Exporting without a local office
For two decades Lawrence Mallinson ran a very successful vegetable and fruit juice firm. Turnover rose year after year. Profits rolled in. But he never exported. Why would he? There’s the cost. Setting up a foreign office means splurging out cash on staff, business taxes, utility bills and a hundred other expenses. And the travel. Did Mr Mallinson want to spend his life stuck in airport departure lounges, listening for flight updates? He did not. So his firm remained marooned in the UK.
But four years ago he had a brainwave. He would export without leaving home. Distributors and partners would handle the nitty-gritty in the destination markets. Mr Mallinson would help his partners, of course, but without either spending cash or racking up air miles. Now his firm, James White Drinks, exports to Japan, Australia, Denmark, Holland and the United States. “Our turnover is £6 million,” he says. “In a few years, I’d expect exports to account for a quarter of that.”
The arms-length model is working beautifully for him. “I have an incredible guy in the Netherlands. He contacted me out the blue and wanted to sell our Beet It beetroot drink for the sports market. He is hugely enthusiastic and really gone for it. The truth is I’ve never met him and we’ve been doing business for nine months.”
So what are the secrets of exporting without having a foreign base? Mr Mallinson is bursting with tips. First, he’s found that the issue of cost does not disappear. “Using a third-party distributor adds a level of cost. There’s the shipping cost and the distributor’s margin to think about, so your product needs to be able to withstand a 40 per cent price premium in the export market. If your product is a commodity, then it is going to struggle. Our distinctive products, such as Beet It, are unique enough to sustain this.”
He advises against long-term contracts. “Distributors will always want exclusivity. The problem with that is you might have the wrong partner or if they lose interest. I find the trick is to make them feel they have exclusivity, but not to formally give it. We work order by order with our partners. Either party can just walk away.”
If I find a country where we don’t have a distributor, I go on the internet, find someone in the trade and send them a link to our YouTube channel which explains our product
When face-to-face contact is needed, get your partners to come to the UK. Mr Mallinson arranged for the matriarch of his Japanese business partner to visit London. “The firm was run by an 80-year-old grand dame. Terrifying! We took her for tea at the Goring Hotel – 100 per cent the right thing to do, she loved it.”
The UK-based export model is ideal for internet firms. Entrepreneur Paul Busby has a rather unusual product which he’s found to be perfect for exporting. His firm, Viezu, tunes cars. A software programme reconfigures the computer chips in cars to boost fuel economy, or to reduce it - “Boy racers love that,” he says. Mechanics plug a Viezu box into the engine and then the box connects to Viezu’s servers via the internet to deliver a software update to the chip. “We did all 24,000 of BT’s vehicles,” says Mr Busby. He exports to 45 countries, contributing half his £2.2-million turnover.
“I get out an atlas and pick a country,” he reveals. “It really is that crude. If I find a country where we don’t have a distributor, say Chile, I go on the internet, find someone in the trade and send them a link to our YouTube channel which explains our product. This approach to export means there is zero cost. No sample costs, no travel costs, nothing.”
Mr Busby remains adamant that he won’t ever set up overseas. “I have no interest in bricks and mortar anywhere offshore. We love the online environment.” However, he can’t avoid the occasional trip. For those excursions he relies on the British Chamber of Commerce. For example, when Viezu were due to visit a trade conference in Russia, the BCC helped them find a translator.
The BCC has also helped Viezu find grants to target the US market and identified a trade show in Shanghai, which will help the firm enter the Chinese market. “They are great guys in my experience,” he says. “You’d be mad not to use them.”
A downside to exporting without a local base is getting paid. When things go wrong it can be hard to pursue debts and even harder to undertake legal proceedings. Joseph Heler Cheese, a Cheshire-based cheesemaker, is an experienced exporter. Managing director Mike Heler says: “Knowing you are going to get paid is the big worry. Our credit insurer is Coface and they will insure against debt worldwide, providing it is a credible customer.”
Another problem is understanding local legal requirements. Joseph Heler Cheese focuses intently on knowing every rule. “Packaging is a hurdle,” warns Mr Heler. “For example, the United States want the packaging to guarantee a 12-month shelf life. You need to pay attention to that sort of detail.”
Finding the right distributor will not be easy. Visiting trade shows remains a popular way to find potential partners, though anecdotally it seems that many tie-ups originate through nothing more than a dose of serendipity.
These niggles should not detract from the principle that exporting from the UK without a foreign base is a viable and proven route to market. For the cheesemaker, it is a path to growth simply unattainable in the UK. Joseph Heler Cheese is ranked by The Sunday Times Fast Track as the 57th fastest-growing private firm in the nation. International sales are up 60 per cent since 2009. It now exports 1,500 tons of cheese to more than 50 countries. Recently the cheeses got Halal certification, opening new markets in the Middle East and North Africa. All achieved from scenic Cheshire.