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Case Study: Penetration of a Food Product to the Korean Premium Market

Target - Selling in the Korean Food Market

An Israeli private company, a manufacturer of food products such as jams and sauces, wished to examine the entrance to the Korean food market. The company is a senior and very active company in the Israeli food market and its products are distributed mainly in food chains both in Israel and in Europe. The company has neither been present nor distributed its products in East Asia, yet, due to an increase in the purchasing power of the East, South Korea has been chosen as a primary target for the products penetration through a local distributor.

Challenge – Saturated market and different local market taste

The food market in South Korea is a highly developed market structurally and it includes big actors such as discount stores in a national layout, prestigious department stores, local supermarkets, convenience stores which are located on every street corner, hotels, restaurants and coffee shops. Each of the potential distribution points is saturated in terms of Western food products, especially of the kind the Israeli client wishes to promote. Furthermore, and like any other food products, it should be examined whether the product will be accepted by the local market taste, as well as will pass the strict tests of the Ministry of Food and Drug Safety (MFDS).

Work Procedure – Customer Research and Product Survey

In order to overcome the difficulties while saving time, the KOISRA team has acted in several levels. First, an internal characterization of the client's products has been made, as well as a comparative survey regarding similar products (including prices) which already exist in the market. At the same time, a customer research has been made in order to learn and understand the 'food chain' in each of the possible distribution points. In this framework, the different profit margins set by each of the actors, and the resulting final product pricing for the client, have also been examined.

After the data regarding the market and the product, has been received and examined, the KOISRA team began to devise several strategies for entering the Korean market, which were examined with the Israeli client, and at the end, and in accordance with the recommendation of KOISRA, a decision has been made to turn to the premium food product market.

Accordingly, an optimal distributor's profile was created, which included mainly a prior experience with Western products, sale points in leading chains, import experience and working in accordance with the KFDA. On the basis of this profile, a list of potential distributors has been prepared. After the first contact has been formed, and screening of the most appropriate distributors has been made, a meeting schedule has been set in the distributors offices. The meetings with the potential distributors are required in the familiarity stage, since, as is customary in the local business setting, the seller has to get to the buyer's premises in order to present himself and his merchandise. KOISRA has arrived to the meetings equipped with a presentation and explanations regarding the Israeli client and his products, in the Korean language, and has left some product samples for them to taste. More meetings took place with the distributors who showed interest, in their offices as well as in ours, in order to discuss the distribution terms, all in the Korean language and in accordance with the local culture rules.

Result – the Company Products are being Sold in Korea

After several months of meetings with potential distributors, information exchange, taste tests, discussions regarding the Distribution Agreement terms, a distributor who fulfills the distribution terms of the Israeli client, has been found – a Korean distributor who has multiple relationships and sale points within prestigious department stores and hotels, as well as experience in penetration and distribution of leading Western food brands. In accordance with the strategy which has been built on the basis of the product characterization and examining the local market, it has been decided that the Israeli client's products shall not be sold at the preliminary stage in discount stores, but rather in prestigious stores and hotels, which will allow a proper profitability for the Israeli client as well as the moderation of competition in terms of other tastes and assortment offered by other Western companies with similar products.

KOISRA continues to accompany the Israeli client and supplies support and assistance to his export department in relation to the local distributor.