Infrastructure and government regulation are two challenges in the BRICs

Infrastructure and government regulation are two challenges in the BRICs

The so-called BRIC markets of Brazil, Russia, India and China have continued to forge ahead in demand and output. While these regions have continued to offer terrific economies to multinational food manufacturers and retailers, their sheer size and often primitive logistics infrastructure mean that companies are having to take careful measure of the real costs of manufacturing and distribution in these new markets.

The growing middle classes of the emerging economies has provided multiple opportunities for food manufacturers and retailers as they look to spread their wings and expand beyond domestic shores.

Logistics firms have either had to adapt to the growing interest of their customers in these markets or have been created to exploit the opportunity in the BRIC economies.

Inna Kuznetsova, chief commercial officer of global logistics firm CEVA, points to China as a major market for the company.

"We have a very big presence in China where we are one of the leaders in domestic transportation, and we see a lot of companies moving their supply chain management capabilities to China as they move production," she tells just-food.

"It's not only local consumption but local development that takes place and that presents a great opportunity for us, to help them with their logistics needs. We are also one of the leading logistics providers in Brazil and we have a very good presence there in the consumer goods and retail sector."

However, operating in fast-growing, geographically diverse markets, with still huge discrepancies in income, generates challenges for FMCG companies - and for their logistics providers.

Infrastructure is a problem common to all the BRIC markets, especially with the uneven development of the economies.

Danielle Negueloua, director of international for US logistics firm Johanson Transportation, highlights the varying conditions across China.

"There are definitely challenges and the most widely known ones are in China," she says. "Eastern China is relativity well-prepared as far as infrastructure is concerned and there is a growing market in the western part, which we know they are in the process of developing. Because we deal with food markets we are dealing with crops and of course there are opportunities in western China to grow tomatoes etc, so we are being asked to ship machinery out there ... and what we find is, when we go to the main ports, the infrastructure is there but other things can be slower and they have strikes."

Inna Kuznetsova, chief commercial officer of global logistics firm CEVA, highlights the issue of customs. "Sometimes customs work can be complicated and requires extra skills to handle. Also, with the fast growth of these economies ... sometimes the development can not catch up with the growth so its getting the right skills and people who can perform and train them very fast."

Negueloua also says government regulations can often cause problems. "There are certain companies that still struggle and have to play by the rules in China. Those coming from the UK and the US we generally struggle with, and then you have to take into account holiday periods in other countries and that goes back to why logistics partners will really work with customers and explain what will impact them and look at the contracts to try and ease the flow of the foreign customs process."

Kuznetsova believes a global logistics provider, with executives of different nationalities, can provide FMCG companies with vital know-how in fast-developing markets like the BRIC economies.

"When you need to handle a much more global presence it often requires a much better understanding of international business and global cultures in your senior team," she says. "If you look at the CEVA board, we have seven nationalities on the board. I am Russian. We bring in our different understandings of the global business environment. It goes beyond the languages, it's an understanding of the culture and the goals. Some of the thinking processes and logic and criteria are different in each country. As you expand globally you need also to look at the diversification of your talent at all levels of your business. They need to understand the specifics and challenges."

Of course, the food industry and business as a whole is eyeing the next wave of key emerging markets. Negueloua believes logistics providers need to consider where their customers will look to manufacture beyond the BRICs.

"The [BRICs] are emerging economies and what we are going to see eventually is a little bit less of a disparity between their exports and imports because they are going to increase how much they consume. By consuming more and having more money their increase in wages is going to lead to another country coming into play that can manufacture cheaper and there goes the process."