Successfully Distributing Food
Products in Continental Europe
Food Industry Day
5th November 2009
The challenge of
distribution
•
Remains major challenge for exporters on the Continent
•
Each market needs to be examined independently
•
No “one size fits all” solution
•
Need to be realistic about capabilities & resources
•
Exporters also face legal, language and cultural barriers
•
Need to be willing to adapt products, logistics etc
Outline
• Background & methodology
• Summary of key findings
• Review of case studies
• Key learning's/Conclusions
Background & Methodology
Background to research
•
Main objectives:
– Examine distribution systems of companies from similar background
– Determine process used in deciding on distribution model
– Summarise key learning’s from this process
– Identify key criteria for Irish manufacturers
Research methodology
•
Work undertaken by Green Seed
•
Case study approach
– 13 in total
– Mostly UK companies
•
French, Spanish, Swedish & Dutch markets
•
Mix of desk research & interviews
•
Undertaken during September/October
Summary of key findings
Rigorous market evaluation
needed before considering
distribution
Initial analysis &
introduction to market
Determine USP’s versus
competition
Determine likely price
competitiveness
- Desk research & store visits
- Assessment of distribution options
- Identify unique points
- Product adaptation required
- Price checks etc
Understand market entry
requirements
- Labelling, packaging & tax levels
- Traceability, GMO issues etc.
Establish key objectives
- Branded vs. private label
- Retail vs. Foodservice
Draw up key criteria to determine most appropriate distribution system
Key criteria to consider
Acceptable timeframe to
finalise distribution
- Long term solution but time intensive
- Quicker solution that can be adapted
Importance of direct
relationship with customers
- Direct customer management
- Handing over responsibility to 3rd party
Logistics capability
- Direct with service provider
- Handover to importer/distributor
Account management role
- Local presence/language capabilities
- Employing third party
Delivery issues
- Timed delivery vs. local warehouse
- Meeting lead times & shelf life issues
Competition
- Domestic supply capability
- Competitiveness of existing suppliers
Distribution options
considered
• Different options examined in case studies include:
– Direct/Direct via Logistics Service Provider (LSP)
– Importer/Distributor
– Joint venture /Acquisition of a local supplier
– Setting up a local office
Case studies highlight need for company/market specific approach
Each option has
positives/negatives
Direct via
LSP
Importer/
Distributor
Joint venture
Local
Office
Dedicated local presence
X
X


Local knowledge/sales force
X



Existing distribution network
X


X
Importer takes ownership
X


X
Direct customer contact

X
X

Maintain control

X
X

Takes time to set up

X


Cultural/language barriers

X

X
Significant investment
X
X


Reduced distribution costs

X


Lessons Learned
•
Must be flexible and willing to adapt products & approach
•
Time and financial investment required
•
Be ready before you present to the trade
•
Don’t assume everyone speaks your language
•
Distribution models can rarely be duplicated across several markets
You only get one chance – it’s important to be right first time!
Review of case studies
France
Chilled value added
seafood supplier
Company size
Turnover: €11m
Employees: 34
Product Range
Shellfish and dip snacks & microwaveable
shellfish starters
Target market channels
Retail & Foodservice (50:50)
Leading retailers, convenience stores
Branding
Mix of branded and private label
Pack formats
Modified atmosphere packaging for retail
Experience exporting to France
Exporting since 2007
Mainly retail – mix of branded and private label
Background to targeting
French market
•
Why France?
– Following market research, prioritised France, Spain, Germany and Holland
•
Already exporting to other markets?
– Previously had business in Belgium
– France is priority market for now
•
What research had they done?
– Employed expertise in market to guide their approach
– Undertaken desk research, store visits etc
•
Key issues in deciding on distribution model
– New to exporting, therefore no logistics model
– Relatively short product shelf life
– Limited resources available for “on the ground” activities
Distribution model
chosen
Importer/Distributor – Seafood Specialist
•
Manages both branded and private label accounts
•
Takes ownership of the goods when they arrive in France
•
Requires exclusive distribution of products in France
•
Manages sales and marketing of brands & private label development
•
Company delivers twice a week to depot
•
Company maintains contact with the trade – joint meetings
Logistics Model
Retailer depots
Importer /
Distributor
Chilled added
value seafood
manufacturer
Retailer depots
Wholesalers
Logistics
provider based
in UK
Why was this model
chosen?
•
Importer does considerable account management
•
Offers “on the ground” sales force
•
Covers both retail & foodservice sectors
•
Importer willing to handle both branded & private label
•
Good flexibility
•
Shelf life is maximised
Plans for the future
•
Happy with growth in volumes
•
Believe current distribution model can handle more volume
Potential issues
•
Costs involved when using local partner
•
Tied to one importer/distributor
•
Need to be sure importer keeps pushing their product
The Netherlands
Chilled & frozen ready
meals manufacturer
Company size
Turnover: > €150m
Employees: 1000
Product Range
Chilled & frozen ethnic ready meals
Target market channels
Retail only
Branding
Mainly private label
Pack formats
Dutch market: sealed black bowl with sleeve
Experience exporting to
Netherlands
Leading retailer employed firm to find
potential suppliers
Private label business commenced in 2006
22
Background to business
development
•
Why the Netherlands?
– Company shortlisted for private label business with leading retailer
•
Already exporting to other markets?
– Limited volumes to the Netherlands and Belgium
•
What research had they done?
– Once shortlisted research undertaken to find unique meal offering
– Once chosen extensive product development
•
Key issues in deciding on distribution model
– Exclusively supplying one retailer so direct route favoured
– However, retailer requirement to supply products on CBL crates a major issue
– Needed to find alternative
Distribution model
chosen
Direct via co-packer appointed by customer
•
Unique & exclusive recipes for retailer under their private label brand
•
Export business is done with co-packer
– Act as an additional depot for retailer
– Send orders and receive invoices from the company (EDI)
•
Ready meals supplied to co-packer who repacks them into CBL crates
•
For chilled products, lead time is 24 hours, 6 days per week. Shelf life 10
days from production
Logistics Model
Orders via
EDI
Retailer shops
Retailer
Headquarter
Retailer shops
Retailer shops
Orders per
EDI
Invoices
Chilled & frozen
ethnic meal
manufacturer
Retailer depots
Invoices
Orders via
EDI
Dutch CoPacker
Retailer depots
Retailer depots
Retailer depots
25
Why was this model
chosen?
• Direct delivery into retailers 4 regional depots didn’t work due to demand to
supply products in CBL crates
– Non-fit with the UK production set-up and very high logistic costs
•
Conclusion: moving from delivery depot to ex-works price was the best option.
•
Using co-packer was both time and cost efficient option, preferred by retailer
•
Business Development Consultant acts as first point of contact
•
Deliver to one hub instead of four
•
Control over stock levels
Plans for the future
•
Current system works well with no plans to change
•
Straight forward system
Potential issues
•
Co-packer can put own products as priority
•
Requires more communication in relation to forecasts, waste etc
•
Less control over process as dependent on co-packer to maintain
service levels
Spain
Dairy manufacturer
Company size
Turnover: €1.5bn
Employees: 8,500
Product Range
Full range of dairy products
Target market channels
Retail 85%, B2B 15%
Branding
Strong emphasis on branded products
Pack formats
No. of different format including individual
packs for retail
Experience exporting to Spain
Exporting for 10 years with steady growth
Initial focus was expatriates
Exports worth €1.3m, cheese & spreads
Background to business
development
•
Why Spain?
– Saw opportunity for brands given strong expatriate, tourist market
•
Already exporting to other markets?
– Exporting to Germany, France, Holland and outside of Europe
•
What research had they done?
– Minimal market knowledge so sought local expertise
– Aware of competitive nature of market
•
Key issues in deciding on distribution model
– Cautious approach - initially targeting the expatriate market
– Need to obtain local expertise
– Seeking cost effective distribution
Distribution model
chosen
Appointed local importer/distributor
•
Local consultancy firm employed to shortlist potential importers/distributors
•
Entered exclusive agreement with a local distributor/importer
•
Distributor takes ownership of products
•
Has sales force & dedicated account manager for larger retailers
•
Company suppliers distributor once every 2/3 weeks
•
Have ex works agreement, which means distributor collects goods
•
Orders sent from distributor to company
Logistics Model
Retailer
depots
Ex-works
Chilled dairy
manufacturer
Local distribution
partner
Sales reps
/ agents
Retailer
stores
Sub
distributors
Regional
wholesalers
Why was this model
chosen?
• Offers good local knowledge
•
Capability to offer both regional & national distribution
•
Distributor takes goods directly from company in UK
•
Straightforward export process for company
•
Seen as cost and time effective entry strategy
•
No issue over holding stocks in the market
Plans for the future
•
Current system has delivered steady growth
•
Works well at regional level but not as strong nationally
•
Recently appointed their own account manager to drive national roll out
Potential issues
•
Need a dedicated on the ground presence to develop national business
•
Exclusive agreement restricts potential to work with other partners
•
Service levels down to distributor
•
Little contact with final customer
Sweden
Frozen ready meals
Manufacturer
Company size
Turnover: €160m
Employees: 500
Product Range
Frozen ready meals
Target market channels
Retail 90%, Foodservice 10%
Branding
Mix of branded and private label
Pack formats
Dedicated retail and foodservice packs
Experience exporting to Sweden
Exporting to Sweden since 1999
Exports now exceed €10m
Present in number of leading retailers
Background to business
development
•
Why Sweden?
– Saw potential gap in the market that its products could fill
•
Already exporting to other markets?
– 15 years experience exporting across Europe
•
What research had they done?
– Use standard market entry “template” while allowing for specific requirements
– Select leading retailer and “deep dive”
– Adapt products as necessary to match local tastes
– Process took 18 months
•
Key issues in deciding on distribution model
– Recognised need for local expertise
– Needed someone to handle and deliver goods
– Wanted to maintain direct contact with customers
Distribution model
chosen
Direct via intermediate warehouse + local expertise
•
Market is handled in collaboration with local consultancy firm
•
Third party used to store goods and handle deliveries
•
Company handles orders and invoicing
•
Logistical set up with retailers managed by local firm
•
Local consultancy firm is first point of contact for customers
•
Not using a “national” sales force
Logistics Model
Retailer depots
Frozen and chilled
ready meals
manufacturer
Local intermediate
warehouse
Retailer depots
Foodservice
partner/depots
Others
Local Consultancy Firm
Why was this model
chosen?
• Offers company direct contact with customers
•
Able to use local expertise to act as “eyes and ears”
•
Local contact point for customers
•
Local intermediary handles storage and deliveries
•
Able to utilise full truck deliveries
•
Believe they cut costs by 12-25% plus the cost of running a local sales force
Plans for the future
•
System working well and able to handle growth in volumes etc
•
Further extension of product range planned
•
Increasingly supplying other Nordic markets from Sweden
Potential issues
•
High cost of keeping stock locally highlights need for accurate forecasting
•
Lack of sales force can make it difficult to secure full distribution
•
Doesn’t own the distribution network
•
Need to ensure local partner is dedicating sufficient time to products
Key learning’s/Conclusions
Key questions to
consider
•
How well do I understand the market?
•
Will my product appeal to local consumers?
•
Can I be competitive, what are my USP’s?
•
Does my product meet commercial and legal requirements?
•
Which channels do I want to target?
•
What resources do I want to dedicate to exporting?
•
Knowledge/resources to handle exports directly or do I need a local player?
•
Do I require local expertise in assessing which distribution system to adopt?
Conclusions
•
No “one size fits all” solution
•
Need to show ability to adapt products to local tastes
•
“Local” presence required but this can take many forms
– Local expertise to assess market & identify potential partners
– Local importer/distributor
– Potential for joint ventures
– Setting up local office
Conclusions
•
Need to be realistic about capabilities & resources
– Acceptable timeframe to finalise distribution
– Importance of direct relationships
– Logistics capabilities
– Ability to handle account management role
– Delivery lead times given product shelf life
– Acceptable cost levels
It will take time to finalise!
Successfully Distributing Food
Products in Continental Europe
Food Industry Day
5th November 2009