Going Global Pays Off
by Carl Hoffman
On a rainy February afternoon, Bud's Best Cookies is spitting out more chocolate-chip cookies in an hour than your grandmother made in a lifetime. Mixed, cut, baked, cooled, iced, bagged, and boxed, 3,045 of the bite-sized delights race off the assembly line every minute, almost faster than the eye can see. The week before, in a record for the five-year-old Hoover, Alabama, company, Bud's shipped 50,000 cases of cookies. They went to Massachusetts; they went to North Carolina; they went to California; and—a first—they went to Israel.
"Can you believe it?" says Albert L. Cason Jr., Bud's vice president of sales, who speaks in an explosion of words whose speed is rivaled only by the pace of his cookie production. "We're actually exporting to Israel, which, to tell you the truth, was the furthest thing from my mind. And it's all because of this team. If it hadn't been for them, we wouldn't be exporting. It's that simple."
"This team" is the Targeted Export Assistance and Management (TEAM) training program, an export assistance project run by the University of Alabama's Alabama International Trade Center (AITC) and sponsored by the Appalachian Regional Commission (ARC), the Alabama Forestry Commission, and the Alabama Department of Agriculture and Industries. In 1997, its first year, the intensive, hands-on program for small and medium-sized businesses in Alabama's Appalachian counties helped ten firms export $3.38 million worth of goods, all first-time sales. Ten new companies are targeted for help in 1998, and ten more will be targeted in 1999.
The effort is part of Alabama's recent effort to increase its exports. "Companies can't just do business locally anymore," says Edwin Gardner, director of the Alabama Department of Economic and Community Affairs and the Alabama ARC state alternate. "Competition is so stiff that companies wanting to increase their business need additional markets, and that means going overseas.
A nonprofit organization funded by the University of Alabama and the Small Business Administration, the AITC provides foreign market research, counseling, and training to some 300 Alabama companies and public agencies a year. Its help seems to be working. According to Brian Davis, associate director of the AITC, Alabama's exports have risen from $3.3 billion in 1990 to $6.7 billion in 1997.
The AITC points out that over 95 percent of the world's population lives outside the United States. There is a huge psychological barrier to accessing that vast market for many people and companies. "Some of the biggest companies in the state are afraid of exporting," says Carol DeCastra, a trade finance consultant who works frequently with the TEAM program. "They'll have price queries from overseas and just never even respond. It can be very frustrating."
"They're afraid of not getting paid; they don't know how to put together a quote; they're intimidated by foreign regulations—there's a host of reasons, many of them myths," says Davis.
Leading Companies into Exporting
In an effort to overcome some of those fears, the AITC decided to target ten companies and see if it could, in effect, lead them by the hand into exporting. "We wanted a really concentrated effort that focused on taking a small number of companies which had the best potential for exporting from ground zero to one new overseas market," says Davis. With $133,000 from ARC and $40,000 in matching state funds for year one, and $55,000 from ARC and $20,000 from Alabama in year two, the TEAM program zeroed in on successful companies in wood products, apparel, and processed foods—industries that accounted for over 40 percent of Alabama's total manufacturing employment but only about 13 percent of its exports.
Davis and his stable of consultants visited 35 companies that expressed a strong interest in the program and chose ten that were both committed to the idea and organizationally and financially capable. In exchange for the hours of training and counseling, the companies had to "buy in" to the program by signing a contract that committed them to either hiring one full-time employee to coordinate exports, or entering one new overseas market. "We spend a lot of time explaining what we expect of the companies, where the money comes from, and that there needs to be some payback," said Davis.
For Birmingham's A.C. Legg, Inc., the timing was perfect. "We got interested in exporting when all the talk about NAFTA came up and we started seeing a lot of buyers from Mexico and Central America at the big trade shows," says Sandra K. Purvis, executive vice president of A.C. Legg, a 75-year-old, family-owned company employing 100 and specializing in custom-blended seasonings for meat products like sausages. "I got a brochure for a Mexican trade show, and I agonized over going, but finally I decided, no way. We just couldn't afford to take big losses," says Purvis, whose father took over the company in the 1950s. "We'd heard horror stories about people who had sold truckloads of meat and never got paid, and we didn't think we could afford to take the risk of selling outside of the country."
In short, A.C. Legg was a perfect candidate: a strong, successful company interested in exporting but intimidated by it. Says Davis: "How to ship, how to get paid—these are common problems for companies, but they're very easy for us."
Bud's Albert Cason likes to show the letter of credit for his Israeli sale: four pages of single-spaced jargon that only a banker and lawyer could love. "It's not English as far as I'm concerned, and if one little detail is wrong, we might not get paid!" says Cason. But to DeCastra, a veteran in international banking, it's as simple as a Dick-and-Jane story.
Customized TrainingOnce a company comes on board, DeCastra and others go to work in formal, in-house training sessions, walking companies through letters of credit, foreign banking, overseas shipping, and documentation. From then on, much of the training is individual and customized to each company as it learns to break into an overseas market under the guidance of the program. From detailed market research to translators for everything from faxes to brochures, whatever a company needs, the program provides.
In the case of Bud's Best Cookies, TEAM not only found a buyer, but also walked Al Cason through all the documentation. And what Cason saw as an insurmountable deal-breaker—he wanted to get paid for his cookies the moment they left his plant, while the Israeli buyer didn't want to pay for them until they made it, safe and sound, to Israel—turned out to be solved very simply by a letter of credit worked out by DeCastra.
At one point DeCastra suggested picking up the telephone and calling the Israeli buyer.
" 'You can't do that,' " DeCastra remembers Cason telling her, " 'He won't understand us.' But of course he spoke English like a native." Says Cason: "There're all kinds of little things that I'm learning, but if this guy buys half of what he says he can, then he'll be a gold mine for us."
Under the TEAM program's first year, a De Kalb County hosiery firm is planning to ship $250,000 worth of socks to a major European clothing chain; a Winston County furniture maker traveled to Japan and the Middle East, where it shipped some $123,000 worth of goods; and a representative of a Cullman County maker of safety harnesses, after extensive travels throughout Southeast Asia, made contacts expected to yield $1 million in export sales in the coming years.
Under the AITC's wing, A.C. Legg's Sandra Purvis put aside her fears and leaped into the Mexican market. The TEAM program connected Purvis with translators who helped her create product description sheets in Spanish, supplied market research to pinpoint possible customers, provided Carol DeCastra's financial know-how, and brought in an international banker who, says Purvis, "gave us a lot of insight into how money flows. It's a simple thing, but wondering how we'd get paid caused a lot of anxiety. I didn't even know what a customs broker was."
A.C. Legg's director of technical services, Peter Brown, attended his first international trade show in Mexico in February 1997. With the help of Spanish-speaking AITC consultant Deborah van der Toorn, says Purvis, A.C. Legg followed up on dozens of inquiries, and a few months later, paid sales calls to 11 firms in four days.
A year later, Brown has been to Mexico three times, A.C. Legg has filled several orders from Mexican companies, and requests from Mexico for price quotes are starting to roll in by fax monthly. "With Deborah's help, we had the best follow-up we've ever had on a show," says Purvis. "[AITC's] been a friend and advisor and really held our hands, and we're developing some very close business relationships with Mexican firms."
Now, when a fax comes in Spanish, Purvis knows where to get it translated. When a request for a quote comes in, she sends it out in Spanish, no longer anxious about the details of money and freight. Purvis has discovered that not only is it often cheaper for staff to travel to A.C. Legg's Mexican clients, but it also can be faster to ship to them than to some of its domestic customers. And, even a bigger surprise, "shipping overseas has boosted our image here in the U.S." says Purvis.
Brian Davis cautions that customers have to understand that developing an export market can take years, and that doing it requires all the patience and persistence of developing any new business. Nothing happens overnight—a sentiment echoed by Purvis, who says that A.C. Legg still can't justify hiring a full-time employee dedicated to its exports. "Of course we're still in the pioneering stage of this, but I think it will be a good segment of our business. We're certainly in a global economy, and a company of our size has to be a part of that to survive. At least now when a request comes in from overseas, we say, 'No problem—we can do this.' "
Carl Hoffman is a freelance writer based in Washington, D.C.