After reading a Trade Routes column, Jeri Ross, MPH, president and CEO, LJR Inc. (dba Institut’ DERMed), decided she wanted to increase her company’s international business. The following is a transcription of a Q&A session I had with her. After many of her answers, I asked what was the lesson she learned from that specific experience; those lessons are set off in italic script.
GCI: How do you feel about today’s international market?
Jeri Ross: Economic times are ripe for pursuing international business due to the declining value of the American dollar. Countries around the globe can gain significant financial margins buying U.S. cosmetic products—and they are doing just that.
GCI: That was not quite the situation when you got started last year. What inspired you to make this move?
Jeri Ross: My inspiration to go international was based on both a professional and personal desire to see the world while doing business. Having spent the majority of my career in the medical industry, raising a family and getting a bachelor’s degree in health services administration and a master’s degree in public health and research, I knew that I would devote the second half of my life to being a world traveler. I also knew that I wanted to shift my career, to be my own boss and work more closely with my sister to advance her enterprise, Institut’ DERMed, a medical spa and line of cosmeceutical skin care products.
GCI: How did you get started?
Jeri Ross: My sister, Lyn Ross, challenged me to develop a serious cellulite treatment product for her line, so that was my way in. I spent two years conducting research and talking with scientists worldwide to design a proprietary formulation that had never been done and that really worked. With a whole lot of tenacity, patience and teamwork, my CelluliteRx products launched in [Spring 2008] in Paris. Of course, there is a story behind this phenomenal event that includes days when I just wanted to move to Mexico, live happily ever after on $1,000 a month and forget about it.
GCI: How does one even get started with international distribution?
Jeri Ross: I was fortunate in having my product picked up by an agent out of New York, based on a recommendation from our Institut’ DERMed public relations firm. Another way to get started is going to the U.S. Department of Commerce (www.export.gov). They have several programs that help find distributors, which is the reason they exist—to encourage U.S. companies to export. I found my local international trade specialist on his Web site, and made an appointment with him. My goal, at the time, was to find out about funding for international exporting, as well as learn more about how it’s done. I’m sure there are other ways to find distributors. You can certainly use ICMAD (www.icmad.org) as a resource to help you get started.
GCI: What was it like working with the agent?
Jeri Ross: Working with an agent that knows the business provides a layer of expertise that is beneficial. You pay them a commission on sales, and they drum up the business on your behalf. No business, no commission ... so you don’t come out of pocket until you get some action.
GCI: What did you discover they were especially good at?
Jeri Ross: What they are good at is negotiating prices, contracts, making connections—which they usually already have with distributors—and representing your brand at trade shows internationally. My agent recently represented CelluliteRx at the Mondial Trade Show in Paris, and lined up a booth with some of his other brands at Cosmoprof Bologna 2008, where I traveled to assist and meet and greet distributors.
Lesson Learned: Your agent may offer information about legal issues, EU regulations or claims. But, even if they offer information regarding these areas, you cannot expect them to know all the details pertaining to your particular industry or product. Therefore, you should still check with the proper authorities.
GCI: What happens first when you have an interested distributor?
Jeri Ross: When you have an interested distributor, they will request full-size samples of your products, usually four to six of each, so that they can field test the brand with their retailers before they commit to distributing the products. The costs for providing the products and shipping are paid for by you.
Lesson Learned: Try to determine which distributors are serious or would be the best fit for your products. It is very easy to get caught up in the excitement of having an interested distributor, especially in places where you would love to do business. However, this is the time to maintain a sense of wanting more information from a position of having what they need, not needing what they have. I sent off multiple packages that cost me a few thousand dollars mostly in shipping. It’s an investment you make to try and get distribution, so it is money well spent, but you can get more information before you decide to incur the cost—such as asking them for their business profile and a projected plan for how they would distribute your product.
GCI: What else did you have to do?
Jeri Ross: I completely redesigned my packaging to be European Union (EU) compliant. In order to do this, I hired a consultant who worked with me on aspects of the packaging—including language, symbols, font size, weight, allowed ingredients, warnings, required addresses of the manufacturer, distributor and the address in the EU that would be the office of record for the dossier. ICMAD can provide you with the EU address to put on your packaging for an annual fee. It’s less expensive than paying a private law firm in Europe, which is still an option.
Lesson Learned: Even having a consultant, my recommendation is that you still do your homework. Through ICMAD, I ordered and read A Guide to European Cosmetic Regulations, as well as conducted research on the Internet to find articles about packaging compliancy. But regulations change, so it is wise to consult updates for EU cosmetic directives and amendments.
GCI: Did that involve much work?
Jeri Ross: One of my challenges was dealing with a short timeline to make all of the revisions, while at the same time, reformulating to have the products ready for spring—the season for cellulite treatments. Because it is not an EU requirement to have the ingredients listed on the primary packaging, I elected to wait and list them on the secondary packaging when I would have the final formulations completed by the lab.
Distributors hold some risk if a customer has a reaction to the product, and, therefore, they want to reduce that risk by having the ingredients listed on the actual product for the customer to assess if they have allergies to certain ingredients.
Lesson Learned: While it is not the law to list your ingredients on the primary packaging, I would suggest doing so in order to make your potential distributors more receptive to your products.
Another area of detail is making claims on your packaging. This gets tricky depending on what kind of product you are distributing. For instance, what I found out after I had printed my cartons by the thousands is that you should not say “therapeutic.” I also should not have said “slimming” on the packaging. The danger you run into is having your product classified as a pharmaceutical. I hired an expensive French attorney in Paris to help me get factual information about how a cellulite product is classified in the EU. I was able to reprint some cartons for Europe.
Lesson Learned: Get up front information about claims, down to very specific details based on the product that you want to distribute. For example, rules for a face cream may not be the same as for a cellulite product. If you know what countries you want to do business with, find an authority in that country. Your distributor can sometimes have the prototype of the product packaging and ingredients reviewed by the authorities in a country, and, depending on the contract you have with the distributor, they pay for the legal review.
GCI: Any additional discoveries?
Jeri Ross: It is not mandatory that cosmetic products be registered in the EU or other countries for that matter. But, you get requests from the distributors to provide them with the documents to register the product. What that means is that if there is ever any issue with the product such as a health reaction that could lead to a lawsuit, they would have to present the proper paperwork to the authorities. This also relates to the address you must print on your packaging in the EU, where authorities can find the manufacturer in these cases.
The documents required are called the dossier; it includes, among other things, the qualitative and quantitative formula, methods of manufacture, assessment of human safety and microbiological specifications. What I want to point out here is that your manufacturing lab doesn’t typically do human safety testing (skin irritation testing). That is a special service that they may or may not perform, and you pay for these tests. In my situation, it wasn’t until the distributor in Italy was running around in circles demanding these tests to register the products that I even knew these tests were essential. He went ahead and had the tests completed by a qualified lab in Italy, but it was a frustrating sticking point that could have been avoided.
Lesson Learned: Don’t expect your lab to tell you that you need skin irritation testing. Get the skin irritation tests completed before you go out looking for distributors. Also, form a very friendly relationship with your lab. I can’t tell you how many times I had to request documents from them. Distributors need originals, not copies.
Because distributors need your exact quantitative formula, best practices include having a signed contract with them before you give them that information—or, at the very least, a signed letter of confidentiality. Sometimes, you get a request from a distributor for the formula so they can have the ingredients checked to see if they can import the product. Give them the formula without the percentages, and have them sign a letter of confidentiality.
So far, so good. I have no bad outcome to report with having my product formulas knocked off.
GCI: Any other documents readers should know about?
Jeri Ross: You may need what’s called a Certificate of Free Sale for some countries. I found that countries outside the EU require this document—including Russia, Turkey and countries in South America. What I didn’t know was that it takes around four to six weeks to get one and that they cost approximately $200 each. You can order them directly through ICMAD, or in some cases, your lab can order them for you.
Lesson Learned: Find out if you need a Certificate of Free Sale in advance so you don’t hold up the process.
GCI: Any final recommendations?
Jeri Ross: I have definitely learned some lessons the hard way. So you can see why I included being patient in my introduction. For me, the direction for doing international business has never been one of should I or shouldn’t I. It has been one of my visions since I started product development.
Regarding the benefits and highlights of international business, I could go on and on about stories where I literally jumped up and down for joy with good news of deals cut and projected expansion into more countries I’ve never been but want to go to. I’m not a pragmatic CEO; thus the bumpy road. But I am a determined one who rises to the challenges, and the enjoyment of always looking for the next exciting event in the unknown dimensions of going global.