Home Market Benchmark – Internal Constraints

In my last newsletter, we explored the Brand Backstory and its significance within the Value Proposition Framework. Understanding your brand's origins, mission, and unique journey helps differentiate your brand, build trust, and create emotional connections with consumers. While a compelling brand story is essential, it is only one piece of the puzzle when preparing for international market expansion.

In this newsletter, I will provide the practical steps to identify and manage internal constraints.

Internal constraints are limitations within a company that can have impact on its ability to expand into new markets. These constraints include production capacity, regulatory compliance, and logistical challenges that need to be addressed to ensure successful market entry. Managing these constraints is crucial for adapting products to meet local requirements and consumer preferences in new markets.

But first let’s start with what we have today.

Many companies start by exporting their home market portfolio. Depending on the available label space and the legislation in force, it is common to have two additional languages besides their native language and to comply with broader legislation that allows exporting their brand without any adaptation.

Current Range

When preparing to expand your brand into a new market, it is essential to start with a thorough evaluation of your current product range. This assessment should be conducted at the SKU (Stock Keeping Unit) level, focusing on several key aspects: packaging, capacity, flavor/recipe, languages, and best before date.

Understanding the strengths and limitations of your existing range will help identify the adaptations necessary to meet the demands of the new market.

I know that in some companies, your current range can have more than 100 SKUs per brand. The idea is to evaluate to what extent these SKUs can be used for export to other countries. If you have a large assortment, the best way to do this is by using an Excel spreadsheet.

Adaptation - Complying Features

When preparing to expand your product into new international markets, it is essential to assess where your current range complies with the local or regional regulations and industry standards. This involves a thorough evaluation of various features of your product to identify any potential compliance issues that need to be addressed.

Here's how you can systematically approach this process:

• Legal Practices Assessment – The recipe or packaging of a product complies with the local regulations and the guidance from local, regional, or global authorities such as FDA (US), EFSA (Europe) or Codex Alimentarius (Global).
• Religious Practices Assessment – The recipe or packaging of a product is influenced by principles of Jewish and Islamic laws. Both kosher and halal diets set strict guidelines regarding which foods can be eaten. Depending on your target audience and the category you work in it can be important to comply with these certifications.
• Certification Practices Assessment – The company or factory where a product is produced has the certification needed to be able to work with specific clients (i.e. retailers, food service), such as: ISO 9001 Quality Management System certification, ISO 14001, BRCGS, HALAL and Kosher certification.

After this assessment you will know which countries or type of clients, you can already export your brands to.

Example: If your home market is in Europe and your country is an EU member, you may already be able to sell in other member states. However, in some target markets, including certain EU member states, there are also local practices that need to be addressed, such as ingredients, materials, or claims which are not allowed, or industry pledges that commit all players to specific market practices.

Adaptation - Production Constrains

When expanding into new international markets, it’s crucial to assess your production capabilities and identify any constraints that could impact your ability to meet the demands of the new market. Understanding and addressing these production constraints is essential for ensuring that your product can be delivered consistently, efficiently, and at the required quality standards.

Here’s how to systematically evaluate and manage production constraints:

• Products Shelf-Life Assessment: Many retailers around the world apply the 1/3 rule. This means that our product should be delivered to retailers within the first one-third of its shelf-life. Evaluate whether the shelf life of your product allows sufficient time after production, transport, and storage for them to be sold to the end customer.
• Product Storage Conditions Assessment: Depending on the category, your product may require different storage temperatures throughout the supply chain: ambient, chilled, or frozen. Ensure that these conditions can be maintained during transportation, warehousing, and retail display in other markets. Consider other factors such as temperature sensitivity and packaging integrity.
• Current Production Capabilities Assessment: Determine the current production capacity of your facilities. Can your existing infrastructure handle the increased demand from new markets without compromising quality or efficiency? Can your facilities be easily adapted to produce different SKUs or modified products to meet the specific needs of the new market?
• Minimum Production Runs Assessment: Identify the minimum and standard production run requirements for your products per packaging/recipe. What are the minimum production runs required per product?

After this assessment, you will have a clear understanding of which products in your current range meet the conditions for international sales, such as minimum shelf life and storage requirements. Additionally, you will identify the constraints if you decide to develop an international portfolio, including your current production capabilities and the minimum production runs required. This knowledge will enable you to make informed decisions about expanding your product line and ensure that you can meet the demands of new markets without compromising quality or efficiency.

The reasons behind having to adapt your Product

There are many reasons behind having different recipes and different packaging for different markets! When you are exporting your product or internationalizing your brand to a new market first you need to know if your product already complies with the regulations and industry standards of the target market (Home Market Benchmark).

But if you want to develop your brand to in a new market you must accommodate the specific needs of the target audience that you want to serve. This may include producing custom SKUs, modifying recipes, or adjusting packaging sizes.

That why assessing and managing internal constraints is a critical step in preparing for market expansion.