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Money Matters 2018

By: Greg Seminara,Export Solutions

Today's Export managers devote more time to finance issues than their historical role as international brand builders. Global managers are turning grey from problems in Russia,Brasil, and Venezuela.  It's virtually guaranteed that this month a new crisis will evolve somewhere.
Few money issues should come as a complete surprise. Watch for clues in your distributors operation and organization. Study country benchmarks published by the Economist or other financial tracking services. Listed below are a few tangible steps to consider to minimize risk and optimize your financial results in 2018.

Update Credit History
2017 Financial reporting should be completed by all distributors. Now is a good time to request an updated credit history for all partners. Recommend that your group finance manager  handle the request to create joint ownership of the issue and to avoid sensitivity. Run a Dun & Bradstreet report for all distributors. Track days outstanding trends for the last 24 months.

Review Pricing Calculation
Brand owners and distributors dedicate significant time to wrestling over the pricing calculation prior to establishing a relationship. As the years go by, the calculation may "drift", although input costs usually shift significantly. Why not take a fresh look at your pricing model ?

Time for a Price Increase ?
Raw material prices and transportation costs have surged in recent months. Many brand owners have taken cost justified price increases . Retailers may complain, but they understand the reality of changes based upon their own private label and transportation costs. In many cases, the retailer may benefit from a price increase if consumption remains stable and competition follows the price hike.
Inventory Levels: Important Benchmark
Measurement of inventory through the supply chain is an important indicator. The key metrics should always be in terms of number of weeks supply on hand at the distributor and retailers warehouses . Evaluation should be based upon trailing 12 week sales velocity or seasonal trends. Low inventory levels could indicate cash flow problems. High inventory levels could suggest sell through issues. Look at trends versus historical levels and contractual agreements.
Retail Pricing Survey
When was the last time that you requested a market wide audit of retail prices ?
Your competition may have adjusted their pricing higher or lower without your notification.
A price survey is also valuable in advance of a price increase to measure "pre" and "post" prices for
your brand and category.

10 % Challenge
Trade spending may be a wise investment if it drives profitable , incremental sales.
This is a good time of year to challenge distributors with the question: "What type of spend levels would be necessary  to secure a 10 % increase in shipments (consumption) in the next 90 days ?". Of course, in emerging markets you may want to challenge the distributor for a 20-40 % increase or higher.

Distributors Need to Make Money Too
Distributors are squeezed, dealing with increased transportation costs and demanding retailers.
Calculate the gross dollars earned by the distributor to represent your product. Consider the financial implications of your requested activity to build your brand. A healthy relationship is when both the brand owner and distributor are making money.