Wednesday, November 28, 2012

Business Success in the US: Trends in US Private Label

It is not surprising that the great recession saw an upswing in the use of private label in the United States. Retailers looked to private brands to provide shoppers greater value and to increase margins.  But since the end of 2008, growth in private label across the three combined food, drug and mass retailer channels has been fairly flat as brands stepped up their promotion support and innovation efforts.  So was the short-lived success of private label a flash in the pan or can we expect continued growth in years to come? 

Size Matters
Make no mistake, private label plays a significant part the US retail landscape. Sales of private brands are now over US$100 billion which is 14% greater than calendar year 2009.  This compares to brand sales which are now over $510 billion having grown by around 5.7% since calendar 2009. 

Changing Perceptions
With increased focus on premium private brands, more consumers now claim that the quality of some private label products is higher than some name brands.  Additionally, fewer consumers think that private brands are for people on tight budgets who can’t afford the best.  And, according to the same research by Nielson, only 11% of households feel uncomfortable serving private brands to guests. 

Channel and Department Differences
According to the Nielson report, just under one in five dollars spent at supermarkets is from private label. Drug stores have about 15% of dollars spent on private label while convenience stores are a tiny 2.5%. Remaining channels average out at about 14%. For the latest annual period, private brands dollar sales reached a 17.2% share, up 0.3 share points from a year ago.  However, this means that branded products still drive the vast majority (83%) of dollar sales.  Private brands dollar shares range from a high of 37% in the dairy department to a low of 1% in alcoholic beverages.

Demographic Changes
Private brands have broad demographic appeal that stretches across income, age and gender groupings.  However, most categories are under-developed among multicultural households, providing opportunity to create future product demand by taking advantage of demographic change. The opportunities are immense, when you consider that if Hispanics (buying power) were a standalone country, they would be the 12th largest economy in world, right behind Mexico. African Americans would be the 17th largest economy right after the emerging market economy of Turkey and Asian Americans the 27th largest economy.

Quote:
Success is not final, failure is not fatal: it is the courage to continue that counts.
Winston Churchill

Author:
Ian Smith
CEO – Access USA Pty Ltd
0417 020 429

Thursday, November 15, 2012

Business Success in the US - One nation or is it?

Having lived in the United States for over 6 years and worked with hundreds of Australian companies trying to crack the world’s largest consumer market, I have seen first-hand what makes for a successful market entry strategy. If I had a dollar for every time an Australian company said to me “If we only get one per cent of the US market we will have it made” I would be a rich man.

True, the US market is one of the largest and most lucrative in the world but it is also one of the most competitive. Careful planning therefore, will save you a lot of time, money and energy. A common mistake Aussies make is thinking of the States as one market – Many shake the hand of the first person that shows interest in their product and grant exclusive distribution – Big mistake! It is in fact made up of many significant markets and companies need to carefully segment by geography and industry focus.

It may be that you decide to target only one State or even one region within a State as part of your initial market entry. You may be surprised to learn that 6 US States (California, Texas, New York, Florida, Illinois and Pennsylvania) rank in the top 25 economies in the world. With this in mind, when deciding on your target segment/geography you need to be sure that you do not become overwhelmed by the scale of supply needed to satisfy the demand. Market research is key in this respect and luckily the States is rich in terms of readily available information whether it be statistics on industry scale and demographics or databases of potential distributors and customers.

The bottom line is to take your time, both in segmenting the market and then choosing the ‘right’ partner for your initial market entry. This will pay off big time in the long run!

"Failure lies not in falling down. Failure lies in not getting up." (Traditional Chinese Proverb)

Author:
Ian Smith
Chief Executive Officer
Access USA Pty Ltd
ian@accessusa.com.au
www.accessusa.com.au

Business Success in the US # 5: US Distribution Debunked

For any of you that have read my previous blogs you will be sick of me banging on about the importance of segmenting the US market, both by geography and industry! But the most common mistake people make is thinking of the States as one market – It is in fact made up of many markets (all significant in their own right) and companies not only need to carefully consider segmentation, but also what distribution model they will set up to achieve successful market entry. In this Business Success in the US blog I look at some of the mechanics of setting up successful US distribution.

What are the common types of distributorships in the US?

  • Standard Distributorship – Buys and resells
  • Agency relationship/Manufacturer’s Representative – Generates sales but does not buy and resell
Is it important to enter into written agreements?
YES – The US is a common law jurisdiction and parties should therefore include all important terms and clauses in their contracts. In general, courts will only enforce what is in the written agreement signed by both parties.

Exclusive or non-exclusive?
This will be highly dependent on the nature of the product or service offering, the market share the potential partner offers and the competitive environment. In general, it is not advisable to offer exclusivity, particularly not across all geographies and segments – Remember that an exclusive means that you are completely reliant on your new partner for all sales in that territory! Consider the pros and cons of each before rushing in.

What performance requirements should I set?
Any agreement entered into should set out the minimum performance standards required of the distributor. In the case of exclusives, this is often an enforceable part of the contract. These may include (in no particular order):

• Value of initial order
• Minimum purchase requirements (generally set by mutual agreement taking into consideration market dynamics and stage of product development)
• Marketing budget
• Minimum inventory levels

It goes without saying that all distribution agreements should be a two-way street and should outline your commitments to the distributor as well. For some reason, many Australian companies think that appointing a distributor is the end point and do not provide adequate in-market support to help to drive sales. Remember that you are dealing with the most competitive market in the world and your product runs a real risk of being lost amongst the other 1000 SKUs your new partner has if you don’t push hard!

Is it advisable to use a law firm?
With over 500,000 lawyers in the US it is not hard to see why it is one of the most litigious countries in the world. Seeking legal advice is just part of doing business in the US and seeking advice on distribution agreements is top of the list. A good lawyer will be able to assist with indemnification, limitations of liability, IP (trademarks, copyrights and patents) and termination of contracts just to name a few.

"Make no little plans. They have no magic to stir men’s blood and probably will not themselves be realized.” Daniel Burnham

Author:
Ian Smith
Chief Executive Officer
Access USA Pty Ltd
ian@accessusa.com.au
www.accessusa.com.au


Wednesday, November 14, 2012

Apply for your IP rights online

IP Australia has just released more transactions into the eServices portal. The portal now allows customers to submit electronic applications for patents, trade marks, designs and plant breeder’s rights and TM Headstart applications where and when it is convenient for them.

eServices is available through IP Australia’s website and allows customers to register and login to access a range of transactions and services for all IP right types, and manage their intellectual property (IP) portfolio. Transactions conducted through eServices can be paid for upfront using a Visa or MasterCard. This means that customers can be certain that they have paid the right fee for the right service at the right point in time.


For more information visit
IP Australia's website.

Exporters to harness the power of Australia's National brand

The Brand Australia Program today announced a new partnership with the Export Council of Australia to trade on Australia’s status as one of the world’s most popular nations.

The Export Council of Australia is the peak industry body for the Australian export community. Under the arrangement, the Council will licence its members to use Australia Unlimited logos, images and digital content, encouraging the uptake of consistent national branding.

The Government launched Australia Unlimited in 2010 through the Austrade-managed Brand Australia Program, aiming to broaden perceptions of the country as a modern, innovative economy.

Research shows Australia’s reputation has improved since then, with global studies now consistently showing Australia is one of the world’s most admired nations.

The Reputation Institute’s latest annual CountryRepTrak survey, for example, found people in G8 advanced economies now rank Australia second out of 50 countries on economic, social and aesthetic factors.

Austrade’s Executive Director of Australian Operations, Tim Beresford said there had never been a better time to partner with Australia Unlimited.

“A strong country brand is the best gift a nation can give its exporters,” Mr Beresford said.

“The more others trust, admire and respect Australia, the more likely they are to invest in our people, ideas and products, and to send their children to study in our universities.

“Australia Unlimited feeds into this positive sentiment, as well as providing exporters with a convenient way of harnessing it,” Mr Beresford said. Executive Director of the Export Council of Australia, Ian Murray said the Council had been a strong supporter of the Brand Australia Program and was proud to become an official partner.

“In 2009, the Export Council of Australia participated in a series of discussions about the importance of the image Australia projects for exporters, and the ways in which industry might benefit from and contribute to updating Brand Australia. Those conversations resulted in the Building Brand Australia Program,” Mr Murray said.

“When Australian exporters think about their international marketing strategy, they should be thinking about how to make the most of their ‘Australianness’, and how to emphasise qualities, ideas and skills that will help enhance Australia’s image over time.

“The best way to make the most of ‘Australianness’ of course, is to use the Australia Unlimited brand and we will be helping our members to do so,” Mr Murray said.

-ENDS-

About Australia Unlimited
Building Brand Australia is the Australian Government’s nation brand program, represented by Australia Unlimited. The campaign aims to build on the reputation held by Australia’s people, lifestyle and natural resources and to promote its creative, intellectual and commercial credentials to a global audience.

The Australia Unlimited iPad magazine and website tells the story of contemporary Australia through the achievements of its people in creative arts, business, science and humanitarian endeavours around the world. To explore a different side of Australia, visit www.australiaunlimited.com, download the free iPad or  iPhone magazine from the App Store, or follow @AusUnlimited on Twitter.

About the Export Council of Australia
The Export Council of Australia (ECA) is the peak industry body for the Australian export community. The ECA is the next step in the evolution of the Australian Institute of Export (AIEx) which, for over 50 years, has had the interests of Australian exporters at heart.

Owned by its members, and steered by a Board and a Council of Industry specialists, the ECA is a not-for-profit organisation that has the development of Australia’s resources via the promotion of Australian industry in international markets as its primary goal. The ECA represents large, medium and small exporters.

Media contacts

• Jonathon Moore (Australia Unlimited)  E: jonathon.moore@statecraft.com.au  T:  (02) 8080 0060 M: 0405 167 675
• Ian Murray (Export Council of Australia) T: (02) 8243 7410 M: 0438 230 245

If the Government is really serious about trade and the opportunities Asia presents, let’s see them walk the talk

It seems ironic that in the week of launching “Australia in the Asian Century White Paper” the Government cuts the Export Market Development Grant Scheme by $25milion a year for four years. Professing that Australia needs to take heed of the massive growth in the middle class in Asia, invest in business opportunities, language proficiency and cultural understanding and in the next breath cut the only significant incentive left to exporters seems absurd. That cut of course follows earlier cuts to the scheme, the cap having dropped from $200million in 2010/11 to just $125million a year. This is a fall of almost 40%, at a time when Australia’s exporters are struggling to hold market share and achieve a decent margin.

The launch of the White Paper prompted a significant level of media coverage as one would expect. Few exporters though seemed to be engaged in the chatter. The fact is Australia has engaged with Asia in business since the 1950’s when John McEwen took off on his controversial mission to start a trade relationship with Japan. Ever since that visit and after being shut out of Europe when the Brits abandoned us, Australian business has traded with Asia in many a field of endeavour. Led by the food sector, including grain and beef, the education sector and more recently the resources boom, Australia’s engagement with Asia at a business level has, for our population base, been quite remarkable. The paper quite rightly points out that the middle class in Asia is expanding at an expediential rate of growth and that now is the time for us to focus on the youth generation and  have our kids learning an Asian language. Nobody can argue against kids learning Mandarin or Bashasa Indonesia, that has to be good for any student but let’s get serious about what is really needed.


First, and our research supports this, Australians trading with Asia need to know, and more importantly understand, the business culture not of Asia but of the individual countries they are dealing with. They are all different and in some cases even regions within countries are different. If the Government is realistic about encouraging a closer business interface, yes, invest in languages for schools as this is a good long term strategy but put some real money right now behind demystifying the business culture so that Australian’s are better equipped to negotiate a sound business outcome.


Second, if the Government is really serious about trade and the opportunities Asia presents, let’s see them walk the talk. Export is 22% of GDP; why not set a target for exports of 25% of GDP by 2020. Put money into the DFAT Trade division to be better equipped to negotiate trade agreements, put money into Austrade for greater overseas representation, for working with business and commerce to maximise the opportunity to win major projects in Asian countries as well and into the EMDG scheme which has historically proven successful.  Further support is also required for educating Australian business in Asian country business culture.


And finally the Government should focus on getting rid of unnecessary red and green tape which is slowly crippling our competitiveness. If one job in five is export dependent and the Asian White Paper is true, one could not in any way shape or form question this investment into our future.   

                            
In response to this and the need for change the ECA is currently undertaking a study to examine the trade programs available to exporters by a number of our major competitors for international trade. This data will form part of a submission and discussion paper on trade facilitation and promotion reform the ECA plans to submit to the Government and Coalition prior to the election. Should any members be interested in participating in the development of this submission please contact Lisa McAuley at lisamcauley@export.org.au.


 
Ian Murray is Executive Director of the Export Council of Australia. Ian has held senior general management positions with private sector companies including Johnson & Johnson, and has lived and worked in Indonesia, Malaysia, Singapore and Pakistan. During 25 years of service with Johnson & Johnson, Ian was Marketing Director of J & J Indonesia and Group Marketing Manager of the Australian company. Ian’s major focus at J & J was new product development, market research and marketing strategy.

Australia in the Asia Century White Paper

Asia’s ascent is changing the world. The 21st century can rightly be called the Asian century.
- Selwin Leito, Marketing Assistant - Export Council of Australia

The White Paper released by the Gillard Government on October 28th 2012 and undertaken by the Department of the Prime Minister and Cabinet was led by Dr Ken Henry AC. As Australia is facing increasing competition for the opportunities arising in Asia, we need to keep ahead of our competitors. This White Paper provides a roadmap for every aspect of the Australian economy to maintain our position as a strong nation in the region.


Other than economic benefits, other valuable opportunities for Australia to build stronger relationships across the region include closer educational, cultural and people-to-people links.


It is expected that in just a few years Asia will be the world’s largest producer of goods and services and also the largest consumer of them. Despite its distance to other countries in the region, the rapid growth of consumerism in Asia provides a prime trading opportunity for Australia going forward. New opportunities arise from the increasingly wealthy and mobile middle class emerging in the Asian region demanding a diverse range of goods and services.


Even though Australia and the Asian countries histories are closely interlined and go back a long way, the opportunities for Australia in the Asian century are vast and Australia’s engagement with Asia has to be deeper and broader. Australia must sustain the policy settings and pathways that have served the country well in the past.


The Asian region has a lot to offer Australia but, we also have a lot to offer to Asia. We have strong, world-leading institutions and a multicultural and highly skilled workforce, to name just a few. And over the past 50 years, Australia’s trade with Asia as a share of our total trade has risen dramatically and our trading relationships can only grow from here.


There are five key areas Australians need to act on to achieve success in the Asian century:


First, we need to build on our strengths. There needs to be a continuous reformation and investment in the five pillars of productivity- skills and education, innovation, infrastructure, tax reform and regulatory reform in order to extend our comparative advantage.


Secondly, as a nation we must do even more to develop the capabilities that will help our country succeed. Our understanding of Asian cultures and languages needs to be broadened and deepened in order to build stronger partnerships and connections across the region.


Third, to achieve commercial success in the region, highly innovative, competitive Australian firms and institutions need to develop collaborative relationships with others in the region.


Fourth, Australia has much to offer through cooperation with other nations to support sustainable security in the region.  


Fifth, we need to strengthen Australia’s relationships across the region at every level. Stronger relationships lead to more knowledge and understanding of what is happening in Asia. Furthermore, we could access the benefits of growth in our region. Our neighbors will know us better in turn.


Some points that are relevant to stimulate export to Asia:

• Australians need to build ‘Asia-relevant’ capabilities—both broad-based and specialised.
• Australian businesses need to continue developing products, services and expertise that are valued in Asia—by innovating and by understanding the diversity in demand, conditions and customs.

To conclude, the challenges ahead require effort, and lots of it. In the long run, we will benefit from this- our economy will be stronger and we will obtain more knowledge and understanding of our neighbors to pass on to the next generations. To increase exporting opportunities to Asia, the Australian Government has to work beyond Australia’s borders to strengthen regional economic and financial architecture, increase openness to trade and improve outward investment opportunities for Australian businesses across the region. We also need to conclude high-quality agreements with China, India, Indonesia, Japan and South Korea and a regional trade agreement in the long term.


Interview with Ian Murray, Executive Director of the Export Council of Australia

In what way do you think Australia will benefit from Asia’s ascent?
The middleclass growth in Asia will increase the level of demand for Western cuisine, and more nutritious foods, Australia is well placed to meet that need, the demand for new tourism destinations, professional services like architecture, construction and of course education.

The paper mentions the potential big opportunity for Australia; how big do you think that opportunity is for our country?

The opportunity is substantial, but there is significant competition from all over the world. We have some advantages like proximity and time zone, many Asian students have been educated here and we have a good track record in Asia and a highly educated workforce. But we are expensive, our infrastructure is dated and inefficient and our ability to raise local finance is limited. So it’s going to be a two way street, Asian finance for our agriculture and infrastructure and we can focus on high value products and services targeted at the middle classes in Asia.


As the Executive Director of the ECA, an organisation that deals with export companies on a day to day basis, how have you seen this opportunity yourself?

I have seen a massive growth in food, particularly high quality meat, education and training over the last ten to fifteen year, massive growth in resources exports and professional services, including banking, architecture and construction.


Many of the targets mentioned in the White Paper have been set for 2025. Is this realistic? Should Australia move more quickly or slower?  

Our country has been engaged with Asia since the 1950’s. It is an automatic progression, accelerated by a substantial growth among the middle classes. The spending capabilities too of the middle class are increasing, so yes, the targets are quite realistic.


Other than China, what other countries that have the potential to become significant trading partners for Australia?

I’m always irritated when China is held up as the only card in the pack. Indonesia, Malaysia, Vietnam and India are all developing rapidly and offer substantial opportunities right across the board.


As is mentioned in the White Paper, the two continents want to be deeper and broader connected. What, in your opinion, is the best way to achieve this
?
First there isn’t an Asian culture. There is a mixture of cultures across the region. Australians doing business in any one of these countries need to understand the business culture of places they plan to do business in. Likewise Asians need to get a better feel for the way we operate. This will occur with more business, more travel and more people being educated either here or just as importantly Australians being educated in Asian countries.


How do we ensure that both nations benefit from the Asian Century?

We need to be open to free trade. If we can freely exchange goods and services across our region, the gap between us will become smaller.


What is your overall opinion about this year’s White Paper?

Australia has had a long engagement with Asia. Teaching of Asian language in schools in Australia is a good strategy but more important to business is to know how to operate successfully in different business cultures.

Access to APEC Business Travel Card less complicated for companies

With the recent White Paper on Australia in the Asian Century and the focus of Austrade on Asian and emerging markets its makes sense to make access to the APEC Business Travel Card less complicated for companies that have a sound track record in export to APEC countries. The Export Council of Australia supports the recent changes made by the Department of Immigration and Citizenship details of which can be sourced via the attached departmental announcement.

What are the new criteria?

To be eligible for an APEC Business Travel Card under the new criteria, an applicant must:
• demonstrate frequent travel for business purposes
• be either:
  • a Chief Executive Officer (CEO) or Chief Financial Officer (CFO), board member, regional/country head or owner/director of a business entity
  • an employee nominated by one of the above people in their business entity (except a board member)

• be employed by a registered business entity, or Australian-based peak business body, engaged in international trade or investment between APEC member economies which:
  • has been certified by an ‘approved body’ or
  • is identified in the current Forbes Global 2000 business list or
  • has received an Export Market Development Grant from Austrade during the previous five years or
  • has been a national finalist in the Australian Export Awards (supported by Austrade and ACCI) during the previous five years.

. Click here to download article >

Sunday, November 4, 2012

Research into trade support program for Australian exporters

An interview with Kristen Mulligan conducted by Faye Veloso

Intern Researcher from Macquarie University Kristen Mulligan is in her final year studying for a Bachelor of International Studies at Macquarie University. Miss Mulligan commenced a major research paper for the Export Council of Australia comparing the export support programs in Australia versus the export support programs in Australia’s most competitive markets for international trade. Since the beginning of her project Miss Mulligan has dedicated herself to pursuing a comprehensive report that will analyse Australia’s trade support programs as they stand against other international programs. The interview below highlights the issues addressed through her research.


1.The focus of your research paper addresses Australia’s competitiveness in the international trade and the area of focus is on support. What is Australia’s current export support system?

Well, the Australian export support system is quite complicated due to federal, state, local laws and peak industry bodies such as the ECA (Export Council of Australia) and other relevant stakeholders that also influence the affairs and representation of exporters. So this research will mainly focus on federal support programs, primarily delivered by the federal trade agencies Austrade and EFIC.
So far, Austrade has several programs and initiatives that are run to support exporters:
• TradeStart: focuses on new and emerging exporters which assist in capacity building and export readiness. This program is a cost recovery system that is contracted to advisors in the private and public organization; it is an effective system as there is an incentive for TradeStart professionals to have their clients successfully export.
• EMDG: There is also an export market development grant which provides funding for overseas marketing expenditure.
• Online:  Austrade also has an online presence with an interactive website that gives access to market reports, country reports, statistics and information, up to date news and opportunities. A tailored service is also offered with a fee for a certain number of Austrade Assistance hours.
 

2. How does Australia compare to other countries and is it competitive for exporters?

Australia is competitive. However, we face challenges: as a large nation, a continent on its own with a small population, there will be logistical issues. Freight costs and transport is expensive, particularly for companies located in regional locations.

From the preliminary research undertaken, the best comparison to Australia has been Canada as it also has a British colonial history, with a similar governmental structure. Canada is relatively similar to Australia in terms of a large land mass with a relatively small population, similar logistical issues and more importantly a shared industry focus- mining, energy and now education.

So far, from the research, I have found that Canada’s trade commissioner service uses a very efficient online presence that offers valuable information for SME exporters and time/ resource poor companies. One such example is the virtual trade commissioner service, which is a personalized webpage with up to date information, news, statistics, market information and other opportunities relevant to the page holder. It is specific, highly centralized and a sophisticated system that has a great ability to reach a wide audience.

3. What have been the some of the more innovative programs you have discovered? 

From the research conducted so far, I can gather that there is always something to be learnt from case studies. While I cannot provide a list of finite recommendations, I can perhaps highlight some of the most innovative programs I have researched so far:

• A  personalized internet system such as the Canadian virtual trade commissioner would offer countless benefits to Australian exporters.
• The Canadian business development bank is a Government mandated bank which offers flexible repayments, to aid capacity building of Canadian businesses. It is not an export credit agency like EFIC. In Australia, there is no similar government mandated bank that offers flexible repayments and advice consultation for businesses. As a government mandated development bank they assist businesses to increase their capacity to produce, providing market information or assist businesses in purchasing specialized equipment or marketing expenses overseas with the view to leading companies to develop the capacity to expand and export.
• Another example that we can learn from is the marketing of Brand Brazil. ‘Brazil’ is a strong national brand with a coherent presence internationally under projects such as Talent Brazil and Taste Brazil in international trade fairs and industry marketing campaigns. Austrade has created the Australia Unlimited brand, which received a $20 million boost in 2010, a great marketing campaign which will hopefully build Australia as a successful national brand. Research has proven that the creation of a national brand makes for a better marketing campaign in the international market, a factor of success. With ongoing support, results should be favorable for Australian exporters.