South African exporters need to look beyond the factory-gate price of their products and understand the full cost of getting goods onto international shelves, as logistics and other export expenses can determine whether a product remains competitive in foreign markets.
The warning comes from Brenda Wilkinson, co-owner of South African olive oil producer Rio Largo, who shared her experience at the Exporters Western Cape Women’s Month breakfast in Cape Town.
Wilkinson said government-supported trade missions had taken Rio Largo to markets including Russia, Canada and Peru. While not every mission resulted in immediate sales, the international exposure provided valuable insights into customer expectations, market conditions and the costs involved in exporting.
For Wilkinson, the lessons gained from these experiences were often as valuable as securing an immediate order.
“Not everyone was buying South African extra virgin olive oil, but I learned something on every mission and brought that knowledge home,” she said.
A trade mission to Peru provided a particularly important lesson in the importance of understanding landed costs.
Rather than attending a traditional exhibition, the South African delegation was taken directly to the premises of a prospective importer. The importer then worked through the cost of the product from the point it left South Africa through shipping, supply-chain expenses and its eventual arrival on the retail shelf.
The exercise demonstrated that a product can be competitive at the point of production but become too expensive once freight, handling, distribution and other costs are added.
The importer ultimately told the visiting exporters that if their products could not compete at the final retail price, they would have to leave. None of the companies present believed their products could reach Peruvian shelves at a competitive price.
Although Rio Largo did not secure a sale in Peru, Wilkinson said the experience provided valuable information about the realities of entering an international market.
The lesson is particularly relevant for businesses expanding into unfamiliar export destinations. A potential buyer, strong demand or an attractive market size does not necessarily translate into a viable export opportunity if logistics costs push the final price beyond what consumers are willing to pay.
Exporters therefore need to calculate the complete landed cost before committing significant resources to a new market. This includes transportation, freight, insurance, customs, duties, handling, warehousing, distribution and other expenses that can accumulate between the producer and the final customer.
Understanding these costs can also help exporters identify where they need to improve their competitiveness. Companies may need to reconsider packaging, shipment volumes, distribution models, pricing strategies or even the markets they target.
Wilkinson also encouraged South African businesses not to write off trade missions simply because they do not immediately generate orders.
International missions can provide exporters with first-hand information about competitors, consumer preferences, pricing, regulations and distribution channels. These insights can then be used to refine products and strategies before returning to the market.
For smaller exporters in particular, such exposure can help shorten the learning curve associated with international expansion.
The experience of Rio Largo illustrates the potential value of this approach. After participating in international trade missions and building its export capabilities, the company has expanded its international footprint and now exports to 15 countries.
For South African businesses seeking to expand beyond the domestic market, the key lesson is clear: export success depends on more than producing a quality product. Businesses must understand the entire supply chain and ensure that their goods can reach the customer at a price that remains competitive.
As global freight, fuel and supply-chain costs continue to influence international trade, calculating the full landed cost should be a fundamental part of every export strategy.