Exports to European supermarkets – 8 main challenges
For many FMCG products the most important channel in the foreign markets is the retail channel, as in many markets the super market chains are controlling more than 80% of the total business volume.
Most of the companies which focus their export efforts on the retail business, underestimate completely the entrance barriers and at the end spend a lot of money without any final result.
What you should before starting to approach retail clients:
1. Time to agreement in retail cooperations
The process of achieving a cooperation agreement with a retail chain, even if everything goes well, takes time. You have to calculate at least 12-18 months before a cooperation agreement is signed. Main reason is that retail buyers have to follow a very formal process. Before that you have to identify the relevant buyer and get his attention. As they are managing a huge number of proposals every day this is probably the hardest part.
2. Process milestones in exports to supermarkets
The process with a supermarket chain is quite standardized and predictable, with specific milestones. Don’t hope for shortcuts.
- Indicative prices
When you have made a good pitch, buyer will ask you for indicative prices.
Usually when you have convinced a retail buyer to check out your company, he will ask you for samples.
- 1st meeting
Having passed the evaluation of samples with success you will be invited for a first meeting. This meeting is usually quite short.
3. Slots for listing of new suppliers
A supermarket chain is not ready to list new suppliers when you are! Depending on their current agreements, they may have specific time slots to consider on new suppliers. Though, they usually prepare shortlists with new candidates and when the time comes, they will start negotiations with these suppliers. So, you have to get your company on this shortlist first.
4. Your Brand vs. Private Label
For many product categories, supermarket chains are open to cooperate with new suppliers only for their private labels. Anyway, you have to be clear, which cooperation model you are targeting, as the approach and the proposition is very different for both categories. As more diffused your approach, as weaker your proposal.
5. Cooperation development costs
Trying to do business with retail clients is very cost-intensive. Starting from sending of samples up to multiple presentation and negotiation meetings. If 2-3 people of a company have to attend meetings with different supermarkets, the budget for traveling can reach very serious amounts.
6. Low margins
Cooperating with a supermarket is for sure a low margin business and profits will come only through the volume. So you will need to develop a very specific price catalog, if you want to have chances to close the deal.
7. Packaging and labeling
Supermarket chain are very strict when it comes to packaging and labeling. You will be asked to deliver your products with very detailed requirements.
8. The agreement is just a next milestone
Reaching finally the point of a cooperation agreement, you probably think that you have made it. Don’t, this would be a mistake. Having listed a new supplier, the supermarkets start with small numbers in a limited number of their shops, in order to test the customer acceptance and/or your reliability. This means in practice that even at this point you probably won’t make profits yet!
All above entrance barriers should not stop a producer from trying to get into business with major retail clients. In contrary, as better prepared a company starts the approach, as higher the chances of success at the end.