Analysis of a small Honduras mango producer's export plan.

Bradley, Don B., III ; Castellanos, Diana

ABSTRACT

The analysis done for QUATRO MANGO PRODUCERS (fictitious name) reveals that the producer has strengths and weaknesses in the areas of marketing, production--operation process, human resources, and insurance, taxes, and zoning.

Price fluctuation, dependability in one market segment, indirect commercialization, commercialization costs and risks, and the lack of information about the United States market and the distribution channels are some of the company's problems in the marketing area. It is strongly recommended that the company seeks the diversification of markets, e.g., Canada or Europe. In addition, the profitability would be higher if the company exported a value added product such as mango juice, mango jelly, and dehydrated mango, among others, providing access to new markets. Marketing research is important to determine in which market the company should focus and to identify which are the customers' preferences. QUATRO MANGO PRODUCERS executives should also consider their participation in international trade fairs and trade shows to promote the company's name and to establish contact with potential business partners.

In the production- operation process some weaknesses were identified: dependence in just two varieties of mangos, low amount of production, inability to produce out of season, phytosanitary problems, quality control, storage and packing capacity, and financial limitations for working capital. The recommendations for the production-operation process are that, if possible, the Honduran mango producers should work together to standardize the production process and quality standards, to negotiate better prices with the US importers, and to lower the costs of insurance, shipping, and other importation costs. Also during the time of year that there is no mango production, the company should provide packing and exportation service for producers that export other kinds of fruit. QUATRO MANGO PRODUCERS should also study the possibility of adopting other varieties of mango to reduce the risk of changes in the market preferences. Again, it is strongly recommended that the company diversifies its product and its market segment. Finally, the company should ask for financial and technical support from the government or other international agencies, e.g. USAID, in order to expand their mango plantation and thus, their exporting capacity.

In the human resource area the company is experiencing problems related to the lack of a well defined human resources department. This has also caused the company to not be able to provide its employees some benefits such as, training, and healthcare, among others. Also, one of the biggest problems that the company has experienced is that it has no representatives in the US port to receive the product and to certify the conditions in which the importer receives the fruit. Thus, it is important that the company establish a well-defined human resource department to accomplish some objectives related to train workers in quality standards, manage the payroll system, and make sure that the workers receive all the benefits according to the law. One of the company's objectives is to directly commercialize the mangos in the US; so a human resource department will be necessary. The functions of this new human resource department could be to assure that the company meets the labor laws requirements in the US and to recruit the labor force for sales, transportation, and administrative personnel.

Due to the fact that QUATRO MANGO PRODUCERS has a small amount of production, the insurance, taxes, transportation, storage, and other costs are very high. However, Honduras and the other Central American countries recently signed a free trade agreement with the US. Thus, QUATRO MANGO PRODUCERS should study this agreement to identify which benefits and opportunities it provides. Again, it is important to increase the amount of product for exportation to reduce costs.

BACKGROUND OF THE FIRM

Description of the firm

QUATRO MANGO PRODUCERS is a corporation constituted of four smaller companies: Two cooperatives of mango producers, a company dedicated to the cultivation of Asian vegetables, and Fundacion de Desarrollo Empresarial Rural (FUNDER), which is a foundation that helps small producers to develop their business. Two members of each company form QUATRO MANGO PRODUCERS's board of directors and they are in charge of the administrative management of the corporation. QUATRO MANGO PRODUCERS is located in Honduras. As mentioned before, QUATRO MANGO PRODUCERS is constituted of four smaller companies however this research paper is based solely in the mango producers' cooperatives.

Currently the mango cooperative is constituted of around 200 mango producers and 1000 hectares of mangos. A significant percentage of the mango producers produce at small and medium scale.

The mango cooperative works as follows: Each mango producer grows the mangos in their own farm. The farm has to be certified and the mangos have to be grown with the specific requirements of the US laws * (8). The harvest seasons starts in April and ends in June. During this season the producers send their mangos to a hydrothermal treatment plant to eliminate any plague. This treatment is automated with modern sensor equipment controlled by a computer. The hydrothermal treatment plant is certified and managed by the US Department of Agriculture and is a legal requirement for every producer in order to export mangos to the United States. After the mangos go through the treatment process they are classified according to their size and weight and later packed in boxes of 4.75 kg. The company's packing plant has a packing capacity of one container per day. The boxes containing the mangos are stored in a cold room and later shipped in a container to the Puerto Cortes (Northern port in Honduras) and then shipped by boat to Tampa, Florida. Customs entry papers may be presented to the United States Customs Service before the merchandise arrives to expedite the clearance. These documents are: a pre-shipment import authorization, Customs entry form 3461, evidence of right to make entry, e.g. bill of lading. (Merchandise may be entered only by the owner, purchaser or a licensed customs house broker), a commercial invoice or pro-forma invoice if a commercial invoice cannot be produced, packing list if appropriate, other necessary documents to determine merchandise admissibility, phytosanitary certificate, and a bond which is normally posted with Customs to cover any potential duties, taxes, and penalties that may accrue after release of the cargo.

There are United States Customs Service licensed commercial brokers (referred to as customs brokers) who typically act as an importer's agent for the preparation and filing of the paperwork for entry of the goods with Customs. Customs does not notify the importer of the arrival of any shipment. The carrier of the shipment typically notifies the importer. The importer makes their own arrangements to insure notification of arrival and timely filing of import documentation.

An importer/distributor is responsible for the mango importation, warehousing and distribution. In this case, QUATRO MANGO PRODUCERS works directly with the importer GARDEN FRESH located in Miami, Florida. The importer receives a 10% commission in addition to $0.20 per box for claiming the mangos at Customs, transporting, and storing them. It is important to note that even though the mangos are commercialized by the importer in the United States, QUATRO MANGO PRODUCERS is still liable for them during all the process of commercialization.

The mango varieties that are currently exported to United States are Haden (85%) and Tommy Atkins (15%). QUATRO MANGO PRODUCERS has experience exporting to the United States and Europe (Holland). During the 1990s the company exported mangos to Europe with success but the exportations were interrupted by Hurricane Mitch in 1998 and were reinitiated last year. For this year the company's goal is to export 540,000 - 675,000 pounds of mangos to United States. The price per box of mangos (each box weighs 4.75 kg) is $3 to $8 depending in the month of the year.

ANALYSIS OF THE INDUSTRY

Fruit consumption tendency

United States consumers have been encouraged to eat more fruits and vegetables for health purposes. A national program to encourage increased fruit and vegetable consumption was initiated by the health care industry and agencies in the United States under the name and slogan "5 A DAY". This program encourages United States consumers to eat at least five servings of fruits or vegetables each day for a better health.

The United States is a major importer of fruits and vegetables from around the world. These imports are typically counter-seasonal to the United States harvest. (3)

United States consumer attitudes on fresh products Fresh produce represents 8.8 percent of the sales at natural food stores and 9.7 percent at conventional supermarkets. The Fresh Trends, 2001 Profile of the Fresh Produce Consumer addressed the conventional fresh produce purchase, and highlighted emerging organic issues and opportunities. (4)

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Vegetarianism growth in the United States

Each day more and more Americans are following vegetarian diets. Around 20 percent of United States college students are reported to follow vegetarian diets. The vegetarian focus is not limited to the campus; a report by the Vegetarian Research Group indicates that more than 55 percent of Americans will occasionally order a vegetarian meal at a restaurant. (2)

The following product categories are expected to be the most important while considering exporting to the United States:

* products, mostly tropical, that are not produced in the United States (or only in very small quantities): examples include coffee, cocoa and tea, most tropical fruit and vegetables (both in fresh and processed form, e.g. fruit juices, concentrates and pulp), various spices and herbs, dried fruit and nuts; suppliers will be producers in developing countries;

* off-season products, such as fresh fruit and vegetables, that are produced in the United States, but where there is an unmet demand during certain periods of the year (outside the US season);

* in-season products, e.g. fruit and vegetables, for which there is a temporary or more permanent shortage because of strong and increasing demand; suppliers are likely to include producers in both developed and developing countries;

* novelty or specialty products, like high quality organic wines, certain ethnic food products or retail-packed food products; this segment is currently of particular interest to European food exporters, though some developing countries might also profit from such opportunities, e.g. wine exporters in Argentina, Chile and South Africa. (4)

According to the Packer Fresh Trends Report of 2006:

* Mango Purchases increased in 2005 - 10% more than in the Fresh Trends Survey of 2005.

* 73% of consumers claimed that they felt comfortable selecting mangos ripe for immediate consumption--but 24% reported that they did not feel comfortable in their ability to select ripe mangos.

* More than 50% of consumers surveyed said they preferred to buy mangos already ripe this year, up from 39% in 2005.

* Shoppers who ate at a fine dining establishment at least three times a month were the most likely group to buy mangos.

* Consumers least likely to purchase mangos were those with a high school education or less.

* 75% of consumers purchase mangos as a snack ... 53% as a dessert ... 34% as an ingredient in a recipe ... 26% as a salad ... 18% as an appetizer ... 17% as a side dish ... 4% as a main dish and 2% were not sure why they purchased mangos.

* The likelihood of purchase by region is mid-west 26%, west 41%, south 29%, and Northeast 41%.

* Likelihood of purchase based on education: 41%--college graduates ... 29% -some college ... 22%--high school graduate or less.

* The import value of mango imports in 2004 was $196 million CIF.

* Per capita consumption has gone from 1.1 pound per person, in 1995, to 2.2 pounds in 2004- a 100% growth in the last 9 years.

* US imports of fresh mangos in 2004 were 638 million lbs.; this is 5 million pounds less than 2003 but 110 million pounds or 21% more than 2000.

* In 2004 Peru had 11% of the market, Mexico had 63% share while Brazil had 9% ... the balance of the market was divided between Ecuador, Guatemala and a few smaller sources like Honduras and Haiti. (5)

GOVERNMENT REGULATIONS

Imported food is regulated by several federal agencies. (3) These include:

* The Food and Drug Administration (FDA), which is part of the Department of Health and Human Services and the Public Health Service--www.fda.gov

* Centers for Disease Control and Prevention (CDC)--www.cdc.gov

* The US Department of Agriculture (USDA)--www.usda.gov

* Environmental Protection Agency (EPA)--www.epa.gov

* US Customs Service, US Department of Treasurywww.customs.ustreas.gov

* Federal Trade Commission (FTC)--www.ftc.gov

Import requirements for all fresh products:

Phytosanitary certification

Import requirements depend on both the product and the country of origin. As a condition of entry, the government requires that the mangos must undergo irradiation treatment and be accompanied by a phytosanitary certificate with additional declarations providing specific information regarding the treatment and inspection of the mangos and the orchards in which they were grown. A phytosanitary certificate issued by an official of the exporting country must accompany all fruit and vegetables shipments to the United States. This official will be able to determine if the particular fruit or vegetable can be exported to the United States and what phytosanitary requirements must be met for export to the United States. The control of this process is with the USDA Animal and Plant Health Inspection Service (APHIS).

Pesticide and other contaminants

The Environmental Protection Agency (EPA) establishes standards for tolerances for pesticides, herbicide and fungicides used in the fumigation of agricultural products. Regulations on tolerance levels are applied to all chemically treated products intended for human and animal consumption in the United States. Fresh producers must only use chemicals which are registered for use on a specific commodity or group of specifically indicated commodities and in accordance with the direction on the package. The United States FDA will test products entering the United States for compliance with EPA regulations on pesticide, fungicide and herbicide residues.

Grade and quality standards

Certain agricultural commodities exported to the United States must meet import requirements relating to size, grade, quality and maturity. A certificate based on an inspection must be issued by the USDA's Agricultural Marketing Services (AMS) to indicate import compliance. Imported goods must meet the same standards applied to United States products (1). Products include: Fresh tomatoes Oranges Green peppers Grapefruit Avocados Dry onions Mangos * Walnuts Limes Eggplants Iris potatoes Cucumbers

Import Clearance

The United States Customs Service (Customs), a division of the United States Treasury Department, is responsible for the final approval and authorization for importation of all products. United States Customs reviews all documentation for the shipment against requirements and will not release goods from the port of entry until all United States Government requirements are met. They are also responsible for the collection of any import duties due to the United States Government.

In addition, the mangos are subject to inspection at the port of first arrival. This action allows for the importation of mangos from other countries into United States while continuing providing protection against the introduction of quarantine pests.

COMPETITION:

Local mango producers: Production of mangos in the United States is limited to three States: Florida, California, and Hawaii. Due to climatic conditions and expanding urbanization in areas of production, mango-producing acreage is small and production minimal. The United States relies heavily on imports of fresh mangos in order to meet consumer demand. The majority of mangos produced in Florida, California, and Hawaii are destined for local markets, with very limited larger-scale commercial production. The Small Business Administration's (SBA) size standard for mango farming is $750,000 or less in annual receipts. According to the 2002 Census of Agriculture, there were a total of 623 farms (400 in Florida, 11 in California, and 212 in Hawaii) engaged in mango production. Census data did not include annual sale valuation statistics for mango-producing farms. The exact number of mango farms that would be considered small by SBA standards is unknown. However, based on the small bearing acreage, production principally for local markets and the dependence on imports to meet domestic demand for mangos, it can be expected that the majority of these operations would be classified as small.

However local competition is facing production problems. For example, Florida producers face some serious obstacles to large-scale production that would meet the growing appetite of U.S. consumers for mangos. Commercial mango production is limited to the warmest areas of the state, where commercial development and agricultural operations compete for limited and expensive property.

During flowering and fruit development, certain conditions increase disease pressure on the flowers and fruits. Expensive iron

supplements are required for trees growing in the alkaline soils of Miami-Dade County. Although Florida produces good quantities of high-quality mangos, production costs are three to five times what they are in dryer climates. Under the North American Free Trade Agreement, inexpensive imports from Mexico have increased. Florida growers are losing their market share (7).

International Competition

The strongest competitors QUATRO MANGO PRODUCERS could face are the other Latin American countries that export mangos to United States. *

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DISTRIBUTION CHANNELS

Store Locations

The United States market should be considered as separate markets by state or region. A review of the concentration of retail stores by state reveals that some markets should be considered separately.

Very few companies launch products in the total United States. Most companies focus in initially on a few key markets and then they extend a product nationally at a later stage. (4)

Mangos can be sold in a natural food store or a conventional retail store. The natural foods markets represent 12,256 retail stores. The top ten states have over 50 percent of total retail outlets with 6,786 stores. Conventional retail stores represent over 120,000 individual stores. Within the conventional market, there have been mergers resulting in a concentration of retail chains. The top four food retailers now have a market share of 28.8 percent of total sales in 1998, up from 15.9 percent in 1992. The top 20 retail chains now command 48.2 percent of the total retail food sales in 1998 up from 37 percent in 1992. This concentration is greater in the largest markets, with the top 8 retail chains controlling 85 percent of retail food sales in these markets.

Fresh produce importers/distributors are responsible for the importation, warehousing and distribution of the product. Some importers will function as the importer and distributor within a region and sell the fresh produce to other wholesalers for servicing other markets.

OBJECTIVES OF THE FIRM

Corporate Objectives

The firm's corporate objectives are:

* To consolidate a market segment in the United States within 3 years,

* To consolidate a market segment in Holland within 3 years,

* Make QUATRO MANGO PRODUCERS a lasting business that generates a real benefit for the mango producers,

* Enter into Canada's market by 2008,

* Export other fruits and vegetables. Financial Objectives The firm's financial objective is:

* To achieve revenue growth of 10% per year.

Strategic Objectives:

The firm's strategic objectives are:

* To eliminate most of the intermediaries,

* To establish a local office in the United States with labor force in charge of handling and of the mangos direct commercialization,

* To provide mangos of excellent quality,

* to import mangos through other ports to have access to the northern and western market segments in United States,

* To add value to the product by means of processing. For example: dehydrated mango, mango pulp, peeled mangos,

* To increase efficiency by producing more and expending less,

* To negotiate with more brokers for the commercialization of the mangos,

* To explore and develop other methods to grow and to harvest mangos earlier and export to the US during January and February,

* To take advantage of CAFTA'S benefits.

MARKETING ANALYSIS

Marketing/Strengths

QUATRO MANGO PRODUCERS favorable location allows the company to have lower transportation costs and thus, to compete with low prices. Besides Mexico and Guatemala, Honduras is the country nearest to United States and if compared with its competitors from South America, QUATRO MANGO PRODUCERS has lower transportation costs and it is able to compete in the US market with lower prices for mangos. This advantage in price is important because 47% of mango consumers consider price as the most important factor impacting purchases as stated by "Profile of Fresh Produce Consumer", Fresh Trends, 2001.

Currently QUATRO MANGO PRODUCERS's mangos are being shipped and commercialized in the Florida area. This may be a main strength for the company because it has access to one of the most important key markets in United States. Florida has been ranked as number two in the top ten states for location of natural food stores in which mangos are sold. In addition, market research done by the National Board of Mango about the mango industry establishes that the highest rate of purchasing is among Hispanics (79%) in larger urban areas.

The key to accessing the United States market is the fresh produce importer. Fresh produce importers/distributors are responsible for the importation, warehousing and distribution of the product. QUATRO MANGO PRODUCERS works with the importer Garden Fresh and is currently negotiating with other importers of fresh fruits. This constitutes an important advantage because these importers have access to different regions within the United States and even though QUATRO MANGO PRODUCERS has to incur all the costs of commercialization, the importers provide their entire infrastructure (trucks, storage) that otherwise the exporter would have to acquire. Working with importers in the first stages of the business is an important strength because usually the importers already have contacts with supermarkets, retailers, and fresh produce stores, Also, the exporter can learn from these relationships and in a later stage of the business control not only the exportation of mangos, but also the direct commercialization in the US.

QUATRO MANGO PRODUCERS as mentioned before is constituted in part by a cooperative of 200 mango producers. A significant percentage of the mango producers produce at small and medium scale. This represents strength because working together can mean producing marketable quantities at better prices, reduce administration costs and it may also help to cut the costs of certification and participation in foreign trade fairs, etc.

Another strength of the company is that it does not rely in just one market to commercialize its products. QUATRO MANGO PRODUCERS, in addition to exportation of mangos to the US, has built up a domestic market in Honduras. All the mangos that do not meet the specific requirements for exportation but that are in good condition for consumption, are sold in the Honduran domestic market. Also, QUATRO MANGO PRODUCERS last year exported to Holland with good results and next year it plans to export to Canada. This helps to reduce over-dependency on one or more export market(s).

Marketing/Weaknesses

The price fluctuation, concentration in just one market segment, indirect commercialization, small mango production, inability to produce out-of-season, commercialization costs and risks and the lack of information about the US market and distribution channels by QUATRO MANGO PRODUCERS executives are some of the company's challenges.

The price of mangos varies during the year. In the first and last month of the year the price stays usually high, $8 per box, because there are not enough mangos to supply the demand. As more and more countries start to harvest and to export, especially Mexico, the market becomes saturated in April and the price starts to decrease, sometimes reaching $3 per box.

In addition, QUATRO MANGO PRODUCERS is focused just in one market in the US. Market research of the mango industry points out that the biggest market segments are in west and northeast US; however, the company just exports through Tampa, Florida port and it just has access to the south market that even though it is an important market segment it is also one of the smallest in the US.

One of the company's weaknesses is that it does not control the entire commercialization process of its products. Basically, the commercialization process ends when the mangos arrive to the US port and are received by the importer. From then on, the importer is in charge of the storage, transportation, and distribution of the fruit.

The possible disadvantages are that the exporter does not establish relationships with the retailers and the exporter can not manage the image of the firm in the US market.

QUATRO MANGO PRODUCERS, as explained before, is in part constituted of a cooperative of 200 mango producers and the majority of them produce in a small and medium scale. This situation creates a problem because there is not enough production to negotiate favorable prices with importers and it is also the reason why it is not feasible for the company to directly commercialize the mangos at this moment.

One of the problems that the company has had is the inability to produce and export before other countries. The exportation would be much more profitable if the company could export in January or February, that is when the price for mangos is at it highest. As mentioned before, the company is already trying to implement a new technological process to produce and export earlier.

QUATRO MANGO PRODUCERS is currently commercializing mangos in the US through the importer Garden Fresh. However, due to the small amount of production QUATRO MANGO PRODUCERS has not been able to negotiate favorable conditions. All the costs and risks of exporting and commercializing the product are incurred by the company.

The lack of information about the US market and the distribution channels have been a barrier for the company and at the same time is has made the company use the services of importers. The business could possibly be more successful if it knew which markets to focus in and which retailers to use.

Marketing/Opportunities

QUATRO MANGO PRODUCERS has the opportunity to increase its market participation because the mango industry has experienced a strong growth in the last ten years. Mango Purchases increased in 2005-10%. Industry sources expect recent years' strong growth to continue over the short to medium term. One of the main factors behind these very positive growth expectations is a strong and increasing consumer awareness of health and environmental issues. United States consumers have been encouraged to eat more fruits and vegetables for general health. The per capita consumption of fruits and vegetables increased 6.6 percent from 1989 to 1998. Fresh produce represents 8.8 percent of the sales at natural food stores and 9.7 percent at conventional supermarkets. Younger Americans are following vegetarian diets, as many as 20 percent of United States college students are reported to follow vegetarian diets.

Another opportunity is that developing countries should look at the United States not only as a potential future market for its products, but also consider it as a possible partner in various forms of cooperation within farming, processing, certification and marketing of products. There are a number of individuals, companies and other organizations that are interested in developing export/import projects in partnership with developing countries.

The trade fairs and trade shows are important opportunities to promote the company's name and image and also to establish relationships with possible business partners. Here are listed some of the most important trade fairs and trade shows that the company's executives can assist:

* Established in 1979, Natural Products Expo West is North America's largest natural and organic products trade show. It is held each spring in Anaheim, California and encompasses a wide range of product categories, including organic food, fiber and personal care products.

In 2002 Expo West attracted more than 25,000 trade professionals to the fair and more than 2,200 stands (exhibit booths).

* Natural Products Expo East, which is the largest show in this category on the East Coast and has the same profile of products as Natural Products Expo West. It is held each autumn in Washington, DC.

* Natural Products Expo Europe, which is held in Amsterdam during the summer. In 2001 there were about 300 exhibitors and 3,200 visitors.

* Natural Products Expo Asia.

QUATRO MANGO PRODUCERS can have direct access to the natural food distributors and wholesalers. There are numerous wholesalers, distributors and traders involved in the distribution of fresh fruits throughout the country. They may import some products direct or through associated companies but they obtain most of their products from specialized importers. Some of the major distributors are:

* United Natural Foods, Inc. is the largest natural foods distributor in the US and supplies more than 7,000 retail stores nationwide with natural groceries, body care products, supplements, and frozen foods. Its subsidiary Albert's Organics distributes organic products, including fresh produce, to retailers. It also owns Hershey Import Co. and runs a number of natural food stores (the Natural Retail Group).

* Tree of Life, Inc. (owned by the Dutch food company Koninklijke Wessanen) is another major national natural food distributor and reaches more than 15,000 food retailers in the US and Canada through about 20 distribution centers.

* Other important natural food distributors include Blooming Prairie Cooperative Warehouse and Northeast Cooperatives

According to a recent report by the U.S. Department of Agriculture the top food stores are: First, The Kroger Co. group with 2,200 stores and US$43.1 billion sales. Second is Albertson's with 1,796 stores and US$34.0 billion in sales. The Safeway group is third with 1,435 stores and US$29.0 billion in sales and fourth is the Dutch-owned A hold USA group (mostly on the East Coast) with 1,294 stores and sales of $23.4 billion.

QUATRO MANGO PRODUCERS can also consider some of the food sectors to increase its market participation.

The natural food store sector

The natural food store sector has over 12,000 stores in the U.S. with a focus on selling organic and natural food products. While this sector has several major chains it still consists predominately of independent retail stores

Conventional supermarkets

Supermarket chains and traditional grocery stores account for the major part of overall food sales. The conventional retail stores represent over 120,000 individual stores.

Another opportunity is to export value-added products. Some of the options are:

* Dried mango: Although there is a considerable domestic production of this product, there is also a significant import demand.

* Processed mango:

--Dehydrated mango, including freeze-dried mango

--Mango juice, concentrates and pulp/puree (canned, frozen, aseptic)

--Canned mango

--Frozen mango

Most of these products are used as ingredients or raw material by US food manufacturers, in particular in the case of juices, concentrates and pulp/puree, which are used not only in juices and juice drinks, but also in dairy products, baby food, bakery products, etc. Dehydrated fruit is used, for example, in desserts, dairy products, bakery products and baby food. There is some import demand for certain canned fruit, while frozen fruit is usually imported in bulk form and reprocessed or repacked by US manufacturers.

QUATRO MANGO PRODUCERS may also consider the organic mango industry which is one of the fastest in growth. The total organic sector of agriculture has recorded over 44 percent growth in certified acreage from 1992 to 1997, and cropland grew by 111 percent. Additional reports since 1997 indicate a continuing pattern of growth in organic acreage. The United States Government completed the US National Organic Standards in December 2000. With the full implementation of these standards by October 2002, the United States industry is preparing for increased interest in organic products. The conventional retail supermarkets have already begun to stock organic fresh produce and now represent over 42 percent of organic fresh produce sales. The United States major food companies are expanding into the organic market segment, and a consolidation within the existing organic and natural foods product companies will lead to increased advertising and promotion of organics in general which will further increase United States consumer interest in organic products, including fresh produce. The United States market has over 12 000 retail stores specializing in organic and natural foods. The United States imports more than US$6 billion of various fruits and vegetables. If the organic segment achieves the same level of imports as current United States retail sales volume (2 percent), the short-term import potential exceeds US$125 million.

Promotions also constitute an important opportunity to increase the market penetration and sales. According to the National Mango Board market research, the promotions are an effective way to increase mango purchases by all types of customers including those who do not buy mangos. Seventy-five percent of the people surveyed said that they would buy more mangos if a promotion was offered.

Marketing/Threats

Although the overall picture looks very positive, a number of potential risk factors or threats should be borne in mind. For example, the oversupply of mango may not only have immediate, but also more long-term negative effects. Reduced price and insufficient profitability amongst producers and traders are important factors. Furthermore other forms of environmentally friendly and sustainable agriculture are likely to result in increased competition in the future, for example the organic mango. Finally, even in the likely event that the market growth forecast turn out to be realistic, growth rates are bound to slow down at some stage similar to what has happened in certain European markets after years of rapid growth.

Marketing/Recommendations

Recommendations to be considered at the present:

* Work together with other mango producers from Honduras to standardize the production process, increase the supply capacity, and to control the quality and image of the Honduran mangos in the international market.

* Design differentiated strategies based in the service quality, package, and product presentation, among others.

* Increase the mango consumption with promotional campaigns about the health.

* Conduct a market research in the west and northeast US to determine if demand exists, if the demand is already satisfied or if sales opportunities exist, and what the customers' preferences are about product presentation, promotions, and distribution channels among others.

* QUATRO MANGO PRODUCERS executives should attend trade fairs and trade shows to establish contacts with possible business partners and at the same time promote the company's image.

* Negotiate with its actual importer, Garden Fresh, to do promotions inside the stores or supermarkets. These promotions could consist in giving the customers free slices of mangos so that they can try the product and increase future purchases.

Recommendations to be considered for the future:

* The Honduran producers should think about developing other products based on the mangos to diversify their market. The new markets that they could have access to are: pulp, juices, ice cream, yogurt, dehydrated mango, jellies, and even perfumes.

* To promote the creation of a Mango International Exporters Board that could regulate the mango production, gaining the stabilization of the prices.

* Negotiate with importers from west and northeast US to have access to the major markets.

Marketing actions taken by the QUATRO MANGO PRODUCERS:

* QUATRO MANGO PRODUCERS has been studying the implementation of a new technical process to harvest mangos in January or February and it plans that by next year it can start with the early exportation to the US.

* QUATRO MANGO PRODUCERS is already negotiating with importers located in California.

* QUATRO MANGO PRODUCERS is currently trying to learn about the commercialization process in the US and one of the future objectives is the elimination of intermediaries.

* Honduras' government has been increasing the financial support for the small producers lately so that they can increase their production.

PRODUCTION/OPERATION ANALYSIS

Production- Operation/Strengths

The local weather conditions The soil and weather conditions of Comayagua city in Honduras, where the mangos are grown, are excellent for the mango production. Comayagua has a really dry weather station of more than 4 months which is a requirement for the mangos to grow. In addition, the mangos that are grown in Comayagua have an attractive color due to the fact that the weather is hot during the day and cool during the night.

Production Process

The mango production process is directly supervised and certified by a US agency which also manages the treatment plant. This makes easier the process of exportation to the US because if a US agency certifies that the product is in good condition it will be less likely that the product would be rejected. Also the Honduras' government provides professional assessment to small producers through people well qualified that have studied in other countries. In the last years, the government also provided technical support to the mango farms through a water irrigation infrastructure. The government also provides local and international training for the producers and for QUATRO MANGO PRODUCERS's executives.

Administrative Structure

QUATRO MANGO PRODUCERS as explained before is managed by a board of directors, two from each individual company. This structure enables the corporation to have all the possible interested parties represented. QUATRO MANGO PRODUCERS executives are well prepared and well trained, with a lot of knowledge in the business.

Production--Operation/Weaknesses

Some of the company's weaknesses are:

Limited varieties

QUATRO MANGO PRODUCERS produces and exports just two mango varieties: Haden and Tommy Akins. The company is highly dependant in just these two varieties which is a risky situation if any changes in the market, such as potential plagues or existent illness related to the plants, are considered.

Relatively low amount of production

The majority of producers and especially the small ones have an annual production of 7 tons per hectare. This represents a problem because the company cannot supply a representative part of the demand in the international market and thus, the company cannot have a significant recognition with its customers. Also with a low amount of product, the company is unable to negotiate better exportation prices.

Even though there is a great harvest capacity per day, not all of it can be sent at the same time to the treatment plant because there is no space to store the fruit. Also, the company's packing plant has a packing capacity of one container per day, which makes the shipping process relatively slow.

Additionally, phytosanitary problems arise due to the fact that some mango plantations are infected with a plague and cannot be exported to the US and/or sold in the domestic market.

Overproduction

Overproduction affects the price of mangos. During the months of April through June the mangos are at it lowest price in the US due to the oversupply.

Quality Control

The Company also has problems with quality control because some of the mangos do not meet the requirements of size, color, shape, and ripeness that the law establishes. If the product arrives spoiled to the US, this situation can be caused by a poor quality package, improper storage conditions, temperature variations inside the container, extensive period of time between the harvest and the mangos' final destination.

Financial Limitations

QUATRO MANGO PRODUCERS also has financial limitations for working capital. Even though the government has provided financial support for the small producers, a line of credit with some banks was necessary.

Production--Operation/Opportunities

As mentioned before, the mango consumption has increased in the last few years. Also, the company has a production opportunity in some of the industries that are experimenting rapid growth in the US such as organic mango, processed mango, canned mango, dehydrated mango, among others.

Also the company has a treatment and packing plant that are not used when mangos are not in season. Thus, the company has the opportunity to use these plants to export other kind of fruits, e.g., pineapple, melons, watermelons, banana, among others. QUATRO MANGO PRODUCERS has already identified this opportunity and is currently planning to provide packing and exporting service for other producers during fall of this year. Since QUATRO MANGO PRODUCERS is a corporation that is in its early stages of growth, it can establish quality standards to protect the Honduran mangos image.

QUATRO MANGO PRODUCERS has the opportunity to diversify its markets, e.g., Canada, Europe and Japan. The company plans that next year it will start exporting to Canada. Currently, the company is negotiating with Canadian importers.

Lastly, building a team of producers, bankers, a production advisor, a financial advisor, and other business people will help QUATRO MANGO PRODUCERS take advantage of opportunities that may present themselves to the company as it continues to strive for success.

Production--Operation/Threats

The company faces the following production threats:

Cultivation

One of the company's biggest production threats is that the cultivation of any fruit or vegetable is highly risky because factors like changing weather conditions or a plague can spoil all the production and can leave the company without exportations.

Strong competition

QUATRO MANGO PRODUCERS has local and international competitors that have advantages of production amount, favorable location e.g., Mexico and Guatemala and higher quality standards, among others.

Image Control

Other Honduran producers that also export mangos to the US can affect the image of it.

Market saturation

Results in a severe reduction in price during the months of May through July.

Production--Operation Recommendations

Recommendations to be considered at the present:

* If possible, Honduran producers should work together with other Central American mango producers/exporters. The important factor is that the bigger the amount of exportation the better, because the company can negotiate favorable prices or sales agreements with the importer, lower costs of transportation, importation and storage.

* QUATRO MANGO PRODUCERS has to try to increase its efficiency to reduce the period of time between the harvests of the fruit until the time it is sold to the final consumer. This will increase the quality of the fruit and will reduce reclassification costs.

* The company should use its treatment plant and the packing plant to export other kind of fruits while the mangos are not in season.

Recommendations to be considered in the future:

* QUATRO MANGO PRODUCERS should try to adopt other mango varieties that can be grown in Honduras. This will reduce the dependence and risk in just two varieties of mangos and will increase the probability of purchase.

* As recommended in the marketing section, QUATRO MANGO PRODUCERS should consider exporting mangos with a value added. This provides the company the access to new markets, eliminates the market dependability in just one market segment, and the company can increase its profitability because a value added product is more expensive than the raw product.

* QUATRO MANGO PRODUCERS should consider the possibility of exporting to other countries that have demand for mangos, e.g., Canada, Hong Kong, Holland, France, among others.

Production actions taken by the company:

* The company is negotiating with Canadian importers and plans to start exporting to this country next year.

* Last year the company experimented exporting to Europe (Holland). The purpose was to gain experience to initiate a formal exportation process for next year and probably export as well to other European countries like Germany.

* The company plans for the fall to provide packing and exporting service for other companies.

HUMAN RESOURCES

Human Resources/Strengths

At the present time, QUATRO MANGO PRODUCERS's human resources division is not well defined. Basically the company just has a board of directors in which its members are elected by majority of votes. Other than that, each producer has his own employees that are in charge of watering the mango trees, keeping the farm clean and harvesting the mangos during the season. QUATRO MANGO PRODUCERS also has employees that work at the packing plant and a permanent engineer that works as a production advisor. The company keeps a file on all team members and makes sure that they have all the benefits that the laws stipulate. The majority of the producers have a weekly payroll system.

Human Resources/Weaknesses

The most serious weakness that the company has is the lack of a well-defined human resource department. As explained before, each producer has his own employees and this situation carries some disadvantages such as the lack of a training program and complications of individual payroll system.

Human Resources/Opportunities

The company aspires to create a formal human resource department not only locally but also in the US. The company sees an opportunity in bringing a Human Resources expert onto the management team that organizes all the employees' functions and benefits. In a later stage of the business, if the company decides to commercialize the mangos directly in the US market, a human resource department will also be necessary in the US.

Human Resources/Threats

QUATRO MANGO PRODUCERS currently does not have a well grounded Human Resources Division. Not being able to provide some benefits such as, training, healthcare, among others will make it more difficult for the company to find skilled personnel and be able to retain their services.

Human Resources Recommendations

Recommendations to be considered at the present:

* A human resource department is important at this moment especially to train the workers about the quality standards that the product has to meet.

* Also, a human resource department is important for keeping track of the hours worked by each worker, the payroll system, and to assure that all workers are receiving the benefits according to the laws.

* The company has to have a representative in the US that does an inspection to the fruit to define in which conditions is the fruit being received by the importer. Recommendations to be considered in the future:

* If the company plans to commercialize their product in the US directly, it is advisable that it has a formal human resource department in the US. This is especially important because the labor laws are different from Honduras and also because the company needs to recruit all the labor force for sales, transportation, and administrative personnel.

INSURANCE, TAXES, AND ZONING

Insurance, taxes, and zoning/Strengths

QUATRO MANGO PRODUCERS's strength in this area is that since last year it has been exporting to the US, meeting all the taxes and insurance requirements by the US government. Also the company is benefiting from the free trade agreement, CAFTA, signed by the Central American countries and the US.

Insurance, taxes, and zoning/Weaknesses:

When QUATRO MANGO PRODUCERS exports products to the US, it has to have insurance to protect its products since they leave the packing plant until they arrive to the US port. In addition to that, the exporter also has to pay the costs of shipment, the importation costs and the storage cost ($210US in total per container). If the product arrives spoiled, the exporter also has to pay an inspection, reclassification and repacking of the product. The exporter carries the risk while the product is being commercialized by the importer, so its insurance should cover this stage. All these costs represent a serious weakness for the company because it has to incur them even before selling the mangos. The importer sells the product, deducts 10% of sales commission and the rest of the money is transferred to the exporter within 30 days. This means that the exporter has to have a huge budget for working capital because it incurs its costs before selling the product and in addition receives its revenues 30 days later.

Insurance, taxes, and zoning/Opportunities

Honduras and the rest of the Central American countries recently signed a free trade agreement with United States, CAFTA. In this agreement the United States provides some preferences related to taxes and zoning that are favorable for the Central American countries.

Insurance, taxes, and zoning/Threats

The US has also signed free trade agreements with Mexico, which is the company's strongest competitor, and with some countries in South America. If these countries have a better negotiating ability than the Central American countries, their products may have more preferences than Honduran products. The company also faces the threat that the laws that regulate taxes and zoning will change at any time.

Recommendations/Insurance, taxes, and zoning were:

* Sometimes the free trade agreements offer a lot of opportunities for the exporters/importers; however, these opportunities are not used because the producers have a lack of the information. Thus, QUATRO MANGO PRODUCERS should study the free trade agreement that was signed between Honduras and United States and should try to identify the opportunities it provides.

* Again it is important to increase the amount of product for exportation to reduce the insurance and tax costs.

REFERENCES

Agreement between United States and Honduras Governments By US: Department of Agriculture/Animal and Plant Health Inspection Service (APHIS) By Honduras: Ministerio de Agricultura y Ganaderia/SENASA

Agricultural Marketing Service http://www.ams.usda.gov/standards/MANGOS.pdf

Food and Agriculture Organization of the United States (FAO), Corporate Document Repository http://www.fao.org/DOCREP/004/Y1669E/y1669e0g.htm

International Trade Centre http://www.intracen.org/organics/documents/US.pdf

International Trade Centre http://www.intracen.org/mds/sectors/organic/usmarket.htm

National Mango Board http://www.nationalmangoboard.com/assests/pdf/ CurrentMangoDemographics2006.pdf

National Mango Board http://www.nationalmangoboard.com/assests/pdf/ CommodityMovementReports.xls

United States Environmental Protection Agency http://www.epa.gov/fedrgstr/EPA-IMPACT/2007/ March/Day-12/i4444.htm

ENDNOTES

(1) Agricultural Marketing Service http://www.ams.usda.gov/standards/MANGOS.pdf

(2) Food and Agriculture Organization of the United States (FAO), Corporate Document Repository http://www.fao.org/DOCREP/004/Y1669E/y1669e0g.htm

(3) International Trade Centre http://www.intracen.org/organics/documents/US.pdf

(4) International Trade Centre http://www.intracen.org/mds/sectors/organic/usmarket.htm

(5) National Mango Board http://www.nationalmangoboard.com/assests/pdf/ CurrentMangoDemographics2006.pdf

(6) National Mango Board http://www.nationalmangoboard.com/assests/pdf/ CommodityMovementReports.xls

(7) United States Environmental Protection Agency http://www.epa.gov/fedrgstr/EPA-IMPACT/2007/ March/Day-12/i4444.htm

(8) Agreement between United States and Honduras Governments By US: Department of Agriculture/Animal and Plant Health Inspection Service (APHIS) By Honduras: Ministerio de Agricultura y Ganaderia/SENASA

Don B. Bradley III, University of Central Arkansas Diana Castellanos, University of Central Arkansas Estate No. of Stores California 1,937 Florida 853 Texas 785 New York 715 Illinois 518 Pennsylvania 465 Ohio 414 Washington 390 New Jersey 356 Michigan 353 Source: National Business Lists