Johannesburg - Being a big fish in South Africa's business world will not equip you to take your brand into the deep waters of international markets.
That is according to leading entrepreneur David Letschert, chief operating officer of skincare product manufacturer Union-Swiss, who addressed delegates at the Wits Business School on Tuesday.
Regaling would-be entrepreneurs on how his first foray into the UK market was almost scuppered after international pharmacy group Boots pulled the plug on his distribution plans, he said getting it wrong could be costly.
"With the exchange rate moving around, our investment to expand moved from R5m to R10m from the time we started out. When you go global it just hoovers up the cash," he told the audience.
Letschert and his brother have in 10 years built up Union-Swiss from a business which was retailing around R5m to a R1.2bn global company - all on the back of a single skincare product called Bio-Oil.
This is now distributed in 26 different countries around the globe, and is the best-selling product in its category in 19 of those countries.
A key message from Letschert was that SA entrepreneurs planning to break into new countries need to recognise that what works in South Africa is still treated with caution by international partners.
"For example, we may be the first country in the world to do a ear transplant, but a medical trial conducted by scientists here is not good enough for Europeans and we now have to undergo another set of trials in Germany at five times the costs," he said.
Tips he gave to entrepreneurs considering international markets included:
- Don't try and sell ice cream to eskimos. Your product needs a unique point of difference.
- Be wary of countries with high customs and excise duties. Union-Swiss has a distributor in Kenya and despite not having local rivals to protect itself from, the product becomes uncompetitively priced once regulatory taxes are applied.
- Don't underestimate how much money it will take to establish a presence in a new country.
- Steer clear of countries where counterfeiting is rife.
Letschert said every time Union-Swiss tried to enter a new country, it was told by local representatives how the product needed to be tweaked to make it attractive to local audiences.
However, he said, entrepreneurs should be wary of drifting away from a working formula and should always keep in mind what has worked before, remembering their product's unique point of difference.