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Country Commercial Guides
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IV. MARKETING U.S. PRODUCTS AND SERVICES
Distribution and Sales Channels: 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 frequently sold through fully owned subsidiaries of which there are probably more than 250, representing a substantial portion of U.S. corporate sales of products and services in Denmark. 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 retail sector is dominated by two large retail chains (FDB and Dansk Supermarked) which account for over 50 percent of the total food retail market. These have substantial in-house wholesale and import divisions. There are about 30 significant independent food product importers in Denmark.
Use of Agents/Distributors, Finding a Partner: Today's modern communications have eliminated numerous barriers, but many Danish companies still prefer to deal with an established local agent or distributor, rather than buying directly from abroad. The Danish agent/distributor community has developed over centuries and is today a select 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 clients. There is now some slow movement 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. 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: Although franchising is not as widespread as in the United States, it is a well-known form of business, and more Danes are becoming interested in investing in franchising businesses. However, the bulk of franchise operated businesses are still of Danish or Scandinavian origin. American franchising companies also operate in Denmark. The longest established are McDonalds, Burger King and Kentucky Fried Chicken. Franchising is also common outside the fast food trade. Shoe-repair services, convenience stores, car rental, health clubs, and indoor tanning salons are examples. There are currently about 120 franchise systems in Denmark with about 2,600 outlets. These represent total annual sales of about $3 billion (DKK 17 billion), a tripling over the last five years. The Danish Franchise Association (see appendix for address information) is a member of the International Franchise Association, headquartered in the U.S.A.
Direct Marketing: Danes are conservative consumers and, because of the small size of the country, used to easy and fast access to retail outlets. Door-to-door sales are generally considered an intrusion on privacy and, with few exceptions, are prohibited by law. Other forms of direct marketing prevail: telephone marketing is permitted, but its success rate with the conservative Danish consumer has been disappointing. The direct marketing which has most piqued consumer curiosity are combination mail-order catalogs and TV-Shop sales. Internet direct marketing and sales exist and are expected to increase during the next few years. Direct marketing, including internet sales, still 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, actively encourages foreign companies to manufacture high-technology products in Denmark. Several Danish non-profit organizations and authorities have programs to attract foreign investment and joint ventures.
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 that determine where importers place their orders are almost entirely commercial, although cultural and historical or social ties with a long-standing trade partner may play a role. General competitive factors such as price, quality, promptness of delivery and availability of service determine the success of a supplier in Denmark. Patience and commitment count. Danes do not change suppliers easily and many commercial relationships have been maintained over decades. Export companies seeking only a fast buck have very little chance of success. Most exporters introducing a "new" product in Denmark should expect fierce competition from both domestic, third-country, and often U.S. companies already well-established in the market. In many cases, local distributors or agents will not take on a new account. Consequently, a new-to-market company's entry would be through establishing its own sales office.
Advertising and Trade Promotion: Introducing a new product or company on the Danish market is often a costly affair. U.S. and foreign parent companies are expected by their Danish agents to cover, in full or in part, 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, while nudity per se is not considered obscene and is seen in some Danish advertising, TV commercials for alcoholic beverages, tobacco and medicine are not allowed. At the time of writing, parliament members are discussing possible legislation against commercials appealing to children during children's programs. The rules and regulations for advertising and marketing are determined in the "Markedsføringsloven" (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 and unfounded claims of a product's qualities. Generally, the types of advertising media that exist in the United States, exist in Denmark. Television commercials, however, are more restricted. Under Danish rules, they cannot interrupt a program and may be shown only in assigned blocks between programs. Only one of the two national stations, TV-2, carries commercials. The other, Danmarks Radio, is a public service station and does not carry commercials. However, it allows certain restricted types of program sponsorship. A recent de-regulation provides for networking of local TV stations. A number of such local stations have merged into "TV-Danmark", which carries commercials under the same regulations as TV-2. One Danish-language TV station (TV3), broadcasting via satellite from the U.K. and receivable only via dish or cable, reaches almost as many viewers as the three Danish nationwide stations. Because it broadcasts from the U.K. and has foreign ownership, it operates outside Danish rules and places commercials within programs. 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. Advertising on the world wide web is increasing.
Below is a list of major newspapers and business journals:
NAME AND ADDRESS CIRCULATION MAJOR NEWSPAPERS *Berlingske Tidende Pilestraede 34 154,267/weekdays DK-1147 Copenhagen K 191,616/Sundays Tel: (45) 3375 7575 Fax: (45) 3375 2020 *Jyllandsposten 177,857/weekdays Bladhuset i Viby 262,340/Sundays Grondalsvej 3 DK-8260 Viby J. Tel: (45) 8738 3838 Fax: (45) 8738 3199 Politiken Raadhuspladsen 37 147,888/weekdays DK-1785 Copenhagen V 195,940/Sundays Tel: (45) 3311 8511 Fax: (45) 3315 4117 MAJOR BUSINESS PAPERS AND JOURNALS *Borsen (Daily) 48,000 Montergade 19 weekdays only DK-1140 Copenhagen K. Tel: (45) 3332 0102 Fax: (45) 3312 2445 ErhvervsBladet (Daily) 107,033 Vesterbrogade 12 weekdays only DK-1780 Copenhagen V Tel: (45) 3326 7200 Fax: (45) 3326 7282 Borsens Nyhedsmagasin (Bi-Weekly) 16,000 Montergade 19, Postbox 2242 DK-1019 Copenhagen K Tel: (45) 3332 4400 Fax: (45) 3311 5906 Computerworld (Bi-Weekly) 24,800 Carl Jacobsensvej 25 DK-2500 Valby Tel: (45) 7730 0300 Fax: (45) 7730 0303 Ingenioren (Weekly) 75,000 Skelbaekgade 4 DK-1503 Copenhagen V Tel: (45) 3326 5300 Fax: (45) 3326 5301* Berlingske Tidende and Jyllandsposten contain significant business sections. Borsen is the closest Denmark has to the Wall Street Journal.
Pricing a Product: Exporters usually quote c.i.f Copenhagen prices to Danish importers. The c.i.f. price includes all U.S. domestic freight costs, ocean/air freight and insurance but not Danish import duty or VAT. 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. There are also heavy surtaxes on a number of "luxury" consumer items, such cigarettes and tobacco, alcoholic beverages, oil and gasoline, and automobiles. Despite a 180% automobile surtax, 68% of Danish families own a car. However, only 11% own more than one car.
The appropriate price for a product in the Danish market is best determined through market research. The US&FCS' Customized Market Analyses (CMA) program 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 CMA. 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 judgment 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/WTO Government Procurement Code and also adheres to EU procurement regulations. U.S. firms are eligible to bid on an equal basis with Danish and other bidders for contracts valued over approximately $200,000. Announcements of public tenders are published in the "Supplement to the Official Journal of the European Communities." The text of the invitation to bid is in English, but the tender documents are normally in Danish. For major projects, documents may be available both in Danish and English. Bid notifications are available on the following website: http://www.europa.eu.int.
Supplier qualifications are established 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 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 in general 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. A short list of attorneys and collection agencies is available on the NTDB. A more comprehensive, but still partial list can be airmailed from post or from the Denmark Desk of the U.S. Department of Commerce, Washington DC.
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
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