As Editor-in-Chief of this magazine, I’m privileged to receive letters from our readers around the world. People ask for help with all kinds of matters, especially finding U.S. suppliers, and one of the most frequent requests is for help in locating “producers” as opposed to “traders.” Over and over again the letters ask why, as buyers, they are frequently solicited for business by U.S.-based traders but, not nearly so often, by manufacturers or producers. The letters go on to ask how they, as importers of products, can access the “good prices” that producers offer their customers.
Well, this magazine is heavily supported by producers. Their advertisements often fill our pages and, certainly, it is wonderful to have a direct relationship with a producer. But, by and large, the letters I get show a misunderstanding of the role of a trader, an independent export company, or a wholesale distributor. Intelligent importers need to analyze the U.S. market as it actually is, rather than as they assume it to be. In the case of importing U.S. food and agricultural products, this means having a healthy respect for the roles of both producers and independent export organizations.
It is not surprising to me that companies that request American food and ag products by contacting the local American Embassy are subsequently and principally contacted by traders. This is a function of two things: First, the job of a producer is to produce. Sales in general and export sales in particular often wind up as secondary to the prime mission of producing the product.
In contrast, trading is everything to a trader. A trader’s whole energy will go into making deals happen. So he – or she – often will be the one scanning most intently for new business opportunities. Second, the nature of a new business, or even a new product offered by an existing business, is such that purchases at first are likely to be lower volume. Perhaps the buyer will be unable to purchase container loads and will want to consolidate shipments with other products. These are areas in which independent exporters have expertise.
Now processed, branded products are a special world. They are often sold in many markets through exclusive distributors, but for many commodity-type agricultural products – fruits and vegetables or meats for example – a familiar pattern is followed: A produce importer, for example, will start out working with an independent exporter who will handle all different items – carrots, potatoes, grapefruit, etc. In time one of the businesses, say grapefruit, becomes a large business in itself, with many trailers of product shipped every week. As such, steadily, the importer becomes more interested in grapefruit, probably follows prices more closely, makes some trips to visit grapefruit growing regions of the U.S. In time the importer may start buying grapefruit direct from the packers, or, if he continues to work with an exporter, may make a new financial arrangement whereby, on that item, the exporter works as a broker.
But initially, at least, solid reasons exist for considering an independent exporter. Here are a few:
- An independent exporter can supply many different items.
If an importer is not specializing in one item but requires many, it often requires an enormous time investment to learn about the market, prices, availability and so on of each item. Dealing with one or two independent exporters can allow an importer to buy hundreds of products with ease and efficiency.
- An independent exporter can often meet or beat producer price levels.
It sounds reasonable to assume that one will pay more through an exporter than by buying direct. After all there is one more hand in the pot to take a share. But, in fact, this is not always true. Many times independent exporters can buy less expensively than an overseas buyer. This allows exporters to mark things up and still be price competitive.
Traders can often buy cheaper for a variety of reasons: first, they are often larger buyers, in effect pooling all their customer’s orders. This gives them leverage that a single importer might lack. Independent exporters also are able to take a variety of sizes and products, as different packs are in demand in different areas of the world.
Also, the independent exporter may be more knowledgeable on the market. Finally, the independent exporter may be considered less of a credit risk and thus get more favorable terms.
- An independent exporter can often shop around for quality or size.
Producers sell what they have. An independent exporter can suggest alternatives.
- An independent exporter can easily mix loads.
Maybe the principle product is a van of produce, but the importer also may need some deli meats and dairy products. Many independent exporters are set up to provide these in a way manufacturers are not.
In addition, many independent exporters would go on to claim, as specialists, greater expertise in helping with transportation. Many have their own quality control inspectors and other special services.
I don’t think, though, that it is possible to say that it is “better” to buy from a producer or an independent exporter. Most producers sell their products both directly overseas and through various wholesalers and traders. They do this because, in total, it helps them make more money. Maybe that is the real lesson: An importer may be unwise in being doctrinaire about the “best” way to buy.