International Business: Insane in the Membrane
International business has always fascinated me. The idea of people from various countries and cultures doing business together and embracing your products, thousands of miles away, is just cool. When we launched Ronnie Coleman Signature Series (RCSS) in 2011, our strategy at the time was extraordinarily unique. We leveraged my business partner Ronnie Coleman’s global celebrity status and focused on growing markets that were less penetrated by other nutritional supplement companies. Those markets happened to all be international. That’s right — RCSS was a domestic brand that launched 100% internationally coining the term “born global”. As a matter of fact, we didn’t sell domestically until another two years later!
So, why international?
- Ronnie Coleman’s Popularity — for starters, Ronnie’s popularity has always been stronger in other countries. He spent a good majority of his career competing overseas in bodybuilding shows, which resulted in long-standing relationships with show organizers and most importantly, distributors.
- Up-Front Cash — with most international business there’s no true way to guarantee payment (lack of legal ramifications), so all international orders are paid in advance. This is a very nice perk when you are launching a company out of your garage with zero capital.
- Growth — international markets (especially emerging markets) grow exponentially faster than the U.S. and they were also less saturated with competition.
- Less Focus by Market — most major supplement brands were neglecting international regions because they were too busy fighting the domestic front. I believe the domestic market is over-saturated, highly competitive and extremely litigious. These factors make market penetration at a premium and not advantageous when you throw in legal fees.
- Not Scared of the Work — Ronnie and I threw on our backpacks and traveled the world, under the radar, for 3 years. This resulted in the distribution of our products in over 100 countries (121 countries today to be exact). It was a natural opportunistic strategy that has rewarded the brand handsomely.
However, the waters aren’t as calm anymore so if being an international bad-ass is on your agenda, throw on a life vest, take some Dramamine, say your prayers, and take notes…
Lesson 1: Stop Thinking Like an American
That’s coming from an American that learned this lesson the hard way. Relieve yourself of “how it’s done over here” and adapt to “how it’s done over there”. International business requires patience and understanding. For example, many countries require products (especially consumables) to get registered through their version of the FDA. This process can be tedious, time consuming and expensive. Adding to the frustration, customers may often request documents that don’t exist domestically, that’s why it’s critical to align yourself with a customer that has experience because it’s easier to follow the paper trail than it is to create one.
You need to understand the markets you are selling to and make sure the product offerings align with the demands of the end consumer. Robust and complicated formulas may sell well in America, but they will collect dust in most countries because the product is too advanced and likely too expensive. You wouldn’t try to sell Ferrari to high school kids…would you?
My recommendations? If you’re serious about making a splash overseas you need a full-time employee that handles product registration. I also suggest you work with established distributors with proven track records of importing product and don’t approach them until you have the right type of products to offer. The distributors you pick don’t have to be the biggest, but they need experience. Again, it takes time! Sure, you can always find a grey importer, but that’s short game, son. Be patient, put in the time, and then reap the rewards.
Lesson 2: Issues Out of Your Control
International climate can change overnight for literally no reason. Geopolitical issues will always be present and while many of these issues are completely out of your control, you are responsible for finding solutions or your brand will not survive globally. Let’s use 2017 as an example, when the perfect storm took place. The U.S. Dollar strengthened to the point where most countries currency devalued 10, 20 and even 30 percent, in a very short period time, all the while protein prices were at an all-time high jumping 20–25% (late 2016) during that same period.
Please digest that for a moment. On one hand, you have a cost of goods increase and on the other, your customer just lost most of their profit due to a swift currency drop.
The natural reaction as the manufacturer is to increase the price but the natural reaction for the customer is to ask for a discount. Sure, you might be able to hold tight and weather the storm but when is the storm going to end? The fast is, we live in a world where a president can single handedly shake the global currency exchange with a simple speech and I concluded that we cannot view this as a storm but as the new norm. Pressure creates diamonds and desperate times lead to desperate measures.
The challenges of 2017 led RCSS to a completely new affordable product line called Vital-XS. This was built not only to withstand all market conditions, but to excel. Customers that were losing money and losing faith in the importation process were now presented with margins they hadn’t seen for years.
The process of creating a complete second line was painful and tiring, but it provided us a competitive advantage that we continue to thrive off.
Lesson here is simple, things happen and if you want to succeed you better stay ahead of the game.
Lesson 3: You Can’t Make Everyone Happy!
The customer isn’t always right, and they won’t understand the complex issues your company is facing daily. You need to learn and exercise the power of NO. For example, you might have a hot product that has an unapproved ingredient and the customer is requesting you make them an approved version. It’s likely their version of volume is significantly less than your minimum order quantity, resulting in the business carrying an excessive inventory that can only move in one country. This is where the power of no comes in to play. It is not worth the financial or operational stress to meet this customers request. Shift their focus to products that are approved and wait until they can prove themselves worthy of a custom run. You must balance working with what you’ve got and trying to meet customer needs.
Lesson 4: Supplements are Finally on their Radar
Roughly a decade ago, the only place you could get quality supplements from was the U.S. Now, that is no longer the case. Most countries now offer localized brands that are far cheaper than anything coming from the US. There’re no import taxes, shipping fees, etc. which could equate to an increase in costs of 20–30% and in some cases, more. Most of the time the quality doesn’t compare, but that’s irrelevant in the customers’ mind. They simply want oranges to compete with apples and you better get used to it. This is where product mix comes into play. You may have to lose on some products and make up the deficit with others. Give them their victories and focus on the blended margin.
International business isn’t for the faint of heart. If you want to succeed you will need to adapt daily. Seriously…and while I think this article is very informative, it is possible my advice may differ in months’ time.