Undestanding Channels & Approaching Buyers


Market Channels

The two key segments in the fish sector are the retail (supermarkets, fishmongers & speciality shops and open markets) and the food service sector, (restaurants, hotels and catering). These two segments are reachable by Vietnamese exporters/processors through importers and wholesalers who are specialized in reaching and meeting the needs of the actors in the retail and food segments. Some importers and wholesalers are more specialized in supplying the retail sector and others more geared to supplying the food service industry. An additional channel is that of the processing industry in Europe itself, who also supply the two segments.   Agents are also operational in the chain supporting exporters to supply to Importers, wholesalers and the European processing industry. Therefore from the Vietnamese Processor/Exporter point of view there are the following options:

  1. Supply to Agents
  2. Supply to Importer (specialized in supplying retailers/processors)
  3. Supply to Wholesaler (specialized in supplying retailers)
  4. Supply to Importer (specialized in supplying the food service industry
  5. Supply to Wholesaler/Food Service Distributors specialized in supplying the food industry
  6. Supply directly to the processing industry  

Importers

Importers are intermediaries engaged in importing and/or distributing goods in large volumes.

Trading with an importer is of interest if you have no direct contacts with the retail or food service companies. Or if you cannot offer the low order volumes that retail or food service companies wish.

An importer is often the recommended trade channel, as importers:

  • Know the market and product specifications very well,
  • Have different types of customers, which lowers your risks,
  • Offer additional services, for example pre-financing.

There are several types of importers:

  • Trading importers, who only trade the product without processing it further themselves. Some of these are specialized in only importing fish products, others are generalist i.e. import multiple food products.
  • Processing importers, who reprocess products before delivering to their customers. Processing importers generally deliver to higher market segments than trading importers.

The Netherlands plays an important role in seafood trade, as many large seafood traders import their products through the Port of Rotterdam. From this point, imported seafood products are further distributed all over Europe. Germany is also a re-exporter into Eastern Europe.

Agents

Importers are not ready to do business with everyone and as they invest a significant amount of time and effort into smooth collaboration with their suppliers, they are not very prone to switching suppliers. As such they are not always so easily approachable. If you lack contacts in the market, agents are appropriate option as they are usually in contact with potential buyers. Agents may also work independently or act as contacts between your company and your buyers.

Sometimes, agents will also work for European buyers seeking to buy directly from suppliers in Developing Countries. Agents can also provide expertise on specific issues, such as requirements for accessing the European market.

The commission of agents is generally between 2-3%

An agent does not buy the product, so this leaves you with the full financial risk. At the same

time your margin decreases, because an agent works on the basis of commission. However, you save on your own marketing costs and pay only in the event of success.

Note: Agents can be very difficult to bypass once engaged, because their position is protected under European Union law.

The Retail Sector

For fishery products the retail sector is in three forms – (1) supermarkets/hypermarkets, (2) specialist fish mongers and (3) street markets. Supermarkets/hypermarkets are by far the main channel, around 90%.

Hypermarkets/Supermarkets

The retail segment in Europe is dominated by a small number of large retail groups that own several supermarket chains. These retail groups have concentrated buyer organizations. It is estimated that Europe has approximately 600 different supermarket chains. Retailers such as Rewe in Germany operate different brands with different consumer target groups: Billa, BIPA, Merkur, and Penny. Other examples of large European food retailers are:

Carrefour (hypermarket/supermarket based in France, > €100 billion turnover)

Metro AG (Germany, > €100 billion turnover)

Tesco (UK, ~€100 billion turnover)

Schwarz Group and Aldi GMBH (discount supermarkets, Germany)

Koninklijke Ahold N.V. (supermarket, the Netherlands).

For a detailed picture on the super/hyper market sector in European countries, USDA conducts very detailed reports on the Food Retail Sector. You can download the reports in the Useful Sources and Guides Section of the Vietnam Export Window to Europe Website. The EU MUTRAP project also recently conducted a detailed study on the topic, downloadable from the same Useful Sources and Guides section.

 High-end

 

 Exclusive supermarkets

and organic

supermarket chains

 

 Market share: small, but increasing

Quality: BRC, IFS

Sustainability: organic, MSC, ASC, GlobalG.A.P.

Quantity: low and medium volumes

Presentation: small portion exclusive brands / designs, frozen and defrosted

Purchase: processing importers,

importers/wholesalers, increasing co-creation, which means that supermarkets work together with their suppliers on product development.

 

  Middle-Range

 

e.g. Tesco, Carrefour, Ahold

 

  Large supermarkets /

hypermarkets

 

  Market share: large and rather stable

Quality: BRC, IFS

Sustainability: GlobalG.A.P. (ASC, MSC)

Quantity: high volumes

Presentation: small portions, house brands, brands,

frozen and defrosted

Purchase: processing importers, increasingly direct

 

 

 

 

 

 

Low-end

 

e.g. Lidl, Aldi

 

 

 

 

 

 

 

Discount supermarkets

 

 Market share: medium and increasing

Quality: Legal requirements. Focus on quality

requirements such as BRC, IFS.

Sustainability: becoming important in countries like

Germany, United Kingdom, Switzerland and the

Netherlands. Focus on ASC and MSC.

Quantity: high volumes

Presentation: Medium-sized portions defrosted and

frozen, recently also small portions and house brands.

Purchase: importers/wholesalers, increasingly direct

 

Source: www.cbi.eu

Direct sourcing by retail and food service companies

Consolidation in the number of supermarket chains There are over 420,000 non-specialist food retail stores in Europe. Nevertheless, this market segment is increasingly dominated by a relatively small number of large retail chains with international buyer groups. Several of these chains operate in multiple European countries, and the largest ones have turnovers exceeding €100 billion. The number of retailers is expected to decline further in the future. Large retailers, such as Carrefour or Ahold Delhaize are increasingly importing low and medium value-added products directly, instead of relying on importers.

Direct sourcing happens when retailers and food service companies purchase directly from the exporter. The number of exporters bypassing European importers has shown an upward trend.

This option is suitable for you if:

  • You can consistently supply high volumes at a competitive price
  • You are able to comply with strict quality, food safety and sustainability requirements
  • You are already familiar with the European market.

Characteristics:

  • Your margins are generally higher because of a shorter supply chain,
  • High up-front investment and on-going support costs,
  • High penalties in the event of non-compliance with contracts.
  • Compared with retailers in Southern and Eastern Europe, retailers in Northern and Western Europe are more likely to buy directly from exporters.

International Buying Groups

As part of the big chains’ strategy to further increase their buyer power they have chosen to cooperate in cross-border buying groups that achieve buying power through the volume of joint purchasing. Currently there are 6 main international buyer groups across Europe shown below. Note: the difference in focus with regard to private label vs. international brands. Some of the groups like EMD and AMS Sourcing focus entirely only on private label products.

 

Buying Group

Membership

 

Main focus of joint sourcing projects

 

Potential consumer turnover

 

Points of sale numbers

 

EMD

 

21 members: Asda, Tuko Logistics, Superunie, Axfood, Markant Germany, Markant Czech Republic , Markant Switzerland, Markant Slovakia, Markant Austria, Casino, Dagrofa, Globus Russia, Euromadi Iberica, ESD Italia, EuromadiPort, Unil/Norges Gruppen, EMC Distributions, Kaufland Poland, Kaufland Croatia, Kaufland Romania, Kaufland Bulgaria, Woolworths.

Private label products

 

178 bn. Euro (216 bn. Euro worldwide)

 

150.000 stores (including sub-members, excluding New-Zealand and Australia)

 

Coopernic

4 members: Coop Italia, Ahold Delhaize, Leclerc, Rewe.

 

International brands

 

142 bn. Euro

 

28.500 stores

 

Alidis/Agecore

6 members: Eroski, Edeka, Intermarché, Colruyt, Conad and Coop Switzerland

International brands

 

140 bn. Euro

 

21.800 stores

 

Eurauchan

3 members: Auchan, Système U, Metro Cash & Carry

International and national brands

 

131 bn. Euro

 

7.300 stores

 

AMS Sourcing

10 members: Ahold Delhaize, Booker, Dansk Supermarked, Hagar, ICA, Jerónimo Martins, Kesko, Migros, Morrisons, Uniarme

 

Private label products for members and the Euro Shopper range

 

103 bn. Euro

 

15.000 stores

 

BIGS

SPAR franchise holders in Austria, Belgium, Czech Republic, Denmark, Eire, Finland, Greece, Hungary, Italy, Netherlands, Slovenia, Switzerland and the UK

 

International brands and limited to a range of approximately 400 standardized own-brand products

 

21 bn. Euro

 

7.700 stores

 

Original Source: Source: IGD Research (2016) and IBG websites (March 2017). Figures include European countries only

Aquired from: SOMO Paper, Eyes on the price International supermarket buying groups in Europe

Fishmongers and specialty shops

Fishmongers are occupying a growing niche within the European market. Their market share ranges from 30-50% in Spain to 10-20% in the United Kingdom. Fishmongers mostly position themselves as speciality shops and offer a wide range of products to their customers. In general, their range of products is more diverse than the range of products seen in large supermarkets.

Fishmongers primarily sell fresh products from European origin. The share of frozen tropical

seafood products is relatively low. Fishmongers mostly purchase their tropical seafood products from specialist importers.

Street markets

Street markets only have a small market share in Europe. Their market share remains significant only in some parts of Greece and Spain. In general, vendors at street markets sell locally caught fresh seafood products. In some cases, they also offer defrosted imported seafood products, which are imported in order to complement their product range.

Tips on Market Entry and Approaching businesses in the market

Exporters with little experience in the market will face challenges convincing importers to immediately start buying from them. Agents, who have good contacts with Importers are a good alternative. A good means of finding agents is on Globaltrade.net

Reaching Importers and Retailers requires a good better knowledge of the market and a good understanding of their requirements. Presenting your companies’ market knowledge, experience and capabilities in line with their requirements is therefore critical. The buyer pitch template will help you convey these.

At the same time it is important to build your network and connect with Purchasing Managers using tools such as Linked In, contacting Importer Associations, making use of Vietnam’s 22 Commercial Counsellors in 22 markets in the EU, and importantly, also attending international trade fairs. Below are a list of European Associations and Key Trade Fairs.

When seeking to network with retailer purchasing, it is important to study the retailers purchasing approach taking into account whether or not your product would more likely be purchased by a Retail Buying Group rather than the Purchasing Department of the retailer itself. As indicated above major food retailers buy products from central buying offices. These offices usually source products, handle import (customs) formalities, logistics, supply, maintenance, delivery, and sometimes pricing and labeling for their retail customers. They insure that foreign-sourced products meet all import requirements, including food labeling, packaging, and other market specifications. The goal for a Vietnamese exporter is that its product meets all the import requirements and that the central buying office includes it in its product catalogue. Food retail buyers use this catalogue to make purchases for their stores.

It is also important to note that the choice of product for global direct sourcing can vary significantly and purchasing can be through an Asian office. Tesco, for example does a significant part of its Asia sourcing through Tesco International Sourcing (TIS) based in Hong Kong. Metro Group also in Hong Kong through MGB – Metro Group Buying HK Limited.

Associations:

EU Fish Processors and Traders Association

www.aipce-cep.org

Seafood Importers & Processors Alliance

www.seafoodalliance.org

European Federation of National Organisations of Importers and Exporters of Fish

www.aipce-cep.org

Trade Fairs:

European Seafood Exhibition

www.seafoodexpo.com

ANUGA

www.anuga.com

SIAL

www.sialparis.com

Seafood International

www.fishinternational.com

Seafood Barcelona

www.seafoodbarcelona.com

CONEXMAR

www.conxemar.com

Salima International Food Fair

www.bvv.cz/en/salima

For additional tips on approaching buyers read CBI, Netherlands’ 10 tips on doing business with the fish and seafood sector. [Retrieve and download the report from the CBI report window]

 

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