Need Help Regarding 7-Eleven Product Sales

[sukree]

Hi All

First off, thanks for even opening this topic as not many people would be interested in such topics. Anyways, as the topic suggests, i need help.

Basically i want to import a certain drink to sell into 7-Elevens. Some things i would really like to know if anyone knows or can be bothered to reply:

• What would i need to start? (eg product presentation, if a marketing plan is needed etc)

• How much do they want before they decide to sell my item?

• What type of profits they are expecting?

Any related answers or even where i can get answers to these questions would be of great help.

Thanks for reading!

[Indo-Siam]

The flow of products into 7-Eleven stores in Thailand is controlled by he CP-All division of CP Group.

For any new product to get on the shelves of a 7-Eleven store, some other product has to be taken off the shelves. So - maintaining a product on the shelves is a matter of "survival of the most profitable product".

The CP-All offices are located in CP tower on Silom Road, and there is a special department within Purchasing that reviews supplier nominations of a new product to go onto the store shelves.

My company has on two occasions assisted clients in submitting products for consideration - one was a sunscreen product, that also prevented jellyfish stings. The other was a type of premium microwave popcorn, so be sold in individual servings. Neither product successfully got onto the shelves.

What CP-All does, if you pass the first conceptual evaluation, is agree to test market the product in a number of stores. You - the supplier - must then supply at your expense the initial inventory, on consignment (meaning: you will get your portion of the selling price, for any inventory that sells - but after the trail period is over). For imported product, you must also arrange for Thai FDA approval to import and distribute, including obtaining Thai FDA approval of your Thai-language label (which can be added on top of exiting labeling in another language). That generally means that you must create your own company, just to apply for those approvals.

CP-All staff are quite slow-moving in dealing with new product nominations - it took several months to get through a series of fairly simple, brief meetings.

You are really facing a daunting competitive challenge, to try to displace an existing product - because every item on sale at a 7-Eleven has remained there by beating countless candidates to replace it. They are looking for fast turnover - nothing should sit on a shelf for even one week, without being consumed, and then replenished.

Think what that means: If any of your product is still sitting in a test-market store after one week, your product basically fails. It must sell-out, at first appearance. So - realistically - in conjunction with the introduction of your product onto the shelves, you need to be running a parallel mass-market advertising program, to inspire customers to head off to 7-Eleven to buy your product. When CP-All meets with you to hear you propose your product, they want to hear about your marketing program, and how you will make your packaging attractive, and so on - you basically have to convince them that your marketing and promotion program will be sufficient to inspire customers to come looking for your product. Unless they feel reasonably confident that you can create sell-out demand, they won't waste further time with you.

Then again - every product that is on the shelves was at one time just a candidate product - like yours - seeking to displace some incumbent space-occupier.

All that I report above was based on projects that we pursued in 2003, and 2006. It is entirely possible that some aspects of the process have changed since 2006 - but not the underlying competitive nature of the process.

Unless you have experience in orchestrating marketing programs for FMCG, you are really at a disadvantage.

Good luck!

Steve Sykes

Managing Director

Indo-Siam Group

[sukree]

The flow of products into 7-Eleven stores in Thailand is controlled by he CP-All division of CP Group.

For any new product to get on the shelves of a 7-Eleven store, some other product has to be taken off the shelves. So - maintaining a product on the shelves is a matter of "survival of the most profitable product".

The CP-All offices are located in CP tower on Silom Road, and there is a special department within Purchasing that reviews supplier nominations of a new product to go onto the store shelves.

My company has on two occasions assisted clients in submitting products for consideration - one was a sunscreen product, that also prevented jellyfish stings. The other was a type of premium microwave popcorn, so be sold in individual servings. Neither product successfully got onto the shelves.

What CP-All does, if you pass the first conceptual evaluation, is agree to test market the product in a number of stores. You - the supplier - must then supply at your expense the initial inventory, on consignment (meaning: you will get your portion of the selling price, for any inventory that sells - but after the trail period is over). For imported product, you must also arrange for Thai FDA approval to import and distribute, including obtaining Thai FDA approval of your Thai-language label (which can be added on top of exiting labeling in another language). That generally means that you must create your own company, just to apply for those approvals.

CP-All staff are quite slow-moving in dealing with new product nominations - it took several months to get through a series of fairly simple, brief meetings.

You are really facing a daunting competitive challenge, to try to displace an existing product - because every item on sale at a 7-Eleven has remained there by beating countless candidates to replace it. They are looking for fast turnover - nothing should sit on a shelf for even one week, without being consumed, and then replenished.

Think what that means: If any of your product is still sitting in a test-market store after one week, your product basically fails. It must sell-out, at first appearance. So - realistically - in conjunction with the introduction of your product onto the shelves, you need to be running a parallel mass-market advertising program, to inspire customers to head off to 7-Eleven to buy your product. When CP-All meets with you to hear you propose your product, they want to hear about your marketing program, and how you will make your packaging attractive, and so on - you basically have to convince them that your marketing and promotion program will be sufficient to inspire customers to come looking for your product. Unless they feel reasonably confident that you can create sell-out demand, they won't waste further time with you.

Then again - every product that is on the shelves was at one time just a candidate product - like yours - seeking to displace some incumbent space-occupier.

All that I report above was based on projects that we pursued in 2003, and 2006. It is entirely possible that some aspects of the process have changed since 2006 - but not the underlying competitive nature of the process.

Unless you have experience in orchestrating marketing programs for FMCG, you are really at a disadvantage.

Good luck!

Steve Sykes

Managing Director

Indo-Siam Group

[sukree]

Dear Steve

Thanks so much for the reply, that will really come in handy and shall keep that in mind. How about stores like Big C and Tesco lotus? I think these stores seem like a much more viable option for proposing a new product to the market. Would you know how much commission they are looking for when placing a new product on the shelves? Any info would be of great use to me.

Thank you very much for such an in depth reply Steve, i really do appreciate it.

Many thanks

Sukree

[raro]

I also did this in the past - about ten years ago with both, Central and Lotus (before Tesco movced in). My experience was pretty much the same what Indo-Siam describes. I remember very well what the Lotus guy said "Lotus is never out of stock - if you are out of stock, you are out!"

Expect a listing fee, shelf fee, testing time and so on. Not an easy undertaking.

Having dsaid that, I can refer you to a friend of mine who can help you through some of the hurdles. Their business is getting people like you into the mega stores.

[Indo-Siam]

OK, this is old (2004) information. Specific multipliers and line-item charges may have changed, but all cost factors that I list below will be present.

First, you figure out the acquisition cost by the receiver - which is the declared value, plus receiving charges:

For the following example (sunscreen product, with jellyfish sting protection) - shipment was 36,000 bottles, with declared value of 160 baht per bottle. 30% import tariff applied.

(Note: I couldn't get the columns to line up properly when displayed in posting mode - so if you want to study the below tables properly, you will have to cut and paste onto a blank page, and then line up the numbers into columns)

HS Code 33049909

Declared CIF Value BKK 5,760,000

Clearance charges: Factor Amount Total

Import Tarriff 30% for this HS Code 1,728,000 1,728,000

Customs formality Per cargo CIF value 4,500 1,732,500

Delivery Order Per shipment 4,000 1,736,500

Terminal handling charge Per cargo value 2,600 1,739,100

EDI charge Per shipment 0 1,739,100

Delivery charge By destination postal code 4,000 1,743,100

Lift on/off (FCL only) Per shipment 1,500 1,744,600

Lab test Per shipment 2,500 1,747,100

Total Receiving Cost: 1,747,100

Divided by number of units per shipment: 36,000

Receiving cost factor per unit: 48.53

Then, you shift to the CP-All model:

Cost per

Cost Factor Percentage this item

CIF Arrival Cost BKK, per bottle 160.00

Receiving/clearance charge 48.53

Distributor acquisition cost 208.53

Distributor profit 17.00% 35.45 (this is your profit, as Thai distribution agent)

Advert & Promo fee 5.00% 10.43

Trade Allowance 15.00% 31.28 (this is CP All corporate profit)

Listed Trade Price 285.69

Retail acquisition price (with 7% VAT) 7.00% 305.68 (this is what store owner pays upon receipt)

Retail Margin 20.00% 61.14 (this is store owner gross profit)

Selling Price 366.82

CP All sets their trade allowance - there are different levels for different classifications of items. Gross retail margin planning factor in 2004 was 20%. Remember - that is GROSS profit per item - from which all store and selling expenses must be deducted (salaries, utilities, etc.).

You are the one who sets distributor profit. This can be whatever you want. But - it then drives the bottom line selling price. In the end, you/they create this sort of spreadsheet model - and CP All then looks at that bottom line price - and asks: "Is there a likely large market for XXX at 367 baht per bottle?". If they fell "yes", they will give it a try. If they feel "no," then they tell you "Sorry, no can do".

All Fast Moving Consumer Goods (FMCG) chain stores will basically use the same sort of model as above.

Realize: A private individual can clear no more than two bulk import shipments per year. So - you must incorporate a business as an importer and distributor to operate - and to apply for permit to import and distribute, and to apply for approval of Thai-language label.

Basically - as a "bright individual," representing just one or two products - you cannot operate as such an agent. The economies of scale will eat you up.

Import and distribution of FMCG in Thailand is basically handled by a handful of big companies: CP-All, Berli Jucker, Otsospa, Diethelm Trading, B. Grimm, Zuellig Pharma. They don't leave much room for small "amateurs."

Good luck!

Steve

Indo-Siam

[saakura]

OK, this is old (2004) information. Specific multipliers and line-item charges may have changed, but all cost factors that I list below will be present.

First, you figure out the acquisition cost by the receiver - which is the declared value, plus receiving charges:

For the following example (sunscreen product, with jellyfish sting protection) - shipment was 36,000 bottles, with declared value of 160 baht per bottle. 30% import tariff applied.

(Note: I couldn't get the columns to line up properly when displayed in posting mode - so if you want to study the below tables properly, you will have to cut and paste onto a blank page, and then line up the numbers into columns)

HS Code 33049909

Declared CIF Value BKK 5,760,000

Clearance charges: Factor Amount Total

Import Tarriff 30% for this HS Code 1,728,000 1,728,000

Customs formality Per cargo CIF value 4,500 1,732,500

Delivery Order Per shipment 4,000 1,736,500

Terminal handling charge Per cargo value 2,600 1,739,100

EDI charge Per shipment 0 1,739,100

Delivery charge By destination postal code 4,000 1,743,100

Lift on/off (FCL only) Per shipment 1,500 1,744,600

Lab test Per shipment 2,500 1,747,100

Total Receiving Cost: 1,747,100

Divided by number of units per shipment: 36,000

Receiving cost factor per unit: 48.53

Then, you shift to the CP-All model:

Cost per

Cost Factor Percentage this item

CIF Arrival Cost BKK, per bottle 160.00

Receiving/clearance charge 48.53

Distributor acquisition cost 208.53

Distributor profit 17.00% 35.45 (this is your profit, as Thai distribution agent)

Advert & Promo fee 5.00% 10.43

Trade Allowance 15.00% 31.28 (this is CP All corporate profit)

Listed Trade Price 285.69

Retail acquisition price (with 7% VAT) 7.00% 305.68 (this is what store owner pays upon receipt)

Retail Margin 20.00% 61.14 (this is store owner gross profit)

Selling Price 366.82

CP All sets their trade allowance - there are different levels for different classifications of items. Gross retail margin planning factor in 2004 was 20%. Remember - that is GROSS profit per item - from which all store and selling expenses must be deducted (salaries, utilities, etc.).

You are the one who sets distributor profit. This can be whatever you want. But - it then drives the bottom line selling price. In the end, you/they create this sort of spreadsheet model - and CP All then looks at that bottom line price - and asks: "Is there a likely large market for XXX at 367 baht per bottle?". If they fell "yes", they will give it a try. If they feel "no," then they tell you "Sorry, no can do".

All Fast Moving Consumer Goods (FMCG) chain stores will basically use the same sort of model as above.

Realize: A private individual can clear no more than two bulk import shipments per year. So - you must incorporate a business as an importer and distributor to operate - and to apply for permit to import and distribute, and to apply for approval of Thai-language label.

Basically - as a "bright individual," representing just one or two products - you cannot operate as such an agent. The economies of scale will eat you up.

Import and distribution of FMCG in Thailand is basically handled by a handful of big companies: CP-All, Berli Jucker, Otsospa, Diethelm Trading, B. Grimm, Zuellig Pharma. They don't leave much room for small "amateurs."

Good luck!

Steve

Indo-Siam

Some absolutely great information in this post, thanks a lot to Steve for taking the time to post such a detailed and clearly understandable post. Greatly appreciated!!