In the FMCG sector, overseas expansion has been the realm of giants such as Unilever or Proctor & Gamble. It was traditionally believed that the scale, resources and local knowledge required to succeed was beyond the reach of smaller brands. However, this is rapidly changing. We are now witnessing smaller, nimble food and drink producers achieve great success abroad with relatively light infrastructure.
Success stories have shared three key characteristics. Here we explore how some of these companies have put these into action.
A great example of a meaningfully distinctive business is Walkers Shortbread – which now exports to over 80 countries and where 40% of sales now come from abroad. OC&C’s Food & Drink 150 Index, which ranks the UK’s top food and drinks producers, found that the Scottish company was the fourth most international business in the UK. So - how did it achieve this?
Walkers is one of only two businesses with shortbread factories in Scotland. While the other is a private label within shortbread, Walkers has been able to own ‘Scottishness’ in the shortbread market and make it a unique feature for international customers.
There are some fantastic examples of companies that have used local relevance to their best advantage – be it by understanding shopping habits or tweaking their product, to tapping into existing relationships to ensure they’re working with a partner that really knows the market.
You might be surprised to find out that fruit drink Vimto now sells over 20 million bottles a year in the Middle East. They’ve achieved this by positioning themselves as the perfect drink to end a day’s fasting during Ramadan – with over 50% of sales taking place during the festival.
Similarly, United Biscuits is experiencing great success in Africa. They’ve achieved this by changing their pack sizes. Having understood that the typical customer’s disposable income is much lower - and buying a packet of 20 digestives is not financially viable for the majority - the company is now selling biscuits in packs of two.
When looking at overseas expansion, it’s safe to assume that things are unlikely to go as planned despite the best laid strategies and most thorough research. However, this does not mean that if things don’t initially go to plan, it’s not worth striving to make them right.
Let’s take Greencore, the Irish company which supplies fresh sandwiches to retailers and coffee chains. Its US division is currently thriving – but there have been some bumps along the road.
Following thorough market research, Greencore initially identified ready meals as the product to spearhead its US growth. However, as they spent time in the market they saw that the growth of coffee shops in the US – relatively premium outlets but with limited prep space – was creating demand for the kind of short shelf pre-packed sandwiches that Greencore excels at in the UK. The business was quick and pragmatic enough to realise that a change of tack was in order. They now bring in $250 million in sales in the US alone and continue to have strong growth prospects.
What does this mean for businesses?
As emerging markets continue to provide huge opportunities, and the domestic environment in the UK and Europe continues to present challenges, FMCG companies need to continue to look for overseas expansion to achieve growth. But international expansion doesn’t come without its risks. Uniqueness, local relevance and persevering in the face of adversity are crucial attributes for success.
Barney Wallace is an Associate Partner at global firm OC&C Strategy Consultants, specialising in advising FMCG firms of all sizes on how to grow profitably and sustainably.