Canada's food exporters scramble to adjust to Mideast turmoil

Just a couple of years ago, Libya was poised to be a promising market for Voortman’s line of baked goods and treats.

The Burlington, Ont.-based company was looking to branch out into new, emerging markets and with Libya’s growing population, and reliance on imports, the conditions appeared ripe. Voortman Cookies Ltd. signed a deal with a local distributor in 2009, and exported roughly $100,000 worth of goods – such as their chocolate chip cookies – annually for two years.

But last year, as the Arab Spring protests began to spread across the Middle East and North Africa, and into Libya in particular, Voortman’s business ground to a halt when their distributor disappeared, said Juan Fuster, the company’s global sales director.

“In reality, I don’t know what happened to my customer … all of a sudden, there was no more business there. I don’t even know if my distributor is alive,” said Mr. Fuster, who is based in Port Orange, Fla.

The Middle East and North Africa, with its large and growing population of 300 million (as of 2010), has an appetite for imported food that represents a major market for Canadian food producers. Canada exports about as much food and agricultural products, by value, to the region as it does to the entire European Union, according to Canada’s Agriculture and Food Trade Commissioner Service.

But as some countries in the region face political turmoil, Canadian companies already exporting to the region are being forced to adjust.

Canadian exporters have shifted their focus away from Libya, Egypt and Syria to more-stable regional economies, at least for the time being, said Susan Powell, president of the Canadian Food Exporters Association.

The CFEA had planned a trade mission to Damascus for last October. But as they began to organize the trip, the situation in Syria began to deteriorate, and it was cancelled, Ms. Powell said.

“There was tons of opportunity,” she said. “The retailers there were very interested in food products. And then everything falls apart.”

Some food exporters continue to ship to Egypt, but a new government and changing infrastructure has created a “bottleneck” for merchandise flowing through the country, said Magdy Ghazal, the president of HEA Import Export Canada in Montreal.

HEA, which sells Canadian delicacies such as cod and beef to hotels and other customers in Egypt, has been plagued with long wait times to get their products cleared at the country’s ports due to new regulations, he said. What would normally take five to 10 working days to be processed and delivered to their customers, now sits at the country’s ports for three or four weeks before it is cleared by customs officials, said Mr. Ghazal, who was senior business development officer at the Canadian embassy in Cairo until 2010.

Also, with Egypt’s banking regulations and economy in flux, HEA’s customers are unsure how much money is legally allowed to be transferred at a time, Mr. Ghazal added. So, instead of transferring the full outstanding amount for a given shipment, their customers send money in intermittent amounts, making it difficult to manage payments, he said.

“It’s a new system there, and everybody is very meticulous. They do not want to make a mistake … I would say it is a kind of bottleneck,” he said. “Give it a year or so, and everything will settle down, and get back to where it used to be. Demand will be there.”

Mississauga, Ont.-based Globeways Canada Inc., which sells staple items such as pulses, lentils, peas and chickpeas, has seen its business drop by about 20 per cent in the region. Sales have been improving recently, including in Syria, but naturally, problems remain, said company president Raj Jain. For businesses, “it’s like living day-to-day.”

In Egypt, the wide fluctuation in currency has made buyers reluctant to purchase regularly or in large quantities, and expose themselves to risk, Mr. Jain said.

Still, for Canadian food companies, exports continue to grow in the region, particularly into stable countries such as Qatar and the United Arab Emirates. Business has been so good that the Middle East and North Africa region has emerged as a higher priority for Canadian food producers and exporters than Asia, Ms. Powell added.

Also, sales of staple foods such as pulses and grains – the bulk of which is exported to the region from Canada – have suffered a smaller impact from the turmoil than have sales of processed foods, she said.

“They still have to eat, they’re still importing,” Ms. Powell said. “For buyers, it’s business as usual. They still have to feed the population.”

Voortman’s cookies can already be found in several countries in the Middle East, including Jordan, Kuwait and Iraq. Toronto-based Taste of Nature’s organic products – such as Niagara Apple Country food bars – can be found on store shelves in the United Arab Emirates.

And Canadian companies continue to seek out new opportunities in the region. About 14 Canadian agri-food based firms exhibited at the recent Gulfood conference, the Middle East’s largest food and hospitality trade show held in Dubai, and another 10 attended. That is up from 11 exhibitors the year before. More were clamouring for space, but 14 is the maximum amount that Canada could fit in the allotted area for the pavilion.

But even in Middle Eastern and North African countries facing instability, most food exporters believe that the opportunity will still be there, once the dust settles, Ms. Powell said.

And with the loonie’s strength against the U.S. dollar, selling to the United States, Canada’s largest trading partner, is less profitable.

In turn, exporters have been actively trying to diversify into new markets, such as the Mideast, said Paul Beamish, professor of international business at the Ivey School of Business at the University of Western Ontario in London. The loonie has been hovering around parity, a sharp difference from the 65 cents to the U.S. dollar it was about a decade ago.

“A lot of people were not particularly aggressive in pursuing places other than the U.S. market. The U.S. was buying all kinds of products, as it was a giant fire sale, our products were so cheap,” Prof. Beamish said.

As the loonie began to approach parity – a much more logical comparison with the U.S. dollar – and as the recession continued to grip the U.S. economy, more and more Canadian agri-food companies have been forced to look elsewhere for business, he said.

Political risk will always be a factor in the Mideast and North Africa region, but opportunity abounds in many of the restive countries, Prof. Beamish said.

And business activity in Libya appears to be stirring again. At this year’s Gulfood conference, buyers from the North African country were out looking for potential partners, Mr. Fuster said.

Mr. Fuster said Voortman was approached by several Libyan companies interested in importing the company’s goods.

“A lot of the stuff that was in that market, after the collapse of the [Gadhafi] regime, have new people in place. It’s a new market for opportunities,” he said.
(Source: CTV News)

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