The USA ranks as the worlds largest consumer market. The USA is receptive to new product entry, with more than 100,000 new products introduced every year. The USA’s large stores stock an average of 40,000 unique items. A small market share in the USA can represent more business to your company than a dominant market share in a smaller country. Read our Ten Tips on building your brand in the USA.
1. Conduct a Category Review: Visit potential retail customers for your brands to investigate competitive brands stocked, flavor/sizing trends, retail prices, and merchandising practices. Store visits should be in a city like Atlanta, Dallas, Denver or Cincinnati that feature a wide assortment of different retailers and formats. Markets like New York or San Francisco are not representative of broader USA conditions. Syndicated category data can be purchased from Nielsen, IRI or Euromonitor.
2. Target a Trade Channel: Consumer goods sell through as many as 13 distinct trade channels in the USA. Each channel has its own distinct set of operating practices. Supermarkets represent around 50 % of sales for a food brand, followed by Hypermarkets (Walmart) with a 20 % share. The Discount and Pharmacy channels may represent 65 % of sales for a Beauty Care or OTC/Healthcare product. Most Supermarket retailers will expect payment of a “slotting allowance” of $50 to $100 per store. Slotting fee’s are less common outside the supermarket sector. Many international specialty food brands start with natural/ gourmet channel retailers such as Whole Foods or Trader Joes.
3. Broker, Importer, Distributor or Direct ? Choosing an appropriate organizational model represents a logical next step. Food Brokers appear as the dominant partners to the supermarket trade, but don’t offer the logistics capabilities required by international brands. Importers provide an integrated service offering, but may lack the scale and retail coverage required. Leading retailers such as Walmart and Costco prefer a direct interface with their suppliers. Distributors must be segmented into wholesale distributors who carry a full range of products and importer/distributors which market a select group of brands. Finding the right organizational model may represent a hybrid approach using different models depending on your category, primary channel, and sales expectations for the USA. Export Solutions database covers more than 351 Food Brokers and 293 Food Distributors/Importers covering all regions and trade customers of the USA. These companies will represent any branded food product normally sold through a supermarket, gourmet store, or foodservice.
4. Selling to the Buyer: Larger retailers publish a schedule of review dates for each category. These retailers would only accept a new product during the category review which might occur only once or twice per year. Buyer interest focuses on traditional elements: What makes your product different versus current assortment? What is your brand marketing plan to generate consumer sales? A positive difference is the absence of European Style, “annual conditions negotiations”. A law called the Robinson – Patman Act creates a fairly level playing field on price and promotion levels across the USA. Requirements are naturally less demanding to sell to smaller retailers in alternate trade channels. Sustainability practices of your company is emerging as an important metric.
5. Category Management Maintains a High Profile: Data transparency and availability in the USA is unique. Manufacturers routinely access and evaluate sales, pricing, and merchandising data to the store level detail for their brand as well as competitors. The role of Category Management analytics is significant, with all suppliers expected to supply fact based analysis and in some cases consumer research to support your product “story”.
6. Retail Coverage is Mandatory: Your brand should include store level coverage for the supermarket and hypermarket (Walmart) channels. This practice is required to insure compliance with account headquarter authorized plans. If you do not have a broker covering stores, your product may be available on the shelf in 60 % of authorized outlets and likely has unfavorable location and space on the shelf fixture. Certain retailers and channels maintainer higher compliance levels than others; Our guidance is to invest in retail coverage at Supermarkets and Walmart.
7. Marketing Investments Average 10-20 % of Sales: New brands should budget 10- 20 % of sales for investments in trade development activities and consumer awareness promotions. Common trade activities include Temporary Price Reductions ( TPR) or participation in the grocers weekly flier. Discount coupon vouchers offering a savings of 35 cents to 75 cents is a popular consumer trial vehicle. Leaders like Walmart and Costco demand marketing support, but offer Every Day Low Prices (EDLP), with limited periodic promotions.
8. Cost Calculation- Key Factors: Importers Margin averages 20-30 %. Brands requiring a wholesale distributor should calculate 20 % for this service. Broker fee’s range from 2 – 10 % , but 5 % is normally fair for a new brand. Retailer margins average 25 %, but could be as high as 40 % for specialty foods and chilled products. Walmart and Costco margins/prices would be 10-30 % less than the general market. Another requirement is your 10-20 % accrual for marketing and trade promotion. Sales tax (VAT) policies vary by state and product, with some states having 0 tax on food products to others with almost a 10 % maximum sales tax level. Note: Sales Tax is not included in USA retail price tags.
9. Trade Shows: The annual Fancy Food Shows in San Francisco and Washington are the most important shows for the branded food sector. The Sweets and Snacks Show in Chicago is essential for the Sweets industry. The NACDS convention is critical for manufacturers of Beauty Care and OTC/Healthcare products. Other industry channels ( Convenience Store etc.) and product sectors ( Natural Food, Frozen Food,Bakery) feature annual trade shows. Other shows of interest are the PLMA (Private Label),NRA (Foodservice), & FMI.
10. Export Solutions Can Help!: The USA is an attractive market with well defined routes to the store shelves. Export Solutions can help your company build your strategy and presence in the USA market. Visit http://www.exportsolutions.com/talkExpert.aspx for more information.