Should President Obama’s fragile nuclear deal with Iran survive the partisan vitriol it’s already ignited in Congress, companies in some of Georgia’s strongest sectors could be primed to tap a market of nearly 80 million consumers hungry to reconnect with the world economy, experts told Global Atlanta.
The removal of the U.S. sanctions is by no means a given; Congress has 60 days from the signing to give its approval to the contentious deal, and the president has stressed his ability to snap the punitive measures back into place if Iran doesn’t live up to its end of the bargain.
But the prospect of a large, virgin market for Western brands is leading to cautious optimism among companies now eyeing the deal’s progress.
Coca-Cola Co., which for two decades has sold beverage concentrate there under a permit from the Treasury Department, wouldn’t comment on any hypothetical plans. Iran is one of just two countries in the world where Coke doesn’t do business directly; the other is North Korea.
United Parcel Service Inc., the Atlanta-based package delivery giant, also wouldn’t speculate on its future in Iran, simply noting that the company doesn’t do business in prohibited countries.
“Should there be a change in Iran’s status, UPS would evaluate the market opportunity and consider our alternatives,” Steve Gaut, vice president of public relations, told Global Atlanta in an email.
But a newly connected Iran, flush with $100 billion in previously frozen oil revenues, could unleash a flurry of technological upgrades in telecommunications, oil infrastructure, roads, hospitals and other sectors, said Tamer Cavusgil, an international business professor at Georgia State University‘s Robinson College of Business.
That means they’ll need the know-how, technology and equipment that American and European companies can provide, said Dr. Cavusgil, who noted that the country’s young population is similar in size and demographic makeup to Turkey, which has been Iran’s “gateway to the world” during the sanctions period.
“If they do liberalize their trade a little bit and the sanctions are lifted to some extent, Iran is going to see a very, very steep growth rate,” he said.
Even amid isolation, Iran has kept up its strong educational system, especially in technical fields.
“That’s one sector that hasn’t suffered. These are people that are well educated, they’re multilingual and they’re also very eager,” Dr. Cavusgil said, noting that Iranian students in the U.S. could help create business links back home. Iran sent nearly 10,200 students to the U.S. in 2013-14, a number that doubled over four years, according to the Institute for International Education.
Georgia’s information technology firms, payment processors, paper products giants and agricultural producers could also benefit, Dr. Cavusgil said. Food and other farm products are already allowed into Iran under exceptions to the sanctions, but harsh restrictions on banking make it next to impossible for most exporters to arrange payment like as they do in other export markets.
While Iran has a significant poultry industry of its own, Georgia’s chicken producers might find ready buyers in a post-sanctions Iran.
“If and when the Iran deal is finalized, that would certainly signal another opportunity for opening Iran up for U.S. agricultural products, and chicken would likely be at the top of the list,” said Jim Sumner, head of the Stone Mountain-based USA Poultry and Egg Export Council.
No Georgia chicken went to Iran last year, though the state did export more than $9.4 million in paper products there, according to U.S. trade statistics. A few of Georgia’s paper products giants, Georgia-Pacific and West Rock, told Global Atlanta that they didn’t export products to Iran in 2014.
All told, Georgia sold more than $10 million in goods to Iran, making it the third largest state for exports there behind California and North Carolina, which also sold Iran a lot of paper. Total U.S. exports were a meager $184 million, lower than sales to the tiny Caribbean island nation of St. Kitts and Nevis.
That could skyrocket if American firms are allowed to reach Iran’s upwardly mobile and increasingly urban middle class, says Ali Dadpay, an Iranian-born associate professor of economics at Clayton State University.
Despite chants of “Death to America” in the street, desire for the forbidden fruits of Western prosperity in Iran has continued unabated in spite of sanctions, he said. Porsches and Mercedes-Benzes roam the streets, and tech-savvy youths find ways to get their hands on Apple iPhones.
“On the Iranian side there is huge demand for American products, and American products have a very good reputation in Iran,” Dr. Dadpay said.
When Dr. Dadpay returns home for visits, he finds relatives and friends up to date on the latest trends, and the private sector is slowly blossoming despite government’s heavy hand in state-controlled sectors like oil production. Private chambers of commerce have cropped up, and female entrepreneurs are launching new ventures, he said.
“People think that everything in Iran is controlled by government and private sector doesn’t have a role; granted, it’s small compared to the government, but it’s growing and maturing, and these are both important,” he said.
To Mojdeh Faraji, an Iranian doctoral candidate in bioengineering at Georgia Institute of Technology, American and European brands are already well entrenched in the market. Removing the sanctions would just make it easier and cheaper to purchase them.
“In every family, you have Apple iPhones, you have American brands of clothes. So people cannot embrace it more; they have already done it,” she said. “They’ve been buying from third parties.”
There’s now even speculation that the ultimate symbol of American consumerism, the Golden Arches of McDonald’s, will soon rise in Tehran. The chain reportedly posted an application for Iranian franchisees on its website, perhaps showing readiness to enter as soon as the door is opened. Homegrown copycats like “Mash Donald’s” and “Boss” Coffee, a Starbucks clone, have seen success in the country.
Franchising is a strong industry for Atlanta, the home of Church’s Chicken, Popeyes, Cinnabon, Arby’s and other brands that already have entered Middle Eastern markets with a flourish.
Focus Brands International, which manages the overseas expansion of Cinnabon and Auntie Anne’s pretzels, is watching Iran “with great interest,” says Nicholas Boudet, president of the international unit of Focus Brands Inc.
The France-born Mr. Boudet said he’d never visited the country but believes it will be a big opportunity given what he’s read about the population’s size and predilections.
He guessed that entering Iran might be a bit like entering Colombia, which saw formidable domestic brands sprout as the government’s armed conflict with FARC rebels keep foreign players away. That made it easier to find partners for new entrants, but it also made the landscape more competitive.
Franchising expert Bachir Mihoubi, head of the Francounsel Group who has brought various concepts into markets as diverse as Honduras and Egypt, says he’s already been getting calls from brands looking into Iran.
He compared the Iran opportunity to Egypt before the revolution scared away foreign investors. But he worries that brands could be getting ahead of themselves in a country that hasn’t proven it has the right “infrastructure” for franchising: proven intellectual property protections, banks that can repatriate all-important royalties and a “culture of franchising” to develop the necessary talent pool.
“There’s definitely pent-up demand. However, selecting the right franchisees is not going to be that easy. I don’t see anybody going there before a year from now, and let us not forget that (the deal) has not been ratified yet by Congress,” he said.
Trailing Europe?
Even if Iran becomes accessible, American firms should tread cautiously, professors said. The country will remain heavily regulated, and recruiting local knowledge will be essential.
Still, U.S. firms shouldn’t rest on their laurels, lest they risk falling irreparably behind European companies that have been waiting for the chance to jump back into Iran.
“They need to take this opportunity seriously,” Dr. Dadpay cautioned American firms. “This is not a country that other countries and other businesses do not have access to. There are German cars, there are Italian businesses, there are Russian businesses. Americans are not going into a land that is closed to foreigners. Americans have been outside this market.”
The nuclear deal is seen as a fait accompli for many ordinary Iranians, he added, since Mr. Obama took it to theUnited Nations before presenting it to Congress in a move that riled Republicans. Should U.S. lawmakers deny it and try to enter the market later, they would “lose all credibility,” Dr. Dadpay said.
Eager to get in on the ground floor, German Economy Minister Sigmar Gabriel visited Iran quickly after the deal, with representatives from some of his country’s largest companies in tow. French Foreign Minister Laurent Fabius is visiting this week, and a delegation of French companies is planned for September. France was a major player in Iran’s auto and energy sectors before sanctions were intensified.
The U.S and Europe battle could most visibly play out in aerospace, a potential bonanza for perennial rivalsChicago-based Boeing and France-based Airbus. Iran’s transport minister said at the recent Paris Air Show the country would need to spend $20 billion to buy 400 planes to modernize its aging fleet if sanctions are lifted.
Currently, Iran can’t buy new aircraft and parts shipments for maintenance must be approved under special license from the Treasury Department. Boeing received approval last summer to sell manuals and parts to enhance safety; the average age of the Iranian fleet is 26 years, according to The Economist.
A newly open market would be a boon for both for new aircraft and used parts sales, said Zaheer Faruqi, CEO of Peachtree City-based Aventure Aviation, which sells parts all over the world and operates an office inDubai.
“For aftermarket parts suppliers, there is likely to be immediate opportunities — both for commercial and military aircraft. By allowing them to sell Iran Air and other local airlines spare parts directly, U.S. companies will benefit, as this aftermarket has been under the control of parts suppliers outside USA who have continued to supply parts to keep the airline in operation,” he said.
Ms. Faraji, the doctoral candidate, says that though some hardliners in her country are still opposed to dealing with the West, most would welcome new business opportunities with open arms.
“I can imagine so many jobs that will come back to the market and so many new contracts — mostly with European countries. I’m positive on that,” she said when asked about her reaction to the deal. “Other than the economic side of it, you can see that it’s diplomacy working to solve the issues by negotiating and without having any boots on the ground.”
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