The marketing of tropical hardwoods

By Patrick F. Kirwan{< Director of International Marketing Boise Cascade CorP. Portland, Oregon

f T takes 24 hours to Put an order I together for a carload of keruing or viola lumber, but it maY take 24' months to obtain the merchandise.

This does not normallY haPPen but due to the many variables of international sales, an order may not ship on schedule.

Many of you are quite familiar with tropical hardwoods and judging from the list of guest speakers, most of them are experts in product analysis, growth cycles, swamp temperatures, cubes per hectare, etc. All of this appears to be on a much higher plain than trying to get a car load of wood from Point A to point B.

Nothing happens unless You have the order. Is there a reason why softwood sells easier than hardwood? Why do the North Americans and the Scandanavians appear to have their ducks in a row when it comes to marketing wood products? The answer is verY simple, it's easier. The infrastructure required to bring a product to market is very well developed. The logistics are well known,have been defined, and have been overcome. And finallY, there's a small item called market acceptance. The primary markets in the world prefer to purchase softwood.

In that case, why bother! Let's go sell softwood. We have, however, identified two primary areas. We have identified a market and we have identified the competition.

Let's take a typical offer of meranti plywood to the United Kingdom. The customer wants to buy 1,000 pieces of l5mm plywood B/BB with WBP glue. In the states, we'd call this a car load of 5/8, A/C sanded, tell him it was on a 140 list, and could ship the week of June 30. Meranti will come out of Southeast Asia and let's assume it will be manufactured near Kuala Lumpur.

I'll also assume that we have overcome a quota problem into the United Kingdom and that our price and product is competitive with French okume, African and Israeli gaboon, Finnistt birch, Russian birch, Italian poplar, Eastern Canadian spruce, American Doug Fir, and is as good, if not better than, Canadian Doug Fir and at least 25%less in price.

I'11 also forget that the customer wants to pay me in U.K. Pounds and on a firm freight ratel with any future currency, freight and/or bunker surcharges for my account.

So far this is an easy one so we take the order. It's marginal, but we haven't seen too many bigger orders for a year-and-a-half.

Then the telexes come in garbled for at least a week. Finally, the telex is back in shape and we ask ITT to resend all the messages. Our customer has changed his port of call from London to Reading. The last vessel to call in Reading was the Cambridge University crew. He also wants it delivered at 10:30 a.m. on JulY 4. He says it's very important and if successful, has excellent potential.

delivery as requested. Being a new customer, we go ahead and having outlined our grading rules prior to negoti ation, we assume that the B/BB sPec, as outlined by us, is quite acceptable. From here on everything goes smoothly!

l. The barge is impounded in Sabah because the Captain didn't PaY his bill last time. An export license won't be granted until he paYs.

2. The log prices go up $5.00 a M3. And the logs get sold to a Japanese trading company.

3. The shipping company won't call at Port Klang. Goods have to be brought to Singapore. $500 in telex bills are incurred in trying to establish who will pay the inland transportation.

4. A dock strike in the U.K. forces the shipping line to declare that all goods will be discharged in Amsterdam.

Finally, the plywood is loaded and in 3-months time, I'll let you know if the grade was O.K.

*This fascinating look at the wild and wooly ,world af importing was originally an address presented before the Forest Products Research Society at their annual meeting in Port land during June.-ed.

The mill decides to lay up the PIYwood. The logs are ordered and are being transported by barge from Sabah. The customer is convinced to take a London discharge, which he does reluctantly, provided we will guarantee

A couple of pluses on this order were (l) the customer spoke and understood English and (2) the agent didn't ask to increase his commission. What does all this have to do with marketing tropical hardwoods? A lot, because that is exactly how it is being done today. With few exceptions, most tropical hardwood is being sold today on price. It is used as a substitute, but only in good markets. Very little has been done to promote the product with a particular end use in mind. Most suppliers have very little first-hand knowledge or understanding of the marketplace. Nothing has been done to educate suppliers of the economics of their competitors or of their market strengths and weaknesses. Today, most suppliers do very little to improve their market knowledge. Most of their sales are generated by commissioned agents who represent similiar shippers and who very definitely do have a conflict ofinterest.

Marketing of tropical hardwoods should be no different than marketing a new line of automobiles. However. up-todate and reliable data should be acquired on the following: a. What is the present consumption? Has it changed in the recent past? b. Will demand change in the future and why? c. What grades and species are required today and why will they change in the future? d. What's the competition? Strengths and weaknesses? Availability of raw material, political and economic stability, etc.

There are many other factors which should be covered. There are three other areas that I think are very essential to a successful marketing effort: l. I have addressed earlier - logistics. What might appear simple in Portland, Oregon can be a monstrous task in Belem or Jahore. A lot of people have been hurt financially in trying to introduce tropical hard- woods because of a lack of knowledge and understanding of logs, specs, shipping, currency, and terms of sale.

2. Governmental help, guidance or hindrance. In many lesser developed countries (that's where most of the tropical hardwood comes from) for one reason or another, the government has decided to help their growing timber industries by establishing export marketing boards or something similar. In turn, these governments help pay for these boards by charging export taxes on wood products. I have a problem with the thought process behind this kind of logic. These boards could be very effective if (a) they were properly staffed, i.e., marketing men and (b) if they were located in the market place.

3. Once in the market place, these people in close co-operation with the sincere suppliers, should zero in on the market requirements. They should define first and foremost what the needs of the market place are. Once these needs are identified, the determination should be made as to their compatability with the supply source. The biggest obstacle in marketing tropical hardwoods today are: a. Poor communications. Not the services being offered, but the ability to clearly explain and outline one's problems. b. Reliability and consistancy. The pipe lines in international trade are very long. In order to service any market successfully, offshore mills have not only to honor their obligations but they have

Story at a Glance

An excellent examination of the challenges and potential rewards of importing hardwoods . but it can only be successful if approached in a professional manner by someone willing to work on a long term rather than a short term basis.

also to accept and live up to a commitment to the market place.

c. Product knowledge. This is a very broad area but so basic that it is overlooked. not because the suppliers don't know the qualities of their product, but because they don't know the qualities of their market.

d. Markets differ. What appears very logical to an American might appear assinine to a Frenchman. In time, you might convince the Frenchman that you make sense, but in the meantime. he will continue to purchase from the supplier who is prepared to accept his logic.

These are not insurmountable probIems. They are challenges and they offer a good reward. There is opportunity unlimited. It is nothing that a lot of blood, sweat, and tears and a lot of common sense won't overcome.