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National Food and Agricultural Expo serves up FF not found at most shows.

National Food and Agricultural Expo Serves Up FF Not Found at Most Shows

Pacific Rim country delegates -- no doubt encouraged by the trade politics of friendly persuasion -- make up largest bloc of buyers. Japanese and Korean presence is especially strong.

Give the organizers of the National Food and Agricultural Exposition high marks for attracting a broad cross-section of manufacturers of made-in-U.S.A. products ranging from frozen Mississippi catfish to Maine-grown wild blueberries. More than 450 displays filled the second floor of Boston's Hynes Convention Center May 15-17, offering a literal cornucopia of American food fare.

But while there was no shortage of sellers, the number of buyers on hand was disappointing to many exhibitors. Official attendance was put at 2,458 by the National Association of State Departments of Agriculture (NASDA), show sponsor.

On a high note, several key countries with large trade surpluses were well represented. Japan, South Korea, Saudi Arabia and Taiwan sent sizable delegations to "shop the aisles." It was the European contingent that was conspicuously absent. Perhaps that was understandable, given the friction between Washington and Brussels over the use of growth hormones in beef and the food import-export skirmish that has resulted.

Although a number of food manufacturers interviewed by Quick Frozen Foods International grumbled about low attendance, others found the dinless surroundings conducive for conducting business. "We may not have quantity here, but we've got quality," remarked one exhibitor. "The decision-making buyers -- especially those from leading Pacific Rim countries -- are among us."

A frozen meat packer commented: "After the dizzying FMI show in Chicago last week, I appreciate the opportunity to talk with potential customers one at a time without the clamor of 100,000-plus people tramping by my booth."

Interestingly, while almost all stands were occupied by sellers, one very large space was peopled by representatives of a very large buyer. The Japan External Trade Organization (JETRO), famous for its ability to assist Japanese exporters in cracking overseas markets, was on hand to provide consultation services for potential exporters to Japan. Its staff scheduled food tastings to gauge products' appeal to the Japanese palate. JETRO's presence was viewed by some as proof positive that Tokyo's scheduled lifting of beef and orange quotas two years from now will give a green light for distribution of a myriad of foreign foods into Asia's richest market.

It is also worth noting that the Korean delegation, led by members of the Seoul-based Super Chain Association, was earnestly on the look-out for value-added products to feed a customer base that is fast taking a liking to processed foods. Historically, most of the country's agricultural imports (a $5-billion market last year in which U.S. producers enjoyed a 52% share) have fallen into two categories: raw materials ultimately re-exported as value-added products such as textiles and leather goods; and bulk commodities including corn, soy beans and wheat. The corn is largely used as cattle feed, while wheat is turned into noodles.

Only one to two percent of the imports are thought to represent consumer food products, which means that the market's actual value is $102-million at best. Of that amount, the Statistical Yearbook of Foreign Trade reports that the leading U.S. imports in 1988 were beef ($27 million on 16,000 metric tons of volume) and frozen concentrated orange juice ($10 million on volume of 4,000 tons).

Korean customs statistics differ from U.S. numbers, however. Purchases of American beef were said to total 4,861 tons during the first 11 months of 1988 -- all except 120 tons of which was in frozen form. Records show that total frozen food imports during the first 11 months were 305,949 tons, dominated by seafood's 297,635 ton share. Almost everything apparently gets reexported -- principally to markets in Japan and Southeast Asia -- as sales of frozens to foreign buyers hit 310,218 tons during the same time period. That figure obviously reflects some tonnage produced domestically.

Despite Korean trade barriers such as high import duties (50% for frozen vegetables and fruit, 30% for frozen meat, and 10% for frozen fish), political pressure from deficit-burdened Washington is forcing more imports into the economically booming Northeast Asia nation.

Exporters keen on capitalizing on newly-stimulated demand should realize that Korea, whose gross domestic product is growing at approximately 12% annually, is developing patterns of frozen food consumption that bear considerable similarity to those in neighboring Japan. With 65% of its 43 million person population under the age of 30, consumption of imported FF is presently estimated to be only 40% of Japanese per capita consumption.

The Seoul government in April announced plans to "liberalize" (translation: automatic approval of import licenses) the importation of 243 agricultural products during the next two years. Among the frozen items listed were beef livers and pork livers in 1989, followed by duck meat, prepared turkey, and pork offals in 1991.

But, despite a 30% tariff there has already been a major frozen food success story -- namely French fries. While Boise, Idaho-based Ore-Ida paved the way in Japan, credit J.R. Simplot of Caldwell, Idaho, with breaking new ground in the Korean market. Or, to be more precise, credit Tae Hueng Ltd. with pioneering the product on the peninsula.

"Today we have a 50% share of the frozen potato market," said C.S. Kim, general manager of the Seoul-headquartered company's import division.

Previously known chiefly as a worldwide exporter of textiles, Tae Hueng began placing greater emphasis on importing and distribution after an appreciating domestic currency and escalating labor rates made Korean-manufactured clothing less competitive abroad. "We're looking to do more business in frozen foods," Kim advised.

The general manager said that he cultivated the French fry market by inviting potential buyers to some 20 different "sampling meetings" throughout the country. There they were educated about the product's attributes. The promotion paid off as Tae Hueng dominates distribution to Korea's leading fast food outlets, Western-style restaurants and retail stores. Among its clients are Kentucky Fried Chicken, Wendy's and various upscale hotels.

Kim offered frozen food manufacturers interested in exporting to the Korean market two tips on how to get off on the right foot: find a reputable local partner who knows the marketplace; rely on exclusive relationships rather than general contracts.

Another man bullish on the prospects of selling more imports was Kwang Jong Lee, executive director of the Korea Super Chain Association. "We are willing and ready to use U.S. agricultural products as long as the two governments (Seoul and Washington) agree," he told American producers attending a seminar at the NASDA show. But, he added: "Please don't push with strong pressure as the Korean economy, compared with Japan's, is just beginning to take off."

Among the products Lee has great expectations for are strawberries, since Korea has a short growing season. Others include: kiwi fruit, lime, pineapple and strawberry juice, watermelons, peas and pork.

Howard R. Wetzel, director of the U.S. Agricultural Trade Office in Seoul, was in agreement with Lee. "There's good potential for animal protein-based products and fruits and vegetables," he commented. "This reflects a basic dietary pattern away from starches that is seen when a nation's standard of living rises."

Specific products picked by Wetzel as likely winners included turkey meat, salmon and other seafoods. "Korea is the fastest-expanding market for U.S. seafood," he remarked. "Growth is over 400%."

Exporters should realize that distribution is generally fragmented throughout the peninsula, and also that stores are apt to be small. However, retail chains are on the rise. Some 12,000 such outlets are now operating, representing 41 companies from Seoul to Pusan. Their share of the overall food retail market was pegged at 10% by Kwang Jong Lee.

While most supermarkets are surprisingly Western in format, the shelves favor kimchee and beef kalbi over dill pickles and T-bone steak. Maintaining that there is a "broad lack of consumer awareness for American foods," Wetzel suggested that exporters will have their work cut out in educating new customers about different things to eat.

While this may be true when it comes to exotic fruits and vegetables such as avocadoes (upon presentation of the latter, the Minister of Agriculture was said to have taken out a penknife and peeled it like an apple in preparation for eating), a strong case can be made that much of the public is already quite familiar with the brand names of many foreign food manufacturers. A number of retail stores visited by Quick Frozen Foods International in recent years have sported small "American sections" featuring processed foods creatively procured from U.S. armed forces personnel based in South Korea. This point was brought up at the NASDA seminar.

"The black market is what you're talking about," Wetzel responded. "It presents what I call a window problem. It gets the products out there at a very reasonable price -- though not entirely legally. But what it doesn't do is provide an opportunity to do good promotions because basically it's illegal...And it's hard for legitimately exported commercial products to compete against what amounts to military commissary wholesale prices."

The trade officer continued: "The answer to this problem is to acknowledge that the black market represents limited volume and respond by doing good promotions to raise demand above that level so that such suppliers can no longer handle the volume. Thus trade will become commercially-oriented..."

Next to U.S.A.-made cigarettes, perhaps no item is in greater demand by consumers than high grade but relatively low-priced American beef. But with 18% of the population made up of farm families, the government has been keen to preserve that market for domestic producers. Such demographics present sensitive political and labor problems that are also acute in Japan.

"If agriculture is rapidly shut down many will flee to the cities," explained Wetzel. "So the government is gradually pushing large farms and phasing out small ones."

In the meantime, exporters can count on protectionist policies designed to keep out any foods that may have price advantages over home-grown varieties.

"Beef imports were banned completely for several years until 1987 when import restrictions were lifted up to a guideline 30% of total consumption," reported Edward J.R. Scott, chairman of John Swire & Sons Ptd., Ltd., Sydney, Australia. He was addressing the recent International Frozen Foods Association Pacific Rim Conference in Honolulu, Hawaii.

Scott continued: "Future tendering to foreign sources will vary with the ability of domestic suppliers to satisfy demand. It is anticipated that 1989 will see a requirement for 65,000 tons of imported beef, principally bone-in, of which 40,000 tons is likely to be supplied by Australia."

The Swire executive concluded that the Korean farm sector, unlike its Japanese counterpart, still has room to expand. Therefore ceilings may be maintained for a long period.

Even the usually open tourist hotel sales channel is closed to imported high quality beef, as well as sausage and grain products. However, other items banned by trade restrictions may be brought into the country via this route so long as final consumption takes place on hotel premises.

The bottom line in Korea is that import liberalization will afford market building opportunities. Non-tariff barriers notwithstanding, a growing youth culture is likely to be more receptive to Western foods than their elders, as has been the case in Japan. But bear in mind that with per capita income now at about $4,000 annually, discretionary spending remains limited.

Still, exports with the right distribution connections should be able to make gradual inroads in a country whose 1988 trade surplus was $8.9 billion. "Koreans have only very recently been allowed to travel overseas for tourism. Hence they are only just starting to acquire, by experience at source, tastes for foreign foodstuffs," observed Swire's Scott.
COPYRIGHT 1989 E.W. Williams Publications, Inc.
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Title Annotation:frozen food; Frozen Foods in North America
Author:Saulnier, John M.
Publication:Quick Frozen Foods International
Date:Jul 1, 1989
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