Question and answer with Bill Sipper in San Francisco

2. Types of Distribution
DSD
Direct Store
Door
Natural
Distributor
Specialty
Food
Distributor
Convenience
Broad liner
Direct to
Retailer
General
Wholesaler
Food Service
Distributor
Club
Warehouse

3. Role of Distributor
Manufacturer
Present/Sell to
Customers
Deliver to Customers
Wholesaler/Distributor
Collect Money From
Customers
Merchandise Products
Place/Manage POS
Retailer
Secure Multiple
Locations
Place/Manage Equipment
Consumer

4. What are Distributors
Looking For?
Uniqueness
Product Appeal
Ingredients
Calories/Fat
Pricing and
Promotional
Strategy
Consumer and
Retailer Demand
Margin
Sales Support
Exclusivity
Buyout

5. 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?

6. Be Prepared to
Answer Questions
Consumer research
or testing?
Delivered or Pick Up
Price?
Who is your
consumer?
Shelf life and spoils
policy?
Where do you want
to be placed on a
shelf (Adjacencies)?
Payment terms?
Order lead times and
minimums?

7. 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

8. 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

9. Types of Promotions
Off Invoice
Scan Down
Billback
Coupons
Manufacturer’s
Chargeback
(MCB)/Case Stack
Deals/Hip Pocket
Deals
Incentive Programs

10. 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

11. Margins and Pricing
C-Store
45%55%
25%35%
Drug
Club
40%50%
45%50%
11%13%
6%8%*
Major Natural Food and Gourmet Chains work on 40% - 44% Margin
Manufacturer Gross Profit Target = 45%

12. 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?

13. Margin or Markup
What is the difference?
Retailer Margin = Selling Price–Cost
Selling Price
Retailer Markup =Selling Price – Price
Cost

14. Build a Sales Organization
• Start Slow
• Need Industry
Execs/Counsel
• Keep things
fresh
• No Re-treads
• Make sure this is
a symbiotic
relationship
• Add structure
where necessary
Entrepreneur
No Cookie
Cutter
• It rarely works
the same exact
way twice
Industry
Execs
Blocking
and Tackling
Consistent
• Product
• Pricing
• Placement
• Price
• Promotion
• POS

15. 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

16. Natural Food Brokers
Make
Wholesaler
Calls
Book
Promotions
Build Displays
Make Key
Account HQ
Calls
Make In Store
Calls
Necessary for the
Natural Food
Channel!
 Need to be
reinforced, at
some point, with
additional
merchandisers
Retainer and
Commission

17. 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.

18. 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

19. 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;

20. The End &
Thank You
www.cascadiamanagingbrands.com
Bsipper@cascadiamanagingbrands.com
201.962.8622