V. MARKETING U.S. PRODUCTS AND SERVICES Distribution and Sales Channels: As in most other developed countries, methods of distribution in Denmark vary with the type of product. Capital goods, commodities and industrial raw materials are most often handled by non-stocking sales agents. Specialized and high-technology products are usually handled by stocking distributors which have their own service and maintenance facilities. Consumer goods are usually sold through importing agents and distributors, but increasingly also imported directly by major retailers such as department and chain stores. The Danish food sector is dominated by a number of large retail chains with in-house wholesale and import divisions. There are about 30 significant food product importers in Denmark. Approximatly 25% of Danish retail food shops are coops. The balance are mostly owned by a few very large private chains. The two largest, FDB and Dansk Supermarked, account for just over 50% of the market with annual turnovers of US$3.5 billion and US$900 million respectively Use of Agents/Distributors, Finding a Partner: The modern world of advanced cross-border communications has eliminated numerous barriers, but many Danish companies still prefer to deal with an established local import agent or distributor, rather than buying directly from abroad. The Danish agent/distributor community has developed over centuries and is today a very selective and competitive group of businesses. Many sectors are dominated by a few powerful and quite conservative companies, which have spent decades establishing lasting relationships with their clientele. In contrast to such traditional distribution channels, there is now some movement, albeit slow, toward direct purchasing especially from European suppliers. This trend is especially evident in the food business where the larger retail chains maintain in- house import divisions. At the same time, there is an increasing trend for foreign companies to establish branch offices in Denmark. In those instances where a U.S. company does not wish to establish its own sales office in Denmark, it is advisable to seek a local agent or distributor. The U.S. Department of Commerce Agent/Distributor Search service (ADS) is an excellent vehicle for finding such a representative. Franchising: While franchising is not as widespread as in the United States, it is a well known form of business. Numerous American franchising companies are already operating in Denmark. The longest established are MacDonalds and Burger King. Pizza Hut and Taco Bell are recent entrants. Franchising is also common outside the fast food trade. Shoe- repair services, car rental, health clubs, and indoor tanning salons are examples. Direct Marketing: Danes are conservative consumers and, because of the small size of the country, used to having easy and fast access to retail outlets. Door-to-door sales are generally prohibited by law, but other forms of direct marketing are starting to be seen. Telephone marketing is still in its infancy, and its success rate with the conservative Danish consumer has so far been disappointing. The forms of direct marketing which have most piqued consumer curiosity, are combination mail-order catalogs and TV-Shop sales. Direct marketing plays an insignificant role in relation to total retail sales. Joint Ventures/Licensing: Licensing and joint venture arrangements are common in Denmark. Danish firms are fully familiar with both licensing foreign products for manufacture and sale in Denmark and licensing their own products for sale abroad. Licensing agreements do not have to be registered with Danish authorities, and there are no Danish government restrictions on remittance of royalties or fees. Joint ventures may be established as corporations, general partnerships, or in any other legal format. Danish law does not discriminate against joint ventures with foreign participation. The Government of Denmark, through the Ministry of Industry and Policy Coordination, actively encourages foreign companies to manufacture high-technology products in Denmark. Steps to Establishing an Office: Setting up a branch office in Denmark requires a relatively simple registration procedure with the Danish Trade and Companies Agency. The filing requirement is for general information on the U.S. parent company and the activities of its Danish branch. This includes place of business, accounting periods, memorandum and articles, and the power of attorney granted to the branch manager. For tax purposes, branches of foreign companies are treated as incorporated companies. As in many other countries, numerous rules and regulations apply to establishing a Danish corporation. Danish business legislation does not discriminate against foreign subsidiaries or foreign owned companies. Foreign companies need only meet the requirements applicable to national companies. As in the United States, it is advisable to secure the services of an attorney and a CPA when establishing a business. There are approximately 250 subsidiaries of American companies in Denmark. Selling Factors/Techniques: The factors deciding where importers place their orders are almost entirely commercial, although cultural/historical or social ties with a long- standing trade partner may, understandably, play a role. General competitive factors such as price, quality, promptness of delivery and availability of service are those which determine the success of a supplier in Denmark. Add to this patience and commitment. Danes don't change suppliers easily and many commercial relationships have been built up and maintained over decades. Export companies seeking only a fast buck have very little chance of success. Advertising and Trade Promotion: Introducing a new product or company on the Danish market is often a costly affair and U.S. parent companies are expected by their Danish agents to cover, in full or in part, initial advertising and promotion expenses. Several large American and international advertising agencies maintain offices in Denmark. The code of conduct for advertising in Denmark is, in some areas, more conservative and consumer protection oriented than that of the United States, while in other areas, more liberal. For example, nudity per se is not considered obscene and is seen in some Danish advertising. The rules and regulations for advertising and marketing are determined in the "Markedsf ringsloven" (the Act on Marketing). The Consumer Ombudsman oversees compliance with the Act on Marketing. He may take action on his own initiative, or based on complaints by third parties. However, he will not be consulted for prior approval or rulings on planned campaigns. Examples of typical cases for Consumer Ombudsman action are those involving misleading statements, unfounded claims of a product's qualities, or sexual discrimination. Generally, the types of advertising media that exist in the United States, exist in Denmark. Television commercials, however, are more restricted. They cannot interrupt a program and may be shown only in assigned spots between programs. Only one of the two national stations, TV-2, regularly carries commercials. The other, Danmarks Radio, only broadcasts certain restricted types of sponsored programs. Local TV stations are allowed to broadcast commercials in commercial blocks in the same way as TV-2. Another popular form of audio-visual advertising is the showing of commercials in movie theaters prior to the main feature film. Printed media advertising is widely used. Below is a list of major newspapers and business journals: NAME AND ADDRESS Circulation *Berlingske Tidende Pilestraede 34 133,600/weekdays DK-1147 Copenhagen K 187,600/Sunday Tel: (45) 3375 7575 Fax: (45) 3375 2020 *Jyllandsposten 146,521/weekdays JP Center 240,533/Sunday Raadhuspladsen 4 DK-4200 Slagelse Tel: (45) 5353 5577 Fax: (45) 5353 2601 Politiken Raadhuspladsen 37 156,200/weekdays DK-1785 Copenhagen V 203,900/Sunday Tel: (45) 3311 8511 Fax: (45) 3315 4117 MAJOR BUSINESS PAPERS AND JOURNALS *Borsen (Daily) 42,000 Montergade 19 weekdays only DK-1140 Copenhagen V Tel: (45) 3332 0102 Fax: (45) 3312 2445 Erhvervsbladet (Daily) 113,000 Vesterbrogade 12 weekdays only DK1780 Copenhagen V Tel: (45) 3121 3636 Fax: (45) 3121 8036 Borsens Nyhedsmagasin (Bi-Weekly) 28,494 Montergade 19 DK-1140 Copenhagen K Tel: (45) 3332 4400 Fax: (45) 3311 5906 Computer World (Weekly) 26,600 Carl Jacobsensvej 25 DK-2500 Valby Tel: (45) 3619 9100 Fax: (45) 3644 2569 Ingenioren (Weekly) 70,000 Skelbaekgade 4 DK-1717 Copenhagen V Tel: (45) 3121 6810 Fax: (45) 3121 6701 * Berlingske Tidende and Jyllandsposten contain significant business sections. Borsen is the closest Denmark has to the Wall Street Journal. Pricing Product: Exporters usually quote c.i.f Copenhagen prices to Danish importers. This price includes all U.S. domestic freight costs, ocean freight and insurance but not Danish duty. The rate of duty ranges from 5 to 14 percent on industrial products. Additionally, the importer must pay a 25% Value Added Tax (VAT) calculated on the landed (c.i.f.) cost plus the duty. VAT applies on a non-discriminatory basis to all products sold in Denmark, whether imported or produced locally. The appropriate price for a product in the Danish market is best determined by thorough market research. The US&FCS' Customized Sales Survey (CSS) is geared to assist U.S. exporters to assess their competition for a specific product in a selected country. Any U.S. Department of Commerce District Office will assist a U.S. exporter in explaining the scope and advantages of the CSS. In Denmark, a number of private companies also perform market research. The Copenhagen US&FCS office can supply contact information. Sales Service/Customer Support: This requirement varies with the type of product. In general, Danish importers demand, and get from European competitors, a high degree of sales and after-sales service and customer support. The extent of the service and support requirement is directly proportional to the technical complexity of the product. Sound commercial judgement dictates after-sales service at least equal to that supplied by European competitors. Immediate response to customer's questions and requests is mandatory as is the use of modern communication methods. This means fax or electronic mail for routine communications and a readiness to employ overnight courier service when necessary. Selling to the Government: Government procurement practices in Denmark are generally transparent. Denmark is a signatory to the GATT Government Procurement Code, and U.S. firms are eligible to bid on an equal basis with Danish and other bidders for contracts valued over approximately $200,000. Invitations to bid are published in English in the EU Official Journal, but the tender documents are normally in Danish. The journal is prepared at EU headquarters in Brussels, Belgium and distributed in all EU countries. Suppliers are qualified on a contract by contract basis. Although a local agent is not required in order for a U.S. firm to bid, it is usually wise to employ one in order to establish service capability equivalent to that available from resident firms. U.S. companies are also eligible to bid for major NATO military projects in Denmark, and for major public works engineering and construction projects such as ocean bridges and tunnels. The central contact point for information on such projects is the U.S. Department of Commerce, ITA/TD/OEEI, Washington DC, telephone (202) 482-5225, or any of the Department's District Offices throughout the United States. Protecting Your Product from IPR Infringement: Denmark offers adequate protection for intellectual property rights. Please see section VII for a list of the international conventions and treaties concerning intellectual property to which Denmark adheres. Need for a Local Attorney: The need for a Danish attorney typically arises in connection with establishing a corporation in Denmark, or in connection with trade disputes. Also, it is advisable to seek local legal assistance in matters involving complicated government concessions such as applications for oil or gas prospecting.