Navigating the consumer behaviour of shoppers in the United States is one of the challenges small businesses venturing into exports encounter amidst experts’ revelation of a growing demand for African products in the American market.
Sustainability, which entails the ethical process these products are produced regarding the environment and the community, as well as the cost of recall insurance also features as a concern for businesses.
A discussion that sought to assist small and medium enterprises (SMEs) in preparing their products for the American market details sustainability as a key consideration for consumers in the US.
The discussion overseen by the Council of East Africa American Chamber of Commerce (Amcham) positioned the US-Africa Trade Desk (USATD) as the body that can assist businesses in accessing the American market.
The Council of East Africa-America Chamber of Commerce consists of Amcham-affiliated bodies in Kenya, Rwanda, Uganda, Tanzania, and Ethiopia.
The US-Africa Trade Desk is a public-private partnership between Proper Africa and USAID that facilitates products from the continent to the shelves in the US.
This is through an umbrella insurance product that facilitates and negotiates air, and sea freight services in favour of businesses.
USATD Founder Gavin Van Der Burgh, an entrepreneur from South Africa now based in the US, said on the backdrop of the challenges small businesses from the continent go through, the body was formed to operate on a demand-driven model.
“We do not deal with any speculative products nor do we carry any inventory,” he said.
Businesses that wish to export to the US can work with USATD which has an elaborate eight-step process of vetting the products to determine their readiness to be put on retailers' shelves in the US.
Some products, he noted, may go through the process successfully, while others will be taken back to the drawing board.
Fish products
This is a challenge Mr Van Der Burgh addressed in the discussion citing the importance of business understanding not only what the American market wants but also how the shoppers consume.
For example, coffee, cocoa, fresh fruits and vegetables, and fish and fish products are among the products in demand in the US. Cashew nuts are also in demand however; most imports do not come from Africa.
“Africa produces 57 per cent of the world’s cashew nuts and the US is the largest consumer, but only eight per cent comes directly from Africa,” he said. “The rest are imported to India, China, and Vietnam where they are processed and then exported to the US.”
One of the initiatives of USATD, he added, is to support markets in the continent, which have the ability to do production of such products, so that they are exported to the US directly and reduce carbon footprint.
Understanding where and how shoppers in the US access their products is also key.
Mr Van Der Burgh says some may prefer doorstep delivery while others physically go to the store. Stores also matter as there are different tiers of retailers who charge differently to have products placed on their shelves.
For example, big retailers like Dollar General charge over Sh1.5 million compared to the minimum of Sh300,000 for regional stores.
“When we started our business, one of the challenges we faced was slotting and listing fees in the US. To get a product into a company like Dollar General, for example, costs you Sh19.5 million ($150,000). A lot of other regional retailers will charge you between Sh390,000 ($3,000) and Sh1.3 million ($10,000),” he said.
Other stores where products can be placed include Costco, H.E.B, Target, Whole Foods, Walmart and Gelson’s.
"You have to make informed decisions and also understand where best to place your product. Do you want to go to mainstream retail? Is omnichannel the best way to get your product into the market?" he posed.
The data shared showed that for fresh products, customers in the US are shopping physically in stores when compared to frozen products, body care and some snacks which are accessed online.
Kenya is among the countries on the continent that are eligible to access duty-free markets in the US through the Africa Growth Opportunity Act (Agoa) with a range of 6,400 products.
However, access to markets, both international and domestic, according to the Kenya Association of Manufacturers (KAM) remains a challenge to SMEs.
“The domestic market is shared out between a small portion of the formal market that has a preference for high-quality products at a reasonable price, but too small to bring down the unit cost of production through economies of scale; and a large segment of the informal market,” says KAM.
“The international market is characterised by a big imbalance between exports and imports where the latter outweighs the former.”
Kenyan currency
KAM, through its chief executive Anthony Mwangi, has been insisting on an export growth model for the sector as one of the ways to reposition the Kenyan currency strongly in the global market.
Mr Mwangi said embracing an export-led growth strategy is not only a solution to reverse the depreciation of the Kenyan shilling but also an opportunity for Kenya to diversify its economy and reduce its vulnerability to global economic fluctuations.
“By tapping into the expertise of KAM’s mapped export potential, expanding export markets, enhancing productivity, supporting SMEs, and fostering collaboration, Kenya can transform the current predicament into an opportunity for sustainable economic growth,” he said.
Amcham-Rwanda Executive Director Ntirushwa Yannick said SMEs are key in job creation and economic contribution encompassing 90 per cent of businesses, providing 65 per cent of formal jobs, and contributing 40 per cent of Gross Domestic Product (GDP) in the region.
However, data from the International Monetary Fund (IMF) and the World Bank, show international trade is domiciled by larger corporations.
“East African SMEs have not fully leveraged on the opportunity to participate in international trade such as through Agoa,” he noted.
