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Winter 2011 Volume 4 Issue 1

Insights to Accelerate International Expansion Our Mission:Help Manufacturers“Spend time Selling to Distributors versus Searching for Distributors”

Sweet Lists for Gourmet & Confectionery How sweet it is! Export Solutions, a leader in distributor identification services, offers online information for the world’s leading confectionery and gourmet products distributors. These popular lists include specialists in handling fine food, specialty food, chocolate, candy, and snack products to all trade channels. The global confectionery list covers 1,420 distributors in 90 countries. The gourmet and specialty food list covers 1,220 distributors in 90 countries. Access the lists via the web at www.exportsolutions.com.

In This Issue Page 1 Walmart International – World’s #3 Retailer Page 2 Straight to the Top Page 3 Ten Tips – USA Market: Cracking the Code Page 4 Country Segmentation – One Size Does Not Fit All Page 5 Distributor Performance: Recognize the Leaders, Push the Laggards Page 6 Need A Hand? Page 8 Sell to the World for $975!

Walmart International – World’s #3 Retailer #3? This is not a mistake! Walmart is recognized as the world’s largest retailer, with anticipated 2010 sales of around 430 billion dollars. Walmart’s International (outside USA) sales should exceed 115 billion dollars this year. This positions Walmart International firmly as the world’s number 3 retailer, galloping ahead of Tesco and Germany’s Metro Group and just a fraction smaller than Carrefour. Walmart International accounts for more than 25% of total Walmart sales and is growing at 20% per year through a network that includes more than 4,500 stores covering 55 different banners in 14 countries outside the USA.

Selling to Walmart International There are several routes to sell to Walmart International. Some suppliers will be tempted to travel to Bentonville (or Miami) to visit with global procurement managers. This avenue may be productive for private label producers or manufacturers of general merchandise type items. Most food and personal care brands prefer to deal directly with Walmart’s in country buyers. This requires a local team or distributor. The distributor understands country market conditions and trends and sells to all customers, not just

Walmart. This strategic approach creates a path to build a long term franchise for your brand in a country. This tends to generate better success than a direct sale only to Walmart International not supported by local marketing activity and in store merchandising.

United Kingdom ASDA is a crown jewel in Walmart’s international portfolio, with sales of 33 billion dollars. Walmart is #2 in the UK, ahead of Sainsbury, but still miles behind rival Tesco. ASDA looks to gain steam in 2011 through the acquisition of Netto’s UK operations and 193 smaller stores. Another push is to gain visibility in greater London through rapid expansion of smaller format stores.

Mexico Walmart’s first international venture is perhaps its most successful. Walmart operates more than 1,600 stores (and

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Straight to the Top You think you are busy? Try serving as the owner or managing director of a distributor. The typical distributor represents 10-20 companies. This role is comparable to parenting 10-20 children, each vying for attention and requiring care everyday, not to mention the needs of the distributor’s own employees. A distributor’s days are filled with back to back meetings, an endless stream of business dinners and an email inbox that never empties. So don’t take it personally when you don’t receive an immediate response from your latest email request.

Strategic Services Contact Us for Export Solutions 1. Identify Best in Class Distributors: 90 Countries 2. Best Practices Export Strategy 3. Distributor Management Workshops 4. Export 101: Let’s Get Started 5. New Market Prioritization & Launch Plan 6. Personal Distributor Introductions: 90 Countries 7. Walmart International 8. Distributor Contracts, Margins, & Fees 9. Meeting Speaker 10. International Strategy Expert

The question for brand owners is, “how do I break through the clutter” to develop a collaborative relationship with the senior manager of your distributor partner? Below are five ideas for gaining management attention to your priorities. 1. Establish a Regular “Phone Date” – Export managers may find it tough to make personal visits to each market on a frequent basis. One concept is to establish a monthly (or quarterly) phone date with the managing director of each distributor. Shipment status is important, but the critical discussion should be around the two key business initiatives that are driving your business. You want him to be clearly focused on “what matters” versus buried under the minutiae of day to day trivia. 2. Top to Top – Invite the distributor owner to meet your company president or division manager. Distributors thrive on the prestige of meeting with their senior counterparts to talk about lofty goals for the industry’s future. Upon return to the home market, the distributor will experience a renewed sense of commitment to your brand as he does not want to disappoint his “new best friend” at your company. 3. Distributor of the Year – My regular readers know that I am a strong proponent of establishing a Distributor of the Year program. This tactic tends to be an inexpensive way to motivate and reward distributor performance. Progress reports on the annual contest provides another important communication opportunity to discuss with the Distributor leadership team 4. Sports – Most of us enjoy sports either as armchair fans or active participants. A good way to connect with a distributor is to find a common link based upon sports. Discover the distributor’s favorite sports team and invite him to a match. Many brands sponsor teams or have marketing relationships around events like Formula 1, Tour de France, or even the World Cup or Olympics. Everyone appreciates a ticket to a “hot event”. For a distributor that is a golf fanatic, nothing beats an invitation to play at a world class course in your country. I am a tennis player and find that the stresses of the business day melt away after a competitive match of tennis. The important message is that your relationship with your distributors senior executive will change once you share some personal time together outside the office. 5. ESMA – One of the best ways to connect with leading European distributors is through ESMA. ESMA is the European Sales and Marketing Association, a group of about 100 of the strongest distributors in Europe. Distributor owners and leading international brands’ senior managers meet once a year (2011- Greece) to discuss issues of the day. There is a modest fee for Brand owners to join ESMA, but it can provide a gateway “straight to the top” at many of Europe’s top distributors. The new year represents an appropriate time to reach out via phone to your distributor’s senior management. Ask about outlook for the new year, planned capital investments, changes in his market, organizational changes and reinforce your two major priorities for the year. My new year’s resolution is to call my contacts more often versus email.

Greg Seminara • gseminara@exportsolutions.com • 404-255-8387

www.exportsolutions.com

“Spend Time Selling to Distributors versus Searching for Distributors” 2


Ten Tips – USA Market: Cracking the Code The USA represents the world’s largest market. A small market share in the USA can represent a bigger business than owning a 50% market share in a smaller country. Many international brands fail to reach their potential in the USA as they treat it as just another export market. Listed below are Export Solutions’ ten tips for improving your results in the USA, a consumer market of 310 million people.

1. Develop a Channel Strategy The USA Food business is segmented into 12 channels, with supermarkets claiming an average of 60% of the business. Other important channels include Supercenters, Mass, Foodservice, Value, Club, Convenience, Natural, Gourmet, Military, Gift, and Ethnic. One strategy is to concentrate efforts on winning in one channel to gain traction, versus spreading efforts in too many areas.

2. Focus on Top 10 USA Retailers Think Walmart, Kroger, Safeway, Publix, and Food Lion that all operate more than 1,000 stores. Many companies claim that they “sell to Walmart”. The key question is to identify a chain’s store count and measure how many of those stores your brand is available in. Last year, an important European beverage brand told me that they were “selling to Walmart”. Turns out that his follow up investigation revealed that he was selling to only 46 of Walmart’s 2,900 supercenters.

3.Think Beyond New York None of the top 5 grocery retailers maintain a presence in metro New York. The USA has experienced a population shift to the South and West, with the Northeast actually representing the smallest of the four regions. Visit Atlanta, Houston, Los Angeles, or Miami to get a more accurate gauge of industry dynamics.

4. Use a Broker

8. Hire a Sales Manager

In the USA, the brokers play a unique role, touching virtually every brand in the supermarket aisles. Even distributors use brokers to supplement their own efforts. Export Solutions’ database tracks 360 USA brokers, including the “Big 3”.

An international company should place at least one person in the USA to manage their interests. Hire a veteran sales person and locate him in a home office in a city with a great airport like Atlanta or Chicago. This role will allow him to manage your distributor and broker network. You can also hire a contract sales management group like Ram to perform this function. Hiring an employee based in the USA signals that you are serious about building your business in the USA.

5. Retail Services are Required Great news! You just received a listing at Kroger or Safeway. Your work has just begun. Planogram integrity is an enormous issue in the USA. Compliance levels of new items at store level may reach only 60% without a broker at store level to “cut in” your product and monitor its availability.

9.TPR This stands for Temporary Price Reduction. USA supermarket aisles are filled with hundreds of these tags. The consumer recognizes these tags to signal a special discount and “time to buy”. TPR’s are normally 10% of everyday price and can be an efficient spend particularly on a “scan down” program.

6. Data Driven Decisions The USA market is blessed with the most sophisticated analytic tools that are used on a daily basis. This includes availability of point of sale data at the chain (and sometimes store) level to measure everything that scans. Business building and selling incorporates use of post promotion analytic tools, market basket studies, and brand sales by demographic cluster.

10. Ethnic Channel: First Stop Your product will be well received in channels specializing in your country’s products. There are well established retailers specializing in Hispanic, Asian, British and Italian Foods. Whole Foods and Cost Plus World Markets offer good assortments of international brands.

7.Try a Coupon USA Sunday newspapers are jammed with coupons offering consumers small discounts (.25 - $1.00) to purchase a product. Many supermarkets up the ante, by doubling the value of the coupons. This is a proven strategy to drive listings, generate trial, and repeat purchase. A coupon can force a retailer to carry your product, as he does not want to disappoint a customer with a coupon.

The USA market thrives on new product innovation. Fortunately, the stores are large, with an average of 40,000 products stocked. Contact Export Solutions for more strategies on penetrating the growing USA market.

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Country Segmentation – One Size Does Not Fit All Strategic segmentation of export opportunities is “Job One” for export managers. Export Solutions divides countries into three groups: Strategic, Priority, and Opportunistic. This approach filters countries by “size of the prize” and investments required to win. The basic rationale is that a company should allocate different resources to develop a large country like Brazil, compared to a medium size country like Belgium versus the Bahamas or Bermuda. Too frequently, we see companies handcuff all markets to one export program, with common strategy, pricing, and invest models for all countries.

Country Segmentation Country Profile

Investment Required

Business Model

Significant Investment in Brand support. Market Research Management Visibility

Local Office or Distributor or Joint Venture

Strategic (Focus)

Large Country (pop. 50mm +) High GDP High Category BDI Global Retailers High Complexity

Priority (Manage)

Mid size Country (pop. 10 mm+) High GDP High Category BDI Mid Complexity

Moderate investment in brand support. Managed by Export Manager

Distributor

Opportunistic (Profit)

Profitable Opportunities. Low GDP Countries Low Complexity

Minimal/no investment in brand support

Distributor or Direct to Retailer

Examples Japan USA Mexico China Germany

Argentina Australia Canada Taiwan/Korea South Africa Benelux Saudi Arabia

Caribbean Central America Middle East Africa

Segmentation Factors

Market Share Expectations

Segmentation analytics will vary by company. Absolute population is just one factor warranting consideration. Other criteria include size of the category, proximity to your producing plant, as well as per capita spending power. For example, most USA based exporters sell far more to Puerto Rico, an island with 4 million people, than they do to China or Brazil. As a result, some USA brand owners place a strategic focus on the Caribbean Basin countries adjacent to the USA and process only occasional opportunistic shipments to complex countries such as China.

Your export road map should also be adjusted based upon your market share expectations for a select market. Generally, there are three scenarios for a brand to pursue. Leader: Brand investment and innovation to become #1 in the category. Player: Brand plans to compete effectively, obtaining a market share of 5% -20%. Participant: Niche. Brand offers unique item or product range. Limited/no investment.

Mix of Countries Most companies can dedicate focus on a strategic launch into only one or two “strategic” countries at a time. It’s appropriate to create a growth plan aimed at a mix of Strategic, Priority, and Opportunistic countries.

Lessons Learned Calibrate expectations to investments in brand support and management oversight. Everyone wants to be a category leader or player. To achieve this lofty status, you need to conduct local market research, innovate, maintain competitive pricing, invest in marketing, and align with a strong sales team just as you do in your home market. Projects fail as certain brands want category leadership but invest only to “niche” levels.

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Distributor Performance: Recognize the Leaders, Push the Laggards The start of a new year is an appropriate time to review distributor performance. This process starts with the evaluation of the usual metrics such as shipment results, market share, and success delivering new item placement. Normally, distributor performance ranges across the spectrum from outstanding results delivered by top distributors to under-achievers who fail to meet their shipment budget. Each scenario warrants a different approach in terms of managing for the future.

Distributor Segmentation

Leaders 20% of total

Performers 60% of total

Laggards 20% of total

Results

Next Steps

Shipment increase of 10% or more. Growing Market Share. Innovative Strategies.

Recognition: Public & Financial. Invest in team generated ideas. Share learning with other markets.

Shipments + 5% and in-line with overall market growth. Consistent results over many years.

Support current growth trajectory. Challenge to reach “Leader” status.

Flat/declining shipments. Poor results for 2+ years. Low energy/innovation.

Probation status for existing partner. Evaluate different representation options. All markets have alternatives!

Distributor Segmentation Analysis

Next Steps

A valuable exercise is to segment your existing distributors into the three groups: Leaders, Performers, and Laggards. Look at the organizational models of your “Leaders” and Laggards”. Are there consistent threads between the business specialization of your distributor network? For example, do you find that your “Leaders” are all Large Distributors (versus small), Big Brand Distributors (vs. niche), Category/Ethnic specialists (vs. all types of Food), technologically savvy versus “old school”? A similar analysis should cover your “Laggard” distributors. Are under performers small organizations that fail to meet your requirements? Or alternatively, large distributors where your brand is too small to gain sufficient attention? Your analysis may reveal that one type of model works well for large or adjacent countries while another approach works best for smaller or remote countries. Look for the trends!

Honor your leaders and drive them to higher levels. Recognition such as Distributor of the Year, visits with your company CEO, or requests to deliver a presentation on their “success story” are inexpensive motivators. “Laggards” impact our own ability to achieve our personal objectives. We often like the people who work at “Laggards”, but at times, you must act to protect the long term interests of your company and pursue a change in distributors. It is important to recognize that all companies have distributors that are “Leaders” and “Laggards”. Proactive attention to fix the “Laggards” will only improve your results versus suffering through another year with a poor performing partner.

Export Solutions Can Help Our industry leading database has been used by more than 1,600 brands to locate partners in 90 countries. This includes an average of 45 unique distributors per country. There are always many alternatives to consider in every country when you have access to the Export Solutions database.

Lessons Learned Completing the distributor segmentation exercise described above should yield some important conclusions on the best partner models to pursue for your brand. For example, an Italian manufacturer of candy may confirm that his best performing distributors are international confectionery experts, versus distributors specializing only in Italian products. On the other hand, an ethnic Asian food producer may find that the best candidates to represent his brand are Asian channel specialists versus distributors that represent all types of fine food categories such as Tea & Olive Oil.

Export Solutions serves as a consultant to European and American brands of all sizes. Our work includes analysis of distributor networks and development of strategies for motivating, measuring, and rewarding distributors. Export Solutions has helped companies identify, interview, and sign distributors on every continent. Contact Greg Seminara at gseminara@exportsolutions.com to discuss your project. Our motto is “Spend time Selling to Distributors vs. Searching for Distributors”.

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Need A Hand?

Some recent projects for Export Solutions: • India/Australia entry strategy and distributor search for 700 million dollar Beverage company • Mexico distributor search for Global Health & Personal Care company • Export Development and Distributor Management workshop for 5 Billion Dollar European Food company • International expansion strategy for 600 million dollar Frozen Food Company • Japan partner identification for 2 Billion Dollar personal care company • Latin America development project for 70 million dollar Juice company • European Strategy and distributor assessment for 250 million dollar Natural Foods company • USA Hispanic Channel Distributor(Broker) search for Top 5 Global company • Marketing your Distributor “Brand” Presentation to European Distributors Association Export Solutions performs distributor search in 90 countries. Our consulting division helps companies of all sizes with global strategy and expansion projects. Looking for an impactful Distributor management workshop for your team or meeting speaker for your annual meeting?

Contact Greg Seminara at gseminara@exportsolutions.com to discuss your international development project.

We can help! 6


Walmart International – World’s #3 Retailer Walmart International Presence

continued from page 1 VIPS casual restaurants) in this strategic country of 110 million people. Export Solutions estimates that Walmart accounts for 55% of total Mexico retail sales through the “Modern Trade” channel. Aurrera is their primary banner and growth vehicle in Mexico. Walmart often sources “Made in the USA” brands from Bentonville for their Mexican Walmart hypermarkets. Results tend to be mixed, as direct imported brands are usually not supported by marketing or the armies of in store merchandisers required to maintain shelf presence in Mexico.

Brazil Walmart has the potential to achieve market leadership in this high profile growth market. Carrefour, the traditional market leader, is suffering and bearing the brunt of a recently announced 700 million dollar write down of assets. After a modest start in 1995, Walmart built a solid platform through the acquisition of Bompreço’s 118 stores in the northern region of Brazil and Sonae’s 140 stores in the southern region. Brazil remains a bright spot for Walmart but persists as a challenging place for suppliers to do business. Look for a local distributor to guide you through the curves!

China A Walmart senior executive once stated that he expected China to represent their #1 market outside the USA. They appear to be on their way, with sales in the 8-9 billion dollar range. Walmart surged ahead through their 2007 partnership with Trust Mart. Still, winning is not easy in China as Walmart faces heavy local competition as well as sparkling new stores from global rivals, Carrefour, Tesco, and Auchan. Walmart benefits from years of experience in navigating a complex maze of government regulations and local labor practices. Global food brands have typically not benefited from Walmart’s (& Tesco/ Carrefour) China expansion. China’s eating habits and practices are different and high priced imported brands are regularly affordable to only a select group of consumers.

Japan Japan represents a rare disappointment for Walmart. Credit Walmart for trying create efficiencies by avoiding century long practices of dealing with Japan’s notorious

Year of Entry

Stores

2010 Sales* (Billions $)

Argentina

1995

53

1

Brazil

1995

455

15

Canada

1994

323

12

Chile

2009

267

4.5

China

1996

304

8.5

Central America

2005

536

3

India (includes Easy Day)

2009

116

0.1

Japan

2002

413

9.5

Mexico

1991

1606

26

Puerto Rico

1992

53

2

United Kingdom

1999

382

33

South Africa (Massmart?)

2011?

288

7.4

Country

*Export Solutions’ estimate multi-tiered distribution system. Walmart has persisted in Japan, despite years of marginal performance since their initial 6.1% investment in Seiyu. Japan represents an enigma for Walmart: Enough critical mass to avoid an embarrassing exit like Germany, but still lagging behind market leadership aspirations.

Central America

provides Bharti with technical support and logistics capabilities to support their 111 Easy Day supermarkets. Walmart has introduced Retail Link to India and is establishing a footprint in this enormous country of 1.1 billion. Ultimately, India is expected to relax their laws limiting foreign investment, providing Walmart with another huge growth engine for the future

Walmart is the dominant retailer in this cluster of five countries. This region is important for USA based suppliers as these small countries are dependent on the USA for many brands. Walmart’s Central America operations now report to Walmart Mexico, with regional procurement activities increasing from their Guatemala buying office. Export Solutions covers about 200 distributors in the region, each servicing Walmart and other market customers.

Future – Massmart: South Africa

India

Looking for strategies to optimize your sales to Walmart International? Export Solutions covers 90 countries, including every country where Walmart operates. Creating viable, long term, strategies for selling to Walmart International and other local retailers is a fundamental part of our expertise.

Walmart is a pioneer in India through their 50:50 partnership with local giant Bharti. The partnership has opened five cash and carry stores under the Best Price Modern Retail banner. Current Indian law permits foreign retailers to operate only in the wholesale sector. Walmart also

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In late 2010, Walmart announced a 2.3 billion dollar bid for 51% of Massmart’s managed portfolio of nine wholesale and retail chains, and one buying group, each focused on high-volume, low-margin, low-cost distribution of mainly branded consumer goods for cash. The group operates in 14 countries in sub-Saharan Africa through four divisions comprising 288 stores.

Export Solutions Can Help!


Sell to the World for $975! Finding qualified new distributors can be tough! Export Solutions makes life a little easier with our time saving international distributor lists. Export Solutions online distributor database covers 90 countries and 4,800 distributors of supermarket/foodservice products. For less than the cost of one business trip, you can purchase an annual subscription. Subscribers enjoy access to all 90 country distributor lists plus category specialty distributor lists for Grocery, Gourmet & Specialty Food, Beverage, and Confectionery products.

Argentina

France

China

Brazil

Germany

India

Colombia

Italy

Japan

Mexico

Russia

Vietnam

USA

Saudi Arabia

South Africa

Export Solutions covers 90 countries. Can we help you“fill the gaps” in your export map?

“Spend time Selling to Distributors versus Searching for Distributors” www.exportsolutions.com


Export Express - Winter 2011