More and more food and drink businesses are waking up to the benefits of export and, in spite of increased competition in the international marketplace, demand for British products remains high.
Before selling overseas, food and drink businesses must understand that exporting is for the long haul and carefully consider what it is that they want to achieve.
Exporting should not be treated as a quick way to boost sales figures.
The most successful exporters are both patient and proactive, they are prepared to foster relationships with overseas buyers and consumers over the long-term and are always actively looking for opportunities and seeking new partnerships.
There is no better time to get started in export, here are the top ten tips to help get you on your way.
1. Create an export plan
If you do plan to export, you will need to develop an export plan covering:
- Which steps you need to take.
- What targets you should aim for (e.g. sales targets)
- What resources you can use to meet your target/s
A Written Export Plan will provide a clear understanding of your long-term product exporting objectives and ensures that all the management are committed to achieving these goals and objectives.
Careful preparation of an Export Plan is critical when entering a new export market and can significantly reduce risks and costs that are often associated with exporting for the first time!
Drop us an email and we will help you with writing the best export plan for food and drink products.
Consider those factors when you prepare an export plan,
Can you assign an existing resource to drive your export activity or do you need to bring in new talent?
If overseas demand for your products grows quickly, do you have enough capacity or a plan in place for increasing production?
Can you enhance the marketability of your product to appeal to overseas customers while complying with foreign regulation?
Visiting different regional markets to conduct research and showcasing your products at trade fairs are the best ways to build contacts and become a successful exporter. Do you have the resource to invest in this activity?
2. Do your market research
Identifying the markets and regions offering the best opportunities for your company will enable you to target your resources to achieve the best return. Undertaking market research will help you to:
- Identify which markets to target
- Establish where to target your products in the market
- Understand potential routes to market (covered in Step 4)
- Populate your export business plan with achievable targets
Ask following questions when doing a market research
Which markets import and/or consume the largest quantities of your product-type, and which markets have experienced the most recent growth?
Which markets are predicted to grow the most in terms of the income per capita and population?
How large is the packaged food and drink market in the regions considered?
How will cultural or religious practises in your target markets affect consumption and/or demand?
What is the demographic of the market e.g. is it a young or old population?
What is the population density of those consumers you will be targeting, e.g. high income for speciality, or ethnic market?
Who are your key competitors? Can your product/s compete with your competitors’?
What is the geographical structure of the market? Are there any regions/cities that you should be focusing on? It is unlikely that you will initially be able to export to all regions of a large country.
What are the barriers to export and how difficult is it to export to a particular market?
Pro Tip – Before conducting market research make sure that you fully understand the Unique Selling Points (USPs) of your product/s and the profile of potential customers i.e. the age or income groups your product/s currently appeal to in the domestic market. (covered in Step 6)
3. Prepare your product-market fit
Once you have identified your target markets it is a good idea to conduct background research on whether your product/s need to be adapted in order to be sold in the countries you are targeting.
Product labelling, packaging design and materials may need to be modified to account for regional differences. Does any additional information need to be included in your product labelling?
Do you need to translate information on-pack into different languages?
If your product/s make any claims based on standards that are accredited in the UK (such as organic certification awarded by the UK Soil Association), will these be accepted by foreign regulators?
Are the size of your packaging and the materials used-acceptable to the relevant authorities in the market you are targeting? Is the packaging robust enough to withstand transportation and temperature differences?
Pricing is crucial.
Before you start to approach buyers you will need to have a good understanding of how your product will be priced to make sure margin requirements are met. You can do this by creating a price chain worksheet taking account of the following factors:
- Basic selling price
- Unit cost of transport, insurance, documentation and certification.
- Landed cost. Learn more, how to calculate your landed cost
- Local import charges and taxes (if applicable)
- Distributor Margin: 10 – 30 %
- Wholesale Margin: 15 – 25 %
- Retail/foodservice Margin: % 25 – 40
- Retailer listing fees/supports
- Retail selling price
4. Find your route to market
You must consider how you want your product(s) to enter the market/s that you have identified and where you want them to be sold.
If you are exporting for the first time it is likely that you will need help in marketing and selling your products overseas.
Importers/distributors purchase directly from your business and normally market/sell products exclusively to retailers and foodservice operators in a particular market or region.
Pro Tip – If possible to A) visit the distributor in the country in which they operate,
and B) appoint them for a trial period initially, with mutually agreed targets, before establishing a more long-term partnership.
Choose distributors carefully, making sure that they are able to sell your product effectively and have a proven track record in the food and drink sector
Keep in regular contact with your distributor and carry out regular reviews.
Export houses/companies are companies based in the UK that purchase your products outright and sell these overseas on their own behalf. Taking this approach will allow you to export with minimal effort, however, your business will have no control over how your products are marketed and sold.
Agents can be appointed to find buyers on your behalf and normally work on a commission basis.
If you choose to work with an agent, make sure that they have experience of working with businesses selling the same or similar products and the outlets you are targeting.
It is important to research the retail and foodservice environment in the market/s that you are planning to export to so you are aware of which will be most effective in maximising sales. This will help when selecting local partners.
Is there any potential for your product in the foodservice or hospitality sectors, such as in coffee shops or hotels?
5. Creating opportunities
In order to promote your products effectively and create new business opportunities, you must consider all of the promotional channels available to you and best suited to your target market and audience.
Website and social Media
We don’t need to mention the importance of them, update your website to inform potential customers that you are willing to export in their geographical and language settings. Provide the right contact details of the company to cover export sales.
Trade shows, exhibitions
Trade fairs, in the UK and abroad, are one of the best ways to meet buyers and generate new business leads. Grants are available to subsidise the cost of exhibiting for SMEs.
Pro Tip – in the world of food and drink ecosystem, you should visit those exhibitions in Europe, ANUGA, SIAL and ISM
Department for International Trade organises structured trade missions to specific markets which allow businesses to meet with buyers and attend relevant events.
6. Your unique selling point, what is the USP?
Products that have strong Unique Selling Points enjoy a competitive advantage and better reception in foreign markets.
For example, in the food sector, such unique selling points include superior quality, taste, organic certificates, health benefits, convenience, eco-friendliness, recycled packaging, etc.
Do you have a unique competitive advantage Unique Selling Point? (USP’s?)
Is your export product NEW and different from what is there already? If you are having problems to identify your unique selling points for export at this point, return to your market research and look for insights to ensure your USP’s.
If you are solving a solid consumer problem in the export market, you are doing good. This is the most important thing to consider. You should demonstrate that you have benchmarked your value proposition against other products in the export market.
7. Understanding Incoterms and documentation
Once you begin to receive enquiries from potential customers the practical elements of exporting come into play. Taking the following steps will lead you to agree to the terms of sale.
Understand ‘Incoterms’. Incoterms are internationally agreed rules which set out the delivery terms for goods being traded internationally. They allow the buyer and seller to agree on details on the terms of sale and prevent any future misunderstandings or disputes.
Further explanation of Incoterms can be found here.
Export documentation. You will need to establish early on what types of documentation you will need to provide to enter the market and how long it will take to gauge how quickly you can deliver your products to the customer.
Provide a written export quotation detailing. The particulars of your product including pack sizes, packaging formats and whether there is an additional cost for export labelling and packaging that you are charging.
Also lead for orders is important information to share with your customers.
Payment terms and conditions. It is important to be clear about terms of repayment and make sure that they fit in with your business plan:
Within the EU most buyers are likely to pay on an ‘open account’ basis similar to that in the UK.
You may be required to set up a Euro business banking account and expect repayment terms of 30, 60 or 90 days. Some buyers will pay up-front, especially for initial orders.
8. Legal consideration
Make sure that the right contractual paperwork is in place to ensure that you are paid on time so no conflicts arise with a new or existing customer.
If you choose to have a written agreement with your overseas partners we recommend that this is approved by an experienced international lawyer and covers the following:
- Territory for the agreement
- Sub-agents and distributors (if applicable)
- Commission rate (in the case of an agent)
- Currency and payment terms
- Levels of authority e.g. in the promotion of your brand(s)
- Frequency of reporting and sharing of customer
- Duration and termination
- Sales targets
9. Export finance
It is important that you cover any risks when exporting to ensure that you receive payment as per the stated terms of your contract. Most of the risk in the export process sits with you the seller, so protection against non-payment and loss or damage of goods is extremely important. Insurance will help mitigate these risks.
Freight forwarders or transportation companies only assume limited liability for the loss or damage of goods when shipping by air or sea. Transportation insurance is therefore essential and can be arranged through an insurance broker or freight forwarder.
Overseas customers should be subjected to checks from your bank or by a credit agency. The British Chamber of Commerce also provides these services. You can also ask other UK companies already dealing with the customer for references.
There are a number of services offered by banks that allow exporters to set-up a secure financial arrangement between the buyer and seller to mitigate the risk of non-payment.
The services available to food and drink manufacturers vary. Contact your bank to discuss what is available for the markets you are exporting to.
10. Translate what you have learnt to new markets.
Use your experiences, feedback, and skills to start exporting to new markets.
Once the first shipment has left the UK there are several steps to take to increase your chances of repeat business and help you to build a good reputation internationally as a reliable exporter.
Make sure your shipments are not delayed. Make sure that your goods are being delivered on time as set out in the sales contract.
Contact your shipping company regularly making sure the products are set to be delivered without delay or act quickly to prevent any long delays.
Maintain promotional activity. To keep the momentum building, maintain promotional activity through trade fairs and advertising.
Agree on a market development plan with an importer/distributor. The success of your products overseas should be almost as important to your export partners as it is to you. Put in place a jointly agreed development plan to help drive up sales and maintain the on-going relationship.
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