The variables are seemingly endless for businesses who want to jump in and be sure they won’t take a fall. Most importantly, they want to safeguard their not inconsiderable investment even if this means trusting it in the hands of a hitherto unknown third-party.
They need to know how to adapt their flavours, formulations and packaging to appeal to Asia’s widely differing markets. They have to have faith in the distributor’s logistics capabilities, trust in its business ethics and confidence in the relationship.
It’s not surprising, then, that even the biggest companies in the food industry can come a cropper all because they picked the wrong distributor.
With this in mind, we approached Daniel Pans, who established DPO International in Japan in 1993, and has subsequently set up distributorships across much of Asia. Now headquartered in Kuala Lumpur, the company deals in distribution across consumer foods, ingredients and food service by working largely with Western blue chip companies and representing their product lines in Asia.
According to Pans, the key to finding the right distributor is in the preparation.
“What separates one distributor from another is how they take ownership within the value chain, and how that ownership is mutually respected.
“There’s a great deal of preparation required before you can see if there is a match between the principal and the distributor, and maybe not enough effort is put into that preparation part by many companies. It’s like getting married before you really get to know the other person.
“Whenever you have an overseas principal, you have an in-depth discussion about what you want each party in the relationship to do.”
Whether principal or distributor, for the relationship to work, both sides must live up to their responsibilities. For example, Pans’ company takes full ownership from the moment the goods depart the factory until they reach consumers. This includes translating the science behind a product to locally accepted statements, health authority approvals, packaging designs and cash collection.
This last area is extremely challenging because credit insurance doesn’t exist in most Asian countries, but nevertheless companies will still demand credit. Foreign exchange is another very complex issue, although a good distributor should have a clear handle on it.
“Then you have a growth platform, and once we agree on it, there has to be very clear, transparent and diligent reporting from which we exchange our mutual progress. Once this is agreed on, it is very easy sailing because everybody knows what the other side has to do,” added Pans.
Ingredients distribution becomes highly involved, with local partners marketing the science behind the product. DPO, which has ingredients clients including international majors DSM and Parlsgaard, has developed its expertise in translating food science and bringing it to the local community so they understand what us used in the finished products.
“There should be mutual respect for the fact that we are in the better position to do this. At the same time, we require the principal to give full, honest and complete training to our people, including regarding competition,” said Pans.
The Belgian likes to think DPO has brought new innovations to the business, largely to do with logistics, and the way it researches its products and markets them.
“Distributing products is a lot about logistics. Many distributors can do logistics, but most of them outsource much of it. We try to be in control of the logistics we handle.
“We also have a range of in-house developed software, and one of these is our own food wiki. This allows our people from China, Indonesia, the Philippines, Thailand—everywhere really—to voice questions across our network for input from other centres.”
Using a closed network, food scientists from, say, DPO’s Beijing centre can exchange information and questions with counterparts in Colombo, where technicians there might have recently made a discovery. The system is expanded to include non-company experts, though it is kept away from the public as products are being developed.
“It gives very quick, in-depth feedback on any need our staff might have. This is, I believe, a very innovative way of doing things, and I haven’t encountered it elsewhere,” said Pans.
Pans’ advice on selecting the right distributor boils down to two things: the company’s trust and its capability. But while these might be two traits that look great on paper, the reality could be quite different. As with many things, the right fit can only be found with a great deal of patience and preparation.
“A lot of other people call themselves distributors, but they end up being a one-man show on the fortieth floor of a fancy office tower. This isn’t the same as a distributor who goes all the way within the value chain.
“The way we do things works well. We describe very clearly what it is we do, and what it is we don’t do. And if we spend time getting to know our principal too, before we start, we find that both parties greatly benefit from it all. It is important to remember that not everybody is made for each other.”