Italian spaghetti, Swiss cheese, Georgian wine, Canadian maple syrup – these are not all the overseas products we enjoy eating. These goods, as well as products of domestic producers, are brought to the nearest store thanks to special market players – distributors. They maintain direct relations with manufacturers. For subsequent sales, the distributor maintains a warehouse, organizes and is responsible for the promotion of goods, and builds a pricing policy.
Choosing a distributor: criteria
The results of market research suggest that the choice of distributor depends on criteria such as:
1. Distributor reliability.
2. the credibility of the company that distributes the product.
3. Speed and flexibility of the distributor’s work.
When choosing an intermediary, it is worth knowing exactly who they are targeting: retailers or manufacturers. Two types of distributors can be distinguished: those who are manufacturer-oriented and those for whom retail acts as a customer.
First model: manufacturer-oriented distributors
In the first way of distributor’s work, the manufacturer is the customer and the retailer is the partner. The scheme of distributor’s orientation to brand development looks like this:
In this case, the manufacturer orders services from the distributor to promote the brand through certain sales channels. And with retailers, the distributor agrees on terms of cooperation, which are included in the product promotion program.
Second model: retail-oriented distributors
In this way of organizing supplies, the retailer is the customer to whom the distributor is oriented and adjusted:
This model works according to the law of the intermediary:
Distributors, who provide all services from purchasing products to developing and executing promotional activities, are worth their weight in gold to manufacturers.
Analysis of distributors in Ukraine shows that 75% of manufacturing companies answering the question “how to choose a distributor?” first of all conduct research of the distribution services market, selecting the most reliable distribution companies. The most reputable distributor companies are also popular among manufacturers. A distributor’s reliability and credibility wins the competition in terms of speed and flexibility in providing distribution services.
Ukrainian distributors : realities
Modern foreign and Ukrainian distributors are systems with many variables and developed logistics infrastructure that know how to deliver goods to the end consumer quickly and reliably. In today’s world, all product manufacturers without exception realize the importance of distribution and its impact on sales, which means that the question “how to choose a good distributor?” becomes relevant.
TradeMasterGroup experts have compiled a rating of the best companies engaged in intermediation on the FMCG (fast moving consumer goods) market. The top ten include the following companies:
Teddis Ukraine is the main supplier of tobacco products. Perhaps that is why the company is among the 500 largest companies in Central and Eastern Europe. And apart from the 330 million fine, the company paid as much as 1.5 billion hryvnias in taxes in 2016.
Myronivsky Hliboproduct is familiar to everyone thanks to Nasha Ryaba, Legko and Bashchinsky. The company produces and supplies meat products to wholesale and retail outlets for sale.
J. T. International Ukraine (J.T.International) is the European division of Japan Tobacco Inc. The official distributor of such brands of cigarettes produced by the firm itself:
Imperial Tobacco Ukraine is one of the largest manufacturers of tobacco products and supplies Ukrainian consumers with such cigarettes:
Procter & Gamble Ukraine (P&G Ukraine) not only produces, but also supplies its products to points of sale. But the largest official distributors of the company’s products are STV and SavService.
Philip Morris International was recognized as the best employer in Ukraine and Europe according to the International Institute of Employers. The main brands of cigarettes supplied by Philip Morris Sales and Distribution:
Bayadera Logistics supplies alcoholic beverages to more than 45 countries, while Bayadera Group combines distribution companies and three in-house manufacturing firms.
SavServe is a supplier of pet food and household chemicals, also manufactures its own products prOK, Siela and imports Pringles, Toblerone, Cleanic, Lambe, Tchibo.
Eastern Beverage Trading possesses such trademarks as Medoff, Arctica, Natural Collection, Nasha Marka, Rodnaya Rosa, Mjrnaya, LONGmixER, which are supplied not only to the stores of Ukraine, but also to the trade points of the world.
Distributors of Ukraine: who to let sell their goods to?
Vsesvit Group
The most successful company, which has been on the market for about 20 years and is engaged in the promotion and distribution of goods. Vsesvit is engaged in the supply of food and household goods. The company knows who to sell the product to in Ukraine: among its clients there are such retailers:
DDS Company
DDS directly and through intermediaries covers about 30 thousand retail outlets of different scale, which makes it possible to take a confident second place in the list. The company supplies such alcoholic beverages as:
Privat Business
The company supplies dairy products (yogurt, dessert, cottage cheese, cottage cheese mass, etc., groceries (canned food, preserves, snacks) and coffee (instant coffee, cappuccino, coffee drinks). “Privat Business” boasts a confident third place, thanks to its maximum presence in local retail chains, wholesale and retail outlets, restaurants, cafes:
Grand Distribution
Grand Distribution Company supplies food products, household goods, household chemicals and cosmetics. The company operates in 11 regions of Ukraine, covering more than 34,000 active points of sale in all market segments. The company supplies goods from such brands as Conti, Biola, Lukas, Nutricia, Unilever, Ahmad tea, Torchin product, Bella, Johnson&johnson, to retail outlets ATB, proStore, Amstor, Brusnichka, Fozzy, Absolut, Obzhora, Epicenter.
Agrobud Trade
Agrobud Trade supplies canned goods, confectionery, frozen foodsgroceries, fruit and vegetable products, coffee drinks and tea, dairy and dairy products, meat productscheese from such trademarks as “Morskoy Mir”, “Kinto”, “Darsil”, “Nalivaiko”, “Pervak”, “Getman”, “Polelya” and others.
Pilsner-Ukraine
The company distributes alcoholic and soft drinks from Czech Republic, Germany, England, Belgium, Georgia, France, Austria: Budweiser Budvar, Natahtari, Prazacka, Cernovar, LondonPride, Bakalar, Samson 1795, Krombacher, Hollandia, Desperados, Organic HoneyDew, Fischer, Black Cab Stout, Organic Honey Dew, Asterie Blanche.
Palma Group Companies
The company distributes pharmaceuticals,dietary supplementstherapeuticcosmeticsThe company distributes medicines, dietary supplements, feed additives, construction chemicals, for the oil and fats and confectionery industries, as well as household chemicals, cosmetics and perfumes: Damco, Hipp, Ashland, Bayer, Farmak.
Tedis-Ukraine: tobacco-flavored scandal
International companies producing tobacco products sent their products to Ukraine mainly through Tedis:
Thanks to this, the pricing policy on the tobacco market was completely dependent on the company’s wishes. But such abuse of monopoly position had a result: at the end of 2016, the Antimonopoly Committee fined Tedis ₴431 million. But they did not stop there, and on March 31, 2017, they were already charged with tax evasion and financing of terrorism (DNR and LNR, and the trail led them to the Russian citizen Kesaev). AMK also fell under the hot hand, but got off with a slight scare. And Tedis is now in the process of changing its beneficiaries.
Distributors of medicines
The largest distributors of Ukraine by volume of supplies of medicines to pharmacies:
BaDM has been on the market for more than 20 years and is engaged in supplying such drugs: antibacterial, herbal, generic therapeutic drugs, antimicrobial, dermatological, antineoplastic and immunomodulating, as well as other medical devices: Travesil, Spatone, Rescue.
Optima-Pharm cooperates with domestic and foreign manufacturers of medical products, supplying vitamin complexes, hemostatic, dressing products.
Venta supplies medical supplies from Glaxosmithkline; Pfizer; Berlin chemie; Bionorica; Teva; Novartis and other medical supplies.
Distributors of household appliances and IT products
ASBIS Ukraine is one of the largest IT-suppliers in Ukraine, which provides computer components, laptops, software, network and server equipment:
Business Technology provides products for small businesses and other computer firms from manufacturers such as Acer, Dell, HP, Lenovo, Samsung, Toshiba, Asus, Sony, Intel, LG, Powercolor, Coolermaster.
ELKO is one of the distribution market leaders in Eastern Europe, CIS and Baltic countries. ELKO supplies products from more than 90 manufacturers, including Intel, Lenovo, Samsung, Toshiba, AMD, as well as:
DataLux supplies communicators, computer peripherals, printing equipment, visualization systems from such companies: HTC, LG, Sandisk, Xerox, Pioneer, Gigabyte.
ERC has been developing in Ukraine for about 20 years, supplying computer and office equipment, software, digital photo/video equipment, information technology products from such manufacturers as Acer, Dell, HP, Samsung, Toshiba, Transcend, Sony, JVC, Canon, Nikon, MSI, AMD, as well as:
Diawest is a business partner of global corporations such as: Intel, Samsung, LG, LG, HP, HP, Epson, Canon, APC, Lexmark, Sony, Microsoft, etc., and also supplies products from Lenovo, Dell, Samsung, Sony, MSI, Fujitsu, Canon, Philips, Acer, VeiwSonic.
South-Contract represents products from over 70 brands including Canon, Goodram, JVC, HiTouch, Kingston, Kodak, Nikon, Nokia, Noritsu, Olympus, Panasonic, Philips, Samsung, Sony, Sony-Ericsson, TDK, Toshiba, TP-LINK, Transcend, as well as:
K-tradeproducesPCs, is engaged in system integration, service and distribution. It supplies products from such manufacturers as 4U, Microlab, Philips, Logitech (Labtech), Compro, FSP, HIS, Flybook, Lenovo, MSI.
MTI is one of the largest participants of the IT market of Ukraine, engaged in wholesale and retail sales of office and computer equipment, service maintenance. The firm cooperates with such companies as: Lenovo, Samsung, Canon, Nokia, Nokia, Panasonic, Philips, Sharp, as well as:
Roma promotes IT and paper business. Supplies products from Samsung, LG, MSI, ViewSonic, Asrock, Captain.
Serol supplies computer components: memory modules, processors, video cards, flash devices.
Bankomsvyaz is engaged in system integration, information and analytical systems, distribution of computer and telecommunication equipment. It is engaged in supplying Fujitsu, OKI, as well as:
DKT is engaged in supplying portable computer equipment and mobile communications, is an official distributor of Toshiba and partner of HP, also supplies products of such manufacturers: Sony, Apple.
Alcotec is engaged not only in the distribution of household appliances, but also provides such types of services: marketing, service, design, logistics. Supplies to the Ukrainian market appliances such firm:
EUROTEC supplies large and small household appliances from the world’s leading manufacturers: Samsung, Sony, LG, Philips, Bosch, Liebherr, Gorenje, Smeg, Gaggenau, Miele, Siemens, Restart, Falmec, Kuppersbusch,
ETK has a portfolio of manufacturers from Europe, Japan and Korea, totaling 24 brands that are certified and backed by a manufacturer’s warranty:
MIRS is a corporation that supplies appliances, kitchen equipment, cookware, and lighting, selling products both wholesale and retail:
NIS provides its partners with equipment and consumables from such manufacturers as Apacer, Ablerex, Odegen, Cosonic, Delux, Glacialtech, Katun, Sanyoo, Superpower, Vigoole.
Dako is a distributor of a full range of IT products in Ukraine:
ITKOM provides a qualitative spectrum of IT-technologies to sellers of electronics, portable equipment, as well as provides quality service to each client, creating conditions for increasing the profitability of the partner’s business. Engaged in the supply of products:
MUK – distributor of computer hardware, networking and peripheral equipment: Dell, HP, Lenovo, Samsung, Lexmark, Xerox, Alcatel, APC, Logitech, Molex, Takems, Iconbit, Checkpoint, Cisco, Extreme, Grandstream.
Film distribution
The film industry in Ukraine is just getting back on its feet after years of decline. Demand for it is growing, and Ukrainians are also going to foreign movies with pleasure. Ukrainian film distributors are trying to provide viewers with quality cinematography. Many film companies work with Ukrainian intermediaries:
B&H Film Distribution is the leader in the Ukrainian film distribution market. The company owns the Kinopalats chain of cinemas (15 locations). The company is a direct distributor of such world-famous studios as:
“UFD (Ukreinian Film Distribution LLC) is a Ukrainian distributor of studios:
“Kinomania is a distributor of Warner Bros. films in Ukraine since 2002. Pictures in Ukraine since 2002.
The company “Cascade-Ukraine” represents the films of Columbia Pictures (Sony), and for ten years has been distributing products from film companies from many countries around the world.
Aurora Group of Companies distributes movies from foreign and domestic companies in Ukraine and other CIS and Asian countries. “Aurora represents Universal Pictures, Paramount Pictures, DreamWorks Studio, as well as:
The law is paramount
It’s not just fashion, quality and price that influence demand. Politics plays not the least role in filling store shelves. And if the Decree of the Cabinet of Ministers of Ukraine from 30.12.2015 No. 1147 “On banning the importation into the customs territory of Ukraine of goods produced in Russia ” is understandable, the desire of lawmakers to ban/allow parallel imports is rather strange. The strangeness lies in the ambiguity: on the one hand 229 article of the Criminal Code of Ukraine, and on the other hand – deliveries in small batches, as well as the uncertain status of parallel import, which, in principle, is legal in Ukraine. The solution to such a problem is gathering dust somewhere in the offices of officials. In the meantime, we will understand the legal confusions of distributors.
Small consignments are consignments of goods not exceeding € 500. And theoretically, such batches do not require customs control. But at customs, the infiltration of small batches of original branded goods is called “importation of counterfeit goods” (although we know that counterfeit is a fake), and for this either a fine (800,000 UAH) or two years in the sky.
Ratio of imports and exports in Ukraine:
Patent trolling has become an equally interesting phenomenon – new, but already habitual for Ukrainians who are “in the subject”. In the USA, for example, this phenomenon has been blooming and smelling for a long time. So: a certain company “X” wants to enter the Ukrainian market, a physical person somehow found out about it and quickly registers a TM with the same name as “X” or, what is a bit more complicated, – gets a patent for this product. Having entered the data into the Customs Register of intellectual property objects (already counts more than 3419 objects as of 01.05.2017). As a result, customs slow down the processing of documents of company “X”, limiting their further importation into the country. Or another option: registration as industrial designs of things that already exist in the household of the population (toilet paper, matches, hangers), thus monopolizing the import of these goods into the country. In both cases, 90% of company X and X¹, and X², and others wishing to expand their markets, will buy a license from the mentioned individual for their own intellectual property object.
Combating parallel imports
What will change when gray (parallel) imports are legal? Original goods, which can be bought not only from the official manufacturer, but also in any other retail outlet, will disappear. This will happen because most online stores, markets and simple stores that are representatives of “unauthorized sellers” will not get permission to sell from the manufacturer.
Large companies dictate their own terms to the market, so it is more profitable for them to work with store chains and large retailers. And small scroungers bringing original goods for their showrooms and small stores will disappear from the face of Ukrainian business. In the Red Book in case of refusal of the right holder to import the following goods fall into the Red Book: household appliances, electronics, medicines, spare parts, household and agricultural chemicals – all those goods that are imported to Ukraine by unofficial distributors and sold in small stores or trays.
The ban on parallel imports is primarily supported by pharmaceutical companies. For example, vaccines that require special storage and transportation conditions, which small importers do not always observe. In the best case there will be no reaction, and in the worst case – the manufacturer will be accused of a severe reaction to the vaccine in a child (deafness, paralysis, death), but the fault is actually the careless importer, who is chasing profit. The manufacturer may also suffer if the goods imported to Ukraine are not designed for our climatic conditions, do not meet the requirements of Ukrainian legislation or do not have Ukrainian-language labeling.
The two camps, opponents and proponents, have plenty of arguments for and against, but who was right – time will tell.
Distribution is a complex path to the consumer
The road of a product from producer to consumer is a chain, the length of which depends on the promotion strategy chosen by the producer as well as the choice of distributor. The traditional model is when a producer seeks its own distributors. Such sales are called direct sales (SUN InBev Ukraine (TM Chernigivske, Stella Artois, Corona, etc.), Carlsberg (TM Slavutich, Tuborg, Baltika, etc.).
Another scheme of supply structure, indirect, – from the manufacturer the goods get to a foreign distributor, which supplies products to subsidiaries in different countries. The third scheme of supply structure, mixed, – a subsidiary of the manufacturer performs the functions of a distributor (Shabo, IDS Borjomi Ukrainе).
The most important goal of a distributor is to deliver products to the market conveniently and quickly. At this stage, the choice of warehouse plays an important role. Today, distributors more often choose small warehouses due to optimization of work with partners. At the same time, a plan is drawn up for the turnover of goods in the warehouse: a lot of goods in the warehouse is a sign of a distributor’s wrong policy. The financial side is also important. The manufacturer determines a recommended price for the end user, which includes all the nuances associated with product delivery.
Results
Selecting an intermediary is a complex task, so it is necessary to evaluate the territory of possible sales, sales channels and the quality of the distributor’s work. This information can be obtained through the intermediary’s website, negotiations with representatives of retail outlets, and dealer conferences. When evaluating the distributor’s product portfolio, one should look at the positioning and competitors’ products. It is worth remembering that the market of distributor companies has already been formed, so they can dictate their own terms of work: additional discounts, large percentage of payment and so on.
The reputation of the manufacturer directly depends on the services of the intermediary. Therefore, before starting cooperation, it is necessary to find out all the questions concerning the warehouse, logistics, personal qualities of the employees, and, if machinery is supplied, the availability of service. Mistakes in one or more niches will lead to lower sales.
