Slow economy, increased competition putting pressure on exporters
NEW YORK, April 24 /PRNewswire/ -- Alternative markets may hold
opportunities for Canadian food processors as rising costs, the
appreciating Canadian dollar and slowing economies pressure profit margins,
according to a new Rabobank report.
According to the report, "Rabo Ag Focus: Canadian Food Processing,"
personal income growth in large economies -- such as Mexico, Brazil, China
and India -- is leading to increased food consumption. Similarly, major
ethnic populations, which continue to be somewhat underserved, in the
United States and Canada, are expected to make up an increasing proportion
of both markets.
"Canadian food processors have historically been able to prosper by
making the most of their domestic market and their access to the U.S.
market," said Food & Agribusiness Research and Advisory (FAR) Vice
President Stephen Rannekleiv. "However, because the U.S. dollar is not
expected to strengthen in the near future, the U.S. market will remain
challenging for Canadian exporters."
Over the years, Canadian food processors have enjoyed an enviable
position in the world food market. Canadian processors are based in an
affluent country with more than 30 million people, have excellent
production technology and have access to a broad supply of top-quality
domestic agricultural inputs. Additionally, Canada's shared border with the
United States has provided easy market access with nominal language and
trade barriers.
The weakening of the U.S. dollar also poses significant challenges for
Canadian food exporters. For many Canadian companies, the cheaper Canadian
dollar was a source of competitiveness, which has been declining along with
their companies' profits. To further aggravate the situation, currencies of
other countries, including China and Mexico, who compete with Canada for
U.S. market share, have appreciated only modestly. This has allowed
competitors to outperform Canada in exports to the United States.
"To remain competitive and profitable, Canadian food processors will
increasingly need to identify growth markets that will allow them to
leverage their production capacity and increase their scale," Rannekleiv
said.
The major ethnic populations in both the United States and Canada are
expected to make up an increasingly large proportion of both markets, and
continue to be somewhat underserved. In the United States and Canada,
certain ethnic groups, due to their rapid population growth, are becoming
increasingly important market segments that -- as of yet -- have a not been
fully exploited. For example, ethnic products developed and marketed in the
United States and in Canada target millions of consumers with growing
purchasing power and a thirst for traditional products from their culture.
Additionally, many food processing companies have seen that these products
have an increasingly broad appeal among the broader population.
"As ethnic minority groups in both the U.S. and Canada are predicted to
make up an increasingly larger share of the market, it is important for
Canadian food processors to consider strategies for targeting these markets
and gaining brand recognition," said Rannekleiv.
Aside from domestic ethnic markets, large emerging markets such as
Brazil, Russia India, China and Mexico also present some attractive
opportunities. "Even though the U.S. and Canada are experiencing slow
economic growth, other large economies are faring much better, thus
creating opportunities abroad," Rannekleiv said. As incomes and demand for
products grow around the world, Canadian food processors have the
opportunity to enter foreign markets through a number of options including:
exporting, franchising, brand licensing, joint ventures, creating
subsidiaries or purchasing existing companies.
Internationally, opportunities offered by less developed economies are
well documented. Many large food processing companies are deriving nearly
all of their growth from markets outside North America and Europe. However,
the decision to focus export development initiatives on one market over
another depends to a great extent on the strengths of the company and the
opportunities available in each market.
The premier bank to the global food and agriculture industry, Rabobank
is a global financial services leader providing institutional and retail
banking and agricultural finance solutions in key markets around the world.
From its century-old roots in the Netherlands, Rabobank has grown into one
of the 25 largest banks worldwide, with over $800 billion in total assets
and operations in over 35 countries. Rabobank is the only private bank in
the world with a triple A credit rating from both Standard & Poor's and
Moody's, and is ranked among the world's safest banks. In the Americas,
Rabobank (http://www.RabobankAmerica.com) is a leading financial partner to the
entire American food and agribusiness industry and is a specialist in
sophisticated, customer-driven solutions in the Global Financial Markets
and Corporate Finance arenas. Rabobank also provides retail and commercial
banking services in California; leasing; and real estate lending, operating
loans, input financing and crop insurance to American agricultural
producers, input suppliers and agricultural manufacturers.
Available Topic Expert(s): For information on the listed expert(s), click
appropriate link.
Stephen Rannekleiv
http://profnet.prnewswire.com/Subscriber/ExpertProfile.aspx?ei=64199
SOURCE Rabobank America
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Related links:
http://www.RabobankAmerica.com
CONTACT:
Heather McElrath of Rabobank America,
+1-347-224-5102, heather.mcelrath@rabobank.com
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