Exporting to the European Union – where to start?
With 27 member states and nearly 500 million consumers, the European Union (EU) is Canada’s second largest trading partner after the United States. According to European Commission data, the EU imported €119.3 billion and exported €151.2 billion in 2019. The European agri-food market therefore represents a size of 270.5 billion euros or more than $400 billion (28 members). Canada was the 16th supplier of the EU with 2.4 billion euros that same year (about 3.6 billion CAD)[1]. As for Quebec, they reached more than 562 million dollars for the same year. The main export markets for Quebec are Italy, Germany, the Netherlands and France.
Global Economic and Trade Agreement (CETA)
Since the implementation of CETA, nearly 94% of the customs duties applicable to agri-food products that respect Canadian rules of origin have been reduced to 0%. As a result, Canadian exporters will gain preferential access over our major competitors such as the U.S. before the free trade agreement. Before the free trade agreement, customs duties for maple syrup were 8%, 15% for jams and jellies, 7.7% for processed legume products, 17.6% for sweetened and dried cranberries, 7.7% for wheat flour pasta + 21.1 euros/100 kg net… The abolition of customs duties combined with the weakness of the Canadian dollar are considerable assets to open doors for Canadian exporters.
Product adaptation
Consumers in the 27 member states of the European Union speak different languages and have very different eating habits. It is therefore necessary to ensure that the product intended for a specific market integrates with the local flavors. You also have to think about adapting your packaging, format and labeling to the standards of the target market.
The advantage of selling your products in the EU is the free movement of products and the harmonization of labelling rules. This means that once a product crosses the border of one EU member country, it can be sold in any other member country without having to go through another customs service. But in order to successfully enter the EU, it must be labeled according to European standards, which are relatively different from ours. This means revising the nutritional table, the font and language of the text, the units of measurement, the date formats, the allergens… For example, article 8 (1) of the European labeling law stipulates that the product label must contain the name of the operator responsible for the information on the product, which is in fact the operator under whose name or business name the product is marketed. If this operator is not established in the Union, it will be the name of the importer in the Union market. This requirement, among others, obliges you to find an importer, a distributor or to register as a company in the European Union in order to also become the importer of your products in the Union. Other regulations may also affect the composition of your product or the size of your packaging.
Distribution channel
In order to define an efficient distribution channel, you need to look at the export process from all angles. The first question to ask is what is your target sales volume in the EU? Will it justify registering your company in the EU as a non-resident importer? Would it be more appropriate to go through a distributor or importer? To answer these questions, there is no magic formula and you have to keep in mind that each intermediary means an additional cost, while you try to reduce them to be the most competitive. The Group Export’s ZENiTH program, among others, can help member companies develop a strategy for deployment in the European market and identify the best approach for success.
Conquering buyers
Where can we meet buyers? What about distributors/importers? The best opportunity to meet these decision-makers is to participate in international trade shows or buyers’ events. Associations such as the Group Export or MAPAQ can help you obtain financial assistance to make your participation in these key events possible. In addition, to support you in your efforts, do not hesitate to contact the trade commissioners in Canadian embassies or the economic advisors in Quebec offices around the world.
Private label products (PLP)
Private label products, as they are called in North America, include all goods sold under a distributor’s brand. This brand can be the name of the distributor itself or a name created exclusively for the distributor’s use. According to Nielsen’s 2020 statistics, private label sales are growing steadily in Europe and represent a significant market share, 49.5% in Spain, 43.1% in Germany, 44% in Belgium and 31.6% in France. Private labels are an excellent way to penetrate a market at a lower cost, and without listing fees. Private label orders give access to considerable volumes that allow for economies of scale, with virtually no marketing costs. However, large European chains that wish to have a product manufactured, like many chains in the Americas, require food safety certifications. In most cases, the manufacturer must be certified SQF (Safe Quality Food), GFSI (Global Food Safety Initiative) or BRC (British Retail Consortium), which requires significant investments.
Logistics and transportation
In order to remain competitive, don’t forget to consider optimizing your supply chain. For example, limited truck size or metric conversion can have the impact of requiring more expensive special transportation. The expertise of a freight forwarder will prevent you from falling into these traps. Remember that the free movement of goods allows your products to be transported to the four corners of the EU by land or rail with very reasonable costs and delays.
Are you ready?
They’re complicated Europeans, you might say – but in the end they’re no more complicated than us or the Americans. It’s just a different way of doing business. Remember, the EU is a pool of nearly 500 million consumers with some of the highest incomes in the world. But before you launch, take the time to question your ability to develop these markets. You will have to devote a significant portion of your human and financial resources before you see a return on your investment. It is sometimes wiser to start exporting to Canada and the United States, given our geographic and cultural proximity. Finally, be well informed about your target markets and use all the resources at your disposal to maximize your chances of success at a lower cost. The Group Export is at your disposal to answer your questions and guide you in your export efforts.