Get ready to crack the EU market
With 28 countries, a population of more than 500 million people and the world’s largest economy, the European market represents tremendous opportunity for Canadian exporters. Yet the EU’s vast differences, many sub-regional markets and demanding tastes can make it a challenging place to do business.
As Canada and the EU prepare to implement the historic Comprehensive Economic and Trade Agreement (CETA), now is the time for companies to get ready to crack the diverse European market, experts say. And a new study is pointing the way to success for innovative companies in this complex yet lucrative region.
“The EU is very sophisticated; you can’t assume that whatever worked in Canada is going to work there,” says Danielle Goldfarb, associate director of the Conference Board of Canada’s Global Commerce Centre. She is co-author of a new report analyzing what has worked for Canadian companies in the past in the EU and how they can best take advantage of CETA when it comes into effect. “History does have something to say about who’s most likely to succeed.”
The study isolated particular strategies among companies in the EU market. It found that exporters boost their sales by exporting to the EU, but not their short-term profits. Innovation and frequently introducing new products, especially adapting them at the sub-regional level, are also a “crucially important factor,” she says. “This is a huge market, it’s a very rich market, but you have to get it right. And if you want to take advantage of CETA, you can’t just see it as a homogeneous entity.”
CETA is considered Canada’s most ambitious trade initiative. It will open doors to the EU market, which has annual economic activity of almost $18 trillion, eliminating tariffs and especially many non-tariff barriers for Canadian goods, services and expertise. It provides preferential access that is not enjoyed by our competitors in other countries.
Goldfarb says that with Canada’s trade with the United States remaining largely flat recently, it’s important for Canadian companies to succeed in the EU. Analysis shows our trade with the region growing significantly by 2025.
Canada has historical and cultural ties with Europe and a significant trading relationship in the EU market, especially selling expertise and services, she points out. These include computer and IT services, finance, insurance, architectural, engineering and other technical services.
Desjardins, the largest cooperative financial group in Canada, opened a European representative office three years ago in Paris, with a mandate to assist Canadian clients doing business in the EU as well as to help European companies coming to North America. Lucia Baldino, senior manager of the office, says that it has done well, with “exponential” business even amidst Europe’s economic downturn in the early days.
The office provides market information and advice, helps companies understand cultures and customs in Europe and offers sector intelligence, she says. It has identified potential partners for companies, organized a trade mission and seminars so that clients can meet with possible buyers and helps companies get access to financing in the EU.
The European financial services industry and business environment can be intricate, Baldino says, noting that making contacts is key. “In Canada, you can pick up the phone and speak to the CEO, but here networks and introductions are very important.”
Baldino is confident that CETA, by eliminating tariffs and other barriers, will boost sales for companies in Europe and make it easier to do business there, “but they need to prepare.” It’s important to build relationships by visiting the target market, investing time and finding local partners, she says.
In terms of products, pay attention to health and environmental requirements and investigate laws and regulations, she says. “There’s a lot of layers,” she notes, which can be specific to a country or Europe-wide.
“Canadian products are considered safe, they’re high-quality and Europeans are open to them,” she says, adding that making adaptations according to local rules and taking care in terms of labelling and dealing with customs brokers and logistics specialists are critical. “It’s important to see this as a long-term commitment.”
Caroline Charette, Senior Trade Commissioner in Paris, says companies should immediately look at the provisions in CETA and “see what’s in it for them,” in terms of their sectors, for example.
“Establish yourself right now and make contacts so when the opportunity opens you’re not starting from scratch,” she advises. “Don’t wait for formal signatures and implementation.”
She says that some companies will be surprised by what they find in Europe, such as the fact that France is a highly technological and innovation-oriented economy, which plays to Canada’s strengths. “We’re not all Mounties and maple syrup,” she says, while at the same time in France, “if you don’t come with something unique and innovative, chances are they can find it around the corner instead.”
Europe has expectations of quality, uniqueness and high standards in consumer goods, Charette says, and companies must be careful to follow all administrative steps required. “There can be heavy bureaucracy, and we’re not used to that. Don’t be caught off guard.”
Within Europe “there’s a real diversity in sub-regional markets,” Goldfarb says, as opposed to selling products in the U.S., where “once you get across the border you’ve got a relatively homogenous market.” Indeed, the Conference Board study showed that the success of Canadian companies in the U.S. had “no significantly statistical impact” on how they did in Europe, although experience in the Canadian market was helpful, given our standards and discerning customers.
Improving products and introducing new features is a “very important predictor of success and longevity,” she says. This can mean making amendments in terms of sizing, packaging and qualities like sugar content in one region versus another. A company can also add a service component for a product, which leverages the significant demand among Europeans for services.
Canadians are likely to continue to face policy rules and regulations under CETA, and following EU standards is critical, Goldfarb says. Under the agreement, Canadian regulatory authorities will be able to pre-certify a narrow category of products, according to European specifications, before they leave Canada.
Steve Spicer, general manager of sales and marketing in Europe for Ocean Choice International, a seafood company based in St. John’s, Newfoundland, says there is significant demand for its products in different European markets. But the elimination of tariffs will open up new sales opportunities for products that wouldn’t ordinarily be sold in Europe today, he says. “It’s an exciting time.”
There are differences in species sold and the preferred product format within various European countries, but all will benefit from CETA, he notes. For example, France is a large market for scallops and scallop meat, Italy buys Canadian lobster and Portugal imports flat fish species such as American plaice and yellowtail flounder. He expects that CETA will help create a broader interest in Canadian seafood in all European markets.
He says that CETA, which will immediately remove the duty tariff rates, which range from 6 to 20 percent on almost all Canadian seafood products, will be a boon to his company overall. “To put ourselves on a level playing field with other fishing nations like Greenland and Iceland should help us, no doubt about it.”
Ocean Choice has sales of more than $200 million a year and does about one third of its business in Europe today. Sales at home have levelled off somewhat, while Europe is considered a growth market, Spicer says. The company anticipates more retail market opportunities once the tariffs are removed and it plans to identify Canada and the quality and sustainability of its seafood on labelling more strongly. “We want to fly the Canadian flag a bit higher.”
Ocean Choice’s strategies for success have included setting up a European office in England, Spicer says. “It helps to be closer to the market. You do need relationships, and that helps you understand what the customers and markets are looking for,” he explains.
The Canadian Trade Commissioner Service (TCS) has been helpful in making introductions, he adds, hosting a trade delegation and organizing meetings to “get Canada elevated in people’s minds.”
Europe is divided into mature markets, like England and Germany, and emerging ones such as the Eastern European countries, Goldfarb notes. The Conference Board study found that Canadian companies going to emerging markets first without getting business experience in Canada or the U.S. were more likely to fail, while those that first went to mature EU markets did better.
Goldfarb says that it’s important for Canadians to understand Europe better, going there, making connections with Europeans, establishing a local presence for their businesses and building credibility. “You can’t just respond to a sales order from a European company and hope for the best.” Tools and services such as the TCS as well as business associations can help companies learn how to differentiate themselves, she suggests.
Charette says that countries and regions in the EU have services that can help foreign companies investing or trading there, such as “Invest in France”, a government agency that attracts investment. The TCS can especially help companies sector by sector and can assist companies in smaller centres.
Through the EU, Canadian companies also get access to a wide market beyond Europe, which acts as a gateway to the Middle East and to Africa, for example. Europe is even a test-bed for some companies looking to develop their products and sell them in those markets, Charette says.
Once CETA is implemented, Canadian companies will also have access to the “vast” government procurement market in Europe, Goldfarb points out.
Baldino says that Canadians are particularly known for their expertise in infrastructure, and under CETA they will benefit from procurement at all levels. But she cautions that it’s important to get to know the different markets there as soon as possible.
“It’s going to take time to get ready,” she adds. “Don’t just show up thinking you’ll be doing business they same way that you do it in Canada.”
For more information, contact the Canadian Trade Commissioner Service.
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