Expert: Eric Hofer - 3/4/2008

Question
Eric,

I am interested in importing beer from overseas and becoming the sole distributor here in Ga, and eventually expand to other cities in the US. Can you please outline the process one will need to get this going? Your help on this matter is highly appreciated.  

Answer
Hi,

I've changed to the subject to better match the jist of the question you asked...

First Step: Document assumptions and construct the plan:-
- identify suppliers, cost of goods, contribution, days of credit; shelf life (from date of purchase to shelf, and shelf til sale)
- determine shipping, transport, storage, delivery, etc.
- identify potential outlets, listing fees, etc.
- identify consumer price point / wholesale pricing
- determine marketing approach, spend, etc.
- determine legal requirements (bonding, import duties, liquor lic)
- decide route-to-market (route sell, distributor, etc.)
- compute your capital costs; factor in the time that product sits in containers, at port awaiting clearances, etc.
- estimate the time it will take to do each step in the launch; identify the resources needed, and their costs.
- construct your model (excel readsheet), determine cashflow, months til breakeven, capital injection requirements
- determine contingency requirements (eg. hold up in delivery of a container)
- outline basic business flows: order-to-cash, purchasing-to-warehouse, marketing and promotions
- construct a first cut business plan.

Second Step: Proof of Concept:-
- Acquire necessary licenses
- Test whether there's actually a market for your product
- Establish the likely price point
- Determine trust level of suppliers, alternative
- Update Business Plan with results / learnings

Third Step: Validate & Look for Sponsorship:-
- identify how you will finance such.
- determine % willing to give in exchange for $s.
- negotiate supply contracts, credit line, etc.
- identify key resources...
- attempt to lock up at least 1 route-to-market/outlet
- organize required licenses, agreements, etc.

Fourth Step: Pilot
- Add details to key business processes
 .. Forms, Policies, Rules
 .. Decision makers, control points
- Organize pilot staff (each person with multiple roles)
- Pre-Sell if possible
- Initiate 1st marketing push
- Organize 1st supply

Each of your key steps should have "pull the plug/continue" criteria; one wants to avoid throwing good money after bad.

With the business plan, you effectively imagine how it could work - and the numbers you need to achieve, the cash you need to inject, the "pain" you can withstand.

These are just starter ideas; as you get into building the plan - determining the critical path, etc. you'll find that there are "missing items" and you'll fill those in.  I find MS Project useful here (though some features are a pain such as "leveling" - so make a backup before you use that as the "undo" doesn't "undo").

- - - -

I recently spent time with a couple who'd lived in the Ukraine (the husband is an FMCG person with a penchant for beer, the wife is a Ukrainian and a Marketing person).  They identified that as there's a huge Ukrainian expat community in their area; and having seen the loyalty paid to some Polish beers by that local ex-pat community - to import from the Ukraine.

The route to market was pretty much determined by the locale; there the gov't runs the chain of outlets through which one can buy alcohol.  Therefore, the major issues that they had to address:-
- capital outlay - importation takes a long time - and the cash is tied up in the containers
- marketing - how they'd advertise, but also what they'd have to pay to get listings
- in-store execution - even with the listings, the state run outlets didn't execute the advertising campaigns so they had to organize it themselves.

As they had experience, they'd built a business plan; it called for them to be cash positive after 2 years; they financed through "Friends & Family" - which if they'd only needed 2 years, would have been great...  

However, they didn't highlight several of their assumptions; namely the delay in payments and the time spent clearing customs.  (All of their product sells out!)...

They're over the hump now; but the extra cash, not having a strategy on how to raise it, and not taking into account the historisis (delay between action and outcome) really hurt especially as they'd used their personal relationships to fund the concern and then had to dilute shares to go after additional financing.

I hope this helps...  
E.