Food and beverage is an exciting sector in the high growth markets of the Four Asian Tigers (Taiwan, Hong Kong and South Korea). The trouble is, there are many nations vying for a piece of the action. A multitude of global brands are busy building trade links with these nations and the fight to gain market share is fierce.
Achieving success involves more than a demand-inducing product. It also requires sufficient marketing support to develop brand awareness and generate sales.
There are a number of ways to provide marketing support. One common approach is the best price model, or "net net pricing" as its often referred to. This involves selling at the lowest price thus allowing your in-market partner sufficient margin for marketing. Many exporters prefer this model thanks to its simplicity. It can also be beneficial for the buyer, as the duties and taxes on each shipment are minimised. The downside is you have very little control over how your product is promoted and there is a danger that your distributor will just treat it as an opportunity to grab more margin.
Negotiating a deal with your new distributors that ensures they have skin in the game (investment) is a much more promising pathway. If they are financially invested in your brand, then they will be significantly more motivated to build a loyal customer base and increase sales. But don't be mistaken, the bulk of the investment needs to come from the brand owner.
A common view expressed by distributors is “the Principle owns the brand and they can (and often do) move their business to a competing importer at any time, so marketing costs should be covered by the Principle”.
A popular arrangement in the shared approach involves the exporter committing a percentage of FOB sales towards marketing as well as Free of Charge Stock (FOC) and marketing collateral while the distributor covers in market costs such as promoter fees, samples, price offers and social media campaigns.
To be successful it’s vital that sales are adequately supported and the strategy mutually agreed upon before a distribution agreement is signed. Open and frank discussion with distributors about marketing should take place at the outset to ensure that expectations are aligned.