Europe vs. USA -Vive la Différence
Europe and USA combined populations exceed one billion people. These developed markets serve as the source of most of the innovation and inspiration for the food and consumer goods industry. Yet the clear fact is that most European manufacturers sell minimal quantities to the USA and American brands are virtually absent from European supermarkets. Multinationals like Nestle,Unilever,Coca Cola, and Procter & Gamble are exceptions and play in a different league. Congratulations to brands like Barilla, Tabasco, and Pringles that achieve strong results on both sides of the Atlantic. However, the list of winners on both continents is short. This issue of Export Express explores Lessons Learned and tips for “Cracking the Code” in the worlds “First Billion”consumer market.
Euro – USA Importance
Some brands avoid the battle and shift strategic focus to high growth markets of Asia, Latin America, and the Middle East. This approach makes sense for companies that view export as an opportunistic source of volume or do not own leading bands. For most, Europe and the USA remain attractive targets due to the large, affluent, populations concentrated in organized markets. Consumers in established countries value innovation and maintain the disposable income to purchase international brands. An important point is that Europe and the USA share many similarities in eating, drinking, personal care and home cleaning practices versus Asia. This environment creates instant consumer understanding of our brands features and benefits versus markets such as Asia where the vast majority of consumers live and eat differently.
Problem: “Me Too” Products
Many leading food segments maintain similar development factors in the USA and Europe. Supermarkets on both continents dedicate significant space to universal categories such as Cookies(Biscuits),Coffee, Cake Mix, and Cereal. Innovation sweeps the globe, so it is a major challenge to differentiate versus existing choices .In our home countries, we enjoy the benefits of local manufacturing, scale, and a tradition of linkage with the consumer. However, these benefits disappear quickly as a USA brand attempts to sell to Europe or vice-versa. In fact, drawbacks emerge instantly, starting with overseas freight, duties, and distributor service fees. These routine costs translate to dramatic price premiums where your product may cost 2-3 times on the shelf versus comparable local brands with years of marketplace heritage. In reality, your initial overseas business base may consist of homesick expatriates willing to pay any price for their favorite candy or tea brand from home.
A typical USA supermarket averages 50,000 square feet and stocks more than 40,000 unique items. Private Label is present, but accounts for only 19 % of total sales. As a result, USA stores have plenty of space for international brands willing to “pay to play”. USA shoppers visit 4-5 stores per week across different trade channels, always on the hunt for bargains. Europe features a mix of large and small stores, but the reality is that the common supermarket is only half the size of a USA store. Shelf space is very limited, with real estate allocated to fast moving brands and private label. Gaining entry to European stores is a challenge for local producers, let alone foreign brands.
What is your Pull Strategy ?
Congratulations ! Your brand has been listed at a European supermarket. The good news is that you may achieve a respectable level of sales simply by being one of the small number of choices on the shelf. Naturally, sales will be proportional to your investment in consumer awareness and trade promotion activities.
Globalists will argue that it is much easier to get on the shelf in the USA, but much tougher to “sell out”. USA consumers face a sea of choices and dedicate less than 10 seconds to making a purchase decision. Success in the USA demands investment in coupons, trade ads and price reduction offers.
The USA market includes 332 million consumers. German population hovers around 83 million, with France and the UK weighing in at 67 million and 66 million respectively. Brand owners should ask the fundamental question of “What a $100,000 investment buys in their country ?” Then, that investment should be divided by the number of people in your target country. For example, $100,000 allows some meaningful activity in a country like Denmark or Ireland or Chicago. On the other hand, $100,000 is a small sum for the entire USA or even Canada which has 35 million people. Best practice suggests using your ” $100,000″ budget to drive high impact promotions at a handful of USA retailers or 1 or 2 European countries.
Brokers versus Distributors
Food brokers are the dominant outsourced model for selling to the USA supermarket channel. Virtually all companies from giants like Nestle and P & G to start-ups hire brokers. Core broker services are key account selling, category management analysis and mandatory retail merchandising. In the USA, the term “distributors” refers to wholesale distributors like UNFI who handle slow moving specialty food items. USA importers play a role for international brands, but represent only one percent of USA turnover. In Europe, distributors serve as the key partners for foreign brands. Distributors provide an integrated portfolio of selling, logistics and financial services. As with brokers, there are significant differences in capabilities between giant power distributors and small “one man show” companies. Export Solutions distributor database tracks more than 3,000 European food distributors and 559 USA brokers.
Crawl, Walk, Run
USA brands looking to enter Europe should target the UK and Ireland as their first point of entry. Find a distributor with a successful track record at importing other USA brands. Waitrose, Whole Foods Costco , and perhaps Asda(Walmart) may be logical first customers. Next stop would be the Nordic region which values premium products and contains many excellent distributor options. Many European brands are already in the USA with modest sales. Hire a USA based employee and locate a “mid-size” broker to handle your brands. Focus on a limited number of upscale supermarket chains with 50-150 stores each. Invest in trade activities to do it right at these accounts prior to expanding attention to giants like Kroger and Publix.
Need a Hand ?
Export Solutions can help on both sides of the Atlantic !I have been a featured speaker for ESMA, the European Distributors Association and am well connected with distributors throughout Europe. I have also spoken to European manufacturer groups in Germany, Italy, and the UK on USA entry strategies. Export Solutions has helped Italian, German,UK, and Dutch companies on USA business development strategies. Our approach is “sales oriented”, focused on creating tangible solutions to create new sales.