Expert: Eric Hofer - 1/19/2010

Question
QUESTION: hello,
please tell me can we do exclusive distribution for FMCGs?if we do then please tell me about some fmcg which are exclusive distributed.


ANSWER: Aiman,

I'm seeing this as an obvious answer, so perhaps I'm not understanding it.  

If you're asking if there's such a thing as an exclusive for FMCG, the answer is yes.  These deals are done all the time, usually for a geographic territory - for example Pakistan.  They may be even within national geographies, for example the state of New York.  

The reason for the exclusivity is simple, if one is going to commit capital to assets (trucks, lines, facilities) and sign employment agreements, then they want to be sure that they'll have the deal long enough to earn back their stake and then some.

Examples are Pepsi.  Pepsi enter into Exclusive Bottling Agreements (EBAs).  These are for fixed terms.  

Please tell me if I'm off here with what you're asking.  

Eric

---------- FOLLOW-UP ----------

QUESTION: thanx for answering my question.i want to ask some thing more please tell me about other fmcg which are exclusively distributed?is lipton tea and pear soap are exclusively disributed.can you tell me the fmcg product with reason why you select thish product?i need its answer till evening please tell me soon.
thanx


ANSWER: Lipton Ice Tea is a Unilever product.  The tea bags go through one stream, the ready-to-drink through Pepsi usually.  And yes, exclusive.  Pears' brand is also part of Unilever, but sits in another division - "personal" as opposed to foods, home or industrial.

As I explained previously, the reason for exclusivity predominantly relates to the capitalization required, and that those that go into distribution in a territory want to earn back their investment.  For distribution in general capital is taken up with warehousing, staffing, outlet agreements, advertising, etc.  For manufacturing (local product) one adds in raws, customs, yet more warehousing, spoilage, etc.  There are many products like this: Pepsi, Pampers, etc.

The brands themselves also seek out exclusivity to guard against knock-offs, lower quality, etc.  And to ensure that one distributor/licensee doesn't cut through into another market - dimishing the brand, delivering a slightly different taste/effect, etc.

Your remaining question is not clear.  What is there to tell you about other FMCGs that are exclusively distributed that you want to know?  You've been non-specify, but okay, I'll answer you as per your question...
- Walkers/Frito-lay are exclusively distributed; I bring it up, because you asked
- Diageo brands are exclusively distributed; I bring it up, because you asked

...  

Not sure how this helps....

Eric.

---------- FOLLOW-UP ----------

QUESTION: hello,What is exclusive distribution and will you recommend exclusive
distribution for FMCGs?
Give two examples of products being exclusively distributed in the market
along with the reason for selected examples.please tell me soon
thanx


Answer
Aiman,

For real, you don't know what is meant by "exclusive distribution"?  

As to recommendations, what are the circumstances?  How much capital is involved?  What's the competition?  How long would the tie up (agreement) be?  How difficult a market is it to enter?  Can one resource a business in the territory easily?  Would the brand owner want to invest in that market directly, or need to, or be able to?  Would there be prohibitions in the brand owners' home country from investment (e.g. South Africa during Aparteid).  Does the brand owner have to work in ways that Sarbannes-Oxley preclude, and therefore have to go through a distributor?  Are their unions and guilds involved (as in Germany)...

Please, if this is a homework question, you should be doing "your own thinking."  I'm happy to give you ideas, but there's a point where you have to connect the dots yourself.

I don't know what you mean by reasons for the selected examples.  I don't understand what you're after; please explain to me how you intend to use the information - give me specific details; also please advise me as to your background so that I can more properly respond.