Should one supermarket have exclusive rights to my product?
Published 01/10/2015 | 02:30
Q: I am producing a food product which is getting a good reaction from the speciality food sector and also from one of the multiple supermarkets. The big supermarket is looking for exclusivity. Can you advise me if this is a good thing or not?
A: It seems like things are going well for your business which suggests your product range is good and that is why you are getting the response from consumers and retailers.
There are always positives and negatives associated with working exclusively with a large customer. The biggest downside is that you could potentially alienate the rest of the larger retailers and, if anything were to happen to the relationship with your sole large retailer, you could find yourself very isolated.
You do also have to remember that no matter how big any one retailer is, they usually have little more than a quarter of the market. At Superquinn the buying team would regularly come to me excited about some new product they had found and where they wanted to support this new producer heavily and the producer was committed to working with us alone.
That's a normal reaction from buyers and retailers love to have a product their competitors can't get their hands on. As a producer it is also a real win as it allows you to exert pressure on the retailer to give you the volumes necessary and to allow you to expand as your business capabilities grow. In a sense offering to work with a retailer exclusively can give you greater power over them if the relationship is working correctly. Remember, you are always in control and if the day comes when you are no longer being offered the volume you need, have an upfront conversation with that retailer and signal that you need more volume and need to go to the wider market. On balance, in my view, I think there is more to be gained by forming a win/win relationship with one big retailer, rather than just be another supplier to many.
I accept that some businesses, particularly larger ones, need to supply everyone in the market as their business is based on volume production. It seems to me, from where you are at on your journey, that this is an opportunity. It will need to be carefully managed and you do not want to alienate anyone else, but it does sound like this retailer sees potential in your product and is willing to support you. That can't be a bad thing.
Q: We run a successful business serving the Irish market and have also identified significant European export opportunities. Can you give strategic advice on what our focus should be?
A: lot depends on your product category, but as a general rule most companies grow their business in Ireland and then, when they have established the required skill sets, start to look at export markets. This seems to be the case in your business. The biggest danger is that you don't recognise the size of the export opportunity and you treat it as an add-on to the business, rather than strategically an area of sales growth which could be a multiple times bigger than your Irish business. Quite typically population levels determine sales and assuming your product has appeal in most countries, then you have to follow population numbers.
I would suggest you first engage with Enterprise Ireland as they have a very strong team of advisers for the export market. Start by looking at your management structure and see will it be able to cope. Look at your own role and whether this should continue to focus on the Irish market, or whether some of your own time should be dedicated to exports.
Perhaps you need to bring in expertise by employing someone who has European export experience and contacts within the industry. It will take you a long time to establish these contacts yourself so there is a commercial argument in favour of 'buying in' expertise which would accelerate your journey.
I would like to applaud you on thinking strategically, rather than adding business on in an unplanned way. Strategy is about finding your place in the future when you are looking at today and that will require lots of standing back from the existing business to develop a road map to maximise opportunities.
Send your small business questions to email@example.com