Although Britain’s exit from the European Union has benefited almost no business, it remains a tempting market. Currently, woodworking companies have been doing best in it for a long time, but in the future, experts see potential for information technology and defense industry companies as well.
“Great Britain is an important market for Latvia, especially for woodworking companies. Our companies consider it their home market, and all British buyers also know about Latvia. The turnover of Latvian companies in this sector in Great Britain is several hundred million euros a year,” says the Latvian Investment and Development Agency. head of the representative office in Great Britain Ivars Zhukovskis.
In the third quarter of 2023, the export value of Latvian wood and its products to Great Britain was 425 million euros. “I think that by the end of the year, the export value of wood products will reach half a billion euros,” he says on the website liaa.gov.lv.
A large country requires large volumes
The experience of the owner and manager of the interior salon, Aigaras Zelmenis, shows that the consumer in the British market can afford to pay more for a special experience, good service and a unique product.
On the other hand, I. Zhukovskis points out that in Great Britain, the most important thing is often a competitive price, not a unique offer. “Great Britain is big, and many Latvian companies simply cannot produce as much as this market requires. We are a relatively small economy, and our large companies are often like foreign small or medium-sized companies. Therefore, it must be understood that it can often be simple impossible to supply specific products to the Tesco chain, for example,” he said.
Although the UK may seem like a tempting market for food manufacturers, it should also be taken into account that the big store chains would like to order really large volumes, which not all companies can afford. “I have seen Lyma products in the Sainsbury’s chain – it is possible for companies of that level, but it would be a very big challenge for smaller players,” says I. Zhukovskis.
He emphasizes that each region of Great Britain is a separate market – London, Wales, Northern Ireland, etc. “They are all geographically and culturally regions. Also, Great Britain is not only British or English. For example, there are many Eastern Europeans in London, including Latvians, Baltics, Poles, etc., and there are special shops that sell products intended for this target audience. For example, already Canelle Bakery products have been available in such stores for a long time, this year Milzu! flakes have also joined it,” says I. Žukovskis.
Commercially mature market
A. Zelmenis reminds that Great Britain is an expensive country in every sense. “When I remember how much we paid to rent the showroom, it makes me sick. We had good results in terms of sales, but all the profits are eaten up by high wages, rent and property taxes,” he says.
Also, the UK is a very mature market commercially. This affects what goods and services are available in the market.
“There, everything has its own specialization. For example, in Latvia, we install carpets in the facility with our assembly team, but in Great Britain there is one team that can only carry carpets, and there is another team that can move furniture – each of them has its own insurance coverage. In other words, the insurance coverage of the company whose representatives carry and lay the carpet does not cover the costs of the scratched floor, which may occur when the furniture is moved,” explains A. Zelmenis.
Deliberately chooses smaller cooperation partners
Great Britain accounts for approximately 10% of the turnover of the Latvian garden house manufacturer. Previously, the company worked with France, cooperating with the large store chains there.
“Supermarket chains always determined what product and at what price they would buy. Therefore, at one point we realized that we want to work a little differently – with smaller partners whose orders are not so big that the demand is greater than our ability to fulfill it,” says the firm board member Ivars Dričs.
In Great Britain, the company cooperates with several smaller clients. Such an approach helps to negotiate more favorable terms, if only for exchange rate fluctuations. “Also in Great Britain, all our contracts are concluded in euros, so exchange rate fluctuations are the client’s risk, not ours. It would be impossible to work with large partners in this way, because they do not engage in unnecessary discussions,” says I. Drić.
The company has been working in this model for more than five years and does not yet see the need to return to cooperation with large wholesalers or store chains.
“There is one very important nuance in working with large store chains that makes cooperation quite tense. Namely, they announce a procurement. If the company wins, it will also deliver the goods during the procurement period. But you never know whether you will win the next procurement. Of course, fluctuations is also in cooperation with small traders, but they are more predictable. Likewise, when producing for large customers, we can produce specific goods only for them,” explains I. Dričs.
2024-01-13 09:08:00
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