Kasih Food Company’s Export Strategy Case Study

Brief Synopsis of the Issue

• Kasih Food is a leading producer of Mediterranean food (both canned and boxed) based in Jordan since 1926. The company offers a wide range of high-quality products including numerous varieties of canned beans, hummus, mezza and other local delicacies.
• Kasih Food is a recognized high-quality producer of Mediterranean food in the Middle East that follows the principles of responsibility and transparency in its activity.
• The company currently distributes its products in such countries as Saudi Arabia, the UAE, Palestine, Iraq, and the USA, though it has not entered the EU market yet.
• The company’s vision statement outline’s Kasih’s ambitions to become the leading supplier of Mediterranean food in the world – thus, entering the EU market will assist in achieving the targeted aim (Kasih Food 2012).
• Jordan is a partner of the Euro-Mediterranean Partnership that is aimed at promoting its economic integration in the EU market.
• Jordan concluded a Free Trade Agreement with the EFTA that eliminates custom duty on fish, marine products, and other industrial goods.
• Germany consumes 8.5% of all the canned production in EU; besides, the primary location of the canned products imported to EU is Germany (CBI 2009).
• Germany and Jordan have close political and economic relations; therefore, it is assumed rational that Jordan should start entering the EU market from Germany.
• The proposed export plan engages external parties such as ZIM Integrated Shipping Services, the German Development Bank, and Coop.
• It is assumed that the current political context in Germany is favourable – the exceeding number of immigrants will increase the demand for products from the Middle East.

Recommendations

• In order to avoid additional risks, it is proposed that Kasih Food concludes the Free on Board Agreement with the shipment company.
• ZIM Integrated Shipping Services is the recommended shipment partner that can perform the products transportation to Europe. The company carries out product shipment to three European ports (ZIM n.d.).
• It is proposed that market entry is carried out collaborating with Coop that performs food retailing through different channels (Coop n.d.).
• Packaging will be performed by Kasih Food, every canned and boxed product will have a special barcode in order to avoid counterfeiting (that is particularly possible related to boxed products). The size of the standard packages will not be changed in order to avoid additional expenses. However, in future, the size of the offered package can be adjusted in accordance with the relevant demand.
• The transportation will be performed by lorries and planes.
• Coop Ltd. Will be expected to complete the payment in a 7-day period beginning from the shipment date. It is proposed that the payments are carried out through the German Development Bank that is currently strengthening its positions in Jordan (KFW n.d.). It is proposed that the transaction is performed in euros that have stronger positions in the market than dinars.

Background

Al Kasih Food Production Company specializes in manufacturing canned and boxed Mediterranean food. Initially, Kasih company, set up in 1926, produced sweets and confectionaries. Since that time, the factory has been holding the leader’s position in the Jordan market of tahini and halua. As soon as Kasih managed to establish a reliable reputation, they set up Kasih Production Company in 1994 that specialized in canning vegetables.

The company uses a special aseptic packaging that helps to preserve the taste of the products for a long time. It is currently the only company in Jordan that produces packed tomato paste and liquid jameed in aseptic containers. The offered product line is rather wide; the main offers are beans, liquid jameed, tomato paste, different types of hummus, mezza, and products for catering. All the products undergo severe quality control. The company’s products are currently distributed in six countries, including the domestic market.

Research on the Assessment Topic

Jordan

According to the Economic Complexity Index (ECI), Jordan represents the 94th world largest export. From the logistic perspective, the country has land borders with Syria, Iraq, Israel, and Saudi Arabia and a sea border with Egypt. Among its top exported goods, it is essential to point out fertilizers, phosphates, medicaments, knitwear, minerals, wheat, and gold.

The country exports 186 products in total. The key export destinations are such countries as the USA, Saudi Arabia, Iraq, Israel, and India. Statistics show that the country’s export has growing dynamics. Thus, the export rate has increased by 5.6% within the past five years. In the meantime, it should be pointed out that the country has a negative trade balance (Jordan n.d.).

Germany

According to the Economic Complexity Index (ECI), Germany represents the 3d world largest export. From the logistic perspective, the country has land borders with Austria, Poland, the Czech Republic, France, Belgium, the Netherlands, and Denmark and sea borders with Sweden and the UK. Among its top exported goods, it is essential to point out cars, planes, medicaments, vehicle parts, human and animal blood. The key export destinations are such countries as the USA, France, the UK, China, and the Netherlands.

The same countries are likewise the main import resource. Statistics show that the country’s export has growing dynamics. Thus, the export rate has increased by 6.3% within the past five years mainly due to the export of cars and vehicle parts. The country’s import rate has likewise increased by 6.1% within the same period. According to the official data, the most significant imports are carried out by Crude Petroleum, which composes 4.7% of the total German imports, as well as the car sector, which comprises 4.17%. The country has a positive trade balance (Germany n.d.).

Implementation of recommendations

The proposed recommendations can be implemented as shown in the figure below.

Therefore, it might be seen that there are five main chains in the export pattern. First, the goods need to be transported from the manufacture to the local warehouses. Then they are sent to one of the Jordan ports. As soon as the goods arrive at the European port, they are transported to the German retailer, Coop that is supposed to distribute them through all the available channels.

Essential clarifications:

• Manufacture – Kasih Food;
• The company concludes FOB in order to avoid additional risks;
• The shipment is carried out by ZIM Integrated Shipping Services;
• German Retailer – Coop;
• The transportation will be carried out by lorries and planes.

Arguments against the Recommendations

• The volatile situation in the Middle East imposes additional risks on the plan’s implementation.
• The shipment process is under the risk of pirate attacks.
• Jordan has no experience of working in the EU market. Therefore, it needs to study the relevant quality requirements in advance.
• EU sets severe sanitary and phytosanitary requirements for the imported goods (European Commission 2016).
• EU sets severe technical requirements for imported goods.
• EU sets severe environmental requirements for imported goods.
• EU has special marketing standards for agricultural and fishery products.
• The company will have to fill in BTI application form – BTI is recognizable within the EU, notwithstanding the import targeted country.
• Statistics show the decrease in the demand for canned vegetables throughout the EU (USDA Foreign Agricultural Service 2014).
• Trade relationships between Germany and Jordan are currently built on the German’s export to Jordan.
• The transportation expenses will have an impact on the product cost elevating it significantly. The high cost of the product will challenge the product’s entry into the German market.

Arguments in Support of the Recommendations

• Jordan has been the member of WTO since 2000. Thus, its accession package comprises market-access privileges (WTO 2000).
• Due to the beneficial geographic position of Jordan, the delivery chain will not be excessively long.
• The engaged parties have a trustworthy reputation.
• The company does not need to involve external parties for packaging procedures.
• Concluding FOB will eliminate additional risks.
• Successful entry into the German market will open prospects for further expansion.
• The current political environment in Germany implies the increased number of immigrants from the Middle East. Therefore, the demand for local food is presumably high.
• Jordan and Germany have had close and friendly political relations within the past years.
• The specificity of the offered products ensures their competitive advantage in the relevant market.

Reference List

CBI 2009, The EU market for canned fruit and vegetables.

Coop n.d., Retailing.

European Commission 2016, Trade.

Germany n.d.

Jordan n.d.

Kasih Food 2012, Vision.

KFW n.d., German Development Bank.

USDA Foreign Agricultural Service 2014, Germany.

WTO 2000, Jordan becomes 136th member of the WTO.

ZIM n.d., ZIM Shipping Line Network.