Expert: Eric Hofer - 5/26/2010

Question
I am part of a new business that was considering getting into the selling of bottled water as a way to make a profit. Our aim is at establishing a niche market for our product. We would seek to target festivals, music venues as well as outdoor events. That being we would start of small at first and try to build our brand. My questions are as follows.

1.) What is a tangible figure to expect in terms of venture capital needed to start (we want a custom bottle and label)?

2.) Who or where would be able to find a 3rd party that would be capable of producing this for us. (Being as that we are small with little capital we understand that we will have to pay more in order to have it bottled)

any help would be greatly appreciated!!

thank you for your time,

MC Breathless

Answer
Hi,

The capital required to get a bottling operation off the ground depends upon a plethora of factors: geography, cost of labour, access to raws and co-packers, transit, warehousing, taxes, marketing, market awareness, lab/assayers, credit lines ...  You're going to have to estimate these in order to turn out a number.  If you're just looking to get a feel, I know of a recent launch of a bottle water in Central Asia that had a budget of 2.5M USD but they used existing fleet capacity (saving 6M on the line and 2M on trucks, delivery staff, etc.); and they overspent.

The 3rd party you're talking about are called Co-Packers.  But that's mainly with mixed products.  If you're bottling water then what are you planning to bottle, city water?  Some special process? Or a specific spring?  Again, geography is critical here; yes, I know several companies that would happily sell you bottled water - but would you be happy to ship it from say Azerbaijan?  And would your consumers think that Azeri tap water is better than say, Bronx Water?

If you're interested in "enhanced waters" then I know of somebody offering that as a franchise who might be interested as he's looking for people for geographies.

As to marketing via events, that's a rather expensive way to go about breaking into the business.  You do know that you have to pay "sponsorship" fees just to get in, and that you'll be competing against companies with deep pockets like Nestle, Coke and Pepsi.  

Aside from seriously considering how much capital you'll have to raise, you'll need to think about how you're going to break into your market - as the idea you've got so far would be equivalent to storming Fort Knox with 2 brooms and a loudhailer.

Breaking into markets is an art.  

When you get to looking at how to manage your back office, I can definitely put you on to a group that do a great job: www.salessuite.net.