Introducing & Succeeding with Your Product at Walgreens – a Conversation with Steve Anderson – Episode 14

This is CPG Insiders, the podcast that helps consumer packaged goods companies survive and thrive in business. Now your hosts, Mark Young and Rob Taylor. Welcome everyone to this edition of CPG Insiders. I'm your host, Mark Young with my co host, Rob Taylor standing by. Rob, what's cooking today?

Just a lot of good stuff. Working on some new brand building things today for a new client. So that's been kind of fun.

That always is. You've got some pretty big productions coming. Yeah.

This morning was working on Bob Evans, some Bob Evans work for their refrigerated sides and then shifted this afternoon after a lunch meeting, productive lunch meeting, into some brand building for a completely new product that's coming out. So that's cool.

You know, that's one of the big advantages to having an ad agency versus an in house marketing program. So one of the things, Rob, that is really good when you have an agency that let's say specializes in a category like CPG is it's like a laboratory. In as much as as you're saying you were working on Bob Evans this morning and you moved to a different product in the afternoon, we get that opportunity to work on lots of different consumer products. So there's a lot of learnings that we get to jump from one brand to another. And for an in house advertising team, that gets tough because they're only working on that one item all the time or that one brand. So they don't get the opportunity to see what works in these other categories and be able to pull those learnings over. So that is one of the big advantages. So we have a great guest today. So our guest today is Steve Anderson. Steve is the president of Hockfield. Steve's a great friend, but more importantly, for the sake of this show, he is one of the best reps in the industry. And Steve's firm really specializes in dealing with Walgreens. And you know, Steve. Steve, welcome to CPG Insiders.

Hey, Steve, thank you. Appreciate being here.

And I'll tell you what, where we want to start off, Steve, and that is what's new at Walgreens because I mean, they've had this boots, you know, situation. So what's different about the landscape at Walgreens in the past 12 months?

Well, what's not new or not different about Walgreens in the past 12 months? It's ever changing. But, you know, I don't think that's anything new to the retail landscape. Obviously, I've been doing this for a few years and every year there's dramatic Change. And I think the change just accelerates every year. And so the important thing is just how you adjust to that change. Both our agency and those vendors that we have that are supplying Walgreens and Walgreens itself, it's a constantly evolving landscape.

Now, I always find Walgreens for most of our clients, clients that are in that consumer package, space, health, beauty, cosmetic, otc. I usually find Walmart and Walgreens are the two most important accounts for most manufacturers. Is that your experience also?

That's true. That is true. And I think Walgreens has always prided themselves on being a retailer that likes to be first to market with new products, new product introductions. And so for that reason, many vendors, many manufacturers do go to Walgreens first because they know they're looking for those new opportunities.

Now that brings up a really good point, because Walmart is very unusual for Walmart to be the first to market on an item.

That's what we hear.

Yes, but you're saying it's not unusual for Walgreens to be first to market?

Absolutely. They realize the importance of capturing that customer early on. And I think probably some of it stems just from their heritage of being a very strong company when it comes to Rx to OTC switches. So as products that have been developed through the pharmacy eventually go over the counter and are available to, you know, at the shelf, they've always done a great job in that area. And because of that, I think many companies look to Walgreens for, you know, where they'd like to launch a product initially. Obviously their huge store presence, what, 78% of of people in America live within five miles of a Walgreens, so they know they can get great penetration by getting distribution in Walgreens.

I'm trying to think that we've launched I don't know how many products here at retail, and I can only think of one off the top of my head right now. There's got to be more than one, but one that launched at Walmart only.

I could only think of one off top.

Is it a hair color?

Yep.

Yeah. And I'm just racking my brain. I feel like there must be one more. But Walgreens is the other way around. It's definitely more or seems more innovative in terms of what it's trying to bring to consumers.

Now I've noticed Walgreens is not only sometimes first to market, but my feeling is, or my experience is Walgreen is more open to the higher price premium products too, in many cases. Is that legit? Steve?

Yeah, I think so. And I think again that stems a little bit from the heritage. Walgreens is certainly looked at as a need based retailer. People go in looking for a specific product to help them with either cough, cold, vitamin health and beauty care, a beauty product. And for that reason, you know, it's not as they're not necessarily looking for a bargain. They're looking for the right product and the right product that will take care of whatever ails them at that particular time. So for that reason, yes, I think the consumer understands that the product quality and the product integrity may be higher there than than at a mass retailer.

So what's hot at Walgreens right now when I say that oftentimes we see that retailers kind of go through cycles where they're looking for certain types of products or certain categories of product. In your opinion, what's Walgreens really focused on this year?

Well, I think one of the hot terms for a long time and it's just maybe more important than ever is they're looking for incremental volume to just bring in a new product, a new flavor that's going to take the place of an existing item really isn't doing anyone any good. There's a tremendous cost to the exiting product and cost to bringing in a new product. So if it's just trading dollars, that's really of no interest to Walgreens at this point or really probably any retailer. So they're looking for people like ourselves, our agency, to try and find those niche items that are new, that are going to bring in incremental volume and incremental store traffic is the other big key. Once again, you have a defined number of people that go into Walgreens every day. They're in there picking up their prescription or they're looking for a particular health care item. And if once again, you're just switching them from one product to another, you really haven't. The retailer really hasn't benefited. So what we look for when we're looking for new products and new companies to represent is products that will bring incremental profit dollars to their departments, to the overall store and increase the store traffic that becomes plus book volume for everyone. And that seems to be the most important thing. Are there particular categories? Yes, there's certainly a lot of hype around the beauty department. There's a tremendous investment that Walgreens has made to improve and increase the selection and assortment within the beauty area, which is of course a key department for them. But on the flip side, Walgreens has Always been known for very strong cough, cold supplements, personal care items. So I think, you know, the incrementality, in my opinion, is the area that they're looking at.

With that shift in mindset, coupled with the changes you've seen over the last 12 months, is it getting easier or harder to get a product into Walgreens?

Well, again, I think, you know, it's always a challenge to get a product on the shelves these days, but if you have the right product, you know, it's the right product, right price, right promotion. Walgreens is always open to looking at new products. They've always been that way. I think they're still that way. Is it more difficult, more challenging? Sure, I think it is. Maybe more so than it was many years ago. But it's just that there's more data available, there's more promotional planning that's necessary to make sure that when a product is launched, it's successful. With the ability for Walgreens to look at sales and watch a new product's performance literally from day one, as soon as it arrives on the shelf, I think we're all just held more accountable for making sure that that new product gets off to a great start versus maybe, you know, 10, 15 years ago, product went in and it just kind of did its thing for three or four or five months until there was really a strong ability to review it. That's not true anymore. Now, you better be moving quickly as soon as the product hits the shelf. So promotional planning in advance and having a strong plan in place prior to the launch is critical.

So when you're saying incremental profits for Walgreens, an example would be this, something we're all working on. An example would be if there was four boxes of product on the shelf. We'll use Earwax Cleaning as an example. If there's four items on the shelf that sell for $10, then you say Walgreens is going to say, don't bring me a fifth $10 earwax cleaner, because now I'm just going to take the money that I was gaining from four items. I'm going to spread it across five items. But if I come in with an earwax cleaner that is different and innovative and $30, now that's different because now all of a sudden, they're making the margin on $30 instead of $10. So now that same buyer who comes in for that ear treatment can walk out the door with a bigger purchase. Is that where you're going as far as incremental?

That is right. That's certainly one of the ways higher retails, higher dollar profits, another opportunity is certainly higher margin items. So, yes, we all have shared in a number of great successes with products that are premium priced at the retail, with a strong retail price. And obviously, if you sell a $30 item, you're obviously making more money than by selling a $10 item. So that's been a real key to a lot of the product successes that, that we've worked on together.

Now, another example of a product that we all, all three of us share is Heliocare. And I think Heliocare is interesting in as much as. So Heliocare is a capsule, in case you don't know what it is, folks, it's a capsule that you take that basically helps your body recover from sun damage. Now, what's great about a product like that, I'm using it as an example. There is no other product on the shelf like that. So is that another way of bringing Walgreens some innovation saying, look, you have nothing that does this?

Most definitely. Most definitely. And that's actually a great example because that would be used in conjunction with any other supplements that you're currently using. So it's not taking the place of something else. It's an additional sale. And we've had instances like that in many of the categories that we sell where it's an additional sale, a second sale, another basket building operating for Walgreens.

One of the things I always use as an example for people is the absolute miracle of in the hair care business, conditioner, you used to buy shampoo. Now you have to have a shampoo and a conditioner. Instant category expander. Now the customer has to walk out.

With two bottles and a treatment packet and a spritzer and something for your purse that you can carry around every day and add in. So, yeah, that's another great example.

So when you're counseling, when you're working with consulting with a new client, what's the advice you give them? What are the things you're looking for? Obviously, we're looking for a product that has something that's unique. Are we usually looking for products that have bigger margin or premium price?

Well, I think there's a lot of things that we look at and we do a very thorough job of looking at any new potential vendor or new potential product and really have to start with the basics is, you know, what's their history, what's their background? If it's a relatively new company, what are the owners or the principles of the company? What's their experience level. Have they launched products successfully in the past in the retail marketplace? Those are some of the real big questions that I ask in an initial phone call or interview type process.

Does that matter to Walgreens?

It will absolutely. It matters to us. And if it matters to us, it'll matter to Walgreens. We try and think as best we can like them, because any vendor or product that we bring to Walgreens, we know a lot of the questions that they're going to ask. And so in our particular situation, before we take them on as a client, we want to make sure that they think like Walgreens thinks. And having a sound background, professional background, experience in the category that they're involved in makes us feel more comfortable. So I'm sure it would make Walgreens feel more comfortable. And then from there we get into things like, you know, financially sound. It's expensive to launch a product these days. So we want to make sure that our new vendors, our new manufacturers are financially able to withstand all the costs of doing business that there are these days at any retailer and certainly be able to also promote the product at a level that's necessary, as I mentioned earlier, to get off to a strong jump start from day one once it hits the shelf. So once we've reviewed those things, I'm not going to say the product is secondary because that's certainly not the case. But then we get into, okay, what's the product? What's the point of difference? Does it bring incremental profits or margins or increased margins? Why is Walgreens going to be interested in adding this to their assortment? Because anytime they add something, something else has to go out the door. So it needs to be stronger, bigger, better, and usually more profitable.

You had mentioned data a few minutes ago and Mark had mentioned it before we started the podcast with Walgreens new focus on data. How do you guys at Hockfield help manufacturers navigate that new data landscape at retailers?

That's a great question.

I stole that one from Mark.

Sorry. It's a, it's certainly a very, very big element of what we offer to our vendors and also to Walgreens because we do help them in many areas with our data also. So Walgreens has a data provider, Retail Solutions Inc. Rsi, and we've been purchasing their data for probably the last. I think it's just about three years now. I think it was July three years ago when we started. And so on a weekly basis we get all of the data from the previous week. So it's real time data. And it's for every single one of our vendors, every single one of our SKUs that scans through Walgreens register. And this enables us to do a lot of different things, actually. One is we provide that to all of our vendors so that they can accurately forecast based on previous week sales, they can look at the future forecasting to make sure they maintain the proper inventory levels. That's probably number one most important thing. But it also allows us to do a number of other things. Such as I mentioned earlier, once you gain shelf distribution at Walgreens, you want to make sure you get off to a strong start. We can be reviewing sales data literally day one, as soon as it starts scanning off the shelf. So we can help our vendors determine how well a new product is doing, how the new launch is going, is the promotional program that's in place working? Do they need to make adjustments? Do they need to beef up the program? And also we can review things such as retail pricing to make sure that, you know, it's at the correct retail price. So there's a lot of, lot of things that we do. There's also a way that we help Walgreens is by looking at the in stock rates at both store level and at the warehouse. So in some cases, in fact, we had a situation just today and I think several just in the past few days, based on what some of my people were telling me when I was congratulating them, is we pointed out to one of the Walgreens inventory managers that one of our items had a low in stock rate in the stores and it's a relatively new item. So there's not a lot of history. Quite honestly, the people at Walgreens in the demand and supply planning departments have thousands, tens of thousands of SKUs to monitor and manage. And in many cases, some of the products we sell are certainly not their top sellers or the biggest sellers. And so for them to micromanage every SKU is virtually impossible. So as, as the broker, the sales agency responsible for sales, obviously we look at in stock rates at the store level. And most importantly, if there are any low in stock rates, we point that out to the demand planners and they are able to then adjust at the store level shelf minimums and actually force additional product out to the stores if necessary to maintain a proper in stock rate.

So I think this is an important point here, and that is I could be dealing with a buyer that has what, 300 SKUs under their control?

Oh, way more than that in many cases, yes.

Okay. So this buyer is responsible for hundreds of products.

Right.

And even though they work for Walgreens and they have the Walgreens data, they don't have the personal bandwidth to go look at the in stock rate of all 300 items and to go look at the pricing of all 300 items. So one of the functions that you provide, working with the vendor is being able to, so you're really bringing a service to Walgreens too, is being able to say, hey, Ms. Buyer, our in stock rate here is 93%. We're losing sales every week. What can we do to up this inventory?

That is correct. And so we actually, when we get our weekly data from rsi, it's a massive data feed from every item that we sell and every item that we've sold to Walgreens over the past, I don't know how many years because it goes back historically also. And so then we actually send that to a third party provider who manipulates it and turns it into a very readable format that's usable by our vendors, usable by us, and most importantly, makes simple good sense to Walgreens management team also so that we can send very specific information rather than just the old days. It was, hey, you didn't get an order this week. You called up the buyer and said, hey, we didn't get an order. Why don't you check your inventory? Well, that doesn't fly in today's world. Now, it's very, very specific. So when we do send a request or a suggestion to Walgreens, it's very specific. With all the data showing the in stock rates, the out of stock rates, we actually can pull stored level data. So we can go right through all 8,000 stores and point out which 200 or 595 stores have low in stock rates. So when we send that over to Walgreens, it's very, very quick, simple and easy for them to review it and agree with us or disagree. 99% of the times, they agree with us and actually appreciate. And we've had many thank yous from them. You'll simplify their job by us providing this information.

So not only when you were just mentioned, you can look at the store by store levels. So we're looking at these 8,000 Walgreens stores. There's what, 80700 stores total? What, how many stores?

There's really about. It's really about 8,000. About 8,000, because all the Rite Aid stores have not been converted yet. So as of right now, there's about 8,020 stores, I believe, that are scanning last I saw.

And will the Rite Aid stores become Walgreens stores?

In most cases? Yes. Well, all the Rite Aid stores that were. That were acquired will become Walgreens stores. So there were about 1900 acquired. And then through some attrition, there were some Walgreens stores that were closed that were in the same location as a Rite Aid and other Rite Aid stores that were closed that were maybe across the street from a Walgreens. That's all still being worked out, and I would not have all that information.

So, I mean, they're on their way to being 9,500 stores.

Yeah, that's the number that we expect to see when it all shakes out is right around 9,500 now, all out.

Of all these 9,500 stores or the 8,000 stores right now. These stores are not all selling the same SKU at the same price.

That can be true. There's small variances based on location. You know, some stores have higher costs of doing business. I always use the example, being here in Chicago of a Michigan Avenue store, South Beach, Hollywood, California, you know, Las Vegas. Those locations tend to have higher retail prices because the costs of doing business at those stores are so much greater than you have in a suburban Chicago or Des Moines, Iowa. Let's say.

When you look at the store data and you see all these different prices of different products, does that kind of data help you price the product in the future? Do you all of a sudden learn, well, wait a minute, this product is selling successfully for $5 more someplace else? Or do you gather any type of data from that?

The retail pricing? Typically, no. One thing that has always been true is the retailer has the final decision to price a product at whatever price they feel is appropriate. So we typically don't get into. We'll make suggestions on occasion. But typically the retail price from one store to the next is. If it varies at all, it's very little. And it would be consistent across all products, not just a product that we were selling. So it doesn't seem to be a hindrance to a brand or to that particular store location. Again, a lot of it's based on just their typical costs of doing business in that location.

When you go into Walgreens and you want to bring a new product in, do you go through the process of reviewing IRI data and looking for the weak players and helping them decide what they could eliminate, or do you stay away from that?

No, absolutely. That's certainly part of our due diligence. It's Part of looking at what the potential of an item is, we will try. Actually Walgreens requires it, but we also do it on our own is we look for items that we can clone an item against. So using your example earlier of an earwax removal kit, we, you know, the first thing we did was look at other earwax removal products that are in the stores to see, you know, how much volume there is. Obviously a higher priced item may not sell as well as a lower priced item, but by looking at current data, you can get a pretty good idea of the range of where you would fit in and what the approximate sales volume would be. So it allows us to project and forecast not only their total retail sales, but certainly their profitability on an item. So yes, that's important. And we'll look at national data. If we don't have something specific to Walgreens, but we usually look at both. We have category data at Walgreens through RSI that is part of our subscription. And we also have of course, information that is given to us by our vendors that they purchase from people like IRI or Nielsen.

So using the earwax thing as an example, if there were five boxes on the shelf and all five of them were ear drops and a syringe, might you go, and I'm not saying this is what happened, might you go to that buyer and say, look, you have five items here. My item can fit in this here's the weakest player of these five. If you got rid of number five, you're not going to lose any sales because the other four are the same thing. And now you have the shelf space to bring in my new higher priced product which will have more potential profit because of the higher rank.

Yeah, that's a good example. Simplified example, but a good example. Once again, that's part of the job of the category manager at Walgreens too, to decide how many of a particular item they need. Are there differences or are they just all me too items and does that by eliminating one of those items will be profits and sales just transfer over to the existing items on the shelf. And that's part of certainly the big responsibility that they have in their decision making process. But yes, we do look at, you know, how much space a product requires, which is another key part of the due diligence that we do with manufacturers when they come to us with potential new items is looking at the product, looking at the packaging. We're certainly not packaging experts, we're not design experts, we're not graphic experts, but when you do this long enough and you see enough products that come along and many succeed and occasionally some will fail, you use your expertise to guide a vendor when it comes to the size of the package, the depth, the width, the height, you know, shelf heights in different departments will vary, space will vary and certainly the graphics are, you know, extremely important. So we do get involved in all areas of a new product in terms of, you know, size, shape, width, depth, look, colorations, you name it.

Are there any products, so I mean you're giving good attributes to successful or I guess keys to success. Are there any products out there that we, you us are not representing that are just killing it there that are, you know, either sleeper hits or who's. Who's a good example of something that's doing it really, really well at Walgreens?

Oh, well, you know, we do look at a number of competitive products so we are aware of who's out there. I know in the, you know, in the pain, external analgesic area. Biofreeze certainly did a great job. They created a great brand through doctor clinics, etc. Etc. And then launched at Walgreens and of course everywhere. I know they've done extremely well in that same category. Theraworks seems to be getting off to a great start. Brand new product in the cough cold area. Mucinex continues to be extremely strong. The last numbers, last ad I saw it was the number one cough cold brand at Walgreens and Premiers. There's a, you know, we do watch the competition and look at who is successful and how they became successful and try and try and use some of those ideas as we guide our vendors even if we're not involved in that particular brand itself.

Yeah, I mean we do the same. That's why I feel comfortable asking that question. We always look at a competitors or somebody who is a comparable case study I guess to say, all right, what do they do in their space that we could apply potentially?

You know, it goes back to the.

Labs idea that Mark was talking about earlier.

Correct.

I always find that almost, not always, but almost without exception, the products that are killing it usually are the premium product or they're at the higher end of the price point.

It seems to be true. Now we've always liked selling more expensive products. It's certainly more challenging to get shelf distribution and shelf placement sometimes, but the rewards are certainly much greater for both the retailer and certainly the vendor. So we've had some great successes selling higher profit, higher priced items and certainly enables the vendor to apply more product to Promotion, drive more consumers into the stores, and everybody seems to be much happier.

So Rob asked you about who was doing it. Right. So without using any names, what are the big mistakes people are making? Break that into two categories for me. One, one, what are the big mistakes that first timers are doing when they have that first meeting? And then after that, what are the mistakes that the companies that are on the shelf are making? So let's start with the first timers. What's the. Give me the list of don't do this when you meet with Walgreens.

Yeah, I would say the first on the list for me, and I'm very passionate about this, is when you get into a meeting. The first time with Walgreens or any retailer is learn to be a good listener, ask questions, find out what they are looking for, find out how your product can fit into what their strategy is. And even though our agency has been doing this a long time, I've been doing this for a few years myself. I still try my best to always ask questions. There's always new things happening. There's new opportunities, there's new challenges. There's new things taking place at Walgreens that the only way we're ever going to know about is if we ask questions. So I think the biggest thing for a new vendor coming in the door is, you know, the only way you're going to learn is by asking questions.

We liken that to when you sit down with that buyer, this is not about the buyer is going to become your hero. It's about how can you become the buyer's hero today.

That's right. That's right. There's no question. I mean, that's my example was probably simple, but I think it's extremely important. And from that, some of the other. So I guess the mistake, in that case, you asked me what would be, the mistake would be people getting in there and talking too much. And I've seen this happen many times. And having been within Walgreens walls hundreds and hundreds of times for meetings over the years, you know, I shall we say, don't get nervous. Don't get, you know, all pumped up, you know, out of control, excited. I'm in there to do a job. But I do understand that many times a new vendor is just so excited, they finally have this appointment at Walgreens, you know, the world's largest drug chain, and they just get so excited that all they want to do is hear themselves talk. And. And they tend to just start rattling and not listening, not asking the proper Questions. And I think that's extremely important to have a pathway. And so prior to these meetings we try and sit down with people and explain to them, hey, we've only got X amount of time. A lot of meetings are only 30 minutes. These days we've had meetings that are 15 to 20 minutes. And so you have to make sure you cover everything that you need to cover with also enabling yourself enough time to learn what it is as to how you may fit into their program.

So the 85 page PowerPoint presentation, not.

On your left single, that's definitely taboo these days.

That's been a common theme when we have other guests on the show. It's ask questions, learn at these first appointments, even later on down the road. I feel like that's a really good piece of advice for everybody. And have a short presentation, short, concise and ask questions.

Exactly what's the most important thing in that presentation? If there's a place I'm going to put focus on, where's the focus?

Well then I think we go back to some of the things we talked about in the earlier part of this discussion is how is your product going to bring incremental profitability to Walgreens?

So it's about the marketing.

It's got to be that because again, if it's just another flavor of something that's already out there, there's going to be no interest. So immediately establish somehow, some way that your product is going to bring new customers in, new profit dollars, additional profit dollars to the category that they were not getting before. And a lot of times, in fact, I've had a lot of meetings, maybe more so lately because of the limited time that we have in meetings these days. It used to be you automatically had an hour. Wasn't that many years ago you called up the buyer said, hey, I want to come in, show you something. And you'd say, I'll come on in tomorrow at 10. And you figured you had an hour or two, shall we say chit chat about the item. Those days are long gone. So we try and be very focused. We have a path as to how we want to start out, where we want to get to how we want to end, and still allowing plenty of time for discussion so that we can involve the buyer in the decision making process.

Some days we're on a speed date.

I think in some of this it's quite like that. Yes. And I think that just kind of goes along with the society that we live in nowadays. We're all trying to do more in fewer minutes. So obviously everyone is overworked and doesn't have enough hours in the day to do their job. So they want to cut right to the chase. And so I think to answer your question, where's the incremental profit that this brings to my department.

What'S the other mistakes made by the first timers?

Well, I think, you know, again, if you're, once you get beyond the so called meeting, the mistakes that are made are poor. Follow up, which drives us crazy. We're follow up crazies. So we're constantly, you know, talking to our vendor, making sure that we get all the information that was either asked about in the meeting or discussed maybe partially in the meeting and buyer needed to learn more about the product and what it is we need to get back to them on. Usually there's additional promotional plans that need to be finalized and also you don't get back to the category manager with that information. So again, sometimes people come in, make the presentation and they think they're done. That's really just the very, very start of all the work that's necessary to gaining distribution in a huge retailer like a Walgreens.

One of my favorite mistakes, you're going to have a favorite mistake is the new vendor who comes in and says, well, I don't like the terms that Walgreens presenting. They're going to need to change the way they do business if they want to carry my product.

Well, that's a, that's a good comment. And again, that's the role of our agency. And anyone that does anything similar to what we do is we counsel our vendors tremendously. Lots of time is spent getting them ready before we ever walk in the door so that they're prepared for any and all questions that may come at them. We certainly, through our experience, know a lot of the probably 80% or 90% of the questions before we go in the door that are probably going to come up. But there's always new things, as said earlier, which is why we also ask questions. So it's very important to be prepared for all those things. And the other thing that we counsel our manufacturers on when they're introducing a new product is, you know, if you don't have an answer, it's okay to say, hey, let me get back to you. There's nothing wrong with that. We'd rather have you do that than do, you know, say something that you regret later.

What do you do with that client who gets the phone call, or you get the phone call saying, this product's in jeopardy of being cut. This product could be delisted from Walgreens because you're not meeting the sales numbers. Because it used to be if you turned, if it was a half a piece per week per store or whatever the case is, you hit the number and everything's fine. But the world's not like that now, is it?

No, it's not. And again, that's one of the great advantages of having weekly POS data at our disposal. So we, there's certain, we watch that every week. We have a pretty sophisticated system here for watching everything from the actual sales to the inventory levels to in stock rates. We also have triggers in the system that will show us if a product was taken out of X number of stores or added to X number of new stores, which obviously happens also. So those are all the kinds of things that if you have access to data, number one, you know how to use it. Number two, and you have the people in place within your organization to manage that data and to actually use can be extremely advantageous. We spend a tremendous amount of money just in purchasing the data and refining it through our third party provider. And then in addition, we have a full time sales analyst and a couple of other people that work with that person to make sure that all of the above are watched on a weekly basis. So I'm not going to say that there isn't an occasional surprise for some reason, but for the most part we know when a product is in jeopardy and we know when it's in trouble long before someone at Walgreens points it out to us. So we already try and have a plan in place and we're working with that vendor and with Walgreens to try and improve the sales through a variety of methods, whether it's additional promotion or whatever the case may be.

I want to walk through cash flow for some of the new people. Right now let's say we have 8,000 stores and let's say that we have a product that wholesales for $10 and Walgreens agrees to bring me in chain wide. So they're probably going to order what, three pieces per store?

Yeah, two and a half to three, depending on the item. Two and a half per store, we figure a lot of times three maybe.

And then they're going to put some in some warehouses, in some DCs also.

Right. That usually will take into account that. But yes, again, it depends on the category. Higher priced, slower velocity items, two and a half to three per store will take care of the initial orders. If it's a higher velocity item that's much lower cost. It can be four to five pieces per store. So we usually figure somewhere in the range of 20 to 40,000 pieces on an initial order.

So my $10 item at a three piece per store is going to be a $240,000 order?

That's correct.

Okay, so this is why I'm walking through this. So I just shipped Walgreens. Walgreens now owes me $240,000. When my product makes the shelf, Walgreens is going to start reordering on a weekly basis, correct?

Yes. It's very seldom that we don't get an order every week. Now, we might not get an order for every warehouse every week, but we usually get orders every week.

And I can't miss those shipping.

No, you don't want to miss ship dates. There's all kinds of reasons for that. Number one certainly is you don't want the store to be out of stock and you're losing business, and so is Walgreens. And there's all kinds of bad things that happen when orders are not shipped on time and complete.

So how long is it going to take Walgreens to pay this new vendor?

Oh, that gets into a myriad of questions. They're on average, on average, you know, their new store terms can be anywhere from 60 to 90 days. Or in the cases of some new vendors, it can be scan based trading where Walgreens will pay after the product actually scans off the shelf.

So I have $240,000 worth of merchandise in Walgreens, and if my product is selling one piece per store per month, which probably is not enough in most cases.

Probably not.

So let's say two pieces. Let's say I'm selling two pieces per store per month. Okay, so that is another $160,000. So theoretically, I could have a $240,000 inventory and I could have two more cycles of $160,000 in reorders before the first check shows up.

That's not inconceivable. Correct.

And that's what I want people to understand. When you decide you're going to go to Walgreens, you need to be able to withhold probably a half a million.

Dollars in receivables, which is exactly as I mentioned in my earlier statement. When we're looking at talking to new vendors and reviewing with them the opportunity to go to a major retailer like a Walgreens, they need to have the financial wherewithal to get started and know that there's going to be a significant investment that they need to make. There have been times where we've had new vendors come to us and we've said to them, you know what, I think you'd be better off finding a 200 store chain somewhere, testing your product and making sure you've got your program ready to go. Because they just may not be ready from a financial standpoint to go to a retailer as big as a Walgreens or other big ones that are out there.

Right in this model. And this is only one SKU at 10 bucks, we're talking about a half a million dollars in receivables. You needed to be investing in advertising during that 60 or 90 day period or the product wasn't selling. So you probably spent another hundred to three hundred thousand dollars in advertising. You may have some other trade deals going on with Walgreens during this time. Maybe you're doing a bogo, maybe you're doing a flyer, whatever the case is. But what I'm trying to get people for the new people listening that deal into Walgreens is a half a million dollar deal plus advertising, plus expenses, plus you need to run your company. You need to, you need to be funded.

That's right. And you need Walgreens. That's right. And that's why. And you need, you need to be very smart about how you are. You know, I don't, I never like to see people spend money. I like to see people invest money. And so when we are trying to guide our new vendors or new manufacturers, you know, these are the reasons why there's tremendous value in using an agency such as ours and there's other ones like us out there because we will be able to guide them as to how to do business and how to invest that money the best way possible to get the greatest bang for their buck.

And you'll make sure they're getting paid.

On time and make all those things. Exactly.

So when you're looking at, when you're looking at this new company, this new product, this new $10 SKU that we've just invented, it's going to cost us a half a million to $800,000 to play at Walgreens. It's going to cost us another half a million to $800,000 to play at CVS. It's going to cost us another half a million to a million dollars to play at Walmart. It's going to cost us another 300,000 to play at Target. It's going to cost us another 200 or 250,000 to play at Rite Aid.

A couple grand in antidepressants from listening to this show. Where's the positive spin here, Mark?

Well, there is a positive spin.

There is.

And the positive spin is when the threshold to get into the category becomes higher, the number of people you have to compete with goes down. So this, in essence, is good news, because the fact that it takes a few million dollars to play across the whole table means that there's a lot of other people in the industry that might be doing business online or doing business at Amazon. They can't play in your world if you can put this funding together.

That's right.

So I'm focusing on, you need to put this funding together, and that moves you to another level. But don't show up at Walgreens and not be prepared to be able to play in this arena.

That's the. You. You took the words out of my mouth. There is. You know, that's why it's extremely important to work with people that are experienced in new product introductions at every retailer, because there, again, there are things that can. That you can do to guide a manufacturer into a product launch that will give them the greatest chance to succeed. And that's really the bottom line as to the greatest value that we provide for our manufacturers, our vendors, and also for Walgreens, because Walgreens lifeblood is new products. That's where they usually make the greatest profit margins and where it brings them the incremental volume. You know, we certainly believe that we are doing a service for both the retailer and the manufacturer by bringing the two parties together and maximizing the potential, the greatest possible profits for the retailer and still at a fair cost of doing business for the vendor. It's really the only way that everybody survives is by, you know, kind of walking that fine line.

Now, there's another big advantage here, too, Rob, and that is when I go to my local bank or I go to the bank I work with, and I tell them that I have a half a million dollars owed to me by Walgreens. The bank's not worried that Walgreens won't pay me.

Yeah, that's correct.

So that's a bankable receivable.

Absolutely.

So I don't want people to get too panicky, because when you're dealing with names like CVS and Walgreens and Walmart, those are receivables that are collateral.

Absolutely.

You can borrow against them. So it's not that the money's not available, it's that I want people to know they have to arrange for the money. You need to be prepared. Steve, what else before we close, what else would you tell people who want to crack Walgreens that want to get in those stores?

Well, first of all, they're, you know, as I mentioned earlier, they're. They're certainly a tremendous organization from the standpoint of being fair and equitable and paying their bills on time and giving, giving everyone an opportunity to do business. And the fact that they have 8,000 stores, soon to be, you know, over 9,000, and a very strong, you know, very strong financial company that has tremendous expansion and opportunities now in South America and certainly in Europe with their ownership of Boots. So there's tremendous opportunity not only today, but down the road to grow with them. We focus tremendous amount of our attention, almost 100% of our attention, on Walgreens. And so we think highly of the way they do business. And we encourage people to come forward with new products, come to us or someone like us, and ask for help. And we think that it will be advantageous to everyone for the greatest chance to succeed.

So now I want to explain something to people, too. Even though Steve is still on the line here, and that is when you have the option of finding a really good, competent broker versus trying to go to Walgreens yourself, I'm going to tell you right now, you go get the competent broker, because I give you a number of reasons. One, if that broker's good, that broker's in those doors every day or every week inside that building and knows the people and knows how things operate and knows the cadence of that company, knows what they're looking for, how they want to pay, what kind of programs are they going to need to have. When you walk into any of these retailers and you don't have an experienced person next to you, you have no idea what that buyer is going to ask for, what you can say yes to, what you can say no to, because you don't have the experience to do it. The other thing that I want to tell people is a lot of people think that the broker's going to get X percentage of sales and he's going to get me a meeting, and after that, I'm doing all the work. If you have a really crappy broker, that's probably the case. If you have a really good broker, the broker's working on your business every day, the broker's looking at your sales and pulling those POS reports and making sure you have in stocks and making sure that the buyer is happy with the product and looking for a future opportunity, opportunities for you. So the broker isn't just getting their money once, you know, because I've got a phone number and you don't and because I know somebody, I can get a meeting. It's way, way more extensive than that.

Yeah, I just, I just had a meeting with a prospect in town a couple weeks ago that has had bad experiences in this area and has all but dismissed the idea. And it took a lot of movement to get him to re engage the thinking that maybe he just had a bad one, you know.

Yeah, unfortunately, unfortunately, like many businesses, there's a lot of people that, you know, don't really provide added value. The days of just knowing someone, having a so called relationship with someone are long gone. You know, do we know people? Yes. But that's not the reason we're successful. It's more the fact that we know how the systems work, we know the details of how the business needs to be run, we know what Walgreens is looking for, we know all the hot buttons. Relationship selling is pretty much gone. It's a lot more complicated than that these days. And so that's why we spent as much time, energy and money in investing, like we said earlier, in data and in the people within our organization that can provide information to our vendors and to Walgreens and then just all the other things that we've already talked about. So it's, you know, it used to be a very simple business in a lot of respects, but like every business, it's become more complicated, more more involved. And for that reason there's a lot of areas that you need to excel in if you're going to be successful.

It's very data driven. But you know, just like there's bad brokers, there's bad ad agents, I mean, we hear the horror stories all the time.

Exactly, exactly. So we're confident there there's good people out there like us. And so if, if you're looking for someone to help you, we'd appreciate the phone call. If you find someone else that does what we do, that's great too. But definitely we encourage you to use a sales agency that has experience. You'll be very, very happy you did.

So if you are interested in knowing more about Steve Anderson's firm, Hockfield, go to the show notes@cpginsiders.com look at the show notes for this episode Walgreens episode. You'll find Steve's contact information, website, email addresses there. And of course, as always, if you have questions about advertising or about marketing your product, you are always welcome to contact us at Jekyll and Hyde Advertising, which Rob, is JekyllHyde, Jekyll Hyde Labs, Jekyll Hyde labs.com We have too many URLs.

J E, K, Y L, L, not.

J E, C K. I know people.

Add that extra letter to our name. Jekyllheidlabs.com you can always call and talk to anybody here, depending on what category, what area that you need help in. Steve, thanks for being with us here. And that's it for this week on CPG Insiders. We'll be back in a couple of weeks with another episode. If you're looking to greatly increase sales on your CPG product, don't hesitate to contact us at Jekyll and Hyde Advertising and Marketing. By the way, the only advertising age with a guaranteed result. Just go to jekyllheidagency.com or feel free to give us a call at 800-500-4210.