HOT OVERSEAS POTATO | Global Trade Magazine
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  May 4th, 2017 | Written by

HOT OVERSEAS POTATO

HOW SCOTT FARMS’ SWEET POTATOES LANDED ON EUROPEAN TABLES

By successfully introducing Brits to an “exotic” product and assuring the quality and reliability of its supply chain, Scott Farms’ sweet potatoes are now on firm ground in Europe.

A staple in the diet of Native Americans even before Columbus arrived, the sweet potato had long been viewed as a quirky vegetable served mostly during the holidays. And across the pond in Europe, anything other than a white potato was unheard of.

But things have changed for the lowly spud, which is now known to be packed with vitamins, dietary fiber and numerous other health benefits.

Today, U.S.-grown sweet potatoes are eaten raw, steamed, boiled and fried. There are now sweet potato chips and microwaveable versions of the tuberous root, presenting abundant sales opportunities here and abroad.

In North Carolina–the nation’s premier sweet potato grower–the fortunes of family farms are rising as they increase production to meet the demands of a thriving export market.

At the headquarters of Scott Farms in Lucama, N.C., just one-half mile from his birthplace, President and Co-Owner Linwood “Sonny” Scott Jr. takes satisfaction in knowing that his own farm has helped kick-start an export market that has served his customers and family well.

In a recent 12-month reporting period, Scott Farms shipped about 20,000 tons of sweet potatoes (or more than 1,000 sea containers) to the United Kingdom, the company says.

Its decision to export some of the sweet potatoes that it plants alongside tobacco, wheat, soy beans and corn was a response to an increasingly crowded domestic market, says Kelly McIver, executive director of the North Carolina Sweet Potato Commission.

“If there were no export markets the (domestic) markets would be flooded” and prices would be depressed, McIver explains. With the U.S. accounting for only four percent of the world’s population, selling the agricultural commodity overseas was a smart move by Scott Farms, she says.

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From 2006 through 2016, sales of sweet potatoes to buyers in the U.K. by all North Carolina producers jumped from $6.9 million to $66.4 million in revenues, according to figures from the state’s Department of Agriculture and Consumer Services, with shipments to all partner countries increasing from $10.7 million to $138.1 million over the same period.

Digging In

Before Sonny Scott and his family could export, they needed to assess whether a sufficient market existed–or could be created–to justify the time, manpower and costs of going international.

While the U.K. imports 40 percent of all the food consumed inside its borders according to Global Food Security, a sustainable-farming advocate, sweet potatoes made up only a small sliver of such imports when Scott Farms began looking offshore in 1999.

The company chose to take its time in deciding if, and how, it would export to the U.K.–a good thing, says Michelle Wang, an international marketing specialist at the agriculture department, as it can take two to three years for a firm to start exporting a known product and up to five years for a product with little prior exposure to gain traction.

At first, Scott Farms began shipping “a couple loads here, a couple loads there,” recalls Dewey Scott, one of Sonny’s two boys and the farm’s vice president of sweet potato operations.

Utilizing the services of a local forwarder who hauled their potatoes from farm to port, Dewey began getting a better understanding for logistics. “Because we were doing small volumes we were able to learn how the process worked,” he says.

But with inconsistent loads moving out of Charleston and Norfolk, finding a reliable berth on vessels remained a concern. Later, as a year-round exporter, Scott Farms was able to negotiate confirmed space on ships departing from the Port of Wilmington (N.C.) and utilize a direct, faster shipping lane to the U.K.

Scott Farms also began cutting into the prospects of sweet potato growers in places like Honduras and Egypt whose insufficient storage capacity affected the taste of their product, says McIver of the sweet potato commission, who believes that quality control and branding are two sides of the same coin.

“You have to be very careful and know what you can and cannot do,” McIver says. “If a product is subject to spoilage and sea transit will take time, then that represents a risk,” she says.

“Buyers will switch easily to other suppliers if expectations are not met,” warns the Centre for the Promotion of Imports, a Netherlands-based trade group that encourages U.S. exports. It adds, “Make sure your products can compete with the quality produce of other suppliers, optimize your production and logistical processes or focus on different varieties…”

Branding was easier overseas “mostly because the pool was smaller and you can hit the ground running,” Dewey explains. “We didn’t just want to sell sweet potatoes, we wanted to sell our sweet potatoes.”

With consumers increasingly embracing the farm-to-table mantra, he adds, “People nowadays, they want to know the people who produce their products,” even if they’re almost 4,000 miles away.

Port or Starboard?

By 2005, and with market prospects in the U.K. looking sustainable, the Scott family had to make a critical choice: keep logistics in the hands of a third party or bring them in-house.

“It takes guts not to lean on anyone and to carry out the burden on oneself,” McIver says of the family’s decision to take direct charge of its supply chain and establish a subsidiary, Scott Farms International, to ratchet up overseas sales and marketing.

“The company needs to have infrastructure set in place, they need to have time to spare … they have to have capital,” she says, recounting just some of the requirements of a hands-on approach to exporting.

But as a family brand with a reputation to uphold for year-round freshness, Scott Farms wanted to “keep as much control of that product in-house for as much as possible,” recounts Dewey Scott.

There are a variety of reasons for adopting the subsidiary model of exporting, explains Charles Baldwin IV, a partner at the Wilmington law firm of Brooks Pierce, which offers strategic business counseling and tax planning to firms engaged in global trade.

Using an independent contractor to represent an exporter thousands of miles away “in the long term may be more costly” if he or she does a poor job, Baldwin says. In addition, “They’re going to want a year-or-two agreement and typically they’re going to want exclusivity.” Further, under some foreign laws, just sending a product sample or promotional materials to an overseas agent may constitute a binding agreement to use that firm exclusively, so know the person you’re dealing with, Baldwin warns.

To establish a subsidiary, “You look first to the tax rate in each country. Then, you look into whether there is a tax treaty in the country that might avoid double taxation. Then you look at currency and exchange controls,” he continues. And be careful about the fine print, he says, as some countries require a percentage of local ownership in the new entity or local representation on the company’s board of directors.

“I would find the best foreign partner you could … and add your people,” the Wilmington attorney emphasizes. “You want to make sure you have good and regular oversight by your people.”

For Scott Farms, a quick trial run with entrepreneur Stan Smith blossomed into what is now a decade-long relationship. Smith, who had 30 years of experience with fresh produce marketing when he first met the Scotts in 2006, served only about six months as a consultant before the family asked him to come in-house. As International CEO, he is now responsible for strategic business development and coordination of financial controls.

Prior to joining Scott Farms, “I’d never eaten a sweet potato,” confesses Smith. Now, he says, his favorite way of eating the vegetable is diced, steamed and served with grilled fish.

Smith admits that using a broker may be advantageous in the short run for U.S. firms, but he says a broker’s attention can sometimes be distracted.

“The broker by their nature is dealing with many, many brands, naturally,” he says. “A broker that’s operating on commission does not have … interest in the brand of the product.”

Dishing Up Advice

As Scott Farms International’s doors opened, Smith leaned on a deep network of contacts to get consumers interested in the health properties and multiple uses of the company’s product before launching a full-throated marketing campaign, “Love Sweet Potatoes,” that utilized cooking demonstrations, recipes, advertising and brightly emblazoned lorries rolling down U.K. motorways to drive the campaign’s messaging home.

“It was about opening people’s minds about what could be done with the product,” says Garry Smith, the U.K.-based international commercial director and Stan’s son.

Consumers found that they could not only grill sweet potatoes and add them to salads during the summer but could roast them or add them to soups and stews in colder months, incorporating the U.S. import into a year-round diet.

But in a country synonymous with fish and chips and teeming with pubs, it was Scott Farms’ decision to enter the snack foods business that represented its biggest breakthrough.

“We knew we created a fantastic product with the sweet potato chip,” relates Garry Smith, explaining that produce imported from North Carolina is peeled, sliced, and fried with a pinch of sea salt much closer to the end-consumer.

In a shrewd tactical move, in 2014 the Smiths chose to hand out sample bags of the new chips at Fruit Logistica, the Berlin trade show that’s considered a must-attend event for sales and relationship-building within the fresh fruit and vegetable industry.

While 58,000 show-goers caught up on the latest in packaging, logistics and technology, they munched on Scott Farms’ new chips. “The consumer education on the continent is done by client and trade shows,” says Dewey Scott, who regularly attends the massive Berlin show.

Newcomers to exporting, watching their budget, may want to tap into the resources of a variety of agencies stateside that can help them with the costs of getting to and participating in shows like Fruit Logistica, say Wang and McIver.

The North Carolina Department of Agriculture can serve as the activities manager for a company exhibiting abroad, says Wang, who shows up at such events about four times a year. In addition, working with the U.S. Small Business Administration, the State Trade Expansion Program, or STEP, can reimburse qualifying companies for up to $3,500 in trade-related travel expenses and up to $2,000 for export or marketing services when entering a new market.

Likewise, the Foreign Agricultural Service, a USDA initiative, helps would-be exporters identify initial opportunities and secure space at trade shows or on a trade mission. Other agencies, such as the U.S. Commercial Service or a Small Business Trade and Development Center, offer access to market research, supply-chain counseling and international matchmaking.

By 2016, with the opening of a second European office to serve markets in the Netherlands, Spain, France and Germany, Scott Farms had diversified its overseas operations in terms of both geography and product development, moves that McIver says illustrate a cardinal rule: “Spread risk as much as possible.”

Risks that are taken should be calculated carefully, adds Dewey Scott, referencing his own company’s reluctance to enter Russia full-bore. “A bad move with the best intentions can take you back a long way,” he warns.

“We have never serviced the Russian market directly,” explains Stan Smith, who from the U.K. now oversees all continental markets. “We did not have a clear vision for the risk versus the reward the market offered in our business model.” Products have been introduced in Russia opportunistically via a third party, he says.

Steady as She Grows

As Scott Farms continues to grow, the family-owned business makes it a point to remember what first earned it a place at the international food table: reliable delivery of a fresh product that’s marketed overseas by people who understand the company’s culture.

And, to uphold its brand reputation, the sixth-generation farm family hasn’t rushed into any big decisions, whether it be a new market, infrastructure or people.

The Scotts learned supply-chain lessons by working with a local forwarder, but it wasn’t until 2005 that they committed to a hands-on approach by creating a subsidiary.

Similarly, as export volume grew, it wasn’t until 2013 that the family committed to constructing a 60,000-square-foot sizing, grading and packing facility stateside, capable of boxing 60 cases of sweet potatoes a minute. In tandem with the construction of an additional 80,000-square-foot, environmentally controlled facility that now yields an even larger number of near field-quality sweet potatoes for up to one year after harvest, Scott Farms’ investments in infrastructure have helped ensure that all its exports are GlobalG.A.P-certified, offering transparent quality in each step of its supply chain.

For the Scotts and other exporters to the British Isles, the best may be yet to come. With the U.K. leaving the European Union’s single market, Prime Minister Theresa May signaled in January that Great Britain will be looking for additional trade opportunities outside the EU.

Beyond Europe, Scott Farms is starting to fix its eyes on other parts of the globe. “We’re looking at that very, very closely,” says Stan Smith, suggesting that Asia could prove an excellent market not only for the company’s established products but also for its newer line of 10 different spirits that use distilled sweet potatoes.

Longtime ally Kelly McIver at the N.C. Sweet Potato Commission believes Scott Farms will please its next wave of customers. Whenever she bumps into the family’s clients overseas, “They will just come and talk to me about the Scott family and how great they are,” she says.

“Never in a million years we would have imagined it would become what it became,” Dewey Scott says.

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