Cost Breakdown

The international environment introduces exporters to logistical scenarios and
payment challenges that are not part of their domestic environment.
In the market research phase, the exporter should have obtained some idea of
the price the market will bear for the product. The next phase then is to establish
whether the product will compete in the selected market segment. Many exporters
make the mistake of using the price they sell the product for in the local market
and adding the additional export-related costs. The first step should therefore be
to reinvestigate production costs and deduct any costs that do not form part of
the export process.

9.1 Factors to take into account when calculating export prices
9.1.1 Export and import process
• The exporter’s own logistical environment and needs.
• Packing requirements for the specific product.
• Product specific requirements (example: label and inspection fees).
• Incoterms®.
• Exchange rate fluctuations (and the management thereof).
• Methods of payments (advantages and disadvantages).
• Transport methods available (advantages and disadvantages) – both in South
Africa and in the importing country.
• Customs processes and requirements for both South Africa and the importing
country.
• Services offered by various service providers to assist exporters.

9.1.2 Complexity of distribution channels in the foreign market
Often more than one intermediary is involved but for food the channel is mostly
manufacturer-wholesaler-retailer.
In the USA for example, the exporter can:
• Sell to an importer who in return sells the product to a distributor.
• Sell direct to the distributor who sells to the retailer.
• Work with a broker to sell to a distributor or retailer.
In the EU the distribution channel could include:
• An agent, who provides the link between the foreign supplier and the importer.
• Importers, who source products from abroad and supply wholesalers or direct
to the large retail group.

The large retail groups in the EU generally buy through an agent or importer, although
in some cases they may have direct contact with a foreign supplier. Channels of
distribution for food ingredients or intermediary food products, such as fruit juice
concentrate or even dried fruit, are somewhat different.

Due to the vast number of products under the processed fruit, vegetable and nuts
category as well as the various grades within which most of these products can
be sold and possible niche markets, it is difficult to provide a standard percentage
that needs to be added to a costing structure for overseas markets. The exporter
needs to do proper research on all factors named to establish individual applicable
percentages. Exporters should make contact with their industry body (if one is
available) to assist with various cost breakdowns and market price indicators.
Some indications for the EU market on pricing and percentages can be found
on www.cbi.eu website. CBI is a Dutch government agency established to assist
producers/exporters in developing countries to market their goods in the EU.