Advice on expanding a consumer brand overseas

In times when the reach of advertising and media continues to extend, product life cycles are short and high quality manufacturing processes are accessible to most, brands are increasingly becoming the main point of difference for consumers.

Capturing this intangible value, which can often grow exponentially over a short period of time, is increasingly the driver of deals for both the private equity community and trade buyers.

Is it right to venture overseas?

Many branded business I meet reach the point in their development when expanding into new overseas markets moves firmly onto the corporate agenda. In many instances there is a firmly held belief that the core domestic part of the business is mature and that the ‘roads are paved with gold’ across the channel and beyond.

Inevitably this is usually not the case and I often challenge owners about whether other, lower risk, opportunities such as brand extension exist closer to home.

However, for some brands entry into overseas markets is the right and logical next step which, if successfully executed, can significantly enhance brand value. Demonstrating that the brand can be successfully introduced into new geographies will also be particularly appealing to prospective acquirers.

What are the considerations for brand owners eyeing the export opportunity?

For owners of any branded business, a number of issues need to be grasped before any decisions should be made. Considerations include:

  • What are the key strategic territories and what are your routes to market in each of these? It is easy to fall into the trap of ‘scatter gun’ expansion by relying on distributors who are willing to try something new. Often, they are not the right partners for your business and fade quickly after an initial flurry of orders.

  • Does the culture and language barrier limit the appeal of your brand? Foreign language packaging could be crucial to the success of your product – particularly if the packaging has an important role educating your consumer. For example, the instructions for self tanning products are incredibly important in order to achieve the best results!

  • Consider how you protect your lucrative brand in its core domestic market. If you own a premium brand you may experience unscrupulous distributors re-importing product back into the UK or local competitors producing copies.

  • How do you create profile and presence in a new country? The most effective strategies often originate from existing relationships which can be broadened outside of the UK – for instance, endorsement by celebrities, coverage in leading publications, leverage existing retail relationships with multi-nationals.

Are you still keen? The next step is recognising that successfully establishing your brand overseas can be both expensive and time consuming. The next is to carefully plan and research you chosen geographies to maximise your chances of getting it right. Then persevere and, if you get it right, the world is your oyster!

Case Study – Farrow & Ball Holdings

Some sound principles of good export strategy are simply not enough! Putting it into practice in real life is invaluable.

Over the last few years Catalyst has advised a number of branded businesses including Farrow & Ball, the leading premium decorative paints and wallpapers brand.

Our initial work with management showed that while dominant in the premium UK wall coverings market, its international footprint was limited and huge opportunities existed in the US. We subsequently supported them to undertake a management buy-out backed by European Capital, a role that for us included:

  • Building a business strategy that applied the strengths of the incumbent Chief Executive, Josh Layish, who had significant knowledge of the US market from his previous roles within the consumer brands industry;
  • Seeking an investor with existing links to the US (in this case in the form of its parent company) who could add expertise and contacts; and
  • Significant market research to underpin the business plan showing the elements of the Farrow & Ball brand which made it particularly attractive to US consumers. This involved a detailed assessment of the cost of market entry and collation of a clear distribution strategy.

This deal has acted as a springboard for the Business and, to date, delivered excellent financial results as US sales have grown rapidly since re-launch.

Conclusions

Trade and financial buyers continue to place great store on strong brands and their ability to deliver above average returns, particularly if they have a credible opportunity to succeed in new overseas markets.

Expanding internationally is still a risky move for most businesses. Three key things to remember to mitigate this risk are to prepare fully, think long term and use trusted, honest business advice from professionals with a track record helping others.