Importing Coffee from Costa Rica to Canada

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Management

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Feb 20, 2024

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Importing Coffee 1 Importing Coffee from Costa Rica to Canada Mandeep Kaur (20000793) Acsenda School Of Management BIBM 432 Professor: - Mr. Au, Mike December 20, 2023

Importing Coffee 2 Importing Coffee from Costa Rica to Canada 1. Product Overview The selected product for importation into Canada is "ICE Arabica," a premium coffee beverage sourced from Costa Rica, Kenya, and Brazil. The vendor responsible for supplying this product is Volcafe Costa Rica, a prominent coffee exporter in Costa Rica, holding a significant share of up to 35% of the country's annual coffee exports (Volcafe, 2023b). The product is a blend of Arabica beans from these diverse regions, promising Canadian consumers a rich and distinctive coffee experience. ICE Arabica presents a lucrative opportunity in the Canadian market due to consumers' growing interest in high-quality coffee. While exploring potential sales opportunities, it's essential to note that certain commodities, including food and beverages, are subject to regulations by federal or provincial government agencies. Therefore, thorough research is required to identify any necessary permits for importing coffee into Canada. 2. Customs Requirements & Importation Controls The Harmonized System (HS) Classification Code for ICE Arabica is Chapter 09, falling under the sub-heading 09.01 for Coffee, Tea, Maté, and Spices. The specific HS Code is 0901.11.00, indicating that the product is unroasted coffee and it is not decaffeinated (World Customs Organization, 2022). The applicable duty rate for this product is 0%, with the preferential tariff treatment being the Goods and Services Tax (Government of Canada, 2023). While coffee itself doesn't face severe restrictions, it is crucial to adhere to labeling requirements set by the Canadian government. The label must include the commodity (coffee

Importing Coffee 3 beans), manufacturer details, net quantity, and country of origin (P. S. and P. C. Government of Canada, 2023). 3. Transportation & Freight ICE Arabica is packaged in jute bags, with each bag weighing 59 kg and having dimensions of 30cm x 45cm x 76cm. The total importation quantity is 325 jute bags, resulting in a total weight of 2925 kgs. The product will be transported in 20 containers, each with external dimensions of 6.06m x 2.44m x 2.59m (length x width x height). Sea transport is chosen as the mode of transportation, with the shipment originating from Puerto de Puntarenas and destined for the Port of Vancouver. The freight rate for this transportation is 2500 CAD per container. Landed Cost Calculation & Pricing Decision The landed cost calculation involves considering the transportation cost, unit price, and total purchase price. In this case, the transportation cost is 2500 CAD, and the unit price is set at 10 CAD. The total purchase price sums up to 29,250 CAD. Adding the transportation cost, the total landed cost is 31,750 CAD. The markup is determined as 25447.5 CAD per container, providing a comprehensive understanding of the financial implications of the importation. Sales Decision: In setting a selling price for ICE Arabica, a competitive approach is adopted. Comparisons with similar products reveal that ICE Arabica is competitively priced at 18.7 CAD, offering a favorable balance between quality and affordability. Two comparable products in the market are ICE Robusta, priced at 20 CAD, and Arbitrage Arabica, priced at 8 CAD (Volcafe, 2023b). The decision to sell directly to both consumers (B2C) and businesses (B2B) through

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Importing Coffee 4 various channels, including coffee stores and online platforms, aligns with the diverse preferences of the target market (Gorevaya & Khayrullina, 2015). 4. Landed Cost, Markup & Sales Decision In determining the landed cost, it is crucial to factor in the transportation cost, unit price, and any additional costs associated with the importation. The calculation reveals that the landed cost for ICE Arabica is 31,750 CAD. The markup, amounting to 25447.5 CAD per container, emphasizes the importance of a strategic pricing decision to ensure profitability. The decision to price ICE Arabica at 18.7 CAD reflects a careful market analysis and consideration of comparable products. ICE Arabica is a competitively priced premium coffee offering, appealing to a broad consumer base. The distribution strategy involves reaching end consumers (B2C) and businesses (B2B) through diverse channels. This includes selling directly to coffee stores, individuals, and chain stores, both online and offline. This comprehensive approach ensures that ICE Arabica reaches a broad audience and capitalizes on various market segments (Gorevaya & Khayrullina, 2015). Conclusion: In conclusion, importing ICE Arabica from Volcafe Costa Rica into Canada presents a well-researched and strategically planned venture. The product's unique blend from diverse coffee-producing regions, compliance with import regulations, and preferential tariff treatments, position it as an attractive choice in the Canadian market. The transportation plan via sea, the meticulous calculation of landed costs, and the strategic pricing decision contribute to a robust supply chain management and logistics strategy.

Importing Coffee 5 The careful consideration of market competition and the decision to sell through various channels highlight the adaptability of the distribution strategy. This report provides a detailed overview of the chosen product, importation processes, customs requirements, transportation logistics, and the financial aspects associated with the venture. The selected product, ICE Arabica, is poised for success in the Canadian market, offering a premium coffee experience to consumers and aligning with the team's goals for the final project.

Importing Coffee 6 References Clearit.ca. (2023). Importing Coffee Into Canada . Clearit.ca. https://clearit.ca/canadian-customs- broker-blog/importing-coffee-into-canada/ Gorevaya, E., & Khayrullina, M. (2015). Evolution of Business Models: Past and Present Trends. Procedia Economics and Finance , 27 , 344–350. https://doi.org/10.1016/s2212- 5671(15)01005-9 Government of Canada, C. B. S. A. (2023, June 30). Customs Tariff chapter-by-chapter (T2023- 6) . Www.cbsa-Asfc.gc.ca. https://cbsa-asfc.gc.ca/trade-commerce/tariff-tarif/2023/html/tblmod-6-eng.html Government of Canada, P. S. and P. C. (2023). Information archivée dans le Web . Publications.gc.ca. https://publications.gc.ca/collections/collection_2019/mdn-dnd/D2- 531-28-2018-eng.pdf Volcafe. (2023a). Coffee Market Overview . https://www.volcafe.com/files/MarketReview_240323.pdf Volcafe. (2023b). Volcafe: Making coffee business better, together . Volcafe. https://www.volcafe.com/ World Customs Organization. (2022). HS Nomenclature 2022 edition . Www.wcoomd.org. https://www.wcoomd.org/en/topics/nomenclature/instrument-and-tools/hs-nomenclature- 2022-edition/hs-nomenclature-2022-edition.aspx

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