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You can't compete on price, but you can compete

IMG 6091 ? a photo of one of our Food Science Division scientists in our Research Center Credit: Acadian Seaplants Limited

When Acadian Seaplants Ltd. dove into the U.S. market 30 years ago, it knew it couldn't compete on price.

The company decided its success rested on making better products. So it developed an aggressive research and development strategy to make that happen.

Today, the family-owned company employs 18 researchers, including nine PhDs, at its facilities in Nova Scotia and New Brunswick, and it partners with universities across Canada to develop, understand and explain its line of edible seaweed and fertilizers and animal feeds derived from seaweed. Acadian Seaplants also researches markets extensively to ensure it meets the needs of its customer base, which has spread to 70 countries.

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"We understand our class of products better than anybody else out there," said president J.P. Deveau, "and we can show our partners how to use them in ways that are leading edge."

The strategy helped Acadian Seaplants become a world leader despite prices that are as much as 50 per cent higher than those of its competitors. The company uses a proprietary processing technique that extracts compounds from seaweed without degrading them. They've been able to show how the compounds work on a molecular and genetic level, which no one else has done, and that they get consistent results.

"There will always be a cheaper product, but with our knowledge base it's up to our competitors to keep up with us," Mr. Deveau said from his office in Dartmouth.

Small businesses have always had a hard time competing on price when going head-to-head with larger firms that have the advantage of economies of scale. Going global can make it even more difficult.

"You can either lead on price or you can lead in product differentiation," said Rob Mitchell, associate professor of entrepreneurship at the University of Western Ontario's Richard Ivey School of Business in London, Ont. "Small businesses, because they are more flexible than bigger companies, are ideally positioned to do the latter."

Product differentiation can be as simple as unique packaging, as banal as bundling extra services or offering favourable credit terms, or as complex as undertaking long-term scientific research to develop and support a product. But the key is to ensure the business fulfills a need its competitors can't meet.

"Ultimately, people pay to have their problems solved. Maybe they want faster delivery, maybe they want something high-end instead of low-end. You have to find out what the problem is and then provide a novel solution," Prof. Mitchell said.

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If formal market research is too expensive, Prof. Mitchell recommends business owners ask their customers what they're looking for but aren't getting, and write the answers in a journal. Owners and their employees should use the journal to keep track of their own ideas, and then talk about them at regular meetings about innovation and potential new opportunities for the company.

Product differentiation is only half the battle for small businesses that can't compete on price in global markets, said Leslie Roberts, president of Calgary-based GoForth Institute, which provides online education for entrepreneurs.

"They really need to develop a proper differentiation strategy to make sure their products are culturally adapted in every way," she said.

Local products have a price and loyalty advantage in most markets, so foreign companies must work harder to build relationships and stand out, Ms. Roberts said. That means learning to speak the language of the country in which a product is sold, and developing partnerships with organizations that are already on the ground and can identify local needs and help build your reputation.

Businesses that want to sell abroad must also have a global website that appeals to target consumers, she said. And products must be adapted so they conform to cultural values and expectations.

"I recall a cosmetic that came from Israel that was a very nice product, but Canadian women were offended by it because it had too much perfume and the packaging was strange," Ms. Roberts said. "That's a perfect example of what not to do."

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Developing strong local relationships has been key for Acadian Seaplants. The company has salespeople in eight countries who work closely with local distributors in the 70 countries where its products are sold. It holds regular seminars and training sessions for the distributors, as well as workshops to train farmers to use their agricultural products. Regular contact serves as a source of market research, since salespeople get first-hand information about the conditions their produced are used in.

Employees will occasionally spend months researching a new product. Acadian Seaplants spokesperson Linda Theriault said that in the early 1990s, one worker spent three months living in Japan trying to find out what kind of seaweed the Japanese prefer to eat. She lived with families, talked to food companies, and asked questions about taste, appearance and "mouth feel." She learned there was a market for "pink, edible seaweed that was beautiful, because the Japanese eat with their eyes," Ms. Theriault said.

The employee also learned that supplies of the pink seaweed were running out because of over-harvesting. Acadian Seaplants developed a way to cultivate the plant on land near Charlesville, N.S. Its trademarked Hana-Tsunomata edible seaweed is now one of the most expensive and biggest selling seaweeds of its kind in Japan.

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