The LATAM Lover, chapter 7 LAUNCH YOUR ATTACK IN 2021!!!
Get ready and go for it! Latam is there for you to dare and conquer, but…do you know how to do it ???. We can certainly help.
As mentioned in previous articles, there are 600 mio people in Latam and 43 countries (believe it or not). We mentioned many times the difference between being affordable and being cheap, the importance of understanding the cultural differences, that not all countries are the same in the region and that you need to know your Latam consumer.
However, one of the most important things before launching your attack into Latam, is for you to know your business and define a clear vision on where do you want your it to be in 5 years and what role will Latam play in it.
From there on, we will now list different distribution stages / models to help you envisioning the path to a strong distribution presence that will reinforce your chances of success.
1- Testing the waters
2- Master Distributor
3- Sub distributors
4- Setting camp
5- Generating Demand for your distribution network
6- Direct and indirect model coexisting
7- Do it yourself
It is recommended that you review the different options above listed, and, again, define where is it that you want to be in the next 5 years. Then, place yourself in 2026 and plan backwards so that you can define what to do now, in the next 6 months, in the next 2 years so that you can pace yourself to where you want your business to be in the region.
It would take an entire text book to describe each of the stages, and don’t worry we are working on it and it is “coming soon”, but we will describe them in a summarized way so that it can be easily digested in this short read. The model to use, or evolving through them, will be correlated to the level of control of the distribution you want to have. The higher the control the more sophisticated and developed your model will be.
1- Testing the waters
Some companies, and we agree with that approach, prefer to “test the waters” pick a market and simulate. You can test your route to market, regulations, logistics challenges
product acceptance, understanding how taxes work in the region ( completely different than the US for example), cost o f media, how does your specific channel behave, how to manage traditional trade vs modern trade and ecommerce, etc. If you opt for this route we suggest a controlled type of evaluation and don’t go for a Mega City such as Mexico city, it will be too complex, you can choose Monterrey or Guadalajara or if you want to go to another country, again, don’t go for the most relevant city, it will be almost impossible to drive any conclusion, because normally, form a mega city the product goes everywhere in that country turning the testing model impossible to manage.
2- Master Distributor
Once you tested the waters and you are ready to go, considering the diversity of the different channels, and how vast the region is, you can certainly opt for the master distributor model. VERY IMPORTANT , if you have decided what model you envision for your business in year 5 m or your end in mind, SHARE IT with the master distributor since day 1, so that there are no misunderstandings later down the road. Those will upset every party involved and will be costly for your Company.
3- Sub distributors
Once you set up a Master distributor, star in one major market developing sub distributors that will be fed by the master distributor, spread quickly, just in one market and learn as much as you can so that you can roll it out in other markets replicating the model.
4- Setting camp
By now, after testing the waters, defining your markets, nominated master distributors and deploying sub distributors, and if you want to keep evolving in the control of your distribution efforts, you have to make the decision and set up camp in the market. You are getting too sophisticated to just managing it remote, you need your feet on the street, your intelligence, and your analytics in the market. Don’t rush to have dozens of people in, and you can certainly mix local knowledge with you own seasoned managers as expats (remember to train them properly since “idiosyncrasy goes to work!!!”)
5- Generating Demand for your distribution network
Now that you distribution network is set up and you are getting more complex, you are introducing new products, line extensions, it will be a good idea to complement your network efforts and put some feet on the street that can generate demand for them.
In general distributors’ sale forces, unless they are exclusive to your product line, carry 100s of skus and will most likely focus on those that really sell form each company they represent. So setting up a Demand Creation Team that complement them, NOT that do their job, but work on promotions, new product introduction, display placement, etc it highly recommended.
6- Direct and indirect model coexisting
If you think that Mexico alone has 600.000 mom and pops, or 76.000 stationery stores, or that Brazil has more than 10.000 construction material stores and thousands of petshops, not to mention that in Sao Paulo alone you can have diner in a different restaurant every night of your adult life without repeating a place…..you will certainly need a lot of feet on the street, master distributors, sub distributors, cover the main grocery chains, and make sure that your product looks spotless when a consumer enters a store. There is simply NO WAY that distributors alone can make that happen. You might want to start thinking about exclusivity to some of them and closed areas if in return they only work with you, or to assign dedicated sales experts to do analytics for them but inevitably you will be combining both direct selling and indirect selling models. Some markets are just huge, and the more you want to control your distribution , the more presence you will need
7- Do it yourself
Depending on your product category and at this point of your journey, just going direct in key markets is a good option. It will depend on your product turns, the higher the turns the more likely to succeed by undertaking direct distribution at all levels, however this takes a major distribution operation , not only form a selling stand point but mainly form a logistics, credit and collect and analytics stand point.
There definitely other options and combinations, especially if you consider ecommerce as well. But Latam is very peculiar, lots and lots of small stores, lots of sub distributors, lots of business made 50 or 100 km from the main city of any state. Just a piece of data, Brazil has more than 5000 municipalities, Sao Paulo city has 12mio inhabitants but the State of Sao Paulo has 40 mio people in it with 647 municipalities, WHAT AN AMAZING CHALLENGE !!!
Thank you for reading this article and following them. Contact us for any specific question you might have and stay tuned for another “chapter” of ……… “ THE LATAM LOVER “
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GABRIEL SARASQUETA is a proven professional with extensive experience in consumer goods companies such as Diageo, Unilever, Mars Inc. , Newell Brands and Movado Group Inc.. Expert in the Latin America Region, having lived and worked in Mexico, Brazil, Argentina and Chile with ample experience in P&L management, business development strategy, sales, marketing, operations and H.R.. Fluent in English, Spanish and Portuguese.