Power Lunch: The Potential in Cuba

Feb. 3, 2015
An end to the embargo could be quite an opportunity for U.S. food and beverage processors.

After half of a century of frozen relations with Cuba, there is a noticeable thaw as the pace of events are heating up. While obstacles remain, the path towards normalized relations will continue.

The U.S. agriculture community is squarely behind the push to an all-out end to the embargo. That force combined with the U.S. Chamber of Commerce and the majority of Americans, who are turning their attention to making friends with an old neighbor, makes any reversal in direction difficult.

So how should companies view the opening of a new market located only 90 miles off the coast of Florida? My advice is to embrace it, do your homework and go slow. But at the same time, do not be afraid to get involved sooner rather than later.

Relationships matter in Cuba just like anywhere else in the world. Even if we ended the embargo tomorrow, we still need to compete with other countries that are currently doing business in Cuba, such as Brazil, China and Canada.

Prior to the avalanche of good news between the U.S. and Cuba, I had been exporting mixed supermarket goods to the island for the past six years and with success. I was selling more than 150 items, including cereals, peanut butter, mayonnaise, canned fruits and beverages to every retail chain in Cuba.

It took time to understand that market, especially given the fact that you cannot just Google Cuban supermarkets and buyers. But beyond just understanding the lay of the land, successful business requires an understanding of Cuba’s culture, history, language and the pace of life on the island itself.

Perhaps that is the most important lesson when doing business in Cuba, “pace”. No matter how hard we try, it seems that most North Americans will revert to the “time is gold” rhythm of life that we are accustomed to. We see so many opportunities and solutions for a development that we believe is best. But in Cuba, it’s more like “poco-a-poco” or little by little. And that plays out in much of life in Cuba, from how you walk in the streets of Havana (always in the shade and slowly), to business negotiations, even to Cuban baseball strategy -- but “small ball” is for another story.

The fact is not that there exists the opportunity for everything, but rather understanding which companies and products can fit into the existing economic structure of Cuba and be successful.

Certainly there are other challenges in Cuba that every exporter will face including inspections, pilferage, warehousing, and local distribution infrastructure. But these are challenges confronted by most exporters all over the world. What remains in Cuba is an opportunity to develop a relationship both with buyers and consumers that is likely to last for decades to come.

Cuban consumer habits are similar to those in the U.S. In fact, there was a time when products were first tested in Cuba to determine their future effectiveness in the U.S. market. It is a country of 11 million, which comparatively would make it the sixth largest state in the U.S. That’s a lot of people, and given the geographical, familial and cultural ties between the U.S. and Cuba, it seems safe to say that trade opportunities between both countries are as bright as Cuban sunshine and potentially strong as Cuban rum.

Surely the economy of Cuba will take time to develop. But it may develop quicker than you expect. The country has an educated workforce, allowing them to export professional services. In addition, a surge of U.S. tourism and foreign direct investment will provide additional sources of revenue.

When U.S. tourists are freely permitted to travel to Cuba, they will be looking to purchase familiar brands. Not only for their own consumption, but for their Cuban families as well. That will create a sales uptick in retail and wholesale packaged goods.

But the tourism market is only a small part of the equation. While it will provide for export sales in the immediate future, it is the brand loyalty of the Cuban national that is most desired. That will take time to develop, but given the freshness of the market and the abundance of opportunities, the journey should be exciting for any company prepared to remember that the rhythm of Cuba is her own.

About Paul Johnson

Paul Johnson is the vice chair of the United States Agriculture Coalition for Cuba and the executive director of the Illinois Cuba Working Group. He owns Chicago Foods International, which exports food products to Cuba. He has spent the past 20 years either living, working or studying in Cuba. He can be reached via e-mail.

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