Aug. 12 (Bloomberg) -- Used to be, Mercer’s ice cream wasn’t found far from the 60-year-old dairy in Boonville, a town of about 4,500 in central New York.
Now Mercer’s Dairy owners Ruth Mignerey and Roxaina Hurlburt and their 25 employees ship specialty wine-infused ice cream in a half-dozen flavors, including Cherry Merlot and Riesling, to 14 nations including China, Indonesia, the Netherlands, Seychelles and Trinidad and Tobago. The product was conceived at a 2005 event sponsored by then-U.S. Senator Hillary Clinton and sales began two years later. Exports started in 2008 and now account for about a quarter of annual sales of more than $1 million. Employment is up from 20 four years ago.
“We went from being a local institution with maybe a 100-mile radius of people knowing Mercer to building a global brand,” Mignerey says by phone amid preparations to expand on four continents. “There are so many people who say something can’t be done and it can. Just don’t take no for an answer.”
Foreign sales by small companies like Mercer’s are becoming a focus for economic development officials in upstate New York and other U.S. regions who are seeking a bigger slice of record exports to boost growth. Shipments abroad by businesses with fewer than 500 employees accounted for 32.9 percent of the U.S. total in 2012, up from 29.2 percent in 2005, according to Census Bureau data.
Continuing to move the needle means persuading more such companies that it’s possible to sell outside of the country. President Barack Obama, who pledged in his 2010 State of the Union speech to double exports in five years, created the National Export Initiative, in part to help small businesses sell abroad.
There’s still plenty of room for improvement. Less than 1 percent of the nation’s 30 million companies ship outside the U.S., significantly less than other developed countries, according to the Commerce Department’s International Trade Administration. Of those that do, 58 percent sell to just one country.
U.S. exports rose last year to a fourth-straight record of $2.28 trillion, increasing by almost $700 billion from 2009 to account for 13.5 percent of the $16.8 trillion gross domestic product, according to Commerce Department data. Selling goods and services abroad supports 11.3 million jobs, the data show.
A report today showed confidence among small businesses increased in July. The National Federation of Independent Business’s optimism index increased by 0.7 point to 95.7, close to the almost seven-year high of 96.6 reached in May. A net 13 percent of respondents said they planned to hire, the highest share since September 2007.
Skepticism is the main challenge in working with small firms to expand beyond the nation’s borders, according to Robert Simpson, president of the CenterState Corporation for Economic Opportunity in Syracuse, New York.
He said he often tells business leaders more than 95 percent of the world’s population is outside the U.S. Demand from the global middle class will soar to $56 trillion by 2030 from $21 trillion in 2010, according to a report from the Organization for Economic Co-operation and Development.
“Antipathy toward the global market is the single-biggest hurdle we have,” Simpson said in a presentation at a recent Federal Reserve Bank of Philadelphia community development conference. “Companies don’t yet fully understand how their products can compete internationally.”
Toni Corsini, who helps jump-start exports by smaller firms as a New York-based loan officer for the U.S. Small Business Administration’s Office of International Trade, shares Simpson’s mission. She says her three-biggest obstacles among small business owners are fear, financing, and lack of faith.
She works to alleviate all three from SBA’s Export Assistance Center in lower Manhattan, one of about 100 regional centers around the country. The office also is home to other federal agencies that assist with exports, making it a kind of one-stop shop.
“We’re available, don’t be afraid, come to us,” she says of her message to business owners. “If you are serious about continuing your business and growing your business, you better understand this is a global marketplace.”
Frigid Fluid Co. took advantage of a Commerce Department program to help expand exports of its funeral products to 16 nations, adding Italy, Mexico, Poland and Spain over the past two years. President Brian Yeazel, whose family has had the Chicago-area firm for 122 years and five generations, says he’s turning to predominantly Catholic countries more geared to traditional burials as Americans increasingly choose cremation.
Yeazel used Commerce’s Gold Key Service, which gives firms market research and arranges meetings with buyers on visits to the country. Trips cost $700 for small companies like Frigid Fluid, which has 17 employees; first-time users pay half price. Commerce Department specialists in 80 countries plan trips, attend meetings, and provide translators.
Exports of products like embalming fluid and casket-lowering devices have grown to make up 34 percent of Frigid Fluid’s $4 million in annual sales, he said.
While such small businesses add to exports, there probably aren’t enough of them to help Obama reach the 2015 goal of $3.1 trillion.
Caroline Freund, a senior fellow at the Peterson Institute for International Economics in Washington, calls Obama’s initiative focusing on small firms misguided and impractical, given the export dominance of bigger companies such as Chicago-based Boeing Co., the largest U.S. exporter.
“Exporting is by its nature dominated by large businesses,” Freund, a former economist at the Federal Reserve, World Bank and International Monetary Fund, wrote in a February research report. A strategy built around small companies does “little to lift exports because only the most productive firms can compete globally, and such highly productive firms grow to be large firms precisely because they are so efficient.”
Yet boosting exports is the missing piece of the full-fledged recovery in the U.S. economy, according to Ludovic Subran, chief economist at Euler Hermes Group. The Paris-based credit insurer pays companies if foreign customers don’t, tracking risk through 1,500 underwriters.
“There is a misconception about the potential to grow outside of the U.S.,” he said. “People don’t realize they can make the big bucks if they go to Latin America or Asia.”
Some business owners have doubts about repayment, a consideration when one big unpaid bill can threaten their future, said Laurel Delaney, the Chicago-based founder of GlobeTrade who’s been helping entrepreneurs sell abroad since 1985. Still, she says insurance can cut risk.
“They’re just not realizing their growth potential,” she said. “You need to develop a global mindset.”
At Mercer’s, Mignerey is working to expand in new markets, including Australia, Kenya, Puerto Rico, South Africa, South Korea, the U.K., Philippines and Suriname. Classification makes approval complicated because some jurisdictions call its wine ice cream food, others label it alcohol. Packaging needs vary.
The hybrid product was born at a 2005 Washington event promoting New York Farm Day sponsored by Clinton. When attendees made ice cream floats with the wine from the next booth, Clinton and others suggested it may have a commercial future.
Mignerey and Hurlburt, her aunt, introduced wine ice cream, which has about 5 percent alcohol content, in 2007. At a New York City trade show the same year, they met a Dutch distributor, who arranged their first foreign deals. They weren’t worried about payment because it was done in advance, but they were concerned about simple labeling errors, Mignerey says. Exports of the wine flavors began in 2008 with the Netherlands, though the company wants to also sell more traditional varieties abroad.
Foreign sales help take the seasonality out of the ice cream business. In the production facility, four employees work year-round where previously winter staffing fell to two full-time and one part-time. In the office, four workers help with export-related administration, up from two.
“It can be done,” Mignerey says. “But it’s a lot of work.”
(An earlier version of this story corrected the spelling of ‘Riesling’ in the second paragraph.)
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