Next in my EU series, I’m examining the myth of the national distributor in our industry. In my previous article, I illustrated how a $100,000 strategy can be far more efficient than spending $500,000 by using a German distributor as an example.
The Shift to Regional Distribution
Today, the idea of a national distributor is largely outdated. Instead, distribution is handled by regional teams. For example, consider Germany:
- Berlin-Based Distributor: A distributor in Berlin typically has a local German sales force for that region, supported by Polish representatives covering parts of Poland and Czech salespeople handling Czechia. (Fun fact: Amazon’s largest logistics center is in Prague, yet it serves the German market.)
- Munich-Based Distributor: In Munich, the team might focus on southern Germany, with specialized staff for Austria—and even Swiss personnel for Switzerland.
This regional model isn’t limited to Germany. In France, a distributor in Paris might manage the Benelux market, while one in Nice could cover northeastern Italy and even serve Monaco.
Comparing Two Manufacturing Approaches
Let’s revisit the example of the two Los Angeles beauty brands from my previous article:
Brand One – Using a U.S. Contract Lab
- Approval Process: After securing their CPNP approval, Brand One must also obtain approval from the German government to sell their products in Germany. This involves meeting German-specific requirements, such as having German on the label.
- Limited Reach: However, this approval is country-specific. Without further approvals, Brand One cannot sell in markets like Poland or Czechia unless they comply with each nation’s additional regulations.
Brand Two – Using an EU Contract Lab
- Unified Standards: Brand Two completes the same CPNP paperwork, but because they manufacture in an EU-based lab, their products automatically meet the standardized EU regulations.
- Wider Market Access: This means their product can be sold across all member states without the need for extra national approvals or different labels.
Why It Matters
The regulatory environments in the USA and the EU couldn’t be more different:
- In the USA: The federal moCRA sets a baseline, though states like California or Washington may impose additional requirements.
- In the EU: There’s a single set of standards for products made in the EU. This principle of “Primacy” ensures that a product manufactured in one member state is recognized and approved across the entire union—eliminating the need for multiple labels or formulations.
This streamlined process is a key reason why The Honest Company struggled in Europe. Lacking an EU contract lab, they only secured approval in five or six member states, forcing them to create multiple product versions. Had they transitioned to an EU-based lab, one unified label would have granted access to over 500 million consumers.
Looking Ahead
We’re likely to see a surge of European brands partnering with U.S. contract labs to manufacture domestically, sidestepping tariffs and reducing costs. As the old saying goes, “Why ship water over water?”
For small and medium-sized brands, the opportunity is clear: by embracing the mantra “Think Globally, Act Locally,” they can overcome regional complexities and expand their market reach significantly.
Which model do you think offers the most compelling strategy for brands looking to scale in the EU market?