Using an Agent or Distributor

Today’s modern communications media 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. In many cases, this is based on a preference for, or even a requirement to have, a responsible, legal entity in Denmark supplying the product. 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. In some cases, the competitive environment may even necessitate such a step. 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.

Establishing an Office

For more information about the establishing and office in Copenhagen or Denmark please contact the Danish Ministry of Foreign Affairs’ Investment Agency; Invest in Denmark www.investindk.com. For investment in the Copenhagen region, please contact Copenhagen Capacity – www.copcap.dk

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 and KFC. 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 is no specific franchising legislation in Denmark. Franchising is subject to legal framework governing all business enterprises. U.S. companies are therefore strongly advised to consult a Danish attorney and the Danish Franchising Association before entering into any form of franchising agreement with a local company or individual. The Danish Franchising Association was established in 1984 and is a member of the International Franchising Association headquartered in the United States (see appendix for address information.)

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 are, with a few exceptions, 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 type 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. There is no requirement to register licensing agreements 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 central Government of Denmark, through the Ministry of Trade and Industry, actively encourages foreign companies to manufacture high-technology products in Denmark. In addition, several Danish local government authorities and non-profit organizations have established offices and programs to attract foreign investment and joint ventures.

Selling to the Government

Government procurement practices in Denmark are generally transparent. Denmark is a signatory to the 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 USD200,000. 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: www.europa.eu.int.

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 about 350. These represent 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 are increasingly being imported directly by major retail and department stores. The non-food retail trade is increasingly being dominated by chain stores.

The Danish food retail sector is dominated by two large retail chains (FDB and Dansk Supermarked) which account for over 50% 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.

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 return have very little chance of success in Denmark.

Most exporters introducing a “new” product in Denmark should expect fierce competition from domestic, third country, and often U.S. companies already well-established in the market. In many cases, local distributors or agents will either decline taking on the representation of a new product line, or alternatively, request a substantial financial contribution towards market entry costs. Consequently, the best, or sometimes even the only way for a new-to-market company to enter the Danish market can be through establishing its own sales office.

Electronic Commerce

Denmark has lower growth rates in e-commerce than those of the U.S. However, the technology to increase those rates is certainly in place in Denmark. E-commerce is expected to play a significant role in Denmark soon. A boom is not expected in selling to private individuals, but rather in the business-to-business segment. In addition, home banking is already very popular, and the market has seen an entry of several ‘pure player’ banks only present on the internet.

Government procurement methods are currently being implemented in the ‘Public Procurement Portal’. The Public Procurement Portal is an electronic market place to which both private and public purchasers and their suppliers have access, and whose functionality, interface, security and transaction costs are regulated by the public sector. The portal was launched in January 2002, and was the first public procurement portal in Europe.

Trade Promotion and Advertising

Introducing a new product or company into 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. Companies in Denmark spend about USD1.0 billion annually on advertising. Television is the largest medium. The code of conduct for advertising in Denmark is, in some areas, more conservative and consumer protection oriented than that of the United States. In other areas it is even more liberal. For example, nudity, per se, is not considered obscene, and it is seen in some Danish advertising. On the other hand, TV commercials for tobacco and medicine are not allowed. Commercials appealing directly to children are subject to legislative restrictions. The rules and regulations for advertising and marketing are determined in the "Markedsforingsloven" (the Act on Marketing). In July 2000, Denmark introduced ‘opt-in’ requirements for unsolicited commercial electronic mailings. 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 also 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 although it does allow certain restricted types of program sponsorship. A recent deregulation 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 microwave 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 (see “Broadcasting” below.) 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 internet is increasing.

Broadcasting in Denmark is organized on three levels; national, regional and local coverage. National coverage consists of DR’s (Denmark’s Radio) radio and TV transmissions and TV2’s TV transmissions. DR and TV2 have certain public service responsibilities. Their programming must strive for quality, versatility and diversity and must aim for objectivity and impartiality in their dissemination of information to the public. Both stations are further obligated to program for and broadcast to the entire population, including the transmission of programs aimed at smaller target groups. Consequently, the executives and board of managers of the two stations are solely responsible for programming.

DR and TV2 are each responsible for two television channels, one terrestrial and one satellite. DR has 4 radio channels. DR is financed almost exclusively by license fees, while TV2 is financed by advertising revenue (approx. 70 %), license fee revenue, and other income. In addition to DR and TV2, a number of private TV- or radio companies also broadcast nationwide through satellite or cable TV. In June 2003, the Ministry of Culture held an auction for two new nationwide radio channels, called P5 and P6. The highest bidders were Sky Radio (Owned by News Corp. International) and Dutch-based Talpa Radio who paid a total of DKR 612 million (USD110 million) for the eight-year licenses.

Regional coverage consists of eight TV2 companies along with DR’s nine regional radio stations. Local coverage consists of about 100 local TV stations and 250 local radio stations. The local TV and radio stations are private enterprises. Local stations are financed by membership and subscriptions and, to some extent, by municipal subsidies, sale of transmission time, and by similar means. Companies, associations and others intending to establish a local broadcasting company must first apply for a license from local boards organized at the municipal level.

In 2002, the Danish government decided to privatize the television station TV2, which had been partially financed by license fees since its beginning in 1988. TV2 is to be sold to a private corporation before 2006. However, even though the station is to be privatized, it must still abide by certain public service obligations with respect to news and current events as well as a continued economic commitment to show and support Danish film.

Pricing

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 import duty typically ranges from 5-14% on industrial products. Additionally, the importer must pay a 25% Value Added Tax (VAT) calculated on the sum of the landed (c.i.f.) cost plus the duty. VAT is levied on a non-discriminatory basis to all products and most services sold in Denmark, whether imported or produced locally. There are also heavy surcharges/taxes on a number of “luxury” consumer items, such as cigarettes and tobacco, alcoholic beverages, energy, including oil and gasoline, and automobiles. Despite a 180% automobile levy, there are almost two million passenger cars on the Danish roads (roughly one for each household).

The appropriate price for a product in the Danish market is often best determined through market research. In Denmark, a number of private companies also perform market research. The Commercial Service Copenhagen can supply contact information on these companies.

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. An immediate response to customers’ questions and requests is essential, as is the use of modern communication methods. This means fax or e-mail for routine communications and a readiness to employ overnight courier service when necessary.

Protecting Your Intellectual Property

In general, Denmark offers adequate protection for intellectual property rights. See section VI for a list of the international conventions and treaties concerning intellectual property to which Denmark adheres

Due Diligence

CS Copenhagen can assist your company in finding the right local partners for your due diligence tasks. Please contact the office directly for more information.

Local Professional Services

CS Copenhagen can assist your company in finding the right partners. Please visit U.S. Commercial Service Denmark’s website: http://www.buyusa.gov/denmark

Web Resources

Organizations:
Invest in Denmark - www.investindk.com
Copenhagen Capacity – www.copcap.dk
Confederation of Danish Industries - www.di.dk
Danish Chamber of Commerce - www.hts.dk

Local trade fair authorities:
Bella Center Copenhagen – www.bellacenter.dk
Herning Trade Fair Center - www.messecenter.dk

Local newspapers:
Berlingske Tidende - www.berlingske.dk
Jyllandsposten - www.jp.dk
Politiken - www.politiken.dk
Borsen (The principal Danish financial paper) - www.borsen.dk
ErhvervsBladet - www.erhvervsbladet.dk

Magazines:
Berlingske Tidendes Nyhedsmagasin - www.bny.dk
Computerworld - www.computerworld.dk
Ingenioren - www.ing.dk

Association of Danish Advertising Agencies - www.drb.dk
(The above website includes contact information and links for all members.)

National Radio/TV channels:
Denmark’s Radio DR - www.dr.dk
TV2 - www.tv2.dk