AboutEric Hofer Expertise Over 27 years experience, with 17 in international FMCG in back office operations and in field sales and data collection, including design, development and deployment of Handhelds, Marketing Equipment (Service, Tracking and Return on Investment), reporting and Vending management. Have participated on the launch of operations in new markets, and re-engineered the back office in several countries.
Experience Designed and led the development and deployment internal ERP system for Pepsi used in On-Premise/Vending in 13 markets.
Designed 2 handheld systems, the latest is now deployed in 4 markets internationally.
Re-engineered the back office functions (settlements, despatch, invoicing, credit control, etc) for over 20 snack, confectionary and beverage operators.
Developing software: Progress, VB, Access, C, Sybase, SA
Organizations Innovative-Selling Solutions
Publications BudapestSun
Education/Credentials State University of New York - BA Economics
NYU - Courant - Graduate work - Computing
Past/Present clients PepsiAmericas
PepsiCola International
PepsiCola Company
British Steel
British Telecom
Britvic (Pepsi's bottler in the UK)
AT&T
BellSouth
Mars Overseas Bottling
Pepsi France
Matutano (Frito-Lay Spain)
Frito-Lay
Pepsi Foods International
Chase Manhattan Bank
Kidder Peabody
National Power
SmithKline Beecham
Mars Overseas Bottling (Pepsi Azerbaijan)
A&P Bottling (Pepsi Serbia & Montenegro)
Iberia Bottlers (Pepsi Georgia)
Question I am interested in becoming the middleman for an overseas juice manufacturer and a beverage distributor in the United States. The manufacturer requires a minimum shipment of 2 40 ft. containers per month, so I don't have the luxury of starting with small mom/pop stores and building slowly. Furthermore, the manufacturer will not give me a price until I present them with a business plan. My first question is how do I put together a BP with financial expectations if the exporter's price is unknown? Secondly, how and who do I go about contacting with local distribution as far as gaining corporate references, etc, so that I am able to take on the quantity that the manufacturer requires?
Hoping this makes sense, john
Answer John, let me first say "thank you" for giving me my 1st question that actually relates to an area I know well! I've only waited 18 months.
A BP takes time to develop and is based upon some assumptions / knowns - a key starter - before ever contemplating a more detailed plan is "the cost of goods."
Why would a potential supplier be unwilling to provide you such? Have they given you any reasons? Is their pricing that opaque? Do they have so much product demand that they don't need the extra business? Are they using you as cheap labour? Perhaps in order to steal your ideas and contacts? Or, so that they can then argue with you what price you should actually pay? Perhaps though you have no track record and they're using this to test your ability (though I doubt this - most manufacturers are happy to have ANY damn outlet - many undercut THEMSELVES (eg. the right hand is cutting off the fingers of the left!).
We've seen this played out several times by not-so-trust worthy "friends." The one my wife (who isn't in the business) loves to remind me about is the "lets play it by ear," offer followed by a "dragging of the heals" until you've made a customer commitment at which point your supplier takes you to the proverbial cleaners.
I'd advise caution and therefore you need to demonstrate that you are a capable dealer, savvy, yet not so foolish as to give away your hand.
You need to be sure that you play up the cost side; lest you find yourself having precious margin whittled away by an ever greedy supplier. The supplier who knows your costs will argue them and demand higher COGs. So onstruct a plan that has expectations to make back investment in 3 years - such that if the supplier pushes back, you turn around and ask them to fund the investment / risk instead.
In your plan build in funding points - where you say for example, at this point we are doing 10 containers a month, and we exchange x% of business, for more capital.
Use soft costs that the supplier will find hard to verify; for example: marketing, "fees" (to grease customs, customers, warehouses, get shelf space, local supermarket managers, etc.) These are things that a foreign company know of, but won't know how to get round in your market - and therefore won't know the costs (or even if they really exists).
One good ploy I saw not so long ago was to have had a "letter of understanding" to supply for a limited time for a particular category; and that this could turn into something longer term; but if that you're approaching a couple of suppliers. Or that you already supply particular product(s) and you have an "opening" to do promotions to break a new product on to the market.
Now you can work out the typical cost of goods backwards from the RRP. Consider for example: RRP will be 1 USD, less markup in the category domestically = 35% (65 cents), less warehousing for 2 months (5 cents), less import duties 10% on purchase, less shipping, less cost of money; etc. taking you to a 10 cents per unit.
Remember to also include the 60 days it'll take to get paid. So, if you ordered the product Jan 1st, arrive port Feb 15th, cleared customs Feb 23rd, arrived at warehouse Feb 25th and was pre-sold - and on the shelves Mar 1st with a shelf life of 6 months (figure manfacture was Jan 10th, so you've only got til Jul 9th.
On delivery, of Mar 1st, you'll start the clock ticking for the 60 days to get paid. But you'll have to hold reserves for write-offs, stales/breakage, samples, promotions, etc.
Other costs you might consider into your initial plan: local food safety and labelling requirements; there might be the FDA standard labelling - which you could push to the manufacturer to fund.
You're going to have to cover a lot of bases; and funding is tough; doing it off your own pocket (or via family and friends) is exceptionally costly; but getting a Letter of Credit is even more difficult in the present climate - especially in the commodities, and International Export/FMCG business. Just like Sub-Prime mortgages, banks are very shy of the less experienced traders.
So, let's get to the BP. How do you do it? The best way to do it is to imagine walking through the actually order-to-cash process; it'll highlight the evolution of the product and it teases out various cost drivers. You know you've got to have credit, organize shippers, customs, labelling, warehousing, etc. Walking through the product's lifecycle - from capital outlay-to-product-to-cash in the bank is the best; and then do the same for establishing your initial working arrangements: office, accounting, legal requirements, company set up, etc.
In your BP, you should construct a working cash flow model: it will work month by month, your opening cash, what you expect to fund, the costs you'll incur, (staffing requirements), waiting for billing, etc.
You'll also show your working assumptions; when you expect to get your next order, how many containers, what's coming out of your warehouse, etc.
Now to your last compound question: it sounds like you're thinking that "references" alone will get you orders, is that right? My experience (albeit with Pepsi) is that there's usually a market perception of the product(s), country of origin (eg. reputation for quality or price)... I'm not so sure this is a question of "references" - what would make sense, to start with would be to get the supplier to organize some "tests"/"promotions". You'd import samples - do some taste tests in markets, etc.; you'd look for angles to tie it in. For example, if you were importing from Austria, you might tie in with the European Cup - "Can't get to Footie? Try the next best thing, the Drink of Austria"...
Recognize that distributors DON'T invest; they pretty much fulfil the orders that they expect others to get; your alternative would be to align with an outlet / chain - but you're likely to pay for shelf space.
Another tactic that "Anna" biscuits used successfully was to latch on to Ikea; so people could taste the "ginger biscuits" that Lars likes. What was clever here was that Ikea opened a 2nd stream for minimal costs, and Anna got an overseas outlet stream - that has since helped them win clientel throughout Europe.
ABOVE all else, remember this one piece of information: "knowledge is power" - in negotiating give away AS LITTLE as possible. If you've got a spare couple of hours have a read through of the "Undercover Economist" - it's insights into negotiating are (forgive the pun) priceless.
I need more info to be of more help; let me know if any of the above rambling helps.
