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Table of Contents

Introduction 2

Honey: A Commercial Item 2

Exporting Success 3

Background of Argentina 4

Logistics of Delivery 4

Customs Regulations 5

Market Entry Methods 6

Joint venture 6

Agents and Distributors 7

Right Choices? 7

Financial Arrangements 7

Additional Information 8

Conclusion 8

References 10

Introduction

Capilano Honey is Australia’s market leader in the honey industry and is also a global competitor, servicing 38 countries worldwide. The reason for exporting in the first place was to facilitate Capilano’s excess amounts of honey that was being produced in Australia due to its successful system of production with its beekeepers. As honey is a seasonal product, Capilano also has undertaken two joint ventures in two different countries to service its worldwide market. This market entry was chosen due to its successful systems that ensure quality and quantity to service not just Australia but to go outside our borders and service worldwide with a variety of different products, to provide the right blend of honey to the right people.

Honey: A Commercial Item

Capilano Honey has been in business since the 1950s, selling only to Queensland at the time. From then, the company has increased in size and has gone international. With product inclusions such as different types and flavors of honey, to golden syrup, to natural medical improvements being developed in its subsidiary company, ‘Medihoney’, Capilano is growing its empire to become a giant competitor in multiple fields.

It’s main focus for exporting however, is the production of honey which involves keeping the quality standard at a high as well as keeping it as natural and as healthy as possible. Capilano achieves this by adhering to the fundamentals of the HACCP (Hazard Analysis and Critical Control Points), which is an international standard for food safety that addresses the “physical, chemical and biological hazards as a means of prevention rather than finished product inspection” (HACCP 2007, 1). Capilano received the HACCP accreditation in August of 2001 which therefore means that in the companies two locations in Australia (Richlands, QLD & Maryborough, VIC), rigorous testing is done to assure the customer that they will get the most hygienic, natural honey available on the market.

Capilano Honey has a unique system with its beekeepers that allows for quality and quantity to be assured. This is done by having the beekeepers as shareholders and giving them a quota to adhere to. This therefore ensures the company that the beekeepers will keep to their quotas and deliver a steady flow of honey, meaning that Capilano has a good source of supply. Capilano receives approximately 18,000 tonnes of honey per year from around 500 beekeepers who run commercial beekeeping operations from New South Wales, Queensland, South Australia and Tasmania. (Source: CASWorkx & Capilano Honey Website)

Due to the massive amount of honey being collected by Capilano, they soon realized that the amount of honey being collected was larger than the demand for honey in Australia. With the HACCP accreditation and the technology with them to ensure quality, they had a good product and supply of it to begin investing in exporting to overseas markets.

Exporting Success

Capilano Honey is now exporting to over 38 countries across the globe supplying quality, healthy honey. Supplying that portion of the world however could not have been in Capilano’s initial thinking as they could produce no where near that much in Australia to meet the demand of so many countries. They therefore decided to form partnerships with businesses in two other countries, Argentina and Canada.

Capilano Labonté Inc. which operates out of Canada is a supplier of honey to all over North America, assuming the same quality standards that were undertaken at the Australian branches. Similarly, Capilano Argentina followed suit on the quality control, however being Argentina, the conditions for growing honey are optimum and so this branch produces enough honey to supply not only South America, but Europe, Japan and North America as well.

For this study however, we will focus on Capilano’s entry into the Argentinean market. In 2003, the company entered into a joint venture with a local company called HoneyMax allowing Capilano to have facilities and a portion of the beekeepers fulfilling their supply needs. With Capilano apart of the joint venture, they were able to improve the facilities at the location in Argentina allowing them access to “world class honey processing technology, further improving the quality of honey exported” (Capilano Argentina 2007, Corporate). Now with the new processing facilities and the optimal conditions in Argentina, Capilano now had a good supply of honey and the means to keep it in a clean, healthy state to keep the quality assurance that the Capilano brand name has with its products.

Background of Argentina

Argentina is a country in South America that has a population of roughly around 40 million people with an average GDP per capita of approximately $15,000 US. This therefore means that Argentina, in comparison with Australia, has around double the amount of people in which to sell too as well as having enough money to purchase cheap items to which honey is. With Capilano, success is almost assured in this country as honey developed by this company is especially healthy and cheap which should appeal to the average Argentinean, as their country already has a good honey market.

Information Provided by CIA Fact book.

Logistics of Delivery

As honey is grown all over Australia and in large quantities, trucks are used to get the honey from the beekeeper to the production facility where it undertakes its testing phase. Once the honey has been cleared for sale, the honey is shipped in containers ready to be sent off to stores around Australia or overseas. As honey has a very long lifetime, it means that the product made in Australia can be shipped overseas without it losing any of its quality in the time it takes to get from a port in Australia, to a port overseas.

To get honey from Australia to overseas markets, there are several alternatives that can be used other than using shipping. Example of this can include shipping by plane, but since the cost of transporting by air is much greater and the honey has a long life time, the obvious best way to transport is by the shipping lanes.

In the Argentinean branch of Capilano, they instead shipped knowledge and technology, rather than honey, to grow its market in the area. By entering into the joint venture with HoneyMax Argentina and providing the resources to grow, Capilano Argentina grew to be a massive supplier in that country and overseas. “Capilano Argentina builds on this technology and is the first state of the art honey processing facility in Argentina” (Capilano Argentina 2007, Facilities). Once the assets were in place in the overseas firm, the site could run itself aside from inspections to make sure that the honey is at a particular standard and thus no more exports would be needed to Argentina.

Customs Regulations

As honey is a food product, it must adhere to any laws regarding the well being of the customers in whichever country in question. A typical example of this is the SPS agreement which states that firms should take necessary means “to protect human or animal life or health within the territory of the Member from risks arising from additives, contaminants, toxins or disease causing organisms in foods, beverages or feedstuffs” (SPS Agreement 2007, 9). Capilano Honey, which has HACCP accreditation, ensures that its product is of the highest standard, both in taste and in health. They ensure this by rigorous testing both before and after production.

They also have the facilities in place to trace a jar of honey right back to the beekeeper who supplied it should any contamination occur.(CASWorkx 2007, Capilano) With all the procedures mentioned above, it makes Capilano Honey a very healthy product both here and abroad. The products are also well packaged to ensure that the product can’t be contaminated en route to any country and are as fresh as possible for the end customer when they receive it.

Market Entry Methods

Capilano Honey has used two different types of market entry to achieve its success overseas. These are Joint Venture and Agents and Distributors.

Joint venture

A joint venture is an agreement between two companies to manufacture a product on a joint basis. “As a form of market entry, it provides greater cover over sales and distribution; develops local manufacturing packing and assembly; permits technology transfer; provides control over cost and production quality; and enhances market penetration, growth and customer loyalty” (Branch 2006, 490). As Argentina had a great potential for honey growth with optimal conditions for growing honey, Capilano decided to set up a joint venture with a local company called HoneyMax Argentina to take advantage of the supply that the country has. As Branch states, this market entry method permits them to transfer technology and provide control over cost and production quality which was exactly what Capilano did with its Argentinean branch, to make it a world class leader in honey production.

Agents and Distributors

For countries that Capilano has no infrastructure in, they use Agents and/or distributors to get there products out to its customers in foreign markets. By observing market preferences in these countries, Capilano can understand which blend of honey is best suited for that country and manufacture it to that nation’s quality standard. All that remains then is to ship it to the target country where the agent is responsible for securing orders. “The agent does not make a profit but is paid a commission on all orders secured, for which his or her principal obtains eventual payment” (Branch 2006, 475).

Right Choices?

Based on the countries, one can see the success of both and also see that these were the two right mediums to choose for their respective markets. Argentina was chosen to implement a Joint Venture in because of its major honey market and its ability to grow that to make it a world competitor. With supporting infrastructure, knowledge and experience in the field, Capilano were able to turn the Argentinean honey industry and make Capilano Argentina a world renowned brand of honey that supports its policies on quality.

For any countries outside of the ones selected for joint ventures, agent and distributors were used to get the massive abundance of honey in the countries such as Australia and Argentina to one of the other 30+ nations that Capilano supplies.

Financial Arrangements

When Capilano Honey decided to set up a joint venture with Honey Max in Argentina, it knew that in order to become a market leader in the province, it needed to commit financially to the venture to ensure that it would have facilities and quality assurance above and beyond its competitors in the region. This support from Capilano allowed the branch in Argentina to grow to be not only market leader in the target country but in many areas around the world as well.

Additional Information

The honey industry in Argentina has been going strong for several decades, which HoneyMax’s (the company Capilano is in a joint venture with) owners and directors had vast amounts of experience in. “They have played a key role in leading honey exporting organizations and have contributed to the development of the Argentine honey industry” (Capilano Argentina 2007, Corporate).

HoneyMax, in conjunction with Capilano, currently exports to more than 15 countries across Europe and North America. Here it can be seen that the industry in Argentina for honey is massive and Capilano as a whole can soon look to exporting to more countries if this branch continues to grow in its support of world class technology which furthers its quality.

Capilano has used export market entries such as joint ventures to set up in countries where honey is a major industry and has taken their production and quality assurances to the next level, enabling them to become market leaders in the region and also in other nations. Using this same tried and true method, Capilano could more than likely launch other joint ventures in other countries in the future to further expand its honey empire and become even more of a global honey producer than they currently are.

Conclusion

Through all the facts given above, it can be seen that Capilano has successfully launched into the international arena with dominance in the Argentinean honey market. It achieved this by setting up a joint venture with a local brand who had extensive knowledge of the local market and then taking their honey production and quality to the next level with the use of world class technology. The success of this combination is evident as Capilano in Argentina has become not only the market leader in this country, but is also a major supplier to many nations in Europe and also in North America. Capilano as a whole can be seen to be making exporting success as it now exports to around 38 countries worldwide.

References

Hazard Analysis and Critical Control Points. 2007. (accessed May 9, 2007).

Capilano Honey. 2007. (accessed May 9, 2007).

SPS Agreement. 2007. (accessed May 9, 2007).

CASWorkx. 2007. (accessed May 6, 2007).

Branch. A. 2006. Export Practice and Management. London: Thomson Learning.

CIA – The World Fact book. 2007. (accessed May 9, 2007).

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