CLARE’S LEGAL LAIR globalisation has provided
particularly susceptible to the opportunities that
The FMCG sector is
CLARE’S LEGAL LAIR FMCG News’ resident lawyer, Clare Thomas, is here every issue tomake sure you stay on the right side of the legal trackwhen operating in the industry
In recent years,many British FMCG producers have looked abroad for opportunities for growth. Last year sawa significant increase in British exports to Brazil, Eastern Europe and the Far East,with China entering the top 20 food & drink export destinations for the first time. In this edition, I look at some of the practical issues that arisewhen taking a brand into newcountries.
A
longwith the opportunities that expansion into new
countries brings, expansion can also comewith unforeseen risks and challenges - particularly in emergingmarkets. Your starting point should be to look intowhat legal or regulatory hurdles exist in that specific jurisdiction thatmay impact your business. For example, youwill need to considerwhether agreements you enter into are compliantwith local competition law, and be abreast of
local risk and compliance issues, such as bribery legislation,which might expose your business to liability. Itmay sound daunting but local lawyerswill be able to helpwith all of these issues. The next thing you will need
to do is to ensure your brand is protected in that territory by, for example, seeking registration of trademarks (often in English and local language translations). It is also advisable to have established contingency measures in place in case a problem arises i.e. if one of your key customers becomes insolvent. What precautions have you taken to make sure you receive your products back and recover amounts owed to you? Think about what rights you have against a local manufacturer or distributor if they terminate their arrangement with you, or if they are not performing as expected. Consider contingency plans to ensure continuity of supply to the market.
There are a number of ways
in which you might structure your overseas venture. You could test the water by using a local distributor to start with. Alternatively, you might wish to establish your own presence from the outset. You could also partner with another business in that market that already has local knowledge and connections. If you do so, it is important to be very clear about the roles of the partners, what each is contributing to the new business and how much control you expect to have. You will need to consider how much due diligence (legal, commercial, financial) you can realistically expect to carry out on your local partner. Think about staging your investment while you carry out due diligence in order to mitigate risk. You will also need to consider what triggers an exit, in the event that the arrangement does not work out as planned. There is a lot to consider
when you look abroad for growth. Time spent getting these basics right at the outset is so important. It will save you time in the long run, not to mention a significant bill should you encounter a problem once you’re up and running.
Clare Thomas is Partner at law firmAddleshawGoddard LLP, where she heads up the firm’s food & drink team. Formore information, visit
www.addleshawgoddard.com.
There is a world of opportunity out there, if you know the right way to go
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