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The international implantation of small-sized and medium-sized companies in the food business

Updated: Jun 29, 2023

At the request of a Peruvian friend with consular responsibilities, today I am sharing my long experience which maybe gives me some elements of reflection to be proposed to my readers.

After experiencing a few successes and many failures, some rules seem to prevail.

Respecting them can give you the hope to succeed.

Unless being fortunate enough to win the lottery, not respecting them can guarantee failure.

You might really need that to export, notably towards the very saturated markets of countries with high purchasing power. The process is expensive and demanding. In case of success, the margins will be rather mediocre in comparison to what is generally offered by domestic and neighbouring countries markets. Especially since production factors in Africa or Latin America are not always as favourable as those in Asia for instance.

Furthermore, you will have to face each year more demanding new constraints. ISO certifications are well-known by the relevant industries; they also are familiar with the private certifications of major retail chains, such as Global Gap or the specialized certifications that cover almost all the fields of sustainability, equity, respect of nature in all its form. Each year, they become a little more restrictive to compete with local productions. Explaining to the European consumer that he must eat Peruvian vegetables is increasingly complicated!

The first step in strategic thinking is to analyse what a company and its products can bring as new and different to the complex environment we just mentioned.

What does our offer bring to the market in terms of innovation, prices, and satisfaction of consumers expectations? What arguments can encourage the consumer to get my product or the purchaser of a large retail chain to reference my product? People who love providing advice will always tell you that undertaking something is a madness. Exporting Coca Cola to Europe or implementing Mac Donald were nonsense. Yet what a success it was! But undertaking something at any cost can be of little use and the cruelty of facts led to the disappearance of many companies. It is not because you are the producer that your product is expected by the entire world…

Assuming a positive answer to these first questions, will the company be able to meet the demands of those new markets?

Are the means of production adapted to the volumes requested? In general, African, or South American industrialists think in terms of pallets when their buyers speak of containers.

Will management teams be flexible enough to understand the culture of foreign customers? Will they be able to match the management’s requirements that are imposed by the new markets (consistency in quality, respect of deadlines, among others…)?

Lastly, will the company have the human and financial means to achieve the huge effort that its implantation represents? Weeks of long travel— often reserved for the managers—with the corresponding travel costs, but also distance from a company’s vital centres. Not to mention the cost of samples shipment, of stands, of a website, of invitations, of the stock and sometimes-the difficult recovery of commercial debts from operators who are not all correct.

Think about measuring carefully the financial needs a long-term implantation requires.

Considering all those difficulties, how can the company hope to face challenges?

The first solution is to group companies of comparable size and culture, to reach a significant and quick turnover. Italy is arguably the perfect illustration of the success of small-sized and medium-sized companies in the food business. This is also the country where the “consorzi” developed. Those consortiums bring companies together which share their range of products, their commercial human means and possibly their logistical capacities to establish themselves in foreign markets. The purchaser of the retail chains will not have to reference 10 companies but only one “consorzio”, that could be as a multinational company in its shelves. The stand and solicitation costs are spread among all the actors in the consortium which can quickly lead to the creation of an autonomous and effective commercial organization. Implementing a collective organization is always a difficult exercise, mainly for entrepreneurs usually with independent nature. However, if Italians can do it, why not other producers?

The second solution is to create a brand. Although it is always difficult to admit that the consumer is more valuing appearance than reality, we have no choice but to note that the “marketing” share of food products can reach 40% of the selling price. We are perfectly aware of farmers’ income difficulties. We know of the weaknesses of industrial valorisation that leaves factories running on but does not guarantee the wealth of its owners. Real wealth—and multinationals are not mistaken—is relying upon the brand.

Two types of brands are to be considered because they are allowing a real “capitalisation” that benefits the producers:

- Collective appellations, specific to producer groups (in the form of geographical indications and/or collective brands);

- Commercial brand that belongs to a physical or legal person and that cannot refer solely to a geographical affiliation.

The economic rationality, that tends to share the advertising effort, is joining the strength of the geographical indication’s impact to advise seeking to create the most suitable collective brand.

The third solution is to create an efficient distribution. Finding a distributor is not enough to sell a product. The distributor provides logistics but only distributes what is requested to be distributed. Therefore, it is necessary to maintain control over the promotion of your products through direct contact with the companies which will be in front of the final customers, and which will be often supplied by a distributor. Do not forget in this process two important aspects:

- The outside-of-home consumer base (HORECA: hotels, restaurants, cafés) is more diffuse and accessible than the retail chains world. It can provide particularly interesting market tests and information feedbacks.

- Your national community in the importing country can be a first market to aim. It can be a recruiting ground which allows to find the animators of demonstration points or even some sellers who would be motivated to participate in the success of a brand of their country. As we can see, the long-term export process cannot be improvised. It requires a pragmatic approach and specific field knowledge. This is the spirit in which our consulting agency is proposing to assist its clients.


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