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We worked with a large Japanese manufacturer that typically worked in mainstream food supply. They had some internal technology that allowed them to produce a product with definable benefits for humans, and they contacted HSC to understand more about how the U.S. market operates, and what were their best options for entry. Their technology had multiple conditions but particularly addressed an area in nutrition that focused on internal health and is represented by about a $US400 million market at retail. The competition in the market is fairly concentrated with only about five sizable players in the retail market, but there are many more smaller brands in the alternative channels (MLM, Practitioner, Direct).

Our client was interested in bringing their proprietary and patented product to the U.S. market. Although, they were the ingredient producer and did some retail marketing in Japan, their intention was to bring this product into the U.S. as a branded retail product, only. They were interested in two clear objectives for this project: (1) Develop a market entry and distribution strategy, and (2) Evaluate the best way to gain the proper competencies to succeed.

HSC will helped our client determine the available options for entering the U.S. market and presented a logical argument for the recommended path forward. Once strategic direction was established, we presented the various options to ensuring that our client obtained the essential competencies to succeed, whether it’s by growing, buying, or partnering. In summary, our client was looking for assistance to capture opportunities in U.S. market, determine an appropriate approach to accelerate its entry into these markets, and facilitate actions that ensure their products are successfully launched. Also, it was recognized that any strategy work here needs to align with the efforts of the previous work that they’ve accomplished, as well as, other initiatives within their organization.

PROJECT PROCESS AND DELIVERABLES

HSC developed a proven process to assist companies like our client in making informed and strategic moves. It was a multi-phased approach that assumed a significant degree of interaction between HSC and our client, and was delivered in three distinct phases: (1) providing a u.s. distribution marketplace overview, (2) formulating strategy development, and (3) planning for strategy implementation.

The purpose of creating a market overview is to create a baseline of knowledge on what is going on in the U.S. dietary supplement market, particularly in the their target health market, around distribution, and gaining an understanding of the key players. This phase had several clear and connected elements: (1) development of an overview on the distribution process and channels to the dietary supplement marketplace, (2) review of key competitors and their relative positioning, (3) review of key distribution systems, including partnerships, for each market, and (4) finalize strategic criteria and begin to develop strategic options for entering this market.

After a sound understanding of the channels and players was established, we focused on finalizing the strategy criteria and formalizing the market entry strategy. This output was used to identify essential competencies that our client required to increase the probability of their success. Our work focused on answering several critical questions: (1) which channel was most attractive and offers the best fit with our clients technology?, (2) how should it be positioned and what are the most effective levers to be used to differentiate their product?, (3) what will “success” look like – financial and market share & penetration?, and (4) what insight can be developed into how competitors might react and how to be prepared?

The final phase of the project determined and created a plan to ensure that our client has the proper competencies to successfully implement and support their strategy, which was developed in earlier phases. We looked at an inventory of our clients current skills and capabilities versus what was needed to develop an analysis of the gap that needed to be bridge, and then creating a plan for our client to best close the gap. We ensured that our client was well equipped with the right skills by looking at three options: (1) buy the skills, (2) create or build the skills, or (3) align and partner for the skills. We looked into each option and determined the strengths and opportunities for each one with respect to our client’s objectives. The phase concluded with our recommendation and we developed a plan for moving forward.

RECOMMENDATION AND CLIENT EFFORTS

Based on an overall assessment of the market, opportunity and our clients’ objectives, HSC strongly suggested that they not look to the standard retail channels for distribution, but rather formulate a plan to use the alternatve channels. We performed in-depth analysis on the various channels, including diving into the margin structure for each of their strategic options, and it became clear that our clients’ best option was to create their own brand and go more direct to the consumer. An added dimension to the project was that our clients’ technology was undergoing a clinical trial, and the potential outcomes needed to be incorporated into our recommendation on a real-time basis. It was anticipated, through preliminary reports, that the results of the study would be very positive, so our recommendation required several facets to deal with actual results of the study.

In addition to refining their focus on the best channel of distribution, they needed to determine whether they would bring in a partner or enter alone. Also, the option of outsourcing certain operations needed to be addressed. After a candid discussion around the resources and energy required to enter the market, our client agreed that it was in their best interest to build the competencies in-house and grow the business by themselves. The product had characteristics that could be detailed with medical doctors, so our recommendation was to pursue one or both options – enter the Practitioner or Direct channel. The Practitioner Channel would require a much more on-the-ground effort, since it would require a sales force, while going direct could mostly be performed by the use of the internet and direct mailing. Our client decided to launch their own direct practice, and they begin to use a hybrid strategy by doing education and mailings to the medical community, while at the same time offering sale of their products through the internet. They subsequently have taken an active role with various medical organizations, and have begun a targeted marketing effort towards specific sufferers that can benefit from their product. Currently, their market entry has been completed and they are focusing on increasing their sales effort.