welcome to the Community Call Podcast.
I am Melissa Travers, Director of Community here at BevNET & NOSH, here with my co-host Monica Watress and Mike Schneider.
If you're enjoying the show, please follow and review us on Apple Podcasts or your listening platform of choice.
Mike and Monica, great to see you.
I am totally exhausted.
I don't know, do you think the full moon keeps you awake?
Just tell me, have you been having trouble sleeping?
It does for me because I'm a werewolf.
Monica, have you found over the last couple of nights it's been difficult to sleep?
I mean, it was for me, but that's because I stayed up watching the Chiefs game and drank too much alcohol.
I thought you were going to say I'm a werewolf.
That would have been hilarious.
I'm not a werewolf.
I'm a witch.
Oh, a werewolf, a witch, and a wardrobe.
A wardrobe.
We had today Lisa Wu in from Taste Deli, and she and I were both talking about how we haven't been able to sleep, and we think it's because of the moon anyways.
Lisa was here from Taste Deli, and she brought some samples of their adult squish packs.
They have konjac in them, which is, are you guys familiar with konjac?
I heard you're explaining it as a vegetable or something that has extraordinary benefits for you, but Monica probably knows more about it than I do.
It's a root vegetable that's high in fiber, and I've seen a lot of brands using it in low calorie, low carb noodles called shirataki noodles.
Yeah, that's exactly where I saw it too.
There's another brand that's doing the squeeze pack format.
It's called Dali.
We just wrote about it on NOSH.
The squeeze pack's also popular for newbies too.
But is Dali also a konjac product?
Yeah, it's a konjac snack.
She told us that it's a lot better known to Chinese people and Korean people than it is to mainstream America.
So just excited to see where that goes.
She also has kid crusher packs too that she called fruit gels.
She brought the fruit gels.
We got a couple of them.
It will be interesting to see how those land in comparison to the konjac.
I don't know.
I think the konjac is such an interesting ingredient.
You look at the squeeze pack and not for nothing, it's 10 calories and no grams of sugar.
I think that's what she should lean into.
Lean into the benefits there and make put the konjac a little lower down.
Because when I saw it at first, I was like, is that cognac?
Then I saw konjac and I wasn't sure if it was a different spelling because I'm dumb.
So I think there is an education.
She admitted to that there's an education hurdle there for konjac.
So I wonder if doing what they did for things like coffee fruit when that was new, because it's also called cascara and moving that back a pack.
I don't know, there's a tiny little brand called Bye that did that very successfully and exploded as a result.
Did that work out well for them?
It seems to have.
Well, it was great to see Lisa.
We also had Matt from Cometeer here today doing some sampling, which was fun.
So it's been a really busy community day with lots of visitors.
You can sign up for a Slack community at slack.bevnet.com, reach all of us here at NOSH and BevNET.
You can also register for our community calls at bevnet.com/communitycall.
It was really good to see Matt from Cometeer.
I'm a big fan.
I think it's super hard to do anything innovative in coffee because coffee is such a ritual.
And Cometeer is one for me that really pays off the whole idea of flash freezing, the perfect cup of coffee or a perfect condensed cup of coffee, and then being able to bring it back to life whenever you want.
It works for them.
And he was talking to us a little bit about how the economies of scale in a frozen offering work and that it's great for people who want to buy enough to keep them sustained for a while, but one box is difficult.
But that said, if you get a chance to try Cometeer, it's a really good way to get a sense for exactly how a coffee roaster wants you to taste their coffee.
It's so hard to do what they do.
I haven't had, it's not instant coffee.
Well, how would you describe the coffee?
I wouldn't.
I would just say this is a new way to enjoy coffee.
It's flash frozen.
That's how I would explain it, but that doesn't really tell somebody, well, what do I do?
It's just you take this pod, you open it, you put it in hot water, and then you've got the perfect cup of coffee.
Instant coffee.
And I know, I'm sure, I understand.
I would never call it that, but it is.
I understand they wouldn't want to be called that, but just so people understand what the value proposition is, it's the best tasting instant coffee I've ever had.
Yeah, it's the best tasting instant coffee.
And if you don't like one of the varieties of Cometeer, try a different one because they work with so many top roasters that you're bound to find something that you like, and they do like long tail, beautiful tea-like, almost very fruity, light roast to your standard, just medium roast, hearty, exactly what you expect cup of coffee from like the George Howells or the Joe's Coffees of the world.
And they've got some in-between stuff from like Intelligencia.
Onyx, if there's a top roaster, it seems like they're working with them.
And that's an interesting proposition because are they making their own product?
Yes, but is it also somebody else's?
Yes, we talked about collaborations earlier today on the CPG when we were recording the CPG Week Podcast.
And I think we're going to talk about another crazy one in a couple of minutes here, but that's an interesting one where everything Cometeer does is a collaboration.
And like my hat's off to them.
I think they're doing a phenomenal job.
Mike, I mean this in the nicest way possible, but you're a coffee snob.
Yeah.
So for a coffee snob like you to say that about an instant coffee, that's really saying something.
Well, thanks, Melissa.
I mean, I appreciate that.
You're welcome.
I think it's just a great product.
And it's one of those like I love, love, love to make my own coffee.
I love to grind the beans.
I love to and I love to make it for other people too.
So it's difficult for me to choose another ritual.
And that's one that I'll choose.
Well, Mike, you just did a little bit of foreshadowing.
We may as well just jump in with both feet.
Monica, what treats doth you have over there?
Treats.
Well, if you weren't already aware, Coca-Cola and Oreo have joined forces on not one but two products, a Coca-Cola flavored Oreo cookie, and an Oreo flavored Coca-Cola.
And I have both.
We were talking about this, well, I wasn't allowed to because I'm the director.
So we were talking about it backstage, I guess, on the CPG Week podcast.
I can't remember a situation where it's usually, you know, a collaboration happens and it'll be something like, you know, Ghost and Sour Patch Kids, and it's in ghost form, you know, ghost energy drink form.
But I don't remember one where they've done it on both sides, where they've made the coke, like they've made the beverage and the food.
It's like a CPG palindrome.
It's super confusing.
I've never seen it before, but I think that I'm going to have to try them together by dunking a Coca-Cola flavored Oreo in Oreo flavored Coke and hope that my heart doesn't explode.
I'm really worried about that because when I was a kid, they told us that Mikey likes it from Life Cereal.
I'm gonna date myself here, but remember he likes it.
Hey, Mikey, if you don't, just Google Mikey Life Cereal, then you'll see the commercials.
But they told us on the playground that Mikey drank Coke and ate Space Dust, which is the precursor to Pop Rocks.
And guys, it looks like a snack shop product.
You gotta go, just Google Space Dust.
Wait, what's Space Dust?
It's Pop Rocks before Pop Rocks.
It's like the original Pop Rocks.
You just gotta Google the packaging.
It's incredible.
And his heart exploded.
So Monica, please, please, are you sure this is okay?
I don't know.
I mean, there is popping candy in the cream of the Oreo to simulate the carbonation.
Wait, Monica, no!
Please, don't do it.
Well, I just want to say before I try this that I've really enjoyed getting to know both of you in my short time here at BevNET & NOSH.
Monica, I can't look.
We love you too much.
I know, I know.
We can't lose you to this.
Here she goes.
Just gonna pour the Oreo flavored Coke into a whiskey glass because it's easy to dunk.
That's where you do all your dunking.
Monica's dunked her donuts into a few whiskeys, a few bourbons.
That's what gets me through the day.
So this Coca-Cola flavored Oreo, one of the wafers is red and tastes like Coke, and then the other one is like the signature Oreo cocoa wafer.
And then there's the cream, like I said, has popping candy in it.
And then with the drink, I mean, it's, you know, well, I got the Coca-Cola zero sugar, but it says fizzy cookie flavor.
I'm so scared.
I'm so scared.
Okay, what is the internet?
The internet couldn't upload.
Oh my God.
She's doing it.
Oh God.
She's dipping it.
We're going to fall into the slipstream.
I'm so scared.
It's fizzing.
Here we go.
I'm scared.
Will it waffle?
Will it give sugar diabetes?
Oh my God.
And?
Is it good?
There's so much going on.
There's the carbonation.
There's the popping candy.
There's this.
This is a lot.
What was that look on Monica's face?
That's-
She's trying to get us to hear the pop-rock popping.
Can you hear it?
Is the mic picking it up?
Wait, try.
Wait, I'm going to get another bite.
Oh my gosh.
You have to watch the video of this one, guys.
Do you hear it?
Keep doing that because that is gold.
That is absolute gold.
Look at that.
This is-
All right, do it again one more time.
It's going to be my dating profile picture.
Oh dear God.
Yeah, that's perfect.
Where do we go from here?
Because someone who sees that and is like, that's the person for me, that is-
I think that will work.
Well, the good news is I didn't die.
No.
Thank God, I was scared.
Yeah, and we're all still here.
Yeah, the Internet didn't implode either.
I thought the space-time continuum might collapse on itself.
Coke Oreo and an Oreo Coke.
Yeah, I know.
I mean, it doesn't feel like you should be able to walk away from that.
And yet we can.
And I think it's possible.
Well, I'm really glad that I got to experience that, and I think I've walked away, although I'm not quite sure yet.
This episode of Community Call revolves around a question many emerging and even later stage brands ask, which is, how long until I start making money in retail?
Jia Liao of Hotpot Queen posed this very question on LinkedIn, sparking the inspiration for this episode.
To explore the answers to this question, we are joined by Dwight Richmond from Town & Country and Sarah Dorey from Synergy Sales.
Our guests discussed navigating the ever-evolving dynamics of retailers and distributors, deciding when and how to target larger versus smaller chains, and employing the most effective trade spend strategies.
Please enjoy.
Hello, and thank you so much for joining us.
I am Melissa Travers, Director of Community here at BevNET & NOSH, welcoming you to Community Call.
You can join our Slack community at slack.bevnet.com to reach all of us here at NOSH & BevNET.
To listen to this Community Call as a podcast, you can do that on your listening platform of choice.
Today on Community Call, we are thrilled to feature Jia Liao, founder of Hotpot Queen, to try to get the answer to a question so many founders have, which is, when do I start making money in this business?
Our experts, Dwight Richmond, Town & Country and Sarah Dorey, partner of Synergy Sales & Consulting, are weighing in and giving advice that will hopefully get Jia an answer sooner rather than later.
Thank you all so much for joining.
It's great to have you here.
We're going to start off with some introductions because I think it's important that our audience know just how well-versed in CPG our experts are.
Dwight, let's start with you.
You are the Director of Center Store for Town & Country.
Previously, you were at Fresh Market, Earth Fair, Whole Foods Market.
You worked on the distributor side at Cahee.
My first question for you is, is there a side of CPG you haven't worked on?
I've never worked directly for a brand, so that is the only thing I have never done yet.
Well, you certainly have a ton of experience that will help us answer the question, how complex is this?
I mean, it's really complex because it really comes down to the person, the brand, the founder, their place in the universe at the moment of time when they go on shelf.
There's a lot of factors that come into play here.
The environment of the economy and the consumer's acceptance and adoption.
Sometimes you can grab onto this rocket ship and go super fast, as we've seen with many brands, and especially in beverages and snacks.
Sometimes it's a slow, steady build to success like we've seen with other brands in pantry categories.
There's really a ton of factors that come in play here.
Well, we're going to get into all those details in just a little bit.
Sarah, thank you so much for joining us.
You are a partner at Synergy Sales Consulting Group.
You were Ignite before that.
You spent a good chunk of time at General Mills.
Is this a question that a lot of the brands that you work with at Synergy are asking?
You know, it is.
And I think that Dwight said it really well of it depends on so many things, right?
I would say it's a choose your own adventure, but a lot of times you don't get to make a lot of the choices.
But, you know, it's funny, I've been with one of the brands that we work with at Synergy.
I've been with them since the very start.
And literally just this morning, you know, this brand is one of the fastest growing brands in the category, doing really, really well.
We've built the business in a really strategic way.
And yet, we're sitting down today reviewing cost of logistics, because we've come upon a large retailer, and literally we're saying, whoa, we don't like these numbers.
And so it's a thing where you have to constantly assess, right?
Like what is today may not be the same way next year.
And then retailers are changing all the time, too, and as our distributors.
And so you really need to stay on it because the old adage of, you know, what got you here won't get you there.
It's kind of the same in profitability, you know, in terms of making a paycheck.
Well, we are looking forward to hearing all of your best advice and tips for Jia over the course of this conversation.
Jia, let's move the spotlight to you.
Hotpot Queen's inception story is a great one.
Please tell us a little bit about why you got into this crazy business.
Well, the story, thank you so much first, Melissa, for having me on this call.
And to let me represent the thousands and if not tens of thousands of CPG startup founders that are just really dying to get this question answered.
It's often something that we love to talk about amongst ourselves, but we don't really like to talk publicly because it shows a little bit of maybe too much transparency, a little bit of vulnerability.
But I think it's important that we get those very important questions out in the open and get the answers so that we know how to position our brand.
A little bit about Hotpot Queen, I thought I'd get started.
Actually, the story started back in 1982.
When my mother opened a three-table restaurant, a hotpot restaurant in my hometown of Chongqing in Sichuan.
I don't know if you guys are familiar with hotpot.
If you have been to a hotpot restaurant, they always serve you the hotpot soup in a pot that divides the soup into two.
So my mother invented that pot in the early 80s.
It really makes something as simple as a hotpot from a regional cuisine into a global phenomenon.
Therefore, she's regarded as the queen of hotpot by international and domestic media.
So in 2021, I moved back to the United States and I launched Hotpot Queen.
Username to give tribute to my mother's legacy.
At the same time, I wanted to rewrite my own story.
So we sell premium spicy Sichuan condiments from chili sauces to package noodles.
They are authentic, packed with flavor, and with good-for-you ingredients.
And we are all manufacturing them in our family-owned factory in Shizhou, which is a hometown of Sichuan chilies.
So we launched it at Expo West of 2023.
It's been like a year and a half.
So far, it's been a wild journey, to say the least.
Lots of ups and downs, so many challenges, but same time, very fulfilling.
And we are currently in about 500 stores across the country.
We're in the Fresh Market, we just got into Brechtown, we're in Fairway Market, Town & Country, Nugget Market, Hagen, and 200 plus independents.
We also just launched Australia Market.
We're actually in their second largest chain calls, in 50 of their upscale stores.
It seems to be nice, right?
I mean, on LinkedIn, people are thinking I'm doing pretty well, but I know that I'm still not breaking even.
I'm starting getting a lot of pressure from my family, asking why am I spending so much of my time working on this business, and when am I going to see the profitability?
Also, when I talk to my CPG founders, mostly are like startups, CPG founders.
They also ask me, Jia, when do I ever make money in this industry?
I say, I'm dying to know as well.
And that's when I started to ask around.
I met up with Dwight the other day, I think a couple of months ago, and I asked him this question, he gave me some really great insight.
That's how it prompted me to write that LinkedIn post about when do we make money.
And I'm glad that LinkedIn post got us here so that we can actually open and have a great discussion around this topic today.
May I ask, have you taken on any investment or are you totally bootstrapping it?
Currently, it's all family and self-funded.
I haven't taken any outside money.
The reason why is that my last venture, I took money from outside.
We actually raised $8 million.
It consumed like 10 years of my life.
And at the end, I totally lost control of the company.
It was really growing for the sake of growing because I need to grow to perform for the investor exit.
And I just didn't like how it ended up.
And I wanted this venture to be a little bit different.
I wanted to boost drive for as long as I can, which is very difficult.
So that was kind of one of the question I want to ask later.
Is like, can people like me who doesn't want to take outside money or try to boost drive as long as we can, can we even make in this industry?
I mean, I feel like we don't have capital.
You just can't grow.
You need capital to grow.
And is that even a viable path?
But anyway, that is for later.
That's my intro for now.
Well, thank you so much for being so transparent and asking this question.
We were talking about this a little bit earlier.
You know, on LinkedIn, all you see are the wins, but this is such a valid question and one that so many folks have.
Dwight, let's start with you.
Jia sat down with you, asked you this question.
What are your initial thoughts and like sort of initial response to the question?
When do I start making money?
Usually it really comes down to what do you want as your strategy for your company first and foremost.
So a lot of questions get answered by what does success look like, whether success is exit, which is, you know, in my early days, I used to cringe about that.
My Whole Foods days was always like, you know, we were looking for brands like Jia, and we would build them up to be wonderful and great.
And then our hearts would get broken because they go into retailers we didn't like or they'd sell to a big CPG.
But as I've matured in the business, I realized that's a real reality, that's a path, and that's a good path for a lot of people because it creates wealth for their families.
And a lot of people want to go on to the next journey.
And so it truly starts kind of there as a brand.
If you've built a great package, you've built a great product, what do you want?
What is the end game for you?
Is it generational?
And I remember writing, I think a post similar about this years ago was, are you a generational brand or are you kind of a brand that wants to exit in an acquisition strategy?
Either is okay, but let's start there because that really truly does determine your burn on when you start making money, and do you take capital on and how do you grow?
And so I start there first with brands when I'm trying to understand kind of their ethos and where they want to go.
And again, either answer is okay.
Jia, what are your thoughts on that question?
Are you looking to sell as soon as possible, or are you looking to be in CPG for the long haul?
Well, I think I did consider this question when I first launched and that's like complete two different kinds of paths.
One is that you want to grow as fast as possible.
You want to get the market share.
And to be honest, like the category I'm in, I cannot be number one or number two already.
I mean, there are already major players in the industry.
But I am, it's more of a for me, it's like carry this family legacy.
I really wanted to share the authentic recipe that's been passed down and that flavor of hometown to a brand new audience.
And I was more leaning towards the generational kind of legacy.
And I wanted to make this business to a reach of, it's like, re-keep or become profitable.
I mean, I know at some point, I must take money from outside.
I mean, I just cannot do it myself, but I wanted to delay that process for as long as I can.
And I'm not really like looking for, getting like a multi-million dollar, get really rich and exit.
I'm more like I wanted to build a business that I feel really proud of.
I want to be in the retail stores that can really sell and I want to build that customer relationship.
And I wanted this business to provide me for my family for a long time.
So that's where I'm at right now.
I just don't know if this is viable path with today's CPG landscape.
It seems difficult for small fish that's not taking big money, that's not spending huge marketing dollars.
Like how do we grow?
That's a big question.
I might even make the right choice right now.
So the thing I would add to, I think what Dwight stated is really important.
I think, you know what, I've met a brand that was, they were two older people and they had built a lovely brand and their goal was to make a salary off of it.
And so they had been making a salary.
So I told them, like our number one piece is to not expand so much that you can't pay yourself, right?
So they were already making money.
And so some of those things are, you have to know in advance, like what is this business capable of, right?
So at my very best, you need to look and say, you already stated you're not going to be the number one or number two in your category.
So what are those brands doing though, from a velocity and a store count, and then build a plan below that, right?
So what you need to do is build a realistic plan that says, okay, at my very best, here's what I think I could get to, right?
In terms of doors and velocities, and what do you think you can, what your threshold is on SKUs?
And I would say the word be realistic.
And so that means as a founder, you probably also need someone else to vet the number because it's your baby, right?
Like, so you want to reach out to Dwight and say, hey, is this in the ballpark of what is out there?
And run those numbers and see.
You might, there are certain categories that are not high velocity, right?
That are not in every store.
And if that's what you're in, you need to be cognizant of that.
And it doesn't mean that in 10 years, every store won't have it.
But for today's purposes, you build what is available to you today, right?
And even if you're saying, in 5 years, I'm going to get here.
But that's what you'd start with.
And then I think the question becomes, then what do you layer on, right?
So it's a matter of, hey, I want to be, a lot of people's goals used to be, I want to be in Whole Foods.
Well, it's great.
It opens up the vast majority of UNFI to you.
But also the fees that are associated with building that business today are dramatically different than what they were even five years ago.
And so that model, I don't want to say it's not ceasing to exist.
It's very different.
It adds a layer of complexity too because you're only as good as your sales, right?
And so it goes to that, what we're talking about that.
Usually in 24 months, you'll know one way or the other where your brand is going to go if you're a new startup brand, in my opinion, because what we say, you're only as good as your first year on shelf because you've paid all your free fills, you've kind of put all your cards on the table with the retailer.
And so at this point, when we start seeing going into year two, we've seen kind of your life cycle, we've seen your seasonality curves, and either you have the staying power to maintain your levels of support, or your category shifts, or your velocity shifts, or consumer interest shifts.
And so then that year or two really becomes really critical on staying on shelf, right?
Because you've invested a lot, now you want to start seeing the return on that investment.
And that really doesn't happen until a year or two.
It's been my experience, both for the retailer and for the brand, because in the retail world, we don't really see the sales investment mature until after that 12-month cycle that we've seen the seasonality curves occur in.
So it kind of goes both ways.
A good retailer should hold on to a brand for a full year, especially in an unproven category.
But that said, to your point, Sarah, the demands are so high right now, that isn't always a guarantee with every retailer anymore.
So it does beg the question where for back to Jia is like, okay, well, how do I survive?
Well, I think one thing also to consider is that you're number one and you're number two brand, you get good intelligence on who they are, what they are, how their investments are.
Because you may find you may be number one or number two very quickly in categories.
Because the one thing we do see, it changes so dramatically so quickly right now in high velocity, high growth categories like you're in the chili crisp world specifically.
There was one brand that came out and it started a rocket ship of success and everybody followed in and then usually there's a settling that will occur in that space when that category growth explodes.
You want to be on the positive side of settling and that will set you up for the most success in multiple years to come back into the five-year plan.
I see.
Dwight, I want to ask you, so Sarah mentioned a lot of brands are chasing after Whole Foods, Sprouse.
I'm one of those brands too, to be honest, because I was doing some calculation in my hand.
I'm thinking, so how do I make it?
In order to get ourselves and get a probability, I need to either have more doors or more velocity.
Velocity is pretty difficult.
It takes time, it takes lots of money.
Opening doors seem to be maybe easier to pass, especially if you can land one of the bigger retail chains.
I mean, in the United States, there's only a few that has that kind of number, right?
I mean, definitely Whole Foods and Sprouts.
I mean, I don't want to go to traditional channel.
I mean, they have numbers, but they don't have velocity.
So the ones that has number and maybe velocity are just very handful.
And it's like expensive, now the landscape is very changing.
I wanted to hear from both of you is like, for a brand like us, I already kind of laid it out that I'm not really chasing big money right now, but I wanted to grow organically and boost strife as long as I can, make profit with business.
Should I even be trying to get into Whole Foods and Sprouts at this point, or should I wait for a couple more years?
And but without sprouts, without Whole Foods, I'm just chasing the still chance, but like smaller chance.
Is that going to make the number work for me?
Like what would be the best strategy at this point?
Both come with benefits and both come with disadvantages for makers like yourself.
So you may be in a situation where you got to pick one or the other at this moment in time, if you're not going to take outside capital.
As you're looking for your plan for growth for the future year, and I think some people do that, and doesn't mean you don't submit to both, but you may be leaning a little harder on one versus the other, because you have a good insight into kind of which direction they may or may not go.
You need to be totally upfront and transparent with their fees and their expectations.
Then kind of where Sarah went to, and I'll let Sarah go further on this, is you need to be really, really aware of their distribution channels, and those distributors' expectations for you.
Again, Whole Foods opens UNFI, it's automatic.
Sprouts often will open to Keighi.
I know you're in Pod as well, that's an option.
But the sprouts buyers may say, no, we want you to go through Keighi because we want velocity, and we want best cost of goods because it's a higher demand category.
So it opens up other costs and other expenses that you maybe weren't prepared for because of your current state of growth and where you are originally.
Oftentimes, when I've been on this other side, it has been one of those tactical decisions of how much.
I can think back to one brand specifically a few years ago, that immediately went into a national retailer surprisingly, and completely burned all the capital off in one retailer.
Then basically had to retrench back to the West Coast.
Now has this idea of going deeper with fewer doors, basically focused on the West Coast, and has seen success in that path to begin then to prepare to go back into more of a national footing with strategic retailers.
Sarah, would you like to add on to that?
I think my first question would be, you have 500 doors today with a key anchor, like a fresh market, a fresh time.
Do you know the levers you have to pull to drive your business and what you have today?
Are you happy with what you're seeing today?
Even if it's not in, yeah, I need more velocity or more doors, like if it's within the realm of your category.
I would say first off, assess that.
If you're not happy with that, I would actually say any problem you have is always easier to fix with a smaller set of stores.
To Dwight's comment there, I would say, I get concerned when a brand's TDPs outpace their demand, because the worst problem you can have, one of them, is you're in 5,000 doors and you can't do anything to pull a lever to make that business move.
That's a very expensive proposition when you're in a national retailer and sometimes you have demands on hitting numbers with them.
Assess, are I happy with what I have today?
If your answer is yes, I know I need to do 16 weeks of promotion at this price point, that generally makes the buyers happy, it gets me some trial, whatever that looks like.
If you feel like you have an 80 percent base of what I need to do to do that, then I think the opportunity against a Whole Foods or Sprouts is great, assuming you run those costs.
If you need to do ads and forced, if you go global with Whole Foods and a forced TBR, those are costly situations.
Do the math and make sure you can afford it.
What is TBR?
A temporary price reduction.
So if you get promo price.
A lot of times, Jia, in your situation specifically, you got to run the ROI on the fee versus how much you think you will sell.
I've run into that situation many times having run that program at Whole Foods for many years where brand like you would say, well, I paid X 10,000s of dollars for this, and I never even sold that much to begin, and so it becomes a real question.
I ran a display program for one of the bigger retailer I'm in, in April, I think it was $4,000, and I asked a couple of my friends to because wherever I live, I don't have access to that store, because they're not in the West Coast, and then they can't even find it on the display.
So I think a lot of times you pay those fees, like a display or promotion, and it's not executed in the store, like every single store is supposed to be, but it doesn't.
So that number, so I guess, so what I'm trying to say is a lot of time, reality doesn't equal expectation.
You expect your product on the display for all the stores, for the whole entire month, but in fact, they're not.
So and then that really skew the numbers and expectations.
And I actually have to consider having just trying to expand independent as much as they can.
Actually, we're doing very well on fair, because they're heavily visual, they love those small indie brands.
It takes a lot of time to go one by one, and they don't have a commitment of buying your products on a regular basis.
But same time, there is no entrance fee to getting the shop.
So those are different routes.
I'm coming to Penang for next year.
I know the Whole Foods Global Flavor Caligar Review is coming up in October.
I'm just thinking it's something that I should have to pursue.
I shouldn't hold it off and trying to go with more of a natural, smaller chance.
So I feel like I got the answer from you guys, and it gave me a little bit more to think about, and that helped me create a clear path.
The only thing I would add is as you think about retailers to approach, Whole Foods and Sprouts have good and bad things each.
But I always encourage emerging food to do is stay as close to the consumer as you can.
So when you think about footprint and as much as I would say, hey, there's a lot of fees of working with Whole Foods, part of the reason for that is they are cultivating your consumer.
They're doing the work of finding your consumer for you.
And so what your goal is, is you got to get into that door.
And then you don't ideally you have to pull fewer levers because they've already done the work of who's coming in the door.
It's going to align to who's going to pick up your product.
The opposite of that is Walmart, right?
They want everybody to come in.
And so the noise you have to fight through, which means think of noises spending, right, is so much greater at those doors.
So if it's not a Whole Foods or a Sprouts, you should certainly take a swing, right?
You can always back out as you say, hey, I found these numbers and I can't do it.
Always take a swing.
But then think through what are those right retailers that are close to the consumer I want?
Great ones out there like O'Wagman's, Lunds & Byerly's out of Minneapolis, Kowalski's, Central Market.
There's amazing small retailers that you can start to say, cultivate your consumer base, build your tribe.
Because those are the folks that are going to talk about you.
They're going to recommend you to others.
And so you don't have to, 10 years ago when I started, which is not that long ago, 10 years ago when I started doing small food, everybody started in whole foods.
That was just the way it was.
That's absolutely not the case today.
And so there's certainly a huge benefit to that business model.
But you're going to learn a lot more about, if I have a really strong Central Market business, I have a really strong Lowe's, United, those kinds of businesses, then once you get bigger, you can just amplify.
And that's a way easier path than figuring the whole thing out all at once and a thousand doors at one time.
And I agree with you.
And I said that when we want to improve, it's either open more doors or better velocity.
Another way I just thought about is to get a second placement.
For example, we had our two sauces at the Fresh Market, 162 stores since last October, but they didn't take any of our noodles.
So this year, I'm applying to say, hey, can we get those noodles on your shelf?
And then that's almost like a double the store count, but just adding more inventory and making easier than opening company noodles.
And I know we've talked about that one before.
In one real world incident, there was a brand out there, I'll say Lotus Foods, that was a rice brand forever and ever.
And that's a slow velocity category, and they would trudge along and they had great product, great story, good door counts.
But I wouldn't call them really getting rich and happy.
And it really came down to incremental, incrementality of finding the white space where you can fit in and you can have a velocity item.
And that became their ramen at the end of the day.
And so that really sort of transformed them and kind of rocket ship them into a whole different gear as a brand, because of that.
And so oftentimes, when you have kind of fixed velocities and your category is starting to kind of settle in, and you know, I think, you know, kind of the sleepy categories, like the condiments can be that way, like a salad dressing or whatnot.
They're great, we need those brands, but we kind of know what the velocities of those categories are.
Chili crisps is still really hard to tell where it's going to go.
Generally, it will probably settle in.
And it's really then a matter of, okay, what incrementality do you build?
Do you build in to go deeper with another retailer and create a second, third skew or even just splinter off another offering that drives the customer to pick up more than one thing?
And then you're starting to then become a lifestyle brand, right?
And then people are thinking of you as a brand totally differently because you're spreading out.
And I can think of multiple brands who've done a really great job of that and started out in what was kind of a slow, sleepy space, but then just found their stride in a totally different area because they just kind of thought outside the box.
Codiac Cakes is a great example of who would have thought you'd start that business out of Pancake Mix.
Oh, actually, I wanted to just chase Dwight's point.
I remember you took me to the store when we had that conversation.
You showed me some of the skills.
And then one thing hit me, right?
Before, I was thinking, as a startup speech founder, I don't want to have too many skills.
I just want to go one or two.
That's what I'm thinking.
I want to be focused.
But then Dwight did come up with, gave me a really good insight, saying that, yeah, you don't need to have that many skills, but you need to have a good amount of set, or a good amount of skill in one set.
Because right now, so I had a powder, noodle and sauce, but actually they don't sit in the same shelf.
So in a way, it seemed like I have four or five different products, but they're all scattered.
And in each category, there's only one single product sitting on the shelf, which is very easy to, you know, people, it's unnoticed.
So I think that one of the recommendations after I had a meeting with you, Dwight, and I talked to somebody else saying that she only had one skill of like one category product.
I said, you should have at least two or three.
So when they sit on the shelf, if you feel like it's a concise brand, it looks better.
So and I think that's actually really, really good insight.
So instead of like having so many different kind of skills, they should focus on one category on the shelf, with different kind of flavor cues or slightly different variation to kind of give that shelf presence.
And then then to find kind of which one works the best.
And then, you know, I mean, to have a little bit more, but then narrow it down later.
Do you guys agree with that strategy?
Absolutely.
And I think remember to especially if you start out at a really small retailer that like loves your brand as they put you together.
And it's amazing as you get even just a tiny bit bigger, your life will be ruled by category reviews and tied to a buyer.
Right?
And so the easiest thing for a buyer to say is no.
And...
And oftentimes multiple buyers if you're into different spaces.
Right.
And so you have no power.
Like you absolutely have no power.
So you're coming in wanting yeses.
You need to have at least two to three, you know, if not a fourth.
So if they take three, you present four.
To give yourself a little bit of staying power.
I always think about like brands as my kids, right?
Would you send your kid to a park by themselves?
Right?
They have to go to this park?
No, they need a friend.
They need someone to write shotgun.
Sarah, that's a great point.
If you don't mind me asking, knowing what to say no to.
And this actually relates back to your comment about TPRs.
How does Jia know whether a trade spend that her retailer or a distributor is asking for is worth the investment?
You have to weigh the two.
You need to it's I hate to simplify it that it's all math because it's not just math.
But know your numbers.
So that is one that is really important.
Know your numbers, run scenarios, high, middle, low.
What does this look like?
Then you know what it looks like, and then what do you think you're going to get?
And so that's what it comes down to.
And then it becomes honestly, what can you tolerate?
Some people can tolerate a higher rate of spend, but you have to assess your numbers regularly.
And then also know too, the other thing too is understand the distribution network.
That drives a lot of cost, right?
So if you're going to go in through a certain distributor, you need to know the fees and the costs that go to that.
You also need to know the upcharge that they're going to charge to a certain retailer.
Then you need to know, I'm getting a bit far here, but you need to know how do I pay that retailer?
How do they execute?
Are they MCB?
Is it OI?
Is it only scan?
You have to walk through all those, especially, and I guess even at the start, slotting versus free fill.
All of those things tie in.
Then you even have to get a little further to say, if I go to Whole Foods, do I need a broker?
Is that a fee I have to add in here?
The industry has also had, there's a lot of additional third-party fees that are out there, whether that's images or systems.
None of those should be high enough to break you.
That being said, they add up.
You have to walk your product all the way through when it leaves you to when it gets to a consumer.
Every touch point, generally speaking, is costly.
Walk yourself all the way through that when you're doing your math, and then you have to make your decision.
No one can make that but you.
All those costs, that's what prompts this question.
People are like, how do I make money in this industry?
Let's just say that we, because we're having this call not for more of a mature brand, it's really for startup CPG founders.
With limited labor and the financial resources, I want to ask you this question, Dwight.
It's like, where should I spend the money to move the velocity in the store?
There's many options.
There is display, there's a demo, there's temperate price reduction, there's scan bag, and I don't know, digital ads.
How do I mix most out of the money?
One thing I would say, Jia, I want to take us all the way back to the very, very beginning when you put the first chili crisp and the first bottle before you can put a label on it.
Sarah will agree with me wholeheartedly on this.
Did you do your cogs right for where you wanted to go?
Oftentimes, small and I say because you just said we're talking about set up, the entrepreneur, the new person starting out.
That is usually the single biggest mistake that they make, is they didn't build on enough gross profit margin for themselves and for the growth plans that they had.
The worst thing, absolute worst thing that can happen is you come to a retailer that you got in to, say, I got to give you a price increase.
Because you'll make up the reason why, but honestly, if anybody's been in this business long enough, we all know what it is.
If you're young, you didn't plan at Chicago's right in the first place.
Can you share what typically, let's say that the price you have on the shelf is how many times the cost?
Is there a rule of thumb?
I'm sorry, one more time on that question?
Let's see, what is the rule of thumb for, let's see, how many times the cost?
Let's say that if your cost is $3, how much you should be selling on the shelf as a retail price?
That's been changing a lot too because of the distributor costs and other fees that go into things.
I was just talking with somebody before, we were saying, well, 45 percent margin internally for a lot of brands was enough.
It isn't anymore.
Really, honestly, I would say, and Sarah, you can jump in on this, I'd say it's over 50 now at this point.
I do rough math, I double it.
If I'm talking to someone new and they say, my unit cost is $4 and I want to be $6 on the shelf, my first answer is, well, that's not happening.
My rough math without even knowing delivered versus pickup, is if you're $4, your best case is $8 on the shelf to roughly assume.
But I think Sprouts just announced a 6 percent increase in cost of doing business.
UNFI increased their fees 3 percent.
So that even rough math is probably not enough at the end of the day.
I was thinking about $55 right now seems about right to me.
I mean, the retail store takes 40 percent profit, and then the distributor takes anywhere from 18 to 25.
And then you still have maybe transportation costs maybe, and the warehouse storage and everything.
So yeah, I definitely see that doing business is getting increasingly expensive.
What you have to do is you have to protect yourself first, right?
And that gives you the test model for viability on shelf.
So you have to establish kind of that.
Okay, here's all the cost factors that go in to make my product.
Here's incrementally or amortized.
Here's what those little fees that we've all talked about are going to cost me over time.
And then we can kind of move into TPRs versus demos versus everything else.
And then that kind of begins to put your final FOB or delivered costs out there to you to then go to the shelf and say, okay, I'm going to be X on the shelf when I tack on 40 margins for the retailers or 40, this may be even more like 45 anymore, depending on the retailer, especially in your category.
And every category is a little different where the margin requirements are for the retailer.
But if you then start to look at it and you're like, well, shoot, I'm $5 higher than the next lowest competitor, then you may have some questions that you need to go back and ask.
The answer isn't, no, I can't go to retail.
The answer is, okay, do I need to retool my ounces?
Do I need to look at my cost of goods and get better, drive more efficiencies?
There are different things that can help you on that path to still getting on retail, but just making sure you're as sharp as possible.
So we get back to the question of how do I start making money, right?
And that's really, really great insight is to get that cost right.
And let's say that you have a little bit of money to spend on trade spend.
And what's the most effective thing to spend?
So it's really knowing your retailer.
First and foremost, like Sarah mentioned to Wegmans.
Well, Wegmans doesn't really care that much about your TPRs.
They want your best cost goods.
Whole Foods or Town & Country, we want a high-low program.
So we're not as sensitive to your retail as long as it's within our category structure and brand structure.
But what we want to know is how many times you're willing to promote.
And 16 weeks is average, four weeks quarterly.
That said, every retailer is going to market, it's just a little bit different.
Some are more flexible than others.
Some like more two-week deals, some like more four-week deals.
Probably asking the category manager, what's the most effective for your category in that retailer is the idea that I would go out.
I would probably have a budgeted bucket of weeks with a percentage attached to it of what you're willing to spend.
Then, you translate that into either OIs or MCBs.
If you're willing to spend 20 percent for every once a quarter or four weeks, then you can take that 20 percent and translate it into, okay, well, they want only scan, so you can make that work in a monetary amount.
Maybe it's 18 percent that works for you, and so you put two percent back in your pocket for something else.
Or maybe it's 22 percent, so you got to decide, well, do I want to try to negotiate and say, well, I can do 12 weeks or X number of weeks of promos, and let's split it up into two-week increments.
The nice thing is most retailers have multiple different ways of going about it.
I think what you have to do is when you're building your budgets, put that fix in there of what your trade spend budget will be based on the average that a retailer is looking for, which is about 16 weeks and about 20 percent.
Right now, it will take on discount.
That's just the base.
I just increased 5 percent from, I thought it was 15.
And I tried to, so when I submit the promotion plan for Unifi for next year, I tried to do MCB, like 15 percent for four times.
And then they changed it back to OI.
So I almost felt like they don't allow to do MCB anymore, and they just kind of wanted to directly take off the invoice, so that I don't get any information back about where they are.
Are you aware though that the cost is different?
So it's not the same.
So we're not advocating for a 20 percent OI.
And so, and then the math is different on where your cost, how they bill you on an MCB versus an OI.
So and then it also is different on where they bill you.
So an OI, and Dwight is going to be probably a better expert than me, an OI is business that comes into Unifi.
And it's a certain percentage.
An MCB is business that comes, goes out to the retailer, but it's at a higher, it's usually a higher percentage and it's usually off of a higher list cost.
And so.
So is it better to do OI than MCB then?
So there's pros and cons to both.
So an OI, you get, you get bridge buying.
A good, what a good buyer to distributor will do is they'll look at your average movement over, because you'll give them the whole year plan, right?
And they'll, they'll just basically buy you only on deal.
And so now your true cost of goods isn't really your true cost of goods for you because that distributor has now bought you at a lower price, knowing that they can just, they'll have enough, more than likely have enough inventory to just wait till they have to buy you again on the next off invoice.
So that benefits the house usually greatly.
And so, and then on the MCB side of the equation, yes, for the most part, most of your money, most of your discount goes directly to the retailer.
However, you pay a cost for it on the other side because they will bill you back at their wholesale, not what the customer paid for the product.
So for OI or MCB, do I actually see the price reduce at the final end for the consumer side or is not necessarily true?
It actually isn't necessarily true.
A retailer can buy at a reduced price and not run you as a TBR, as a reduced price.
That's why you negotiate with the retailer, your promo strategy that's usually in concert with your distributor strategy.
A lot of brands, probably a lot of them on this call, that's why they will only usually want to work directly with the retailer and that can work sometimes, but usually both retailers and distributors have pushed back on that for various reasons why.
Some legitimate, some not so legitimate.
Thank you so much, Sarah and Dwight, for all of that great advice.
Jia, you had a comment from Allison Myers, some words of encouragement, don't be discouraged.
Know that it doesn't get easier, but if you love your product and your business, it makes for a satisfyingly challenging career.
Jia, in closing, any thoughts about how you might move forward, taking into consideration some of the discussion that we had here today?
I first want to just thank everyone, Melissa, Dwight, Sarah for just putting everything together, gave me such a great insights, and I definitely gave me a lot to think about, and I think that also gave me hope.
I think I was a little bit, I don't know, defeated.
It's like a kind of LinkedIn, like I'm getting into more retail shops, everything seems very wonderful from the outside, but inside I know that I am still haven't reached that breakeven point.
It looks like I am getting closer to that point, but same time it might be fake one because I'm not really paying myself, right?
But I think that there is a lie at the end of the tunnel.
I think I have to be persistent, be patient, and I think that if I have a good product, and I believe in it, it seems like I have a good product, I have a good story, and it will shine.
So definitely, I got a lot of industrial insights today, and I will take that knowledge and share it with my CPG friends.
We do have a little monthly community call, where we share our challenges and support each other, and I think whatever I learned today will be a really, really valuable insight to them.
But thank you guys so much.
Thank you.
Jia, thank you so much.
Everyone in the audience should go out and buy themselves some Hotpot Queen because it is absolutely delicious.
The packaging is gorgeous.
You're doing such an amazing job.
So go out and get some Hotpot Queen.
Sarah Dorey of Synergy Sales and Dwight Richmond of Town & Country, thank you so much for your advice.
That was absolutely fantastic.
That concludes another episode of the Community Call Podcast.
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