Main options to enter an East European market

• Establish a direct link with the main Key Accounts/Buying Groups
• Appoint a distributor
• Set up your own organisation

Direct export to the Key Accounts/Buying groups

This option is a low-cost route, which can most probably only work for private label products or a small assortment with price-driven products. But if your objective is to build brands in these markets, this alternative is not the recommended way. The Key Accounts will expect a variety of complex and differing aspects to be dealt with. Therefore it would never be sufficient to simply have an Export manager, maybe even for some countries together, dealing with the clients via remote control. And nobody would take care of the quality of selling. It is highly recommended to have people working in the country who know the trade well and are able to anticipate their response in advance.

Appoint a distributor

For many manufacturers this is the most popular way of launching and developing brands in Eastern Europe, and for very good reasons:

• Established distributors have many years experience in handling a variety of brands and products.
• They have good contacts at all levels to the retail and wholesale trade.
• Combining a number of product ranges from different manufacturers/principals puts them in a stronger negotiating position with the trade.
• As the distributor works on an agreed commission, the principal’s costs are normally variable, in line with sales.
• Because costs are shared across a number of different manufacturers, it is a more cost-effective method.
• Distributors are flexible and often able to provide alternative services for the principal:

•    Guidance on product ingredients allowable and not permitted (e.g. additives)
•    Help with pack sizes and packaging, including the labelling requirements
•    Marketing and promotional planning
•    Key account planning and negotiation
•    Selling and merchandising
•    Warehousing and logistics
•    Invoicing and Cash collection
•    Administration

Great care needs to be given to the choice of the right distributor. Remember that you are choosing a long term partner.
What to look out for a distributor:

• Is he well established on the market?
• Is his existing product range compatible with yours?
• Can he cover the trade sectors that you need?
• What is the size and strength of his operation?
• What services does he provide?
• Can you work closely with the people, who would be your main contacts?
• What commission terms is he offering?

You should also realise that the best distributors are not always the biggest. The smaller distributor, specialised in a tight category, may be a better choice than the larger, wider-based, distributor, where you can be just the “fifth wheel”. Be open about your realistic objectives for your brand.  Be truthful about what you can do and what you can’t do, particularly with regard to marketing support and with the listing fees, which you have to pay in most of the Key Accounts.  It is important for you to be clear up-front about your attitude to the market. Do you genuinely want to invest in brand-building over a sustained period, or simply sell some products in a short term opportunistic scenario. A good distributor will expect normally an exclusive contract from the manufacturer, reflecting the partnership between the two companies to jointly develop the market for the brands. He will also expect a reasonable termination period to be included in the contract.  Why should he devote a huge amount of time, money and resource to develop your brands in the early phase of their development without a reasonable measure of protection?

Seeing the advantage of a big distributor above, there can be also some disadvantages:
If a number of product ranges from different manufacturers/principals are combined, there is clearly less focus on the single products. Some distributors have overseen a little bit the fast change in the trade, giving not enough priority to the Key Accounts, and lacking a professional approach to handle Key Accounts.

Setup your own sales organisation

This is the alternative, which will give you a focused, unshared support for your brands, but it is also the one with the highest costs, mainly fixed costs.

An intermediate form is to build up an own Key Account Management. Depending on your targets, the size and specialisation of your assortment, the costs and the country you can employ few  Key Account Manager, which are negotiating and selling to (all or just defined) Key Accounts and which are steering the free-lance merchandisers in the big outlets. The traditional trade in general, but also warehousing, logistics, invoicing and cash collection for the Key Accounts remain at a distributor.