Entering the Global Marketplace:Lessons Learned

David Fuhrmann

President

A Snapshot ofForemost Farms USA

Established: 1995

Milk volume: 4.8 billion pounds

Member-owners: 3,600

Revenues: $1.4 billion

Employees: 1,487

Ranking: No. 15 (Dairy Foods

magazine) among top 100

processors

Procurement Area and Plants

Cheese54%

Butter2%

Packaged milk

products16%

Liquid & condensed

milk products

21%

Juice products

1%

Whey products

6%

Our ProductsMarkets are grocery, foodservice, industrial

and converters

How we got startedin the export business:

• - Acquisition of business entity in 1984

• - Have continued to grow and diversify the exports

Foremost Farms USA Exports Today:

• 40 million lbs./year – Whey Based Products

• 5 million lbs./year – Cheese

Export Destinations:

• - South East Asia (China, Japan, S. Korea)

• - Central & South America (Mexico, Puerto Rico, Columbia, etc.)

• - Europe• - Others

Export Sales to:

• - Brokers

• - Distributors

• - Specialty company manufacturers

• - Multi-national corporations

Why We Export:

• - Supplier to multi-national companies

• - Grow our business

• - Profitable business

Requests from:

• - Multi-national corporations

• - Repeat users

• - USDEC inquiries

• - Website

Challenges:

• - Language

. Shame on us:

“We only know English”

. Time zone differences

Challenges:

• - Cultural Differences. Negotiations are different in

different

cultures

. Difficulty in understanding “tones” of

e-mails

. “Bribes” vs “the way business is done”

Challenges:

• - Negative perception of US whey

products

• - History of “dumping inferior product”

Challenges:

- Product Packaging

• . Long distances

. Truck, rail & sea travel

. Hot, humid conditions

. Complaints on 50% of shipments

Challenges:

• - Dealing with rejected product:

. Can result in major $$ impact

. Can’t bring product back to U.S.

. Resell the product in that country

Challenges:

• - Competition from other countries

. Exchange rates

. “Product dumping”

Challenges:

- Quality

. “Expectations” are not the same as product “specifications”

. The customer is always right

Challenges:

Quality (cont.):

. Testing methods may be different

. Local regulations can vary

. The rules change without notice

Challenges:

- Quality (Cont.)

. International customers are

concerned about the source and quality

of the raw milk supply

. Quality discussions are more difficult when using an intermediary

Challenges:

• - Documentation. Paperwork must be flawless

. Papers must exactly match product

. Codes on product must be totally legible

• The process is tedious and time consuming with “no margin for errors”

Resources:

• - USDEC

• - USDA – Washington

• - Bank

Lessons Learned:

• - International customers have higher expectations

• - We have experienced some expensive

lessons

Lessons Learned:

• - “Partnerships” are critical

• - New communication technologies have

opened the world!

Lessons Learned:

- International business has become more

complex since September 11, 2001

- International business is not “lucrative”

Lessons Learned:

• - Exporting has made us much better