency, not volume, is the way to growth and prosperity.

You flogging the lcl moq fob is to act as messenger boy between people who can trust you that much, to deliver a message.  if and when anyone cares about the message, then you can offer to help with the discussions, and given the likelihood more work is necessary than both parties can handle, you have created your own opportunity.  So all this work is search and learn, passing messages, finding the unseen opportunity that you create.  You grow from there.

I cannot teach anyone to be successful, or even what to trade.  i only teach people how it is done so they can save time and money getting to their own success. And how it is done is you start at the bottom and work your way up.  You cannot start at the top.  With what product is the one you love, you see how this product is a solution to that problem.

Spielbergs work is limited to pop culture and engllsh and disposable income.  With food it is non-discretionary budget, all languages and worldwide.  More opportunity there, but as always, demand is for quality content.  In food we call that specialty.

The process is easy, the customers are easy, getting the product right is the only hard part in this business.  That takes passion/joy.  Without it, your progress is unlikely.  And there is no way to start at the top.

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Export Food - Repping Supplier Approach - LCL MOQ FOB Part 2

This is part two, part one yesterday...

On Nov 27, 2016, at 11:18 AM, J L wrote:

Hi John,

Appreciate you taking out the time to provide such a detailed feedback. The "Answer matrix" is amazing and very helpful.  

• I actually liked the idea of having the LCL MOQ FOB listed on his website. It puts the supplier at ease in terms of transparency ( which you have been advocating all along ), they are still in charge of their product and will probably make them comfortable doing business with me. It's a win win situation for both parties

• I've cleaned up the concluding statements in the draft and also made the other changes you suggested. Please let me know how it looks?.

• I like "Brothers L". My brother's name is K’yo and I was also thinking of names like Kyoto or Tokyp by combining both. Though they sound more Japanese than Ghanian :). What do you think?

• By all means strip and edit this as an example if it helps.

Thanks,

J

On Nov 27, 2016, at 12:00 PM, J L wrote:

I've included "export" in the letter for specificity. Thanks!

• You're right. I checked the HTS for units and it is Kg. So then is the analysis correct?. The Specialty Snack chips, 1 packet is 5 OZ and cost ~ $5 (retail). For Mexico the average price is $4.55 per Kg!

***Right, mostly chips...  at costco chips are about that...  he might say, that's too cheap, you reply..

a. that includes the cheapest mass produced chips too, it's the average, so skews very low give the mass amount of bad chops going in...  

b.  the bigger the mass market, the bigger the specialty market too...  

It's the trends that tell... ***

From point "b", should I initially be targeting Canada then in lieu of Mexico even though the average prices are lower?

JL

On Nov 27, 2016, at 12:09 PM, John Spiers wrote:

Hmmm... do either on either justification... just pick one narrative to start...

John

On Dec 2, 2016, at 1:03 AM, J L wrote:

Hi John,

Thanks for another fantastic session this Tuesday. I have mailed out the initial letter and wanted to be prepared just in case he calls me before our scheduled time this Tuesday. I have started a different email thread since we are on the next phase and also makes it easier.  

So the "Answer matrix" from previous email ( At the end of this email & Thanks for that! ) is an initial Introduction of myself & a proposal on how we can mutually benefit by doing business together. Assuming he's interested, he'll either start getting into specificity then and there OR will want to think about it and get back to me OR will ask me on how I want to proceed [ I'm assuming you'll say "Right Now over the phone" ?? ].  Was hoping me you can give me some guidelines on the following details which I think will be fundamental to our discussions and If there's something else you think might come up in the discussion and is important, please let me know

MOQ

Will the owner provide this?. If I have to come up with MOQ, I have absolutely no idea on what would be the ideal "smallest rational possible" quantity or how to go about finding that out.

Manufacturer Price ( ExW) / My Commission

On his website, he has prices quoted for 1 & 2 packets. Price for 8 packets have a reduction of approximately 12.2%. Going by that assumption, I came up with price for 1024 packets [ Hypothetical MOQ ]. The store I bought them from sold it for $5.50/packet 

• Now I know the reduction will stop at some point but am not sure what I can expect a reasonable price to be. As I'm writing this, I'm guessing you'll say that I should just take his price quote and get back with reliable and validated test data. 

• Should I go with 10% commission as suggested in the class?.

packets

Pricereductionmatrix.xls

JL

On Dec 2, 2016, at 6:31 AM, John Spiers wrote:

On Dec 2, 2016, at 1:03 AM, J L wrote:

Hi John,

So the "Answer matrix" from previous email ( At the end of this email & Thanks for that! ) is an initial Introduction of myself & a proposal on how we can mutually benefit by doing business together. Assuming he's interested, he'll either start getting into specificity then and there

***Yes, and you're best answer is "I don't know... and it will be fun to find out..."  (Will I have to change the packaging? Who in Mexico do you have in mind?)

A N D

No, I don't want or need an exclusive

Yes, you can say forget it... (except for the one, first LCL MOQ FOB)

Yes, you can fire me...  because I am not your employee and don't have anything at riak but some time spent doing something interesting, trying out my learning...

OR will want to think about it and get back to me

***  All I need is weights and measures of say a pallet load, what price YOU want, where I can pick it up from you, and  what would be the lead time, a month?  Then you can think about my export offer, after you see it,  is it something you want out there?  Start your thinking then, when you have something solid to look at.  If you say no, I'll be trying Bison Jerky next, but I like your product more. "***

MOQ

Will the owner provide this?. If I have to come up with MOQ, I have absolutely no idea on what would be the ideal "smallest rational possible" quantity or how to go about finding that out.

***Yes, must...  they have one already for domestic sales, but yours may be bigger, but usually no more than a pallet load.  You see on the template we need the weights and measures (H,L. W each and total) of the cartons, add the pallet height, and the price he wants to earn on the sale (ExW), and his delivery lead time, plus where he wants the goods picked up.  You might just have a rough draft template of the LCL MOQ FOB form with those blanks highlighted to email him, so if he asks how you want to proceed, you can just email him that .pdf.

Smallest rational really gets to logistics cost; if you get 100% more product for 5% more logistics cost (FF will point this out), then yes, jack up the qty to make the offer more attractive, but no, never a full container load...  two pallets is max for a test, and we are testing at this point in the export game.  There is back and forth on the LCL MOQ FOB development.  Measure twice, cut once....  remember, you are stuck with your lcl moq fob through 100 inquiries...***

Manufacturer Price ( ExW) / My Commission

On his website, he has prices quoted for 1 & 2 packets. Price for 8 packets have a reduction of approximately 12.2%. Going by that assumption, I came up with price for 1024 packets [ Hypothetical MOQ ]. The store I bought them from sold it for $5.50/packet 

• Now I know the reduction will stop at some point but am not sure what I can expect a reasonable price to be. As I'm writing this, I'm guessing you'll say that I should just take his price quote and get back with reliable and validated test data. 

****Precisement!  You are testing prices too.  The higher the better.  You get data back from your effort, for future reference, iterations.***

• Should I go with 10% commission as suggested in the class?.

Yes.

His discount is probably an example of the folly of price cutting, he has no economies of scale to offer...  it probably costs him close to your 64 box discount....

Just take his price and work with it...

And make sure you keep records of all of this activity with the potential supplier.  You add this to your rolodex of your contacts in the international trade of specialty chips.

As usualy feel free to email...

This is fun...

John

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Export Food - Repping Supplier Approach - LCL MOQ FOB Part 1

Here is the continuing of the colloquy started last week.  The names & location & product & urls are changed to protect the innocent... it’s the tools, tactic and attitude that matters...

On Nov 19, 2016, at 2:28 PM, J L wrote:

Hi John,

Thanks for sending over all the info for week1. Very insightful!.

So the product I have in mind is Specialty Snack Chips. You can read all about them here https://specialty*chips.com/ but in brief these are Gluten free, Non GMO chips containing only limited ingredients. I have tried them out and they are good. But I guess that does not matter :). This idea came from a restaurant owner in city state and he currently sells it to speciality shops in the area and through his website. I am originally from Ghana and have never heard of or had Specialty Snack (South Ghanian cuisine) chips before. 

I went through the steps outlined by you to find the HTS number but I don't think I have one for something like this. This is what I got 

• HTS 2005.20.0020  ( These are Potato Chips ) and the data came up with nothing which is very odd. Either I'm doing something wrong or data is incorrect

• HTS 2005.90.0000  ( These are Chips made from other vegetables) and the data came up with nothing

• HTS 2005.99.6550  ( These are Other Vegi Preparations ). I do get data for this which I have attached but don't think I have the correct 10 digit HTS number for this product. Any suggestions on how I should go about finding the correct HTS?   

Regarding the above product, I guess here are my questions

• I guess after the data has been analyzed and once confirmed that there is an opportunity, the next step will be contacting the supplier just like in your sample letter. I don't have a registered company. Does that matter?

• Now I'm assuming the production capacity will be on the lower side for these chips. From an agent perspective and with the process outlined by you, is our supplier generally this small?

• Please let me know your thoughts on this idea

For me I love the breads (Dave's and Eureka) and chips that are produced in USA. I haven't travelled the world that much but love these products and think there is scope. I'll probably do some analysis on Eureka bread too after this :) but they are pretty big and I suspect might not need someone like me to export. What do you think?

And finally thanks for the blog today morning. Very timely. I'm a (job & location) and have a bunch of friends proposing a startup and leaving our jobs to concentrate on it after we get funding :)    

Thanks,

J

On Nov 19, 2016, at 10:07 PM, John Spiers wrote:

Of course you don’t need funding, you need customers.  Until you find customers, you cannot know what funding, if any, you need.  It is rare for a start-up to require any more funding than what is lying around.

On Nov 19, 2016, at 2:28 PM, J L wrote:

Hi John,

Thanks for sending over all the info for week1. Very insightful!.

"Specialty Snack is a kind of pancake made from a fermented batter. Its main ingredients are (ingredients)." well, then they are a rice product, not potato.... nor veggie...

from http://rulings.cbp.gov/index.asp?sjeudjksed=Specialty Snack&vw=detail

"

The applicable subheading for this Specialty Snack will be 1905.90.9090, HTSUS, which provides for bread, pastry, cakes, biscuits and other bakers' wares, whether or not containing cocoa…other…other…other. The duty rate will be 4.5 percent ad valorem.

"

In export, the Sch B number seems to be....

1905.90.9090

But when I go to the report, it said "communion wafers...."

so I dropped back to 1905.90.9030  "..savory chips..."

and here is what I found...

John

On Nov 20, 2016, at 10:18 AM, J L wrote:

Thank you!. I started all wrong by doing a search for chips.

J

On Nov 20, 2016, at 10:29 AM, John Spiers wrote:

I searched Specialty Snack and was surprised there was actually that customs letter on the item...

So now try to do the USITC Trade Data analysis...

John

On Nov 22, 2016, at 1:03 AM, J L wrote:

• So the exports to Canada far exceed any other country, though the amount exported has been decreasing gradually since 2012. Also the Average selling price is less than the world average selling price

• Exports to Australia and Mexico have been increasing since 2012, with the Average selling price is higher in Mexico.

• Philippines exports have somewhat remained constant but have the highest selling price among the top 6

• Exports to Japan and Korea have gone down and they also  have selling price cheaper than world average selling price.

Based on the above analysis, the best target country appear to be Mexico

.[ Analysis attached ]

Thanks,

J

On Nov 22, 2016, at 1:18 AM, John Spiers wrote:

On Nov 22, 2016, at 1:03 AM, J L wrote:

• So the exports to Canada far exceed any other country, though the amount exported has been decreasing gradually since 2012. Also the Average selling price is less than the world average selling price

**Cheap mass production chips, but that means here is market for high end too...***

• Exports to Australia and Mexico have been increasing since 2012, with the Average selling price is higher in Mexico.

• Philippines exports have somewhat remained constant but have the highest selling price among the top 6

• Exports to Japan and Korea have gone down and they also  have selling price cheaper than world average selling price.

Based on the above analysis, the best target country appear to be Mexico.[ Analysis attached ]

*** Very good...  now to create the offer, the LCL MOQ FOB...  you'll need to approach the supplier for  that, let's discuss that...

John

On Nov 25, 2016, at 11:14 PM, J L wrote:

Hi John,

So the owner has closed down his restaurant until further notice but his voicemail says that he still does Specialty Snack chips and points to his website which only has an email address. I guess I’m left with only 2 options now, go meet him personally or email ( which I know you strongly recommend not doing ). Would it not be worth trying to email hom with the details and then calling in a few days?. What do you suggest? 

Thanks,

J

On Nov 26, 2016, at 1:10 AM, John Spiers wrote:

Find a mailing address for him...  google, google...  real estate agent for location would know... 

The second you say “call me” you give u conrrol of the process.  Syat in charge of this business deal.

Find the mailing address and a phone number and then when you've drafted the letter, let me look at it...

JOhn

On Nov 26, 2016, at 6:46 PM, J L wrote:

Hi John,

Appreciate all the advise and help you're offering!. Done. I googled his home mailing address and have attached the initial draft of the letter. For the Company name, I have also included my brothers name as I'd like him to join me if/when this turns into something. I concluded the letter with the alternative of he contacting me as I do not have his direct phone contact.  Please review and let me know.

Thanks,

J

On Nov 26, 2016, at 6:50 PM, John Spiers wrote:

the letter comes thru garbled on a mac...

Why not just call the company L ?

(What's it mean?)

John

On Nov 26, 2016, at 7:02 PM, John Spiers wrote:

On Nov 26, 2016, at 6:46 PM, J L wrote:

 initial draft of the letter.

If you can send it as a .pdf, great...

On Nov 26, 2016, at 7:39 PM, J L wrote:

Attached is the pdf format.  

The name L does keeps it short. So just L?. No Company or Corp or Inc after it? or maybe the old fashioned way L & Sons. 

Are you asking what does L mean ?? ?    I actually don't know. I'll have to ask my parents

On Nov 26, 2016, at 7:56 PM, John Spiers wrote:

Here are some notes...  do you have your name spelling in (ancient script)?  And the suppliers usually has a capital D.

Problems in the letter:

do we know "savory"?

I think price per kilo, but includes plain old potato chips...

Initially we'll discover what market there is in Mexico, and then whether we can work together building this new market,and after that...

 best to find his phone number,. what was the phone number of the restaurant?  do cached webpages say?  Even if dead, name a phone number...

John

On Nov 26, 2016, at 9:56 PM, J L wrote:

Thanks John. I've updated the draft with your recommendations.

• "Do we know savory?". The chip is not sweet and is crunchy with little salt added. The HTS number 1905.90.9030 is for "Corn chips and similar crisp savory snack foods". I'd say these are similar to corn chips 

• I found suppiers landline number and have listed both landline / restaurant numbers in the letter. John, I'm hoping he won't mind me contacting him at Home address & number. On specialty*chips.com, he's clearly mentioned the email address as contact info and that's the reason I'm being a little skeptical.

• You're right. I checked the HTS for units and it is Kg. So then is the analysis correct?. The Specialty Snack chips, 1 packet is 5 OZ and cost ~ $5 (retail). For Mexico the average price is $4.55 per Kg!

• So my first name means "whatever" :) and here's the first and last name in Anciet Script.

On Nov 27, 2016, at 3:50 AM, John Spiers wrote:

On Nov 26, 2016, at 9:56 PM, J L wrote:

Thanks John. I've updated the draft with your recommendations.

• "Do we know savory?". The chip is not sweet and is crunchy with little salt added. The HTS number 1905.90.9030 is for "Corn chips and similar crisp savory snack foods". I'd say these are similar to corn chips 

***Good...  gotta be careful when using words and representing data, you have...***

• I found his landline number and have listed both landline / restaurant numbers in the letter. John, I'm hoping he won't mind me contacting his at Home address & number. On specilty*chips.com, he's clearly mentioned the email address as contact info and that's the reason I'm being a little skeptical.

*** He very well may freak out, but I doubt it. He already put himself waaaay out there opening a retail biz...  as to the phone number,  it's tactical...

1. He pre-empts you, calls you with a 

a,.  I'm interested

b. get lost...

With a, you proceed, humbly, with him in charge...  with b, you find a new source for Specialty Snack chips...

2. The phone number is dead, THEN you email saying, "I wrote, I called, and now I email....

You are driving at a contact, and rather obliging him to answer yes/no...***

***

• You're right. I checked the HTS for units and it is Kg. So then is the analysis correct?. The Specialty Snack chips, 1 packet is 5 OZ and cost ~ $5 (retail). For Mexico the average price is $4.55 per Kg!

***Right, mostly chips...  at costco chips are about that...  he might say, that's too cheap, you reply..

a. that includes the cheapest mass produced chips too, it's the average, so skews very low give the mass amount of bad chips going in...  

b.  the bigger the mass market, the bigger the specialty market too...  

It's the trends that tell... ***

• So my first name means "whatever" :) and here's the first and last name in ancient text.

*** Maybe your parents will answer first, but let's see what my sources say...

There are brand names like Ernest and Julio Gallo, and of course just a last name, Nordstrom.  People read it first, then sound it out, and then maybe wonder what it means...   You can always change it, maybe ask a dozen random people at a starbucks...  I am starting a food biz selling Specialty Snack chips, what do you think of these two names (L and then brothers L and J & ?  L...    Indeed Brothers L J might be interesting...

*** As to the letter, make it Dear Mr. d’Daddy  be formal...

clean this up...

 what market there is in Mexico and then whether we can work together building this new market and after that can negotiate if we are the team to represent you. 

maybe : what market there is in Mexico and then discuss (negotiate is too hard) if we are the team to help build market for Specialty Snack chips in Mexico.  

I see now the two phone numbers,  do just the restaurant one, avoid the home one if possible...  

So now it is attitude - he'll want to know about you...

Answer matrix:

I am nobody, (Fedex driver?) hate it and love your chips... (what's your "conversion story"? keep this real short...)

I am Ghanian, but did not know about Specialty Snack of Specialty Snack chips...  (south v north) it's Ghanian, clearly, but new to me...

"I'm hungry for change, you might be hungry for more customers, let's find people hungry for your chips, and then see if there is work for me too..."

Took some training on how to break into new markets, but no accomplishments yet, so no demands on my part: if I find customers, please sell to them, but if you don't want to work with me, OK, I'll find another product I love....  it really is not hard to find out if the customers are there...

(Also, who knows, "you may want to take mexico, and let me have France...  way too early to decide anything because we know nothing...")

So once this letter goes out, you shift to attitude with the supplier...  "you get free market info, I get a chance to maybe start my export food biz with you...***

Indeed, to use his very nice website to add the lcl moq fob would be ideal...

anyway, good to see this proceeding...  your views?

JOhn

(Part Two Tomorrow)

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LCL MOQ FOB Partial Colloquy

On Dec 2, 2016, at 1:03 AM, LL wrote:

Hi John,

Thanks for another fantastic session this Tuesday. I have mailed out the initial letter and wanted to be prepared just incase she calls me before our scheduled time this Tuesday. I have started a different email thread since we are on the next phase and also makes it easier.  

So the "Answer matrix" from previous email ( At the end of this email & Thanks for that! ) is an initial Introduction of myself & a proposal on how we can mutually benefit by doing business together. Assuming she's interested, she'll either start getting into specificity then and there

***Yes, and you're best answer is "I don't know... and it will be find to find out..."  (Will I have to change the packaging?Who in Mexico do you have in mond?)

A N D

No, I don't want or need and exclusive

Yes, you can say forget it... (except for the one, first LCL MOQ FOB)

Yes, you can fire me...  because I am not your employee and don't have anything but some time spent doing something interesting, trying out my learning, at risk...

OR will want to think about it and get back to me

***  All I need is weights and measures of say a pallet load, what price YOU want, where I can pick it up from you, and  what would be the lead time, a month?  Then you can think about my export offer, after you see it,  is it something you want out there?  Start your thinking then, when you have something solid to look at.  If you say no, I'll be trying Bison Jerky next, but I like your product more. "***

OR will ask me on how I want to proceed [ I'm assuming you'll say "Right Now over the phone" 🙂 ].  Was hoping me you can give me some guidelines on the following details which I think will be fundamental to our discussions and If there's something else you think might come up in the discussion and is important, please let me know

MOQ

Will the owner provide this?. If I have to come up with MOQ, I have absolutely no idea on what would be the ideal "smallest rational possible" quantity or how to go about finding that out.

***Yes, must...  they have one already for domestic sales, but yours may be bigger, but usually no more than a pallet load.  You see on the template we need the weights and measures (H,L. W each and total) of the cartons, add the pallet height, and the price she wants to ear on the sale (ExW), and her delivery lead time, plus where she wants the goods picked up.  You might just have a rough draft template of the LCL MOQ FOB form with those blanks highlighted to email her, so if she asks how you want to proceed, you can just email her that .pdf.

Smallest rational really gets to logistics cost; if you get 100% more product for 5% more logistics cost (FF will point this out), then yes, jack up the qty to make the offer more attractive, but no, never a full container load...  two pallets is max for a test, and we are testing at this point in the export game.  There is back and forth on the LCL MOQ FOB development.  Measure twice, cut once....  remember it, you are stuck with it through 100 inquiries...***

More to follow...

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Start-up Requires No Funding

Funding a start-up is risky, and as Drucker noted, entrepreneurs never take risks.

The risky part is not for those who assign a bit of ex nihilo credit tally to a given start-up, but to those who sign the slave papers in return for the granting of ex nihilo credit.  Now that is risky. You might end up like a college graduate today, huge debt and unemployed. No need to do that when starting up, for a proper start-up takes no money or credit to speak of.

The banks promote the idea of "risk taking" by entrepreneurs as a means to unload the unlimited ex nihilo credit, the granting of which is no risk to them.

We have at least one generation that has been trained to lose:

get enough funding to live off of for a year or two, and blow through it... who cares if anything succeeds, cuz you get to play "business" for a year or two...  and who knows, great resumes have serial start-up experience.  Those days are over, but the idea is embedded in a generation core curriculum at the universities.  (And as Drucker said you can tell when information is obsolete, the universities make it core curriculum.)

If you are serious about start-up, you must have a business plan that moves forward without funding.  If you are saying "I just need funding" then you are deluding yourself.  If you are saying "I just need customers" you are at least assessing the problem correctly.

Start-up is about creating customers and innovating in the redeployment of excess capacity (or lessor demand capacity) to the end of solutions to problems. (And as Drucker says, there is no solution that cannot be imporoved upon.)

It takes no money to conceive of the solution.

You must speak to the customer at some point, why not first?  It takes no money to do so.  And you walk away from this phase with ideas and contacts, with which you begin to fill your rolodex and files.  And this is critical, to begin to build your "world trade organization" that is the people you've met, with whom your synergies will produce more than otherwise possible.

It takes no money to talk to your customers.

You have no credibility as a start up, so you borrow authority from target customers... talk to them first...  do they say yours is a good idea and does not otherwise exist?

Then you begin to work on the design, which the best is on a royalty basis. Again, done right, no money up front. And as to design, you work only to achieve "enough design" to generate enough orders to cover the suppliers minimum order requirement. Repeat this mantra: customer is the most important thing in business, getting the design right is the hardest.  But even with this in mind, people fail by working way too hard on the design.  Learn from Steve Jobs.

https://en.wikipedia.org/wiki/Apple_I

You learn quickly that in the real world "intellectual property rights" thinking is counterproductive.  Forget about patents, copyrights, trade marks, you get nothing you can use for your time and money. You leave all that behind. With necessary and sufficient product design you expand your world trade association. You begin to discover those whose expertise is in your area, and gather their advice: freight forwarders, customshouse brokers, 3PL, and with it the realities of logistics and costs of your product.  You do not waste time and money becoming expert in international trade, you become expert merely in the international trade of only your items.

It takes no money to gather to get this far.

Please note what "snowballs" here is your solution with customer feedback packed around it. It is what is rolling and why all the other people you contact stick to it getting bigger and ever more momentum (and value).  Each door is opened because of the work getting the previous door opened.  You have not made any money yet, but you haven't spent any either.

Now, you propose importing or exporting (or both?)  Neither importing nor exporting is a business. They are steps in business.   In essence, authentic international trade is simply accessing optimal excess production capacity to the end of production.  Business is buying and selling, not making.  The world is full of production that created no demand.  We do not want to join the 80% of start-ups that fail.

Customers (there is that word again) call forth the product.  We are the impresarios who gather the players necessary to respond to that call.  Yes, we suggested the solution, but the customers power the rationale for all the players you collect to act.  (And I might add, dealing with very talented people each in his own narrow field is a privilege and often breathtaking.  It is also tempering, you just know not to waste these peoples time, you know you must do your best work. Re: best work, see below.)

With importing, you are moving from general (the domestic market) to specific, the best supplier in the world.  In exporting, you are moving from specific to general, the best supplier in the world, to any buyer worldwide. With either, you are discovering markets no one else considered, directions informed with data no one else has created and studied.

This costs you nothing, and you cannot buy it anywhere, it is not for sale.  It is free.

For specialty, the best source is rarely, if ever, the cheapest.  Usually it is more expensive.  We are not achieving perfection in initial product design, any more than Apple's first product was perfect.  We are achieving milestone #3, enough orders to cover the supplier's minimum order requirement, in a workable amount of time, profitably.  Again, learn from Steve Jobs.

https://en.wikipedia.org/wiki/Apple_I

Then you find the best sources for production, and discuss what you've done so far. And now this is where you do your best work, as paranthesied above: you promise nothing except to test this very well informed (by now) idea, by presenting the sample of what you created in the form of products, agricultural items, services, you name it, back to the customers you first encountered in your start-up.

What you are offering is new market study at no cost to the supplier.  Your compensation comes only from customers you create.  Everyone involved gets something for nothing, and you get paid by customers (your markup on all the discovered costs) if you get the design right.  Never promise anything more than to report back on a test.  No one needs anything more, expects anything more, nor would believe you if you promised anything more.

You form a hypothesis and shift from passion/joy to science. You seek out valid and reliable information about the market, you search and learn the contours of a market no one else yet sees.

You may of may not pay for samples, but otherwise it does not cost you money to pay your dues. The less money you spend and the more time you research, the better off your start up. As the carpenters say, measure twice cut once.

Now, here is where people those with funding fail:  since they did not start with the customer, they promise the supplier much in the way of flash and imagery but no customers (or worse, assumed customers).  The wrong suppliers respond to that (or just plain scammers.)  Just as these people begin "selling", things go bad fast.  (Alibaba is the world center for failure match-up.  Amazon and eBay is the medium upon which failure occurs.)

What we promise all of our associates is not a single order.  What we promise is to test against samples the most informed hypothesis of whether there is enough customers collectively to cover the supplier's minimum production run in a workable amount of time, profitably.

Sound complicated?  No, it is quite simple, and may take some unlearning to "get it." It is what the best suppliers expect.  And so far it costs nothing to speak of.

That minimum production run requirement is specifically the LCL MOQ FOB:  Less than container load, minimum order quantity, priced free on board country of origin port of lading.  That is often merely a pallet load.

 In importing we are the ones buying the lcl moq fob, in exporting, we are the ones selling the lcl moq fob.

And if we do achieve the initial goal of enough orders to cover the suppliers minimum in a workable amount of time, profitably, then we execute.  And we are talking a min order qty of one maybe one pallet, no more than say $5000 worth.  Do you really need a venture capitalist for this?  Or a banker? Or even a rich uncle?

And if we do not achieve it, then what we have in hand is market feedback, what is wrong (shape, weight, color, size, package, material, speed, flavor?) with our product.  Aren't you glad you only have samples, not a garage full?  You can go back to your world trade association you built and fix the problem.  And then go at the market again.  These is no excuse for failure, or especially burn out.

You may fantasize some business in which you are paragraphed in the Wall Street Journal.  Sure, if you want, but both Apple and Vandor started the same way.  Vandor never got above $3 million in sales (at least when I was managing it) and you've never heard of it.  The first company I was working for was at that time the same size as NIKE, tiny.  Phil Knight knew no bounds. But the owners of all had all of their material wants met by the business.  Business is about lifestyle, not accumulation, another conept the last two generations need to learn.

And start-up is not about funding. Anyone investing more than $900 or ninety hours before discovering whether they have enough orders from customers to cover the suppliers minimum order requirement in a workable amount of time, profitably is wasting time and money.  I am often pointing out where people are wasting either in their pursuits.

Now as simple as this is, there is many a slip twixt the cup and the lip.  I came of age when it was no problem to walk down a street and see a "help wanted" sign in the window of an import-export company and after two years of learning every part of the business, be travelling the world as a buyer.  Ex nihilo cedit ended all that for now, but the ex nihilo credit regime is over.  Thirty years ago I could see this de facto apprenticeship program ending, so I began to lecture at colleges and wrote a book to fill-in the gap formed when getting a job and working your way up ended.

Those were boom years, and the damage is done during the boom years.  Now it is the bust, where the losses are laid on the living (the rich take the profits, the poor take the losses) and the work of rebuilding a natural, authentic economy is at hand.

Pro sports bore me.  I spend the time most people devote to pro sports teaching, writing and lecturing.  I find it fun and fascinating.  And writing is how I get paid for time spent thinking. The rest of the time I spend working on my own business.  Lifestyle, not accumulation.

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A Tool For Seeing Clear

You need an analogy upon which you can compare and contrast your own situation, to derive some sense of it.  For me it has been the music business.  So many parts of it are absurd, and other parts stone cold truth, that it is probably the best analogy, as far as I am concerned.

On one hand, music has a total of four notes.  That is it.  From those four notes, all music proceeds.  Just as the entire computer industry is based on silica (Silicon valley), that is the kind of sand necessary for computers to exist, and probably the most common element in the universe (or is it carbon?), so what you do with sand or notes upon all depends.  In other words, design is everything.

As to compare and contrast, on one hand we have the utterly delusional, insane, evil regime of intellectual property rights, in music of all things!  How did food and clothing escape IPR but not music?  (Yes, 97% of USA corn is GMO, and under patent, but it is not food, it is poison as far as I can tell, and anyone who eats it is taken out of the gene pool early anyway as suppressed science suggests, so never mind that.)

At the same time, with those mere four notes in music, with time and melody, all music proceeds.  Everything else, which notes, harmony, timbre, key, chords, arrangement and dynamics, is all up to design.  Like computers, in music design is everything.  It can yield the best song extant ever composed, Greensleeves, or its nadir (Gud hjålp oss) Torn Between Two Lovers.

And Wynton Marsalis notes all songs are about God or love.  Such much for themes. (If not, the are novelty songs, empty.)

So with the music business is at once utterly basic and utterly nonsensical.  That can help when wondering how to handle a product that has become a fad.

I found this article full of points that cross all boundaries:

Most people start out in this game looking for that “thing,” whether it be a special insight, indicator or strategy, that will show them how to win. They think if they can just find the secrets to what make the greats great, then they will be set. But in reality, if there is any secret at all, it is that there is no secret.

Yes!  So many people look for the angle in international trade, when there is none. It is the same in any busininess, find a need and fill it.  Yet everyone else teaches "find a met need and study it" ... good luck with that. People feeling smart try to take that a step further, and try to find some names in trade data in hopes of interposing their offer.  Good luck.  And then

Mark Spitznagel wrote in "The Dao of Capital" that the most valuable lesson he learned from his Chicago trading pit mentor, Everett Klipp, was that “you’ve got to love to lose money.” If you love to take small losses then you will never take a large one. That is important because it is the large ones that will kill you.

Yes, lcl moq fob.  Entrepreneurs never take risks.  We have orders for what we buy, and we study the feedback on what we sell.  And then step forward based on science.  Countless tiny errors are data points supporting ever more better iterations of the product mix.  And then

Livermore’s occasional failure to follow this rule is what led to the multiple blowups he experienced throughout his career. He lost when he failed to follow his advice that it is “foolhardy to make a second trade, if your first trade shows you a loss. Never average losses. Let this thought be written indelibly upon your mind.”

Yes, indeed, even the teachers fail to follow their own advice, and end up obliged to cut a deal with BigLots! to get rid of a big lot of mistake.  The analogy here is change if you take a loss, and entrepreneurs take a profit on every deal, especially their very first.    Anyone who plans to take a loss "to get a foot in the door" or whatever rationale, should stop and reconsider another field.  The point is lifestyle, but losing money is not a viable lifestyle.

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How To Build Export Sales In Four Steps

Redo your spreadsheets, look for differences.   Here comes the announcement at USITC.gov:

 Aug, 2016 trade data are now posted. Our practice is to update Dataweb as soon as possible after the Census Bureau releases monthly trade data, generally within three business days.Notice: The import and export data on Dataweb for 2010-2015 have been updated as of July 2, 2016 based on the latest official revisions from the Census Bureau (the first official revisions for 2016 data will not be available until June 2017). For the years prior to 2010, Dataweb will continue to show import and export data as originally issued by the Census Bureau with no revisions.

Yes, we begin with passion and joy, and then ground our strengths in what real world trade data (commodity, prices, target markets, trends) to form a scientific hypothesis to test.  Central to proceeding in int'l trade is the rock solid trade data.  Not the pointless junk you can buy at the 4 digit HTS level, but the most specific 10 digit level, which can only be had by gathering and analyzing it yourself, by hand. And in so doing, you have information no one else has.  Knowledge is power.  Five years is enough trend info, and then there is the practical problem wrong numbers stay wrong after five years.

And you must keep up on the trends.  So every year say around April, the full year data may be updated.  But when you find something that just looks dead wrong, like the price of caviar exported from USA (yes, we do...) then you must jump on it and get a review:

From: "M DDate: May 13, 2015 2:38:36 PM PDTTo: "johnspiers@b
Subject: Data Inquiry
Dear Mr. Spiers: This refers to your email concerning the unit price for exports of caviar (Schedule B number 1604.31.0000) to Japan during 2014. We have reviewed the data and have revised the reported statistics. Please make note of the following attachment and revisions to our published statistics. Thank you for your interest in the accuracy of our trade statistics. If you have further questions contact *****  The attached revisions are also available on our website at: www.census.gov/foreign-trade/statistics/corrections/index.html In June, our revised monthly data for the three prior years will be available through our on-line data product, USA Trade. For information on our current revision policy go to: www.census.gov/foreign-trade/guide/revisions.html

So here are the changes made after the challenge:

Corrections to Published Export Data

Month	Year	ACTION	Type	ERRATA	HS	Country	Qty1	Unit1	SWT	FAS Value
April	2014	READS:	Domestic	2016	1604.31.0000	Japan	1,312	KG	1,489	$19,368
		SHOULD READ	Domestic	2016	1604.31.0000	Japan	74	KG	1,489	$19,368
May	2014	READS:	Domestic	2015	1604.31.0000	Japan	15,045	KG	30,804	$222,097
		SHOULD READ	Domestic	2015	1604.31.0000	Japan	589	KG	30,804	$222,097
July	2014	READS:	Domestic	2015	1604.31.0000	Japan	7,986	KG	9,064	$117,896
		SHOULD READ	Domestic	2015	1604.31.0000	Japan	288	KG	9,064	$117,896
September	2014	READS:	Domestic	2015	1604.31.0000	Japan	40,429	KG	21,759	$1,097,248
		SHOULD READ	Domestic	2015	1604.31.0000	Japan	21,847	KG	21,759	$1,097,248
October	2014	READS:	Domestic	2015	1604.31.0000	Japan	24,515	KG	13,517	$970,738
		SHOULD READ	Domestic	2015	1604.31.0000	Japan	12,953	KG	13,517	$970,738
November	2014	READS:	Domestic	2015	1604.31.0000	Japan	19,145	KG	21,729	$282,607
		SHOULD READ	Domestic	2015	1604.31.0000	Japan	637	KG	21,729	$282,607

Source: U.S. Census Bureau, International Trade Management Division, Washington, D.C., 20233

The analysis on the original trade data looked ridiculous.  The client whose first foray into trade data analysis, in this case the trade data on caviar,  rejected it as impossible, evidence of criminal activity, anything except reality.  I advised him to challenge USCensus on the underlying data, and indeed they found it wrong (unlikely a Census problem, most likely a source problem corrupted data at the collection point, etc.)

Now, since we work at the ten digit level in data analysis, the new caviar trader introduces himself with information, at that point only someone in USCensus and he could have, could possibly have (OK< also me, but I am not in caviar), for a month or so.   The trader with this may make news, enhance his image and grow his business, as Ogilvy demands.

Yesterday I received this, in part of an email, from another student...

...the VP of sales I spoke with today told me "obviously you (meaning me) have been exporting for years"!  I explain my plan just as you outlined in your class (did not tell me I just completed my second class with you on Tuesday).
I followed up as you stated and found out the person I tried to contact is no longer with the company so I sent the same information update with the new VP sales contact information and we setup a call to review the opportunity to be a selling agent with them.  Finally schedule this morning.
My first question was are you currently exporting, she said no but do have sells in *****.  I told her from my data ***** and ******* are markets I would not presue because they are NOT growth markets and the price per kilo in on the decline.I explain my test market 1 size fits all (preselected pallet of product) with the MOQ FOB LCL and creating a website for serious buyers only.I told her it will be the same as a domestic order.  Her major question was who pays for all the export fees etc...I told her the buyer who imports that is their responsible.

Just so...  what I present in my classes is what I learned on the job the first decade I worked for others.  I've been self-employed since then.  I teach on the side, and as such have gathered the meta-study data that shows what I teach is also how it is done.  It is no secret, but I am the only one teaching it.  For reasons I can only imagine, no one else teaches what is effective.

The work is also crucial to economic recovery, as in YOUR economic recovery, so I am running another special session of my online seminar:

Fall Special Session  2016 

11/15- 12/6/2016   Four Sessions

Section One ~ 6 PM to 7 PM Pacific Time

(This would be 7 PM to 8 PM Mountain, 8 PM to 9 PM Central, 9 PM to 10 PM Eastern)

The tactics taught here relating to food can be used for any product, but the specificity fits with the brevity.  Here is more info on the course, and you may enroll here.... (scroll down to the bottom of the page and use the form at the bottom of the page for this special session.

eMail me if you have any questions. (Ask John in upper right)

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