Beverage School Summer 2023 Understanding Route to Market 1920x1080 MP4

Summary

The speaker at a beverage industry event emphasizes the importance of understanding distribution for beverage entrepreneurs. He outlines various distributor types, the significance of natural specialty distribution, the role of brokers, and the challenges of selling to retailers and consumers. He advises focusing on the right accounts, managing margins, and being strategic about slotting fees. The presentation concludes with insights on achieving success in the competitive beverage market.

Takeaways

• 📹 The speaker emphasizes the importance of the initial part of the show, which focuses on educating new beverage entrepreneurs and providing refreshers for others.
• 🎥 Presentations will be recorded and made available for later viewing, and there will be no direct Q&A after each presentation but rather a group Q&A session at the end.
• 🏆 Bill Sipper, the first presenter and managing partner at Cascadia Managing Brands, discusses the various types of distributors and their roles in the beverage industry.
• 📈 DSD (Direct Store Delivery) distributors are highlighted as the most competitive but also the most demanding, requiring exclusive contracts and buyouts.
• 🌿 Natural specialty distributors are noted for their slightly lower barriers to entry and their appeal to a more premium customer base.
• 📉 The script warns about the potential for high deductions in the natural specialty channel, which can significantly reduce payments to suppliers.
• 🏪 Convenience store distributors are praised for their wide coverage but criticized for not merchandising products effectively.
• 📊 The speaker stresses the importance of understanding the different sales pitches required for various distribution channels, from supermarkets to food service.
• 💼 The role of brokers is underscored, particularly in securing pre-commitments from chains, which are crucial for getting products into distribution.
• 💵 Margins vary widely among distributors and retailers, with DSD typically offering around a 33% margin, while supermarkets might work on a 30-35% margin.
• 💼 The script concludes with a reminder of the importance of persistence and strategic growth in the beverage industry, as well as the reality of the financial investments required.

Q & A

What is the primary focus of the speaker's presentation?

The speaker's presentation primarily focuses on educating new beverage entrepreneurs and providing insights into the distribution process for CPG (Consumer Packaged Goods) companies, including the different types of distributors and the considerations involved in choosing them.

What does the acronym 'DSD' stand for in the context of the presentation?

In the context of the presentation, 'DSD' stands for Direct Store Delivery, which is a type of distribution where distributors not only deliver products to stores but also merchandise them, ensuring the product is well-presented on the shelves.

Why are DSD distributors considered the best but also the most challenging to work with?

DSD distributors are considered the best because they merchandise the stores, ensuring the product remains on the shelves. However, they are also the most challenging to work with because there are fewer independent DSD distributors, they often require exclusive contracts, and they may demand a buyout.

What is the role of natural food brokers according to the speaker?

Natural food brokers play a crucial role in getting commitments from independent stores, especially when trying to get products into natural and specialty channels. They help secure pre-commitments from stores, which are necessary for some distributors to take on a new product.

What are the potential financial pitfalls of working with natural specialty distributors?

The potential financial pitfalls of working with natural specialty distributors include high deductions that can significantly reduce payments on invoices, sometimes leading to receiving a much smaller payment than the invoiced amount.

How does the speaker describe the evolution of a beverage brand's distribution strategy?

The speaker describes the evolution of a beverage brand's distribution strategy as starting at a certain point (Point A) and having the goal to reach another (Point Z), with many stops in between. It's an evolutionary business where one might not be ready for certain types of distributors like DSD initially but may progress to that stage over time.

What is the importance of creating success stories for a new beverage brand?

Creating success stories is important because it helps to build a brand's credibility and can be used to convince larger chains to carry the product. It's about breeding success from smaller accounts and using those achievements to negotiate with bigger accounts.

What is the typical margin that DSD distributors and retailers work on, according to the speaker?

The speaker mentions that DSD distributors typically work on a margin of 33%, while retailers can vary but are commonly around 30-35% for supermarkets, 40-45% for convenience stores, and 45-50% for drug chains.

What is a slotting fee in the context of supermarket distribution?

A slotting fee is a payment made by a supplier to a supermarket chain for the privilege of having their product stocked. It secures shelf space but does not guarantee that the product will be placed on the shelves.

Why is it crucial for a new beverage brand to select the right accounts for distribution?

It is crucial to select the right accounts because not all stores within a chain may align with the brand's target demographics. Distributing to stores where the brand is unlikely to sell well can lead to wasted time and resources, including slotting fees.

What advice does the speaker give regarding the startup phase of a beverage brand?

The speaker advises that most startups do not make money on the products they sell initially and that the real opportunity for financial success often comes from an exit strategy, such as being acquired by a larger company.