Theo Paphitis one of the stars of UK’s Dragon’s Den has taken to advising nine companies with their plans to enter into rapidly expanding global markets. The whole process has been documented by the BBC in an interesting new series “Adventure Capitalist.” In the three episodes Paphitis takes his protégés away from the market report, rumors, urban legends and Googling, to face the actual target markets (Brazil, India, Vietnam).

Intellectually we all acknowledge that if it was easy, someone would have already done it, but our ego often tempts us to believe that we are the first to have some unique insight or solution to the problem. Initial contact with the target market is therefore often a surprisingly painful and uncomfortable experience for most entrepreneurs, creating challenges to their ego and often disillusionment. The mirage of a big fat market that is just dying to get your product, is replaced with a long list of new local challenges (often the very reasons that previous attempts at market entry by others have failed). If the CEO’s can weather the initial blows and roadblocks, and creatively re-focus his/her attention – innovative solutions can emerge.

Here’s three good examples:

Bremont (product – luxury watches)

Founded by two bothers as a fruition of their life’s passion for watches. Three years ago they started selling their distinctive aviation related designs and established some brand recognition in the UK market. So far they have invested over a £1.5M into building the brand. India is one of the fastest growing economies in the world, with a 300 million large middle class, and more per capita millionaires in Mumbai than anywhere else. Bremont seeks to become more global and expand into India’s upscale watch market.
Culture shock: Most Indian luxury watch customers prefer gold, gold plated and gold tone watches instead of the stainless steel like Bremont’s watches. Indian market penetration with a new product requires a celebrity endorsements, instead of the planned air force or other reasonably priced endorsements. Moreover, Bremont pricing strategy was unrealistic: seven different taxes and duties totaling over 75%, customer expectation haggle 30-40% of the retail price, and the dealer cut together more than doubled the expected watch price from the already high £6,500.
Resolution: Bremont listened to the customer feedback, and deciding to start very slowly with only one or two displays at shops in India before they can do proper advertising and marketing.

Regenatec (product – biodiesel converter kit)

Regenatec, a five year old start up company’s £500,000 in R&D produced the RG100 – converter that lets any diesel engine run on biodiesel. also sells “ethical” biodiesel (no food oils). India is the biggest diesel market in the world, also the fastest growing oil market.
Culture shock: Jatropha plantations in India are still in the experimental phase, with no regular commercial volumes available. Indian government heavily subsidizes standard diesel bringing its cost per liter down to 35 rupies, while jathropra biodiesel is at an economically uncompetitive 50 rupies per liter. With no reliable supplies of reasonably priced biodiesel, there is no way that Regenatec can pursue its business model in India. Finally, the conversion violates Indian vehicle type certifications, and needs to be recertified after the conversion – a bureaucratic headache.
Resolution: Field trial stage with one bus and one generator, and seeking $2 million to continue entry into India’s market.

Marmite (product – English spread for toast)

Small (£40M sales) subsidiary of food giant Uniliver, Marmite is a century old UK company that got popular during WWI (cheapest way to get vitamins added into peoples diet) as a replacement of jam on toast. Marmite has started to internationalize, and has had success in countries like Sri Lanka where they have 30% market share. Marmite seeks to target India’s very large middle class of moms that make the meals for their families.

Culture shock: Focus groups showed that Indian moms thought that toast with Marmite tasted strange, smelled funny and reminded everyone of medicine. Most Indians simply did not like Marmite on toast.

Marmite refocused, and pitched the spread as a cooking ingredient, a type of flavor enhancer. Marmite consulted with Indian chefs to create some dishes for new focus groups and testers. Turns out the potential customers really enjoyed the yeasty and tangy flavor that the spread added to Indian food.

Resolution: Marmite was able to approach the Indian market from another angle by pitching their spread as a cooking ingredient. They also understood that market entry will require a robust marketing strategy with an initial investment of £500,000. Marmite decided to get a local celebrity chef, advertising, in-store displays and sampling, recipe campaigns and other targeted promotions. Marmite does not expect to turn a profit for 3 years, plowing all revenues back into marketing, but remains optimistic about the prospects of success in India.

Paphitis is an experienced entrepreneur that started out as a tea boy and filing clerk, but now is on the Sunday Times Rich list of the wealthiest UK residents. He made most of his fortune with the £100 million sale of Canadian underwear retailer La Senza.

Much of what he has to say seems simple and obvious – but very difficult to actually carry out – as most true things in life. Theo’s commentary is available here.