Product Overview

Kamal Patel and Tushar Thumar, co-founders of Khedut Feeds & Foods Private Limited (KFFPL), were contemplating whether to accept the proposal from Royal Exporters Private Limited (REPL) to become one of its contract manufacturers. REPL was a leading peanut exporter in India that shipped premium peanuts to the European Union (EU) and other markets. Patel and Thumar had invested INR 134.8 million to establish a cutting-edge peanut-processing facility for exporting peanuts to the EU. However, despite producing high-quality peanuts, they could not find buyers in the EU willing to pay a reasonable price. This happened for two reasons. First, they started at a time when the EU was considering a ban on Indian peanuts because of the presence of aflatoxin in them. Second, many EU importers were unwilling to take a chance on a new exporter from India. By accepting REPL’s offer, KFFPL could benefit from gaining access to its production capacity and obtaining a guaranteed return on investment. However, the downside would be losing autonomy in decision-making, brand-building potential and international recognition.

Learning Objectives

After reading and discussing the case, students should be able to recognise the opportunities and challenges of market selection for a company exporting from a developing country; comprehend the impediments an emerging-market export firm faces while exporting to a developed market; ascertain how a company’s country of origin (COO) affects its export credentials, even if the company produces products of superior quality and analyse how to mitigate the negative effect of COO for an emerging-market firm considering export to a developed market.