LOS ANGELES -- Certified Grocers of California here has seen a 30% jump in international sales over the past year -- the result of adopting a more innovative and customer-friendly strategy, Alex Lockner, general manager of the division, told SN. Lockner said international sales for the year ended last August were $128 million, compared with $98.6 million in fiscal 1997.
pull-through strategy that takes programs that have been successful at the local level and develops them further by adding an American flavor.
"Our first concern is learning what the customer wants. So we study his specific needs, his volume problems, his relationships with his customers -- everything that creates a pattern of success for him -- and then match that success with programs and products from around the United States."
Certified also changed the way it uses technology, Lockner said. "How we go to market is more innovative and more efficient than it used to be. For example, we've succeeded in utilizing electronic data interchange for direct communication with our clients and vendors, and we use the Internet to compress data onto disks to send to the other side -- all of which results in efficiencies in both time and costs.
"In fact, we saved $90,000 last year by using the Internet to zip prices, and at the same time we've been able to create a virtual warehouse on the Internet."
Other points Lockner made in his interview with SN included the following:
Aggressive new-business development has enabled Certified to emerge virtually unscathed from the economic crises in several Asian countries.
Promoting its controlled-label Springfield line as a quality brand has enabled Certified to boost private-label sales to 25% of its overseas business.
The wholesaler has developed a user-friendly baby formula for distribution in China and other countries.
Certified's International division has been doing business for more than 20 years. Lockner, who's been general manager the past two years, said it started "more as a natural transition for a West Coast wholesaler like Certified to move to the Pacific -- places like Guam, Saipan and the Marshall Islands."
Today Certified does 15% of its international business in the Pacific; 50% in Asia (including about 30% in China and Hong Kong alone); and 35% in Latin America, West Africa and Europe, Lockner said.
Despite relying on Asia for so much of its volume, Certified hasn't been hurt by the economic turmoil there the last couple of years, Lockner told SN.
"Although Asia is suffering from an economic recession, it's still a market where a wealthy middle class requires a better and larger selection of foreign products," he said.
Despite the shaky economic situation there, it's also important for Certified to maintain a strong distribution program in Asia, Lockner said, "because by the year 2000 two-thirds of the world's population will be in Asia, compared with 6% in Europe and less than 4% in the U.S." Certified hasn't been hurt too badly in its Asian markets, he explained, "because we've been very selective since the 'tidal wave' started rising over there.
"For the past two years we've been very cautious about selecting target markets, and as we've gone through the actual assessments of local economies, we've identified less vulnerable centers of Asia to work with.
"As a result, we haven't put any dramatic emphasis on developing business in such troubled places as Indonesia, Malaysia and the Philippines."
Certified still does business in all those countries, he said, "but we've used standard financial tools to assure collection of funds and made alliances with shipping companies to guarantee deliveries."
One of the major changes Certified made in June 1997 was to require letters of credit from each overseas customer rather than open accounts and terms, Lockner said. "We knew the situation in the Philippines was becoming very uncertain at that time, so we imposed stricter financial policies and stopped offering the kind of flexibility we once did.
"It's been very time-consuming and required a lot of learning on our part, but, as a result, our Asian business has not been hurt.
"And while we have noticed a slowdown with existing customers in Asia, our ultimate success there is due to our aggressive business development efforts -- combining a slowly diminishing base business with a new-business development strategy that helped us develop additional clients in the same areas.
"We've tried never to jeopardize our existing group of local distributors by working with competitors in the same area. Instead, we've created parallel channels with a different group of target market distributors to build product identification.
"Sometimes that means going to one group of distributors and offering to replace their existing vendors. That increases our exposure if the economy goes down but it also builds up loyalty to our products across a broader base, and that has allowed us to sustain a large portion of our base business while driving new business."
Certified depends heavily on its controlled-label Springfield line to attract customers overseas, Lockner said.
"We're trying to cater to the cultural patterns of middle-class customers all over the world and trying to maintain a specific identity by offering very good quality products, often based on what local manufacturers are not offering," he explained.
"Toward that end, a good private label has a competitive advantage over branded product because of its price and availability."
According to Lockner, customers around the world demand quality and variety, "and they are interested in comparing ingredients, and rather than relying only on national brands, they are interested in looking for good private-label products. "As a result, some of our current strength around the world is based on the fact we have greater flexibility to offer a broader product mix of private-label and branded products to foreign markets, and we've identified a definite demand for such items." Of the 1,800-plus Springfield-label products offered by Certified, "virtually the entire line is available for global distribution," Lockner said. He said 25% of Certified's overseas sales come from Springfield products, compared with less than 10% four years ago.
"And with the economic slowdown around the world, people have become more conscious about what they buy and the cost, so if our business stays appropriately aware of quality, that 25% can go up significantly in the future," Lockner said.
To cater to international customers, Certified developed a baby formula last year that it distributes in China, Latin America and the Middle East, Lockner said. The line includes Happy Healthy Baby One (for infants up to six months) and Happy Healthy Baby Two (for children six months to six years).
"These products are user-friendly to moms and kids," he explained. "We found that the labels on competing products tended to be sterile, looking more like medicine, so our products carry labels that are full of life and color, and we now aim to be a major player in baby formula."
The baby formulas are especially important in China, Lockner said, "because reproduction is restricted there to one baby per family, and that child becomes a king or queen. So we're doing very aggressive advertising and promotional campaigns with doctors, delivery rooms, pharmacies and retail outlets to introduce our formula."
He said growth of the baby formula business right now is incremental.
In developing its overseas business, Lockner said, Certified generally forms strategic alliances with well-established local wholesalers and distributors, "though we're not equal partners -- we provide the products and they provide the services.
''In the past we tended to be oriented exclusively toward simple customer service. But we've become more commercially oriented over the past three years, and we offer more programs that sustain and grow our business.
"For example, we offer training in category management, label development, advertising and point-of-sale programs and help them with merchandising strategies, which is our added-value commitment to success."
During the four years it has become more commercial, Certified has added customers in Europe, Latin America, West Africa and China, Lockner said.
"In the past we were not as aggressive about pursuing new business. Now we have a more aggressive team pursuing new business, and we're more responsive to local demands." He said the countries in the European Economic Community require multilingual labels, "which can be a difficult, demanding process. But to be successful, you must be flexible to achieve volume in key categories.
"Since the EEC integrated Jan. 1, 1995, each European product is required to have eight languages on it," Lockner said. "And we're starting to work on North American Free Trade Agreement documents now to deal with the bilingual labels .... that will be required in the United States, Canada and Mexico.
"On many branded and private-label products, we've developed our own stick-ons for each country, which is more economical than going through the elaborate process of developing separate bilingual and multilingual labels. The stick-ons state the ingredients, the calorie content, the country of origin and the manufacturing and expiration dates."