Jim Menzies discusses how international expansion is creating new opportunities, challenges and profits
Profitably growing a Food and Beverage company today is more difficult than ever – yet opportunities have never been greater. As a result I see our leading F&B clients actively pursuing global growth opportunities. And it's the emerging middle classes feeding this trend on every continent.
As our latest Grant Thornton report Expanding Horizons shows, F&B leaders are implementing strategies focused on innovation and agile business models. This allows organisations to adapt processes, products and resources to wherever sales and profits arise.
But before you expand internationally, our experience shows that there are a number of key areas to think about in advance. Planning ahead can help you choose the most appropriate products, messaging and route into a new market.
First, get in touch with the local culture and lifestyle of consumers. Is there, or could there be, substantial demand for your products? Will you have to have to adapt your products to local tastes or due to limited access to raw ingredients? When Kentucky Fried Chicken entered China the company decided to localise its menu. The strategy worked and there are now nearly 4,600 KFC restaurants in the country.1
Once you understand the potential demand it's important to examine and learn the local market dynamics, competitors, distribution channels and potential business partners. Can you establish a network to sell and safely distribute high quality goods in a cost effective way? While Brazil may have high operating costs, it has excellent infrastructure and is open to foreign investment.
Next, find out about the local regulatory requirements. Can your products meet standards required in the region, country, state or city without substantial changes? Take India for example. The country has no comprehensive national food processing policy and each state determines its own F&B regulations.
Finally, when you understand the cultural and logistical dimensions of the market, identify the most profitable opportunities and potential risks. Which products, packaging and messaging will you deliver? And how might necessary alterations to products, production and distribution impact profits? To reach international markets Guinness introduced 'foreign extra stout'. The gamble paid off and Nigeria is now Guinness' largest sales market.
F&B executives have new tools and technologies (e.g. big data, business analytics) on their side to sort through these decisions – and to predict how market factors (e.g. tariff and tax implications, currency issues) will help or hinder.
But it’s also important to have a knowledgeable ally at your side as you take your first steps in new lands. Grant Thornton works daily in F&B markets around the globe, and we’ve been helping leaders like you with new ventures for decades.
To learn more about the opportunities that await (and how to capitalise on them) download Expanding Horizons today.
1'Restaurant counts,' Yum! Brands, retrieved 20 November, 2014.