Marketing Materials procurement strategies in Latam
Marketing materials is remarkably wide as a category. It is composed of a huge variety of items ranging from promotional items to merchandizing and event furniture. Consequently, different products will often require different sourcing strategies.
It is undeniable the impact that marketing materials purchases have on companies’ budgets. Despite the well-known implementation of digital and social media marketing, the expenditure in this category has been globally increasing in recent years, and this trend is expected to continue, with promotional items leading the class. What is more, acquisitions completed by Latin American companies and branches of multinational corporations located in the region account for 12% of global promotional items expenditure. Most of these purchases are concentrated in the F&B (1) and CPG (2) sectors.
It is also important to consider that this market is characterized by a high level of competition among a large number of suppliers. Sale prices are a major leverage point to success in this industry, and that is why providers also tend to take advantage of their comprehensive footprint, as well as their alliance networks and design capabilities. Besides, Latin American and global suppliers, as well as distributors, frequently go through mergers and acquisitions in order to reduce overhead costs and to gain large volume of contracts. On the other hand, small and medium-sized players emerge with flexible strategies and operating at low margins so that they can bring down overhead expenditures.
In this context, procurement leaders generally find it difficult to select marketing materials manufacturers and/or distributors. As a general idea, there are different sourcing models that are widely used in Latin America when it comes to sourcing this category. On the one hand, it is possible to procure from domestic and offshoring suppliers. The former implies manufacturers or distributors that operate within the country or zone where the buyer runs its business. The latter is generally related to suppliers and distributors that are located overseas –often in low-cost regions. On the other hand, some companies prefer direct purchases from manufacturers without the intervention of traders or distributors, whereas other firms opt for engaging with intermediaries that source from manufactures.
Thus, it is possible to set different combinations gathering marketing materials procurement models -direct offshoring procurement, indirect offshoring procurement, direct domestic procurement, indirect domestic procurement - that are commonly useful and adaptable to the needs of the category. For sure, every model offers various advantages and disadvantages that are worth to be considered before making a final decision.
In addition, marketing materials is remarkably wide as a category. It is composed of a huge variety of items ranging from promotional items to merchandizing and event furniture. Consequently, different products will often require different sourcing strategies. For instance, simple items, such as keychains or t-shirts, are generally sourced efficiently and at considerable saving margins, whereas more complex materials, such as fridges or displays, are quite more difficult to procure. What is more, , items that are only needed in a particular subsidiary, such as racks or signs, are purchased from local suppliers, while those materials needed for the whole company, such as glassware or office products, are sourced from global providers.
The duration of the engagement with the supplier also varies according to the type of item that is being negotiated. Long-term relationships are usually linked to products whose demand is foreseeable or to situations in which it is mandatory to establish a good relationship with the supplier in order to ensure innovation and sourcing effectiveness. However, short-term engagements are suitable in the procurement of items that are occasionally necessary, such as a special rack designed exclusively for the lunch of a new product. Therefore, it is recommendable to opt for hybrid procurement strategies that provide accurate solutions for the diverse types of marketing materials that make up the category.
Having said that, it is palpable the fact that planned purchases of marketing materials are essential to provide an efficient and effective use of resources. Moreover, even though planning these acquisitions takes significant time and effort, they will probably end up being well organized, and achieving cost reductions and economies of scales. In the meantime, these activities encompass rethinking the process and performance of the marketing materials sourcing system, finding opportunities to recognize points of improvement. In this sense, many Latin American companies begin with this process some months before the validity of the annual plan that generally estimates the needs of the marketing sector.
Chinese suppliers of Marketing Materials
Chinese manufacturers and distributors are suppliers that are worth to be considered in the sourcing of this category. Even though prices in this market have been increasing lately, Chinese items are generally 30% cheaper than other countries’ proposals. Besides, these suppliers are starting to improve the functionality of their products, and to focus on upmarket materials. In addition, major clients of Chinese materials are firms from US and EU. Yet, in recent years, and during the financial crisis of 2009, these suppliers have started to pay attention to other markets in Latin America and Africa.
Nonetheless, Latin American companies frequently procure marketing materials from China indirectly. These acquisitions usually involve marketing companies or distributors. Thus, firms do not tend to make sustained effort because these intermediaries accomplish the process.
In recent years, some other Asian markets have emerged. Thus, countries like India, Taiwan, Indonesia, and Malaysia, among others, are offering high volume productions and low-cost for marketing materials.
 F&B: Food & Beverege
 CPG: Consumer Packaged Goods