What drives companies to re-enter markets

When a company exhibits perseverance and an unwillingness to give up, it can be one of its greatest assets. On the other hand, sometimes knowing when to throw in the towel is just as important. In light of this, it was interesting to read about smoothie maker Innocent planning to enter the Swedish market for a third time. Some people may look at the move as risky, given the firm’s record in the country, but Innocent is said to have vastly improved its relationships with grocers, and European MD Giles Carter has backed Innocent to successfully grow market share. So what has changed between then and now? And what drives companies to re-enter markets where they have formerly struggled?

Innocent previously attempted to develop a presence within Sweden in 2008 and 2011. Both times, the structure of Sweden’s grocery market – which works predominantly through a co-operative model – conspired against the business. This time, however, Innocent has worked hard to grow relationships with the country’s leading distributors and retailers, including drinks giant Rynkeby. Tailoring its approach will be key. Whereas at first, as Carter says, the company “just replicated [its] UK model”, Innocent will now customise its approach to the Swedish market in order to improve its relationship with consumers.

When re-entering a market, then, an awareness of local knowledge is essential. This issue has affected online retail giant eBay’s attitude to the Asian market in recent years; although it entered Japan in 2000, increased local competition had driven the company out by 2002. A comparable sequence of events took place in China. Despite performing strongly when it established its presence in 2003, new players such as Taobao forced eBay to end its operations in the country in 2006. The business did not give up, though, re-entering China and Japan after a couple of years with improved management structures and a more considered response to regional customs and tastes.

Changing market forces can engineer situations that may not be favourable for companies looking to re-enter a particular territory. eBay’s experience battling Asian firms like Taobao in Japan and China shows that competitors having a better grasp of the local market can be a key factor. Similarly, Innocent founder Richard Reed has said that when the brand moved into Germany, timings meant that eight different smoothie brands launched around the same time. Although Innocent held on to its market share, this goes to show that expansion can come with different issues and complications.

Reasons for re-entry can extend to social and political forces as well. Burma is perhaps the market that has changed the most over the last few years, thanks to the regime shift that has seen its markets reopen to foreign investment. As such, global businesses like PepsiCo and Coca-Cola have re-entered the Burmese market for the first time in decades. Sometimes, when a brand re-enters a particular territory, a period of absence can see its products take off in a big way when they come back, thanks to renewed popular demand. As you might imagine, Pepsi and Coke have been improving market share rapidly.

Re-entering markets can be a risky business, but there are usually good reasons for businesses gambling on giving it another shot. Can you think of any other companies that have made a success of returning to a particular territory? Let me know at moira@thembsgroup.co.uk, and have a lovely weekend.