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 Eric, www.Anti-AgeingWater.com has interested investors as well as commitments from bottlers. Besides needing someone like you on the Board, I need to know if giving a distributor a fee of 20% is enough to excite & motivate them, or if 25% or even 30% will be what it takes to get a giant firm to represent the line of Beverages? I am also thinking that giving the Retailers 100% mark up will do. That should leave me with 45% @ $1.75 retail
Regards,
Stuart Garret
Global Beverage Innovations
760-272-6377
Answer Stuart,
I've had a bit of time to think this through.
In essence your question is, what percentage do you give up to launch a product. What stumped me is that the question is both a "valid" and "invalid" question. "Valid" in the sense that you have to work out costs, and you have a perception of pricing that the market will bear; but "Invalid" because as with anything new, neither you nor your potential partners are in possession of all the information - and therefore cannot yet be determining what will be the "rule of thumb" for your product.
By it's very nature, this is a specialist product. Anti-Ageing products are cosmetic - a fortified drink sold at a premium and entitled "water" is going to be a challenge for a marketing person. And it's upon this aspirational concept that you're expecting to command a premium consumer rrp.
Those who distribute (unless you're planning to sell based using a contingency model in which case you must have a lot of capital) are going to lay out capital in hopes that you can create the marketing pull to get consumers clamouring for your product. Can you? Effectively, this is what's going to drive your RRP; and the willingness of distributors to carry your product.
In your modelling, what are you expecting the demand to be? What is going to drive it? How much marketing push are you going to expend? You probably know approximately your COGS (though the fixed costs - if you sell higher volumes will be spread over more units). With demand, you have something you can present to a distributor; the distributor then will consider "space" / "customer universe", and that in turn should drive an expectation. For example, say you're target market is health spas - turning to a traditional FMCG distributor who has 25 spas (out of a portfolio of 5000 accounts) isn't a "big" idea. And you're going to be eating away at alternative drinks that he would have sold anyway.
On the other hand, if your product is a "hit" - and the distributor has sole distribution - then other "non-customer" outlets will be going to that distributor, expanding his/her account universe. That alone might reward you such that you give away fewer points.
From what I saw on your website, you've already had some big orders? Are you able to leverage any of that to develop market awareness?
Let me turn to the "big" companies... In general, they have armies - and they have 2 ways of working; either they invent it themselves or they gobble it up; I've never seen them "partner" with somebody that has a specialist item - so if you succeed on this tactic I'd like to hear about it.
Having said that, your plan could be to create enough interest that a large company might approach you. [With what I mentioned in my previous reply on this topic] though, if this is a strategy then early on you should identify the sort of company you think would be a natural type of "buyer". The selling skills of say a "Pepsi" wouldn't really work for your product; this is more of a "spa" / "health" or as your site puts it a cross between cosmetic and pharma - in which case, your natural alliance should be more in that sort of industrial sales force ...
So to sum up, there's no "magic" formula that says x% is enough to motivate. If you sell 1 unit a week, giving 99% away doesn't do it. If you sell 10000 a day, 10% might be more than enough. The percentage will vary through the lifecycle of the product; to start you may have to give away 95-2000%* just to get the product "out there" and then claw back that percentage perhaps by swapping the avenues of distribution.
Let me hear your thoughts,
Eric
*2000% is NOT a typo; I mean that you'll have to put marketing money behind the product - give away samples, run advertising campaigns, et.c
