Types of Distribution

DSDDirect Store

Door

Convenience Broad liner

Food Service Distributor

Club

Direct to Retailer

Natural Distributor

Specialty Food

Distributor

General

Wholesaler

Warehouse

Role of Distributor

Present/Sell to Customers

Deliver to Customers

Collect Money From Customers

Merchandise Products

Place/Manage POS

Secure Multiple Locations

Place/Manage Equipment

Manufacturer

Wholesaler/Distributor

Retailer

Consumer

What are Distributors

Looking For?

Uniqueness

Product Appeal

Ingredients

Calories/Fat

Pricing and

Promotional

Strategy

Consumer and

Retailer Demand

Margin

Sales Support

Exclusivity

Buyout

Recommendations for Presenting

New Items to a Distributor

Push and Pull Strategy

PUSH Strategy

Full year recommended promotional and incentive calendar by month

PULL Strategy

Full year recommended promotional calendar by channel

How you are going to spread the word out about your brand (demos, social networking, consumer sweepstakes and promotions, advertising, public relations, guerrilla, etc.)

Make sure you can concisely present your strategy in an easily understandable manner

Elevator Pitch

What you are going to do for the distributor and how much money can they make selling your product?

Be Prepared to

Answer Questions

Consumer research

or testing?

Who is your

consumer?

Where do you want

to be placed on a

shelf (Adjacencies)?

Delivered or Pick Up

Price?

Shelf life and spoils

policy?

Payment terms?

Order lead times and

minimums?

Distributor Programs

Promotional Programs—ex. Buy X Get Y free or

―15%‖ off per case

Incentive Programs/SPIFFS

Can be targeted at distributor sales force,

sales management, distributor ownership or

even independent retailers

Ad/Catalog Fees

Trade Promotions

Trade promotions are developed to spark consumer trial and

awareness in the beginning and to increase frequency of

purchase as your brand becomes larger

Poor promotions have poor results

Promotions that are too ―rich‖ will break you.

Speak to your distributor or customer and ask them what has

worked in the past and what they recommend for your brand at

your sales level

Push vs. pull promotions

Some promotions are designed to get the retailer to put you

on their shelf, expand the number of your skus they are

selling, gain better shelf position, or to secure a display.

These are called ―Push‖ Promotions

Types of Promotions

Off Invoice

Billback

Manufacturer’s

Chargeback

(MCB)/Case Stack

Deals/Hip Pocket

Deals

Scan Down

Coupons

Incentive Programs

How Much Money

Will I Need?

Realistically $3M-$5M

A little less for a brand almost exclusively focused on the natural and gourmet channels

Don’t need it all upfront but probably need close $500k to really get started

Friends and family are the best route to raise capital

Have an exit plan in mind before raising capital

You don’t have to sell the company, but investors want to know how they are going to get their money out

Margins and Pricing

Manufacturer Gross Profit Target = 45%

45%-

55%

C-Store

25%-

35%

40%-

50%

Drug

45%-

50%

Club

11%-

13%

6%-

8%*

Major Natural Food and Gourmet Chains work on 40% - 44% Margin

Gross Margin

Gross Margin is defined as the difference between the costs (COGS) related to manufacturing your product and the price that you sell the product for

Is freight a part of COGS?

Margin or Markup

What is the difference?

Retailer Margin = Selling Price–Cost

Selling Price

Retailer Markup =Selling Price – Price

Cost

Build a Sales Organization

• Product

• Pricing

• Placement

• Price

• Promotion

• POS

• It rarely works the same exact way twice

• No Re-treads

• Make sure this is a symbiotic relationship

• Add structure where necessary

• Start Slow

• Need Industry Execs/Counsel

• Keep things fresh

EntrepreneurIndustry

Execs

Blocking

and Tackling

Consistent

No Cookie

Cutter

Brokers

Natural—separate subject

Helpful in grocery, mass, and drug

channels

May interfere with DSD

Usually 3%-5% commission

based on volume

Some require minimum

monthly retainers

Natural Food Brokers

Necessary for the

Natural Food

Channel!

Need to be

reinforced, at

some point, with

additional

merchandisers

Retainer and

Commission

Make Wholesaler

Calls

Make Key Account HQ

Calls

Make In Store Calls

Build Displays

Book Promotions

Natural, Specialty

and DSD distributors

Hybrid or not?Tough call

You can’t service the entire country and every account exclusively with either DSD, Specialty, or natural distributors

DSD understandably wants exclusivity and protection

DSD is very expensive

A distributor Doen’t want to build a brand and lose it after all their hard work is done and they are finally reaping the benefits

But…Certain key accounts have ―Preferred Vendors‖. Overall, Depending on the Product, a hybrid system may be necessary.

Yet very few beverage companies can sustain themselves long term with sales exclusively from natural and gourmet retailers. Most beverage companies will want to transition to DSD.

DSD Contract

Exclusivity

Perpetuity vs. Term

2-4x gross profit for the past 12

months minimum

Invasion Fee

Manpower and marketing

commitments

Advice: hire an attorney that

specializes in the beverage industry

Almost The End

This is not a difficult business. Do not over think it;

If you don’t know something, ask for help;

Entrepreneurs need expert assistance as much as

expert assistance needs Entrepreneurs;

The End &

Thank You

www.cascadiamanagingbrands.com

Bsipper@cascadiamanagingbrands.com

201.962.8622