Stateside trade still looking up

Mar 20 2008 By The Journal

When America catches an economic cold, the rest of the world sneezes, but – so far – there hasn’t even been a sniffle among the North East firms for whom the US remains the top off-shore sales destination. Sue Scott reports.

HE might be teetering on the verge of recession, but Uncle Sam remains North East business’ biggest export customer. Around £1bn in products and services leave the region every year heading for the United States, with automotive, chemical, engineering, pharmaceutical, construction, aerospace and energy companies leading the charge. Stateside exports are worth 10% of the region’s entire foreign order book and even in the current climate, businesses have been insulated from a downturn – at least, so far.

It’s not culture that cements our “special relationship” so much as dollars and dimes, according to John Padbury, marketing director for Stockton-based Darchem Engineering, a long-standing exporter of aerospace products to the US, whose impressive foreign tally helped get them the finals of the North East Business Awards this year.

“The US is incredibly price sensitive but if you are within 10% of the lowest bid they will look at all those soft issues,” says John.

If you thought dealing with the biggest English-speaking nation in the world was easy, though, think again. They drive a hard bargain and they expect you to be awake when half the world’s asleep. They still insist on pounds and ounces and they’ve never learned how to spell ‘color’, but if you strike a business deal with an American, you’ve pretty much got a contract for life – which is a comforting thought as the Federal Bank wrestles with imminent recession.

Loyalty defines their corporate relationships, says Newcastle-based Simon Crosby, lead international trade advisor who picks up the American brief for UK Trade & Investment in the North East. “They get down to business very quickly but they are genuinely honest and trustworthy – you don’t hear of many companies getting their fingers burned in the US,” he says.

But he stresses that America is not one country, but several. “You are doomed to failure if you think you can work at arm’s length. It’s not just about getting the website right for an American audience, it’s about getting the back office right, even making sure there’s someone on the phone to take a call at 4am. Service is very important to the Americans – if you do not get the customer service right, you are doomed to failure.”

Emily Humphrys, commercial manager for Cambridge Research Biochemicals’, almost 100% of whose products go overseas agrees. “The difficulty we have is that the US is a big continent and we are not really hitting the middle states where there are some pharma companies and the west coast, which has all the biotech.”

So, the former ICI life science firm is looking to partner with other North East exporters and move further west. “We are looking to find some way of dealing with American customers, either by having a virtual office or finding a like-minded company that feels too small to pay for a whole office, but wants some presence. The life science market is a major one in America, but it’s got tougher over the last three years. We have seen significant declines in US sales. It used to be 50% of turnover, but it’s not that anymore. We’ve looked at ourselves and said you can’t just have a model that satisfies a few large accounts. So rather than just talking to the top five companies, we’re talking to the top 20.”

In order to remain competitive, CRB has pegged its pricing matrix for the States at a 1.6 exchange and adopted American customs, even down to using US paper sizes.

As Brits, of course, they do have one built-in advantage over home-grown competitors, says Emily. “Sometimes they think you’re more intelligent just because you have an English accent!”

GUY WOODALL of Eaglescliffe’s Thorncroft Drinks employed a UKTI “virtual export manager” to help him break into the Coke kingdom with his all natural, Healthy Thirst fizzy juices.

“It worked very well in terms of getting a very professional manager in to help and take hands-on control,” he says.

Not surprisingly, Americans initially struggled with the concept of a premium soft drink, but two weeks’ worth of product sold out in just two days through the upmarket Wholefoods Market. Price remains an issue.

“The US is one of the markets where we went in when the dollar was 1.69, which we thought was high. America is a cheap market for that kind of stuff; they buy on price. We got a tremendous response, but Wholefoods put it in at $1.99 which for us is not sustainable. We had to put it up to $2.50, which hit sales quite a lot and then the dollar slid drastically. Our US importer is still keeping it going, though.”

The company has, however, made some concessions. It is introducing a natural cola-based alternative to the iconic Coke, called Carnival Spirit, and is upsizing all of its bottles to 70cl “because the average single serve is about half a litre in America anyway”.