Probably sitting at number 2 in the excuses offered when sales did not happen as planned is parallel or grey trade. Without doubt greys, “passing off” and counterfeits can have an impact on FMCG sales but I was surprised how they only became significant when sales bonus targets were not achieved. Sales not going well? Drum up a story about greys flooding your market.
Counterfeits are simply illegal copies of quality brand names. Increasingly they are more and more sophisticated and recognition is now longer a check of the bottle mould stamp or a sniff of the fragrance. Despite co-ordinated attention from multi-national companies, well equipped underground factories still exist to rip-off brand owners and consumers.
Passing-off an inferior product by making it appear to be a top brand is also potentially illegal but often takes time to prove a case. When a product is called Tipton Tea in a yellow box it is clearly an attempt to steal consumers who are not vigilant. However, if the tea was from Tipton how do you persuade a judge to rule in your favour if the artwork is not identical?
Back to greys or parallel trade. This is genuine product being sold in a territory for which it was not meant. The quality is fine and multi-lingual packs mean the instructions for use are available. Oh, and they are cheaper than what is normally available. Grey sources can be a distributor in another country sending stock over the border with a bulk discount at month end – a sort of shifty shades of grey!
The real problem arises when there is nothing shifty about the origin and there is no discounting or margin misbehaviour. Someone can get the same product in to your market at lower cost than you can and consumers do not care whose bonus they are affecting. Instead of moaning and groaning about greys why not take advantage of this learning opportunity as someone can do it better than you, deal with it!
Assuming the source cost ex factory and distributor margin are consistent then you should study your arrangements for transport, warehousing and Route To Market distribution. Get your Supply Chain people onto this and fix the problem. If distributor margins are causing the greys then that is a sales issue, i.e. self inflicted sales pain.
If you are the CEO do not be seduced by the sales message that there is nothing you can do about greys - this could cost you your job!
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