Expert: Eric Hofer - 11/18/2008

Question
Hi Eric,

I'm not sure if you're able to assist with this.  But any suggestion is necessary.  We're a small beverage startup based in the U.S. specializing in the energy drink market.  We already have our formula complete and currently bottling in Austria.

Do you have any suggestions on how we can located distributors in the U.S. and Canada as well as manufacturer representatives in other countries - Europe, Middle East and Africa?

Also any suggestions on:

1.  How to work with the distributors/mfc reps and types of incentives we should offer.

2.  How much % should be commit to advertising for new territories industry best practices on how to do this.

Thanks.


Anthony.

Thanks.


Anthony.

Answer
Anthony,

I'm wondering, how it is that you're a startup in the US with an energy drink that is bottled in Austria, a market dominated by the local favorite son, "Red Bull"?



-- Finding Distributors --

Distributors can be found via the internet, and more especially BevNet, at least in the North America.

As to other countries, each is it's own beast.  You can sometimes piggy back on other companies that also distribute premium product in a market, for example, somebody who is importing beer into a particular market.  There's no single source as there's no authority requiring membership internationally.  Each country will require its own approach.

The major players (eg. Pepsi and Coke) already have their own products; the minor players will expect you to provide marketing money if you're looking to set up distribution.  If your product is a hit then of course you'll have marketing money and distributors will be coming to you; if you're unknown then its a different story made more challenging as you're competing with other energy drinks that are already established.



-- Working with distributors and sales reps --

The biggest advice is that this needs to be holistic - in that you need to consider how you go to market, where your market is and how to interact with your local teams; and also find a path that works with neighboring territories to prevent "cut through".

There's a host of incentives that you can offer.  
- Keep the guaranteed wage low; drive your staff based upon what they sell.  
- Base incentives either on cases or value of a case (I think the former would apply better to your situation, the latter more for a heterogenous portfolio).
- Build in safeguards from re-opening the same account.
- Have stepped bonuses, so if over a certain qt of sales, ratchet up the %
- Discourage End of Month trade loading; so pay on the rolling average with penalties for wild swings.

For each market, you need to devise a selling story.  Why is your product suitable.  Out of that comes the SDOs (sales development objectives) and these should also drive your incentive scheme.  For that, you generally need a good back office & reporting system (which is my area of expertise, namely developing and offering systems at affordable prices).



-- Advertising % / Industry Best Practice --

This is out of my area of expertise.  My 2 cents worth.  I doubt there's a best practice.  It depends on too many factors.  GDI, Social Norms, Route-to-Market, Advertising Infrastructure, Familiarity with Product/Group/Segment.  I recall reading about Ava Chandler ("For God, Country and Coca-Cola", Pendergrast 2000) finding that for every 10 cents he spent on advertising, he made a dollar - of course that was at the advent of the CB (carbonated beverage) age and his product was a novelty.



Let me hear your thoughts and we can continue,

Eric