This article is the first in a series that will discuss what you, or your company, need to understand when launching new consumer goods product into the GCC markets. It is written from the perspective that it is your first experience of doing this. With Gulfood 2021 almost upon us, it is timely to take a look at this topic. As a first installment, we are focusing on initial considerations, only scratching the surface of what is a very deep subject. As the series progresses, we will get into more depth and be more practical in terms of what needs to happen.
The first question you should ask yourself is, are the products mass market, or niche market? In other words, are they products that should be distributed throughout the market from large hypermarkets to small grocery stores and other types of outlets, or are they products that you would sell through niche retail outlets, or maybe purely online?
Let’s look at the first of these, mass market. How do you reach distribution throughout hypermarkets, supermarkets, convenience stores, grocery outlets and more? The infrastructure and capital investment required to achieve mass market distribution is significant. For most entrepreneurs and many companies, it is prohibitive. Neither is such a project just about cost, you would also have to find the right personnel to staff a new distribution business. Furthermore, a critical success factor in bringing any new product to market is understanding the dynamics of how the whole market works, which is far greater than just an understanding of your product category.
A common example of how this can be solved is by appointing an existing 3rd party consumer goods distribution business to provide the service for you. The right distributor will have the infrastructure you need to reach your targeted outlets, a trained sales and merchandising team, who know how to maximize opportunity for products displayed in stores. They will have capable negotiators in their key account managers and existing strong relationships with trade customers, backed up with a sufficient logistical capability to warehouse goods and deliver to your trade customers.
Sounds great, doesn’t it? But now comes probably the most difficult part of the project, finding and appointing the ‘right’ distributor. There are too many examples of new product launches that have failed as a consequence of not getting this right and although this comment could be interpreted as being loaded against the distributor, this is not always the case and could equally be a failure on the supplier’s part.
There are, perhaps obvious, considerations that need to be accounted for in making your distributor selection;
- Is the distributor financially secure?
The last thing you need is a distributor without the financial capability to service your product.
- Does the distributor have the logistical reach to achieve your distribution targets?
If not, then you will not maximize the potential of your product.
- Does the distributor have relevant product category experience?
Whilst it can be argued in the business of selling consumer goods that the product category is irrelevant (as the same selling skills are required regardless of the nature of the product) the fact is that existing relationships with product category trade buyers goes a long way.
- Are there conflicting products within their existing portfolio?
Some distribution companies are expert and capable at managing product conflict within their portfolios, but most are not. You do not want a situation where the demands of an existing competing product supplier pushes your product aside.
- How big is their existing portfolio?
If the distributor has an impressive range of established products, it does not necessarily follow that your product will succeed. An objective evaluation of any selling situation will tell you that it is far easier to sell more of an established product than to introduce a new one. This scenario may translate to the sales team taking the path of least resistance by relying on established, easy to sell, products in order to hit their targets leading to a lack of focus on the new product.
- Is your proposition sufficiently attractive to a 3rd party distributor?
It may seem obvious, but if the product margins available do not match the distributor’s needs, there will be no interest. The price strategy should be carefully evaluated at every stage along the commercial selling chain. Working backwards, it starts with the consumer, who must believe the price they are being asked to pay for the product represents value. The retailer who sells it to them must achieve their required margin. As already stated, the distributor will not consider the product, irrespective of how great that product may be if the margin is not there. Then there is you and possibly either your supplier, or your factory. If the margin element fails to meet needs at any point along this chain, the product is destined to fail.
However, it is not just about price and margins. In the highly competitive retail environments of the modern world, distributors and retailers need to be assured that any new product launch is going to be sufficiently supported in order to maximize consumer purchase. This is going to be your most expensive cost and you must carefully budget for it. We will look at this in more detail in future articles.
With Gulfood just around the corner, product suppliers and distributors will have the opportunity to meet face to face and discuss potential new business. As someone who has experienced this event as both an exhibitor and a visitor, I know it to be an excellent forum for establishing new business and relationships. If you are exhibiting at, or visiting Gulfood this year with a view to achieving new product distribution in the GCC, I wish you every success and look forward to seeing your new product in market!
This article has been contributed by a CBD client, AFPCO, which provides a full range of FMCG consultancy services from product feasibility studies to facilitating the appointment and terms of a distributor. If you are interested in finding out how to distribute your food products in the UAE, please contact firstname.lastname@example.org for more information.