Give Your Product Wings

MASTERCLASS:THE SMALL size of the Irish market makes exporting a necessity for growth-minded companies. But exporting is not without its challenges. Having a clearly differentiated product or service is the basic prerequisite. After that selling successfully abroad is down to a lot of leg work and a certain amount of luck.

“The first mistake companies make is to assume that an overseas market is like their home market in terms of its expectations and development,” says marketing consultant Martin McGuire of Martin McGuire Associates who mentors export-oriented companies for Enterprise Ireland.

McGuire worked abroad with Unilever and Waterford Glass. His basic advice to would-be exporters is “get on a plane and go and take an in-depth look at what’s going on. You need to understand your consumer in detail and then to choose the correct channel to that market”.

McGuire says Irish firms often fall down on knowing the full extent of their competition. “They’re aware of the big names but not always of small local brands. Local products often have strong customer loyalty and it’s difficult to take market share away from them.”

McGuire also warns against thinking too big. “Irish companies tend to think of Russia or the US or Poland as one market,” he says. “In fact they are huge fragmented entities. Anyone who thinks they will conquer them in one go is in for a rude awakening.

“Large countries are complicated multiple markets within themselves and must be tackled in individual pieces.”

Well developed first-world markets such as Japan, the US and Western Europe are the toughest to crack, McGuire says. “They appear easy because we have a certain familiarity with them but they are the most sophisticated and therefore more demanding. There is also a lot of PR and marketing clutter in these markets and trying to get your message through can be difficult and very expensive. Emerging markets – by which I mean anywhere east of Berlin – are the best bet but if yours is a commodity product think again. The chances of succeeding with a commodity or a ‘me too’ product are slim. You have to offer tangible added value.”

The total value of Irish exports of goods and services in 2009 was €154 billion. Despite the recession this was just a 1 per cent drop on 2008. However, some categories were more badly hit than others by the global recession and more particularly by issues with sterling.

“It was a very tough year for many and those heavily exposed to the UK market and primarily trading in the agri-food and drinks sector suffered a 9 per cent fall in exports,” says John Whelan, chief executive of the Irish Exporters Association.

At one time the UK market was seen as the next logical step for Irish exporters. Not any more. Disparities in the cost base between the two countries compounded by the economic downturn and a fluctuating exchange rate make the UK look increasingly unattractive.

“At current rates few Irish manufacturers can make money in the UK,” says Whelan. “For those not already tied into the UK the advice would be to focus on the euro zone.”

Irish companies are already successfully operating outside what might be considered traditional export markets. For example, we have modest exports to Cyprus and Greece and growing exports to Portugal. BRIC (Brazil, Russia, India, China) is now the largest emerging economic block and our trade with Brazil rose 14 per cent last year while our trade with China and Hong Kong was up 3 per cent. This was the same growth as with euro zone countries. Most of the growth in exports in 2010 is expected to come from the services sector.

Whelan says one of the difficulties exporters face is finding sales staff with the skills to sell internationally. “About two thirds of our SME members tell us this is their biggest problem,” he says. “A second challenge can be the continuous need for new product development in the interests of sustainability. What often happens is that companies put so much effort and money into developing a market that they simply burn out after a few years.”

Having a good product or service is one thing. Getting it to market is another. Whelan advises companies to consider using a multichannel approach to avoid catastrophe if a single channel fails.

Top Tips For Exporting Success

- Identify your target consumer. Observe how they shop and consume your product category. Define how your product will add value to the category and to the retailer. Remember, consumer research is an investment not a cost.

- Plan for distribution and representation. Work out the costs involved, understand regulatory requirements (particularly labelling) and factor this into pricing.

- Combine opportunism with realism and patience and an appetite to close the deal. This is particularly important for food firms where the lead time in opening a new account can be as long as 18 months.

- Be open, decisive and resilient and willing to adapt your product mix to market requirements. Be open to learning from others, particularly from the experience of non-competing suppliers targeting the same consumer and/or retailer in the new market.

- Understand and accept powerful competitors. Attempt to secure a comfortable niche which competitors may welcome. Fulfilling a niche that benefits the overall category can be welcomed by competition.  – Una Fitzgibbon, director of marketing, Bord Bia

Moving Overseas

There are various ways of breaking into international markets, says Bernard Walsh founder of speciality drinks company Hot Irishman

SPECIALITY DRINKS producer Hot Irishman was set up in 1999. Today the company exports over 90 per cent of its output.

“I had always envisaged our business would be export-led but my initial intentions were to establish ourselves in Ireland as that was necessary for credibility on the export market,” says company founder Bernard Walsh.

“This is important if you are trading in the ‘Irish Category’ which we are. Four years ago we were exporting about 40 per cent so our exports have grown sharply quite quickly. We are exporting to 30 countries in five continents. Our biggest markets are the US, Russia and France,” he says.

Hot Irishman broke into international markets by going on the trade show circuit. That helped make the initial contacts but then Walsh had to find distributors. “Finding the right importer is the hardest part because you are only as good as their people,” he says. “Be very selective when signing up a partner and work very closely with them, especially in the launch period. When going to market in the early years we often attracted the ‘early adopters’. These tended to be small outfits who had vision but no established route to market. Now, 10 years on, we are a little bit smarter when choosing partners. We need importers who have a well-trodden distribution route with a strong (not necessarily big) sales force.

“The import and distributors sales force is your front line and you are continually fighting for mind share with them as they are inundated with other brands. Don’t be surprised if it takes several attempts to get the right partner in a territory. A contract is extremely useful in these situations where you can hire and fire based on non-performance. We trade in euros (except in the UK) and this has made doing business a lot easier. So for anyone thinking about export I would recommend working within the EU to start as there are minimal barriers.”

Fear of not getting paid is a perennial worry. “Export credit insur- ance is a must – that way you can sleep at night,” says Walsh. “Nine out of 10 times you’ll get paid but unfort- unately you will have customers who default. If you are stung at least you will be covered if you have insurance.