1. Improving Forest Management Practices Through the Development of Markets for Lesser Known Species (LKS) in Bolivia Bob Smith Victor Cossio Tom Hammett Department of Wood Science and Forest Products

2. Outline  General Overview  Results of the Survey of U.S. Companies  Marketing Recommendations  Conclusions  Questions?

3. General Overview  271 million acres (1.6 Texas)  131 million acres → tropical forests (48%), 10% of South America’s tropical forest  More than 2 million Ha. are certified FSC  Annual sustainable production capacity 8 billion BF  11 wood species = 75% volume (6 species = 45% in 2004)  72 species exported in 2004  63,000 direct employments Source: (FAO 2006) Bolivian Forest Products Sector

4. General Overview Bolivian Forest Products Sector  Forest products GDP 3%  Wooden products GDP decreased from 0.97% to 0.78% (1994-2004)  The process of forest certification in Bolivia started in 1994  Forestry Law, 1996  Switch between primary to secondary processing  Increase in the exporting of certified forest products  $300 million sales (domestic and exports) Source: (CFB 2005, INE 2005)

5. General Overview OverviewConclusionsEndSurvey of U.S Co.Bolivian LKS Source: (CFB 2005)

6. General Overview U.S. Imports of hardwood and tropical hardwood lumber Source: (USDA-FAS 2006)

7. General Overview The U.S. Hardwood Market  Relevant hardwood market segments for Bolivian wood products OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS Source: (WHR 2006)

8. General Overview U.S. hardwood flooring industry OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS Source: (Brindle 2006)

9. General Overview U.S. furniture industry OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS Source: (Vlosky 2005)

10. General Overview U.S. door and millwork industries OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS Source: (USDA-FAS 2006)

11. General Overview  Increase the participation of Bolivian wood products in the GDP  Improve the effectiveness of forest products management  Can’t meet the requirements of FSC certification if no market for timber that needs to be harvested to meet management plans.  Ensure the sustainability of Bolivian rainforests  Improve the well-being of Bolivian indigenous communities  U.S. final consumer (LEED, ENGOs) Justification OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

12. General Overview Assess the interest of U.S. companies to import Bolivian wood products made from LKS Develop marketing recommendations Objectives OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS Identify incentives and barriers to introduce lesser-known wood species into the U.S.

13. General Overview Market Assessment  Identify incentives and barriers to introduce lesser-known wood species into the U.S.  Identify marketing opportunities for Bolivian LKS  Identify common tropical species imported into the U.S. OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

14. Survey of U.S. Companies Sampling frame  Population: Importers of tropical hardwood  Tailored Design Method (Dillman 2000)  Questionnaires were mailed to 400 companies  Data Analysis using MS-Excel, SPSS and SAS  27.7% response rate (32.3% adjusted); 111 usable questionnaires.  Non-response bias is not considered a limitation OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

15. Survey of U.S. Companies Demographics, Type of businesses Business Type Qty. Importer43 Wholesaler18 Distributor20 Manufacturer16 Retailer12 Agent1 Broker1 OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

16. Survey of U.S. Companies Demographics, Gross Sales OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

17. Survey of U.S. Companies Imported Wood Products Made from Tropical Species OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

18. Survey of U.S. Companies Country of Origin of Respondents’ Wood Product Imports 67% of respondents are planning to increase their Imports of Tropical Hardwood in 2007 OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

19. Survey of U.S. Companies Respondents’ Last New Wood Species Purchased ConclusionsEndSurvey of U.S Co.Bolivian LKS

20. Survey of U.S. Companies % OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS Bolivian LKS imported by respondents

21. Survey of U.S. Companies Number of New Wood Species Tried in 2006 OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

22. Survey of U.S. Companies Major Reasons to Try New Imported Wood Species OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

23. Survey of U.S. Companies Important Factors to Try New Imported Wood Species (5-point Likert scale) OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

24. Survey of U.S. Companies Important Factors to Try New Wood Species OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

25. Survey of U.S. Companies Imports of Environmentally Certified Wood Products Percent of Imports that are Environmentally Certified Willingness to Pay for Environmentally Certified Wood Prod. OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

26. Survey of U.S. Companies Preferred Source of Information to Find New Imported Wood Species OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

27. Survey of U.S. Companies Barriers to Importing from Bolivia OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

28. Survey of U.S. Companies Willingness to pay for a Bolivian Substitute Species OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

29. Survey of U.S. Companies Respondents’ Interest in importing LKS  Fairly interested (3.2 on a 5-point Likert scale)  No significant differences between type of businesses  No significant difference between industry sectors OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

30. Survey of U.S. Companies Other Results  Past experience importing Bolivian LKS (neither good nor bad)  Preferred brand names for Bolivian LKS would be associated to U.S. species names  Sawnwood is the sector that more likely will try new species  Personal interviews  Image of Bolivian forest products sector  Competitive advantage of environmental certification  Impact of CITES OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

31. Marketing Recommendations SWOT  Strengths  Commitment with environmental certification  Variety of species  Weaknesses  Landlocked country  Political instability  Limited capacity  Production technology  Opportunities  Wood species in CITES  Demand for certified products  Accessible information systems  Threats  Emergence of new composite materials  Marketing initiatives of competitors  Duty and tax exemption OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

32. Marketing Recommendations Promotion  Use well-established brand names instead of common Bolivian names for certain species  Associate U.S. domestic species to similar Bolivian LKS  Marketing penetration strategies for some Bolivian LKS  Marketing development strategies for other Bolivian LKS  Promote environmental certification through architects and retailers  Take advantage of Internet technologies OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

33. Marketing Recommendations Price and Distribution  It is required a “price structure” for Bolivian LKS  Some Bolivian LKS should be marketed at low prices (5% to 20% less)  Western of the U.S. constitutes a better target market for Bolivian LKS  U.S. importers are reluctant to use intermediaries  Take advantage of the Internet and e-business OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

34. General Conclusions  Several Bolivian LKS wood species are well- known in the U.S. marketplace  Environmental certification can provide competitive advantage  U.S. importers, in general, are planning to increase their imports of tropical hardwoods  Significant differences were found between geographic regions respect the interest on LKS  Important factors to try new wood species were identified OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

35. General Conclusions Limitations and Avenues for Future Research  Other segment like architects or constructors were not included in this research  Characterization of Bolivian LKS was based on literature review  More research on technical information is required for certain Bolivian LKS (ASTM) OutlineOverviewConclusionsEndSurvey of U.S Co.Bolivian LKS

36. Thank you! Research project sponsored by: The Center for Forest Products Marketing and Management