Food and beverage is an exciting sector in the high growth markets of Southeast Asia and the East Asian Tigers (Taiwan, Hong Kong and South Korea). The trouble is, we are not the only nation vying for a piece of the action. A multitude of global brands are busy building trade links in the region 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.
For most exporters using a distribution partnership model in Asia, there are a number of approaches that can be taken, such as a best price model, which involves selling at the lowest price, allowing your partner sufficient margin for marketing. Many kiwi 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 little control over how well your product is promoted or its final selling price.
Without skin in the game, your distributors attitude to brand building can be lack lustre. 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 middle ground is a shared approach, which often involves the exporter committing a percentage of FOB sales towards marketing while the distributor covers in market costs such as promoter salaries, samples, price offers etc.
To be successful it’s vital that sales are adequately supported and the strategy mutually agreed upon. Open and frank discussion with distributors about marketing should take place at the outset to ensure that expectations are aligned.