NOSH Bootcamp Winter 2021: Understanding Channel Strategy, Sponsored by Cascadia Managing Brands

Bill Zipper [00:04] Hi, I'm Bill Zipper. I'm a managing partner with Cascadia Managing Brands. And today I'm gonna take you uh through a presentation called Straight Talk. And I'm, uh, I'm not gonna lie to you. Uh, I have, uh, done this 3 times in a row. The first time I, uh, made a lot of mistakes, so I decided to start over. The second time I think I did much better, uh, just forgot to hit the record button. And, uh, this is now my 3rd time. So I'm gonna be straight with all of you. I'm, I'm here with my, uh, Granizado soda. Uh, I'm in sunny Medellin, Colombia. I'll be back in the US for Thanksgiving, and, uh, I would like to just get this presentation over and hopefully, uh, you enjoy it. Um I have about 30 years' experience with sales, uh, marketing, operations, logistics. I've held, uh, senior and C-level positions at, uh, brands like Aavon, Nantucket Nectars, Fresh Samantha, Otwala, uh, Naked Juice. Um, we, I've run, uh, DSD companies nationwide 3 times. We've done brand management and consulting for companies including Hintwater, uh, Zico Coconut Water, uh, Stez, Guru, Pathwater, C2O Coconut Water, uh, Rubicon, Rainwater, Liquid Death, etc. We've done strategic consulting for companies including Budweiser, InBev. Coca-Cola, Bain and Company, etc. And we have experience in North America, Central America, South America, Europe, Asia, Middle East, and Australia. Um, why this particular presentation? Well, I didn't wanna give you the same kind of presentation that, that we always seem to wind up doing where we change a couple of things and move things around. I wanted to create something that was unique and that would give people answers and insights to questions that you might have or you should have. Um, so I contacted a bunch of current and former clients including Hint, Zico, Liquid Death, Sole Water, Rain, more. We also reached out for friends at Coca-Cola and InBev to provide questions at 30,000 ft view, and we contacted other industry friends and colleagues for input. Um, none of what we're gonna talk about. is rocket science, but it can be challenging if you're doing this without experience in this, in this field. If you have any questions about the presentation, uh, please feel free to, uh, uh, ask us, send us a, uh, an email to [email protected] and we'll try and answer that, uh, promptly. Um, so one of the first questions is, what is your plan and what is your way to the market? So there are many things you need to plan. What is your distribution model today and tomorrow? Because honestly, where you start is not often where you, you end up. Hopefully, you start small and wind up really big, and that's gonna change the way your distribution system works. Um, are you gonna use natural food distributors like UNFI and Kay? Are you going to use DSD distributors? DSD stands for direct store door like Coca-Cola, Budweiser, MillerCoors, independent distributors, etc. Are you gonna use brokers? Are you gonna use brokers for specific channels only? What territory are you're gonna start in? Uh, are, are you gonna use e-commerce? You're gonna sell through e-commerce. On the marketing side, you need to focus and, and understand the question, what's my plan for consumer awareness and trial? How do I get someone to try my product? Uh, you have different things you can try, advertising, promotions, public relations, social media, coupons, scan downs, in-store sampling, special events, guerrilla marketing. And you need to also plan your operations, logistics, and finance. Do you have the necessary funding to do what you want to achieve? Um, Do you have cash flow? Cash flow is king in this industry. Where do you get money from if you don't have it already? Uh, operations and logistics, production, ordering and invoicing, accounting. You need to have a plan for all of these areas. You need to be able to ask questions and get the right answers. Let's start off with distributors. What Should you ask a distributor and that critical first call, let's say. Well, you wanna know, it's, and brokers and distributors are very similar in terms of the questions, but with the distributor specifically, you wanna know what number of salespeople that they have, the number of supervisors. How are those folks compensated? What are the best ways to incentivize them to sell your product in the right stores? What have been the best promotions and why? And that, that's really, you know, important. I remember a guy from Seagram's came into our building once when we ran a uh distributorship in New York City, and they, he ran a promotion called uh Steak and eggs. Um, the winners won, uh, steak and the losers won eggs. Probably the worst promotion that you could possibly run, worst incentive that you can possibly run for a salesperson. So you should ask, what has, what have the best promotions and incentives been? What's the process for riding with their salespeople? What competitive lines do they sell? Is there a t sales department? If there is, can we incentivize the tsal department? How many trucks do they have? How many decal trucks do they have? How do you get your decals on one of those trucks? And then you also have to know who your contacts are, AR, AP, orders, depletions, key managers, salespeople, point of sale orders, etc. Additionally, what's the process to obtain monthly sales reports by SKU, by store? Customers who purchased your product but have not purchased it within 90 days. This is a critical report, we call a no-buy report and it's critical because if you add 100 accounts and you lose 90, something's not going right and you need to figure out what that is. It could be as simple as uh you're not in the right stores. It could be as simple as uh you don't have point of sale material up. Um, either way, you need this data to, uh, to fix your problem before it becomes a real problem. You want to get a list of their 50 highest volume independent accounts. Why? Because success breeds more success and failure breeds more failure. Fish where the fish are. If their, their top 50 accounts are their best accounts, that's where you want to be initially. Um, what are the distributor's margin requirements? What is the retail margin requirements in that particular territory? So for example, in New York City, the independent delis, uh, need 50% gross margin. That's a huge number. You're not gonna see that even in convenience stores in the Midwest. Does the distributor require an exclusive contract and a buyout clause? What is a buyout clause? A buyout clause basically states that if you want to terminate the distribution agreement and the distributor is still in full compliance with that agreement, you have the right to buy them out and take your product to a different distributor. The cost is usually 2 times gross pro, their gross profit for the trailing 12-month period. Sometimes it can be for 2 years. We've seen buyout clauses on the West Coast closer to 5 times gross profits for the trailing 12 months. Why would a manufacturer want to pay to get out of a distributor's house? Usually brands start with smaller distributors and when they get bigger or they, they outgrow the DSD distributor, they want to have an opportunity to terminate the contract without litigation and move on to a bigger and better distributor. Why does the distributor want want this? Well, unless they're Coca-Cola, Pepsi, or Doctor Pepper, Snapple Group, they know one day, if they do a good job, you're gonna leave for a larger distributor, and they wanna be paid appropriately for all of their hard work in building your brand. When you talk to distributors, and when you manage distributors, you can never forget the importance of distributor data. Whether it's a DSD distributor or a UNFIR KE. There's a saying by W. Edwards Demming, In God We Trust all others must bring data. Whether you're managing your sales, looking for investors, for your, uh, your data is critical. Too often manufacturers don't ask their distributors for data, or more often, Don't understand how to interpret or understand the distributor data, and use it to manage the distributor and increase sales. Here are the key metrics that you need to look at when you're looking at distributor data. Sales by month, by quarter, by year. Sales increase or decrease in dollars, sales increase or decrease in percentage. Sales per SKU. Top states sold by month, sales by chain, sales by store, sales by SKU by store, number of stores sold per month, top 10 customers, sales by channel, and the critical no-buy reports. Mike Schmoker said, things get done only if the data we gather can inform and inspire those in a position to make a difference. There are companies out there that are highly underutilized. We work with one called Business Analytica, for example. They take your raw data from all of your distributors, some of your distributors or whatever you want. Um, And they create, you, you literally upload your Excel file into their system and they create easy to use and understand graphs and charts that will help you manage the metrics of your business. Um, there are other companies too, um, this just happens to be one that we work with and like a lot. Um, I'm not really sure, unless you're an Excel whiz, not sure how people can look at all the data they get in the raw form and not convert it to, to these graphs and charts to really understand it and to really go back to the distributor or the retailer and say, hey, Look at this metric. What do you think of this? You know, we're in 100 accounts this month. How do we get to 130? We're in 20 of your top 50 accounts. How do we get the next 20? Uh, the data will give you all this information, but it's your job to use it, uh, and you, it's your job to find tools to use it wisely. Here are some questions that, uh, you should ask a broker. A lot of these are the same, some are different. A number of salespeople, number of supervisors, how are they compensated? What are the best ways to incentivize them to sell your product in the right stores? What have the best promotions been and why? Do they have competitive lines? Is there a tel sales department? Can we incentivize them? How do you get their salesperson to focus on selling your product now? Do they make chain calls? What chain calls do they call on? What is the cost of doing business in each of those chains? What independent accounts do they call on? Do they provide monthly turnover reports? Can you ride with their salespeople? What new placement deals do they do? What new placement deals do they recommend, and what is the cost to you? What case stack deals or value-added deals for refrigerated beverages do they recommend for independent retailers? Do they work with any distributors besides UNFIAKE? Do they provide you with category review schedules? Do they complete the required forms for authorizations and promotions? Do they utilize stand down promotions? Can you attend category review meetings with them? Make sure you do your research on the internet before you walk into a retailer buyer call. When do they do their new product reviews? Do they do them by category? For example, refrigerated beverages one month, shelf stable beverages another month, carbonated soft drink one month, juice is a different time. Um, if you get authorized today, when will your product actually be on the shelf? What margins do they work on? What have their best promotions been and why? Is there a minimum promotional amount required for promotions? Some retailers want to see a 20% discount as a minimum. Others are, I will leave it up to you, but I, I urge you to figure out and find out what are the best promotions in those stores. Are demos permitted? If yes, can you use uh your sales team or your team, your demo team, which is the best option? Um, do you have to use an outside demo company? Or do you have to use a demo company mandated by their retail, by the retailer. The best option by far is your own people because they know the brand, they know how to explain it, and they're used to it. If you hire an outside demo company or a demo company mandated by retailer, you need to make sure you train every single one of those uh demo folks and you stop by those stores to make sure they're doing it the right way. What is the best way to, to support the product in store? Some retailers will say uh scan downs. Other retailers will say demos. Find out what works for them and why. What is the cost of ad programs and what is the cost of demos. Do they use scan down programs? Is cold space available for shelf space, shelf stable beverages? What is the cost of slotting of refills? Do they require EDLP's everyday low price? But be truthful with the buyer. You can't afford what you can't afford and only you know what that is. It's better to say no than to run a bad promotion or get into an account you can't, can't afford. We once ran a promotion with Shoprite some years ago, um, on a soda called Nice and Natural. Um, and, uh, it was a buy one get one free and they ordered about 45 containers and we lost money on every single case we sold because we had no idea what we're doing at the time. So you, you, you can't run promotions that are too aggressive that you can't afford. If you can't afford them, that's something else. Um, is it bad to say no to a broker, a distributor, or a retailer? No, it's not bad at all. In fact, it's smart business. When I worked for Nantucket Nectars, um, Tom Furs, who was one of the co-founders, was the master of saying no if he didn't think the deal was right for, for Nantucket Nectars. I remember going with him to 7-Eleven in in, uh, Florida. I they had something like 700 stores at the time. And they wanted to give us, I think, two flavors, orange orange, mango and kiwi strawberry on the bottom shelf. And Tom said, no, we're not gonna do that. I appreciate it. Thank you, but I know that we'll fail if we do that. And the buyer was a bit miffed and we went to a store and he showed us where he wanted to put us and Tom said, or I said, somebody said, you know, hey, look, man, if you take Tropicana juice or something that everybody knows and you put it on the bottom shelf, you know, People are gonna find that product, but if you take a new product that no one had heard of at the time, and you put it on the bottom shelf, we're gonna fail. And then when we fail, You're not gonna be happy with me. You're not gonna wanna talk to me again. So therefore I'd rather tell you straight to your face, no, we're not gonna do that, rather than commit to something that we don't think is good for us. It turned out that the, the buyer wound up giving us the, the, the eye. Level shelf and we got more, more flavors in. Um, and I, I gotta be honest, I was, uh, freaking out in my mind as he's talking to the buyer and telling them no, but it was really, uh, one of the greatest learning, uh, opportunities in my career. So it is not a bad thing to say no to a broker, retailer or distributor. What is the UPS concept in the beverage industry? Well, we all know UPS, that brown company, they're great at shipping, but they don't sell things. Most distributors are good at delivering products, but they don't sell in the beginning. Most large distributors will not sell your product until you create the critical amount of volume for them to be interested. In a more simple way, be prepared to do all the sales to the distributor in the beginning. If you get the sales to a certain level, they'll begin to sell and they will take you to the promised land, but you have to start them off. Focus on the better territories and the better accounts within those territories. Make sure you merchandise those accounts because brands that sell between the eye-level position and the thigh-level position sell dramatically faster than products that are on the bottom shelf. Products that have point of sale of, uh, sell better than products that don't have point of sale. Um, success breeds more success and failure breeds more failure. What is slotting or a free field, and do I pay for it or not? Well, Most chains and some independents charge you for the pleasure of doing business with them. This is called a free-filler slotting. Traditionally, a freefill means they'll charge you for one free case per store per SKU at the price the distributor charges them, not the price you charge the distributor. Slotting is the same, but it can be more than one case. Although one case per SKU uh per store is the norm, some chains charge more than one case per SKU per store. And this is real money when you multiply the cost you sell, that the distributor sells to the retailer by the number of SKUs you want to sell, uh, and the number of stores in the chain. So let's take a look at this real quick. If the distributor is selling it to the chain for $10 and they have 2,757 stores, that's about $110,000 investment. That's a lot of money. And if you only had 354 stores at the same uh cost, that's $14,000. But this is real money and you need to figure out, um, you know, what it's gonna cost, and can you afford it? Especially from a cash flow position. Um, some chains including Wegmans, Walmart, and Publix for example, do not charge slaughter. But they're less apt to take new products without having some sort of data showing that the product has potential. There are some questions you need to ask yourself about slotting before you can say whether you should do it or not. One is, can I afford this? And I'm talking strictly from a cash flow perspective. How many cases do I need to sell per week in order to break even? Does your target consumer shop at these stores? Does your target consumer shop at each and every one of those stores, or just some of those stores? Do you want to pay slotting to stores where your target audience doesn't shop? Therefore, can I enter and pay slotting for their better stores where my target consumer shops? Or is it all or nothing? Every chain has a different policy. Another question that comes up all the time is how is how important is Whole Foods? We tell people all the time, if your business plan is only Whole Foods, you don't have a business and you don't have a plan. Things have changed dramatically with Whole Foods. They're no longer automatic early adopters. Shelf space is a premium and most decisions are being made at in the corporate headquarters in Austin. Many regional buyers have been eliminated. And even if they're still there, because all the product directed directives from Austin, they have very little room for new regional items. Now, this is a little bit different with a program that's called the local program. Uh, it's somewhat more flexible, but even here, they've been downsizing the amount of local buyers that they have throughout the country. And again, If there's 100 slots on a shelf for product, and, and Austin dictates that 97 have to be the ones that they say, Not a huge amount of opportunity uh to get on that shelf. Now, doesn't mean you shouldn't apply, you should, but don't be upset, don't be deterred when they say no. You just have to keep surrounding them and doing better in other stores until you can get into their stores. One of the things I've learned about the beverage industry, the word no does not mean no. It means not now, because you can ask the same customer 20 times, and they say no, and that one opportunity that somebody else messes up, or some other product fails, or some other opportunity exists, and they say yes. So you need to be persistent. Um, what margin does a typical distributor work on or retailer work on? Well, most distributors work on about 33.3% margin. Um, some better distributors in New York are asking for 40% margin. Ewan and Kay typically work on 25 to 30% margin, but there are a lot of buildbacks and deductions that you need to consider. They also work on reduced margins for volume accounts like Whole Foods and supermarket chains, etc. Traditional supermarkets work on 30 to 35% margin. Uh, typical convenience stores work on 40 to 45% margin, some are a little higher. Drug chains work on 40 to 45% margin. UNI and Cahe, uh, UNFI East works on 25% margin, UNFI West works on 28% margin, and Kahe works about 30% margin. Are all stores equal? No, 80% of your sales always comes from 20% of your customers. That's a fact. You need to fish where the fish are. This is the one element that has been accurate throughout my entire 30-year career, that 80% of your sales comes from 20% of your customers. Fish where the fish are, focus on the better accounts, get your products into the account and sold through. Have you placed your product on the shelf directly next to the brands currently servicing your target customers? This is critical. Do not settle for bad shelf space, because if you get bad shelf space 9 out of 10 times, your brand will fail. And it's not fair to you, and it's not fair to the retailer, and it's not fair to your brand. You need to know who your competition is, and you need to be next to them. If you have a sparkling water, it's not a good idea to sell it in the juice section, because most people aren't looking for sparkling waters in the juice section. If you can't sell next to your competitors, then you don't have a business. So make sure you get on the shelf right next to your biggest competitor. OK. What is marketing? Well, marketing, it refers to activities a company undertakes to promote the buying, selling or of a product or service. Marketing includes advertising, selling, merchandizing, and products and delivering products. We normally start with a process we call insights. We look at the competition, we talk to customers, we talk to the company, and then we say, OK. Um, this brand stands for X, and that X becomes what we call the platform. Underneath X is what we call the distilled proposition, the just do it for your company. Once you have your distilled proposition, everything should flow from there. Everything should, should mimic that distilled proposition, whether it's your in-store support, your online, social and creative trade show presence, core collateral and sales support materials, your branded website, your name, your graphics, your brand. Identity, your label, Amazon content, advertising, consumer and trade, PR press, events and promotion, branding and positioning, it all flows from your distilled proposition, and it all needs to look like it's the same brand. What is your unique selling proposition? And is it really unique? This determines whether or not a distributor, retailer, or consumer would want to buy your product. And is your product truly different. No one has ever come into my office and said, my product is awful, it tastes horrible, and it's too expensive. Everyone thinks they have the best product in the world. But is it good enough for distributors to pay attention and sell it? Is it good enough for retailers to discontinue something else in order to give you an opportunity? Will the consumer buy your product versus the thousands of other items in the store? Yet, Still, over 93% of new beverage companies fail every year. Why? There's a lot of answers to that question, one of which is, you need to make sure your unique selling proposition is really unique. I wanna take a look at Nike and Adidas to give you a different idea about their strategies. Um, Nike is more rooted in athletics, while Adidas is more rooted in style. Um, Nike is performance gear rather than leisure wear, and Adidas is the king of leisure wear. Uh, for Nike, if you have a body, you are an athlete, and everyone should feel like an athlete in Nike gear. Yet, Adidas, equally successful in many ways, ties into fashion, lifestyle, entertainment, music, culture, etc. There are 4 elements of a good brand positioning statement. Brand positioning statement is similar to a distilled proposition. So you're talking to the target. Who is in the consumer target? What slice of the population is the most motivated by what you do? Your brand is, and now we're talking about the category. Where do you play? What is the frame of reference that helps you define the space in the marketplace that you compete in? That is the benefit. Where do you win? What promise will you make to the consumer target? Thinking about the main benefits, rational and emotional. And that's because, meaning your supporting points. Why would they believe us? What support helps you to back up the main benefit? Again, one more picture of Nike, um, Their brand identity is very clear. Their physique is just do it. That's their logo and their symbol, uh, their relationship. They can provocation. They quote, Yesterday you said tomorrow, run today, don't let it run you. Uh, reflection, it's full of energy, aggressive, youthful, competitive, and brand conscious, brand conscious. It has a personality, it's sportive spirit. Athlete, lifestyle. It's culture is American sport and fitness, and wants you to have a self-image that says, I am an athlete, I am brand conscious, and I am cool. If you don't have these last 3 slides put together, there's a really good chance that things aren't going to come out properly for you. I would ask you to go, I would recommend that you go back or that you hire a professional, to lay some of this out. Now, you don't need all of this, OK? But you need to understand what makes you unique and why the, the retailer, distributor, and consumer, which all have different wants and needs, should be buying your product. I want to talk a minute about POS, which is point of sale. Um, I wanna break it down by needs and wants. Point of sale is kind of funny because I remember a story again by Tom First at Nantucket Nectars who went into the largest liquor distributor in, um, in Boston, and he, you know, Tom and Tom went together and they said, hey man, you know, you should carry our product with the best product, blah blah, blah. And the guy was like, yeah, man, that's great, you know, do you guys have POS? And Tom First said, yeah, we got tons of POS and allegedly, uh, as they were driving back, Tom Scott turned to Tom First and he said, Tommy, what's POS? He said, I don't know. But POS is all the things that you put in the store to help you sell your product. You need the basics. You need a sell sheet. The sell sheet is targeting the retailer and the distributor, not the consumer. The consumer will never see this, OK? This is your reason, this is your sell sheet needs to tell the retailer and the distributor why your product makes sense for them to buy it. Usually that comes down to money. Every distributor and retailer wants to make more money. How is your product gonna make them more money? You need a key account presentation. You need a cold box sticker. You probably want what's called low tech adhesive. It's a, it's a glue that you can remove relatively easily, but it's not a static cling where your competitors can just peel it off 123. You need a dangler wobbler. This is a product that fits into the channel of a shelf, and as people walk by, the, the, you know, blows a little bit of air as they walk by, and the uh dangler wobbler moves a little bit, gaining people's attention. Uh, just, just, um, Google it and, uh, you'll see what it is. Uh, there are other things that you want if you have the money, and if you're gonna be in the right channels. For example, if you're gonna be in the supermarket chain, market chains, um, you know, and you're not gonna be cold, you definitely want a display rack or a shipper if possible. You wanna have a channel strip, you wanna have a shelf sign, a pallet sign, and an outdoor sign. But again, understanding cash flow, understanding what you can do and you can't do, let's focus on getting the need first. What's the consumer response to your product at the price point. This is not your opinion, it's not your friends, family, partners, workers or investors' opinions. It's not people who know you, own or work for the company. I'm talking about complete strangers. Will they pay the price the retailer is charging to buy your product? Will they buy it again? If the price is too high, what is the price that would motivate them to buy? How do I stay relevant? The industry and this consumer usually move at an incredibly fast pace. What is popular today may not be popular in several months, years or decades. Look at juice companies, for examples. Look at apple juice companies, orange juice companies. look at fruit punch companies. All, many of these companies sales are declining. Why? Because they're high in sugar and high in carbs. Consumers have changed. They've moved on. Look at brands like New York Seltzer Seltzer, and clearly Canadian. At one point, clearly Canadians sold 23 million cases per year, but the consumer got smart, realized it was not just a sparkling water with flavors, and when they saw the calorie count and when they saw the sugar content, they walked away. Why do they continue to lose sales, market share, and even go out of business? If this industry, in this industry, if a brand is static, it is destined to failure. How do you keep changing with the times? When you look at great brand builders, marketers like John Bellow at Soby or Mike uh Mike uh Mark Rampola at Zico, or Mike Rapola. At, uh, uh, Vitamin Water and Body Armor and Lance Collins and various companies. They've been very consistent. They changed with the times of the consumer and they've made millions of dollars doing it. You cannot be static. Do you have a pipeline of investors and a list of metrics they want to see before they would invest? What are the most important metrics to investors? Well, sales volume, same store sales. What that means is that you were sold in the same stores in January, February, March, April, May, June, July, August, September, October, November, December. And that hopefully you were increasing sales at every and every month. The same store sales are one of the most critical factors because you can add 100 new accounts and increase your sales. But if you're not getting same store sales, you're in trouble. Uh, units sold per day, gross margin, team and or advisors. And they hate, hate, hate large geographies. Get deep penetration into tighter geography. If you perform locally, then it can scale. Most recently, uh, investors are also looking at social engagement. Not the number of followers, not the number of posts, but how your followers interact with your brand in social media. Are they liking things? Are they forwarding things? Are they making comments, etc. And obviously look at percent sales growth. What is and how do I track units sold per day, per SKU, per store, per day. USPD is the single most important metric for distributors, retailers and potential investors and it's the most important metric to understand the health of your brand. You can add new markets and thousands of accounts, but is your product selling through? Getting on the shelf is often the easy part. Getting off the shelf is much more difficult. Focus on increasing sales in your current stores. Don't add too many new stores or too many new territories than you can effectively manage and market to. Have you first demonstrated the proof of concept locally and via e-commerce? Best practice is to start in one market or one channel at a time. Markets like New York City are difficult, but they also give you the best chance of success because of per capita income, diversity of market, and most importantly, 25,000+ independent accounts, most of which have refrigerators. Yes, you can choose a market like New York City and a special channel regionally like natural food, specialty foods, at the same time. Build relationships with key retailers and key or pet accounts. These accounts are the accounts that have tremendous volume potential, and where your target consumer shops. What do you expect? You need to, to write down what you expect the 1st 3 months, the 1st 6 months, 9 months, 12 months, year, 2nd year, 5th year. How are you gonna get from point A to point B? Are your expectations fair and reasonable within 80% of a chance? You have to write these down, and you have to bounce these ideas off of people. And you need to be fair. You need to be aggressive, so your brand grows, you need to have you be hags, we call them, big, hairy, audacious goals. Uh, at the same time, you know, you need to be fair and reasonable, and be within 80% chance of success. A shareholders and operating agreement. What is a shareholders agreement? Shareholders agreement is an arrangement among the company's shareholders that describes how the company should be operated and outlines the shareholders' rights and obligations. The shareholders agreement is intended to make sure shareholders are treated fairly and that their rights are protected. It's important to have this because one day you will hopefully have partners and investors. The shareholders and operating agreements should also protect you. It spells out your rights. There's a great resource in New York City and in California called uh Giannuzi Luwwenden. They're a law firm. They're the most experienced and successful beverage attorneys. If you have an opportunity, contact them about setting up a shareholders and or operating agreement before you get too far into your business. How much money do I need the first couple of years in business? It's a very difficult question and depends on a lot of different factors, but let's look at your startup expenses, and this is not all inclusive, but just an idea. Production. Let's say it's $80,000. Now, this includes raw materials, ingredients, everything, labels, bottles, caps, yada yadda yada. But This could be higher, this could be lower. If you run less of a production, it could be lower. If you run more SKUs it could be higher. If you were to hire a branding and positioning firm, uh, that's approximately $25,000. If you were to hire a label and graphic design firm, you know, a really top-end firm, better-end firm, $35,000 to $100,000. Website and social media, $15,000 to $35,000. Startup for point of sale, $7500. If you're gonna do a trade show, when you think about all the product you're gonna give away, all the expenses like travel, uh, meals, hotels, shipping product to the venue, etc. you're probably talking about $150,000 to $30,000 if you do it on a really low, low scale. A street salesperson could be $650,000 to $90,000 90,000 dollars depending on the market. A regional sales manager, which you definitely do not need day 1, 120,000 to 150,000. Uh, and a brand management company like the Cascadia, usually around the 90,000 to 120,000 depending on what you are asking them to do. And you don't need all of this, but you do need to determine exactly what you need and how much it's gonna cost. There's a 95% chance you're not gonna be profitable for a very long time. And that is OK. Most of the beverage companies that have been purchased by Strategics in the past 20 years have not been profitable, including brands that you know like uh Vitamin Water, like Bay, etc. But you need enough money to survive. There are very few brands like Vitacoco or Monster who have run profitable companies in later years and have not been acquired. But you need enough capital to survive to survive. There are a couple of really good books to read. One is called High Hanging Fruit, Build Something Great by Going Where No One Else Will by Mark Rampola. Mark is the founder and former CEO of uh Zico, and Undaunted Overcoming Doubts and Doubters by Kara Golden. Kara is the CEO and co-founder of Hintwater. Um, both of these books are great reads and they're available online on Amazon. Um, What is the difference between markup and margin? Oh, thank God my brother does most of this work, uh, in our office, but, uh, you can read this at your leisure, um, but you, you will know that, uh, the food and beverage industry works exclusively on margin, gross margin. How do I process feedback from customers, consumers, and advisors with regard to my initial product? When do you stick to your guns? When do you listen and make changes? When is the appropriate time to make changes? Well, remember the seven P's. Proper planning and preparation prevents piss poor performance, or prior, proper prior planning prevents piss poor performance, or prior proper planning prevents piss poor performance prior. proper preparation prevents piss poor performance. Piss poor planning promotes piss poor performance. Prior planning and preparation prevents piss poor performance. Prior preparation and planning prevents piss poor performance, and positive pre-planning prevents piss poor performance. I cannot stress it enough. You need to have a plan. You need to ask questions. Moreover, This is a business based on common sense. It's not rocket science. Believe me, if it was rocket science, I would not be in this industry. Um, just think about it commonsensically and think about it in advance and try and understand what you're gonna be up against and ask a lot of questions. Do you have a scalable supply chain? Well, your target, uh, margin goal is about 45%. But you're not gonna come close to that making, making that day one. so you have to think about what will your cost of goods be if you achieve X volume, meaning you're at scalable volume. Usually one can expect about a 30% decrease in cost of goods once you're at a very large volume. Um, the other things to consider about a supply chain are all, are all of your materials readily available, or do you have to stock up and warehouse them? Uh, can you get raw materials to and from, uh, with the current situation we have in, in this country and many others, with freight. What is cash flow and why is it important? Cash flow is the inflow and outflow of money from a business. It's necessary for daily operations, taxes, purchasing inventory, and paying employees and operating costs. Positive cash flow indicates that a company's liquid assets are increasing. Most food and beverage startups have negative cash flow. Cash flow is important because it tells the actual business cash position of the business. For a business to be successful, it must have sufficient cash at all times. It needs cash to pay its expenses, to pay banks' loans, to pay taxes, and to purchase new assets. Most startups need to buy ingredients and raw materials with cash. They don't receive terms in the beginning. When they receive terms, the term is usually 30 days net. That sounds great. Unfortunately, most customers in the industry uh pay between 30 and 60 days. So that in and of itself creates a cash flow problem. Uh, the next few slides, this slide and the next one are, um, a beverage industry glossary, just a glossary of some of the terms that you're gonna hear come up, um, from me, from others, etc. It's not all inclusive, but we try and get it as close as we can. Um, it's here for your reference, uh, and to, uh, do what you want with it. Uh, there are some great resources out there. I would consider Cascadia Managing Brands a pretty good one. give us a call, give us, uh, an email. Beveridge Analytica is another good resource for uh data, um, understanding your data. And, uh, not very expensive when you think about it. Uh, Rena Partners are uh great marketers. I've been working with them since, uh, I was, uh, VP marketing at, uh, Naked Juice. And, uh, they are excellent, uh, do a lot of branding, positioning, graphic design work with them. Uh, Januzi Luwenden is a law firm that's excellent. Obviously, Bevnet is the premier, uh, website and magazine in the beverage industry. There are also a couple of smaller companies, websites that you should look at Specialtyfood.com, New Hope.com, Progressive Grocer.com, Supermarketnews.com, and, uh, GourmetNews.com. Make sure you're on all of these, uh, email blasts, so you, you're getting all the, uh, current data, current information. And um these are some of the brands that we've worked with and work, and currently work with. Uh, you wanna take your food or beverage brand to new heights, rely on Cascadia to be your guide. Our proven expertise in strategy, brand management, sales execution, marketing, and operations will help you succeed. Here's our contact information. I hope, uh, everybody, uh, got something out of this. If you have any questions, please feel free to, uh, call us or email us and we'll do our best to get back to you uh as soon as possible. Thank you for the time. Take care.