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Market Research Report Cuba

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Market Research Report Cuba MARKET RESEARCH REPORT CUBA Research Unit A. PURPOSE AND PARAMETERS OF REPORT Cuba is fast becoming a market of interest to the rest of the world since the US announced that it would be dismantling the 54-year old trade embargo it imposed on that country. This market is deemed to be large in the eyes of Caribbean producers, with over 11 million residents, and is considered a primitive market in dire need of development to bring it up to par with what is globally accepted in 2015. The nation has had a centrally planned economy for almost 60 years and as a consequence, all industries, mines, refineries, communications, and export-import concerns were brought under a government control and procurement process. Throughout this period, Barbados and its CARICOM allies maintained both diplomatic and trade relations with Cuba but limited trading was realised between Barbados and Cuba. The Cuban economy itself became less and less efficient as low wages acted as a disincentive to productivity under the centrally-planned, sugar-based economy. Within the recent past, additional economic policy reforms have been made and measured concessions to encourage more entrepreneurship and private-sector growth have yielded modest economic improvements. Reforms have been targeted at reducing government expenditure to give the economy a necessary boost. However, they have not been deep enough and price controls and the two-tiered exchange rate still remain, resulting in a distorted pricing structure. The gates to Havana are finally re-opening and policymakers throughout the Caribbean are shifting their focus to this once taboo state. The CARICOM-Cuba Trade and Economic Agreement signed in 2001 allows for considerable duty-free access to Cuba and countries throughout CARICOM have actively begun to seek ways to capitalize on the proposed gains to be seen from trade with this country. Because Cuba is a relatively untapped market right in our backdoor, coupled with the fact that it has a sizable market is enough incentive for Barbados to at least explore any potential opportunities that might exist and allow our producers to diversify away from traditional export markets in North America, Europe and CARICOM. Situated at the tip of the Caribbean archipelago, Cuba is regarded as an ideal market for most CARICOM producers. This market research project was therefore undertaken to examine the prospects for select Barbadian products in the Cuban market. Objectives The objectives of the research, as outlined in the research proposal, were as follows: 1. To help Barbadian companies to make sound business decisions on: Whether or not to enter the market Whether the product/service is likely to require further development before launching in the market Page | 2 How the product/service could be supplied to the market How the product could be promoted within the market 2. To collate relevant and timely information on: Current size of market o Market segmentation o Market trends and opportunities Accessibility of Barbadian suppliers to the market o Policy initiatives designed to promote trade o Regulations and Legislation Import policy/Market Access/Licensing Import Tariffs o Customs procedures and practices o Terms of Trade (payments) o The specific mechanisms, formal and informal for entering the market o The general experiences of companies that have operated in the market o Non-Tariff barriers to market entry o Foreign exchange controls o Marking/labeling/packaging requirements Distribution channels o Agents or distributors used o How the market is best supplied o Costs of distribution o Pricing and general pricing structure Competition o Is existing competition more or less sophisticated o Presence of local/international competitors o Key players‟ activity, strategy and performance Potential customers’ views o Customer needs, usage and attitudes o Do they see a need for the product/service o How do they source new suppliers/selection criteria used o Is the product/service acceptable in its current format Economic and financial statistics o Recently published trade statistics o Major products traded and major trading partners o Major industries and new developments o Transport and communication facilities o General information on the country Methodology Page | 3 This report will present the findings of the research that was conducted in Cuba’s commercial capital, Havana, and the Fihav Expo at the ExpoCuba grounds. The products, which were presented during meetings with key players, are listed in the following table: COMPANY PRODUCTS HS CODES Lenstec Inoccular lenses 9021.39.00 McBride Caribbean Ltd. Insecticides, Insect repellent 3808.91.00 Disinfectants 3808.94.00 Aerosol sprays (air fresheners) 3307.90.00 Caribbean Label Crafts Labels 4821.10.00. WIBISCO Biscuits (unsweetened and 1905.90.10 sweetened) 1905.31.00 Banks Holdings Ltd. Aerated beverages (malt, 2202.10.10 coconut coolers, plus) Beer 2203.00.10 Stout 2203.00.20 Shandy 2206.00.10 Roberts Manufacturing Margarine, 1517.10.00 Shortening 1517.90.10 Soyabean oil 1507.00 Soyabean meal 2304.00 Dog food 2309.10.00 HIPAC Sausages 1601.00 Assorted canned meats (hams, 1602.41.00 luncheon meat, burgers) 1602.50.90.20 Caribbean LED Lighting LED lamps 9405.99.00 Tubes Panel lights Flood lights Armstrong Agencies Alcolado 3303.00.90 Essences 3302.10.90 Claytons Cola Tonic 2202.10.00 Kick Energy Drink 2202.10.00 Harris Paints Paints (Emulsion paints, enamel 3208.10.30.00 paints, gloss paints,) Varnish 3209.90.30 Colourants, 3212.90.00 Superseal, Overglaze 3210.00.40 Troweltex 3214.10.90 Berger Paints Paints (Emulsion paints, enamel 3208.10.30.00 paints, gloss paints,) 3209.10.20.00 Page | 4 Paints (primers, varnish, roofing compound, wood stain etc) 3210.00.10 Brushing solutions, wood lacquer, etc.) 3209.90.00 Reducers, thinners Automotive Arts Not a Manufacturer. Exports mainly labels and plastic bags, occasionally. All exported products are sourced from other manufacturers. Trowel Plastics Trowel plastics 3214.90.00 Water glaze 3210.00.10 Brushing solution 3210.00.10 Colortrend 3207.1.00 Doyle Offshore Sails Barbados Community College English as a Foreign Language These products were selected based on companies that expressed interest in the Cuban market, as well as suggestions made from brainstorming on ways that Barbados could lend its expertise to the Cuban economy. The then Export Development and Promotion Department of the BIDC and the Private Sector Trade Team who, at the time, were adopting a collaborative approach to market entry and development for Cuba generated the initial list of companies. The two entities successfully planned and executed a seminar entitled ‘Consultations with Cuba – Charting a New Course,’ which was attended by representatives from many of the interested companies. The list of products and research needs were provided to Ms. Donna Forde, Barbados’ Charge- de-Affaires in Cuba at the Embassy of Barbados in Havana and her Executive Secretary, Miss Mairobis Tomayo, set up meetings with key institutions who would be able to assist with the research requests. A market visit was then undertaken in Cuba during the week of November 1st – 7th, 2015. This visit was facilitated by the Embassy of Barbados in Cuba and Miss Mairobis Tomayo was assigned to visiting officers during the period. The visit comprised of meetings with two consultant firms, a business support organisation, an importer company, a representative from the ExportTT Trade Facilitation Office, and Republic Bank’s EXIM banking facility. All, with the exception of the Republic Bank meeting, took place at the FIHAV Expo. Officers were unable to meet with any key governmental organisations relating to customs, standards and key business support. This report will present the feedback gathered from initial contacts made with the relevant companies, as well as an outline of the market peculiarities as they relate to the proposed products. Information will also be given on similar products being produced, imported and Page | 5 retailed in the country, and suggestions will be provided as to how Barbadian producers can best enter the Cuban market and successfully target the relevant consumers. EXECUTIVE SUMMARY Situated in the northern Caribbean Sea lies Cuba, the westernmost island of the Greater Antilles, located some 93 miles south of the United States. Cuba, a former Spanish colony with an extremely rich history, has maintained a strong centrally planned political ideology and has become isolated due to a trade embargo imposed by its neighbour, the US. The isolation resulted in grave economic crises that have plagued the nation since the 1960s, affecting production and income levels and causing personal hardships that were felt by almost every one of its over 11 million citizens. As of July 20, 2015, the US and Cuba have been seeking to “normalise relations” as diplomatic relations have been restored since being severed in the 1961 Cold War. Ever since then, there seems to have been a “mad rush” to Cuba. These developments, in addition to Cuba’s own attempts to modernise its economy, are expected to result in a swift liberalisation of the country’s market systems and increased market access to a seemingly untapped market with great potential. The Barbados Investment & Development Corporation has therefore embarked on a mission to explore the potential that the Cuban market has to offer for local manufacturers, given the interest in the market expressed by some key producers. The Cuban market is one that deserves exploration as a potential export market for Barbadian products given its proximity, market size and the fact that for years Barbados and Cuba have had a good diplomatic relationship despite how the rest of the world felt about Cuba ad its leadership. Given Cuba’s current market and political system, price appears to be the overarching factor that determines what is bought and ultimately sold in Cuba. However, since there appears to be an ongoing paradigm shift in how the country operates, chances are that market liberalisation may lead a more democratic and market-driven economy, where quality, brand loyalty, consumer preferences and other factors play more significant roles in determining demand.
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