Domestic consumption that has fueled the economy of Wisconsin and the rest of the country for decades may be an engine that is running out of horsepower.

That’s where exports may come in.

“Exporting companies can position themselves to compensate for downturns in the domestic market,” says Tony Hozeny, a spokesman for the Wisconsin Department of Commerce. “They usually grow faster and move ahead by the expanded markets.”

Consider that two-thirds of the world’s buying power is found outside the U.S., and even before the recession international trade accounted for more than $20 billion in sales for Wisconsin firms. A total of 6,467 companies exported from Wisconsin in 2007, the latest year for which data are available, according to Commerce. More than 80 percent of these companies were small- and medium-size firms with fewer than 500 employees.

In addition, exports supported an estimated 8 percent of all private-sector employment and more than 20 percent of manufacturing jobs in the state.

Choton Basu, a University of Wisconsin-Whitewater professor, an expert on high technology and the director of the university’s Global Business Resource Center, says there’s a wide range of experience and effectiveness in international trading among companies in this state, but adds that all need to improve to compete with foreign businesses.

Citing New York Times columnist Thomas Friedman, author of The World is Flat, Basu says communications systems and management are key to effectiveness in competing in the world market. Friedman identified three levels of globalization. Globalization 1.0 was the colonization primarily by European countries from the 1500s to mid-1900s. Globalization 2.0 is conventional international trade, which coincided with the Colonial Period and is still operative. Globalization 3.0 involves individuals using high-technology to grease the skids of international trade and eliminate the necessity of companies.

Basu says Wisconsin’s international traders vary in their expertise and experience in international trade, but most have not fully realized the potential of Globalization 3.0.

The professor, who has a contract with Commerce to work with state firms, says the small- and medium-size companies probably need the most help. It often takes them eight to 12 years to become effective, he says.

That may not be good enough to compete in international markets with nimble foreign companies. In China, India, South Korea and Taiwan, for example, some companies are now “born global,” meaning they are focused on exporting from their start-up, Basu says. From Day 1, they use the computer, cell phone and other high-technology applications for communications.

Software One of New Berlin, a company that helps firms obtain licensing agreements from software publishers, is helping companies in Wisconsin. Peter Ells, Software One’s director of strategic alliances, says agreements reached in the United States can often apply in foreign countries. Obtaining them in this country substantially reduces costs, time and work for American businesses. In the process, Software One’s sales have been growing at a 30 percent annual rate, even in the recession. The company earned $14 million in 2004 and its sales grew to $320 million last year. And Software One’s agreements cover only two percent of Microsoft’s licenses.

“That means there’s plenty of room for growth,” Ells says. “We’re one of Wisconsin’s best kept secrets. Not many people know what I do, but there’s not a business in Wisconsin that could not be a customer.”

Four small- and medium-size Wisconsin companies that have found success in international trading are CRI/Genex Corporation Inc., a Shawano-based cooperative which supplies bull semen for the dairy and beef cattle industries; Bradley Corp., a Menomonee Falls manufacturer of plumbing fixtures, wash fountains and washroom accessories;  Urban Processing of Wisconsin Rapids, a processor of cranberries; and ENRECO Inc., a Sheboygan Falls flaxseed processor.

CRI/Genex saw annual total growth in sales of 10 to 30 percent over the four or five years preceding 2009, but they flattened out in the recession, says Huub Te Plate, Genex’s vice president of international marketing. The overall growth declined in 2009.

However, international sales, which make up one-third of the cooperative’s $120 million to $140 million total, weren’t hit as hard as domestic sales.

“We were quite fortunate to have international sales [in 2009],” Te Plate emphasizes.  Genex’s top international customers are Argentina, Brazil, Mexico and Iran. Iran presents unique problems because of the U.S. embargo on that country, but Genex’s products are exempt from the embargo. Nevertheless, Genex has to make special arrangements for trading with Iran.

“But Iran is a really good market for bull semen,” Te Plate says.

 Another problem for Genex’s business is bovine spongiform encephalopathy (BSE) or Mad Cow Disease.

“One sick cow in Washington state led to countries shutting their borders for bull semen a few years ago,” Te Plate says. “Overseas customers need to be assured that diseases are not being shipped to them in any biological products.”

Bradley Corp., the 90-year-old plumbing fixture manufacturer, has made exports an  important component of its business for many years, but the international segment has been particularly important in helping the business weather the recession, says Kris Alderson, Bradley’s senior marketing manager. Bradley growth in exports in the past couple of years led to it being named recently as the 2010 Exporter of the Year in the building products category by the U.S. Department of Commerce’s promotional magazine.

Bradley’s international business growth has been particularly strong in the Middle East and South America, Alderson says. Among the top Mideast customers are Saudi Arabia, Dubai and the United Arab Emirates. In South America, leading customers have been Brazil, Argentina, Chile and Peru. In addition to hurdles to international trade encountered by other companies, Bradley faces challenges in coping with differing plumbing codes in selling its plumbing fixtures and wash stations in foreign markets. Looking to the next three to five years, Alderson says, Bradley is targeting China and other Asian nations for its exports.

Cranberries, a Wisconsin product that might have seemed like an unlikely candidate for export a decade ago, has enjoyed great success in international trade, according to Basu. The UW-Whitewater professor, a native of India, says, “I never heard of cranberries before I came to this country.”

All that is changing as Asians are turning to the tart red fruit in recent years, and 25 percent of the American crop is now sent overseas. “It’s a natural fit for the Asian market because cranberries are so healthy,” Basu says.

Medical research has confirmed that the cranberry can play an important role in maintaining health of the urinary tract and prevention of periodontal disease. Ongoing studies have also shown that the cranberry can help people resist heart disease and cancer.

After facing a slack domestic market in the 1990s, Urban Processing of Wisconsin Rapids,  turned to international trade, says Steve Berlyn, CEO of the cranberry processor. “It now makes up 23 to 26 percent of our sales.”

The Urban family, which has grown cranberries in Wood County for decades, opened the processing plant in 2001, and soon after began shipping its products to other countries. By 2004, the company was named the Entrepreneur of the Year by the Heart of Wisconsin Business and Economic Alliance.

Since sale of food is much more dependent on local culture than manufacturing or technical products, Urban Processing and other food producers encounter special problems in international trading. For example, Berlyn says, the level of sweetness or tartness favored in one country may differ greatly from another. Urban Processing has to find a level that the majority of markets favor.

Another state product with a phenomenal health pedigree is processed flaxseed, rich in omega-3 fatty acids. Flaxseeds also contain more antioxidants than blueberries, 20 to 23 percent protein and more fiber than oat bran. Flaxseed is used as a nutritional supplement for baking and as an ingredient in animal foods.

Sean Moriarty, CEO of the flaxseed processor ENRECO Inc., has quadrupled the company’s sales since purchasing it in 2004, and a significant part of the growth has come in the international market. Exports now account for about 16 percent of ENRECO’s sales, and Moriarty has set a goal of increasing that to 25 percent in the coming years.  One of the keys to success, he says is developing a network of good companies to market your product in foreign nations.

Basu adds: “Too many companies are focused on the process of exporting such as how to do letters of credit.” he says.
They also need to know about the countries they wish to export to, he says. In India, for example, 30 percent of the food spoils on the way to market because of a lack of refrigeration. That means there are big opportunities for cold-chain storage products, but Wisconsin firms aren’t taking advantage of them.

He also sees the United States losing its long-time advantage in innovation. Developing countries have lower labor costs and much larger labor forces, he says, but they also must be innovative to survive in a globalized world.

By John Hill

You can contact John Hill by e-mail at jhoythill@sbcglobal.net.

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