Vanilla Firm Extracts Success in Europe
Since its founding in 1907, Nielsen-Massey Vanillas Inc. has followed a winning business recipe of importing some of the world’s highest-quality vanilla beans and turning them into pure extracts for some of America’s finest confectioners, bakers and ice cream makers.
Then in 1987, the family-run, Waukegan, Ill.-based company decided it was time to export its flavorful products. But for years, Nielsen-Massey’s export business faltered because of an unreliable distribution system and because its new customers worried the company might abandon the overseas market at the first sign of problems.
To keep its costs down, from 1987 to 1995, Nielsen-Massey relied on a bonded warehouse in Rotterdam, Netherlands, and domestic freight forwarders to deliver its vanilla extracts to customers throughout Europe. As faxed orders arrived, the company sent instructions to the warehouse, which then released vanilla goods to a local trucking company, which would deliver them to customers.
For many exporters the bonded warehouse/freight forward system works well, but for Nielsen-Massey it was a failure.
Problem No. 1, as company Vice President Craig Nielsen recalls, was that one vanilla product was the same as any other in the minds of Dutch warehouse workers. Too often the company’s Bourbon-Indonesian Vanilla would leave the warehouse instead of the Bourbon-Mexican Vanilla or the Royal Brand Bourbon Vanilla that a food processor ordered. Or the shipment contained the right vanilla, but it arrived late, stirring up a mild panic attack in the customer who needed it.
“We didn’t have control over the situation,” Nielsen said.
Another difficulty was allaying customer concerns that Nielsen-Massey would abandon the market. Some of their customers had previously done business with American companies and had been hurt when the U.S. firms shut down their export business after sales failed to meet expectations. Would Nielsen-Massey do the same, they asked.
Nielsen realized that things had to change to make his export business work, and his firm came up with a solution: Set up its own factory in Europe, to give the company control over distribution and convey to customers that Nielsen-Massey was committed to its European clients. Leeuwarden, Netherlands, was selected because of its central location and the country’s political neutrality, and the new factory opened in 1995, Nielsen said.
But while the factory solved the distribution and commitment problems, Nielsen said, it created another: The expense of taking over a factory meant that Nielsen-Massey had to drum up more business overseas.
“We had tried over a period of two years to find some different [sales] agents to represent our products,” Nielsen said, “but we weren’t having a lot of luck. We weren’t finding anyone we could work with.”
In addition, export sales hovered at only 1% of the company’s total revenue despite eight years of business in Europe.
The vanilla giant turned to a consulting firm, BCMS Export Development Inc., that Nielsen-Massey learned about at an export seminar. After hiring BCMS, Nielsen-Massey had to fill out a 12-page questionnaire detailing its strategic goals, its commitment to increasing market share and its assessment of the competition.
Having such information is vital to successful partnering overseas, says BCMS President John C. Lalgee, who heads the Kenosha, Wis., office of the Britain-based consulting firm.
“The first step is shoring up what is happening in the foreign market. But about 50% or our U.S. clients don’t have any idea about which countries to look into in the first place,” Lalgee said. “They don’t put in the necessary research and selection of relationships before they jump in.”
Nielsen-Massey had done some research and figured that Europe would be an ideal market for its vanillas because ice cream producers there were starting to sell ice creams with all-natural ingredients such as pure vanilla.
“The fact that American-style ice cream was growing in Europe was a big part of our decision,” Nielsen said.
Within four months, BCMS produced a list of 30 potential European partners for Nielsen-Massey, using its extensive database of foreign companies, agents and distributors.
“BCMS did a really good job for us in Europe,” Nielsen said. “As a small company, you have to manage your time well. They did a lot of the legwork that would have taken us an extraordinary amount of time to do.”
With list in hand, Nielsen and other Nielsen-Massey managers flew to Europe to meet with their prospective sales reps. That part of the research Nielsen and other managers weren’t going to leave to anyone else.
“It’s important that you meet with them and make sure you can work with them,” he said. “A company may sound great on paper, but if you can’t get along with the guy then it’s not going to do you any good.”
In the end, Nielsen-Massey selected six agents to represent the company in Western Europe.
Four years later, Nielsen-Massey’s European market accounts for about $4 million (or 30%) of the company’s $13 million in total sales, and Nielsen-Massey’s Illinois plant is now starting to export vanilla products to Australia, New Zealand, Canada, Japan and South Korea. Nielsen credits BCMS with helping the company find sales representation in most of those countries.
BCMS charges between $5,800 and $7,800 per country for each trade plan it develops, with a minimum order of two countries, Lalgee says, adding that knowing your export market and picking the right partner are keys to success.
“We find that for most U.S. companies, they’re selling into certain [export] countries after some type of incidental meeting,” he said. “But if you can get that kind of business by accidentally stumbling into it, imagine what you could get by actually seeking the best [sales] representation in that country.”
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