Timing and Strategy of Getting into Retail – Episode 10

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 everybody to this edition of CPG Insiders. I'm your host, Mark Young, my co host, Rob Taylor, the very frightening individual sitting next to, to my right.

And handsome.

And devilishly handsome. Actually. Rob has a nickname. His nickname actually is Rough and Tumble Man Candy. That's actually what he goes by. So anyways, enough of that Rough and tumble. That's just making this creeping me out just thinking about it. We have our dear friend and friend of CPG Insiders, David Berenbaum, back with us. David, welcome to CPG Insiders.

Hi, how are you doing? We are doing great.

And David, I tell you what we want to talk about today. So we're going to get all your wisdom and the subject we're going to talk about today is timing. So David, when we're talking with companies, especially younger companies, they'll always talk about, well, when should I be doing what? When does my plan go in for review? How long does it take me to get cut in? When should I be working on my presentation? So David, first if we would, let's start off with the major retailers in all the different categories. They have review periods, correct?

Yes.

Times change, right? They're not all the same for every category.

They're not all the same for every category and they're not even all the same for every retailer, is that right?

So Walmart could be have a March review and CVS could have a June review or something?

Well, yeah, absolutely. Walmart could have a review, let's say on oral care in May, which happens to be true. And CVS does a review for oral care in September. Walgreens does an oral care review in June. And it varies with every supermarket chain and every mass merchandiser chain. It's all different. Market used to be where you could pretty much generalize a category would be reviewed by most accounts at a certain time of the year. That is no longer true. Right.

They kind of used to follow the ECRM pattern a little bit, didn't they?

That's correct, yeah. And actually I think more than anything, ECRM drives that. But now with technology and with so much data available and it comes so rapid fire and it's so available, it's much easier now for a retailer to make changes in the middle of the year that are not necessarily at the scheduled time. So now they do an annual review, but they can touch it or affect it just about any time now that.

They Want, is there a reason they change from a single time for a category? Are they just waiting to see what the other guy's going to do or is it just because of what you're saying? Where it's now they can cut you in or they can make adjustments on the fly. What's going on there?

Yeah, Rob, it's definitely a result of having more data faster, more technology. So it's not as much of a hardship for them to review the category more often. But there's definitely still a major review for every category and there's usually a mid year cut in which is a mini review where at best 2%, maybe to 5% of the shelves will see changes. For a annual category review it could be as much as 10% or 15%.

So I get one chance here, I've got one time a year to come in there, right?

Yes, you get one chance to present, to get in. Yes.

So it sounds like with all of those reviews though, so you have one opportunity to hit a home run, but sounds like now you have more opportunities to be under the scrutiny of the buyers.

That's absolutely right. Yeah. You know, in some ways it's kind of scary and in other ways if your brand is performing well, it's great because sometimes you can add more SKUs and not have to wait until a year later. Still though, for the most part for smaller brands and entrepreneurial type brands, it's pretty much going to be a once a year procedure. You could get knocked off though without waiting for a year if they need the space for a major large mega brand from a mega company. But for the most part it's still an annual and, and semiannual basis.

So David, let's go backward for a minute. Let's say that the plan reset for my category is February 15th. So February 15th is when let's say we'll call it Walmart is going to reset the shelves for the year. Okay, so the first thing is when they tell me they're going to reset on February 15, how many days is it going to be before that shelf really gets reset?

At every store, the reset, and it does vary by retailer as everything else does. But generally speaking, Mark, it takes about four weeks before every store in the system has product on the shelf. Now if the reset is in February, that means the appointment will probably be about four to six months before the reset. So we're probably looking at an appointment in September or August really for a February reset.

Okay, so I'm looking at this February reset, which really means March is when it'll all make the shelf.

Yes.

So from February I'm going to go six months backward.

Yes.

And that's probably when I had my appointment with the buyer.

Most likely. It's not an exact science, but yes, approximately.

So if my appointment is six months.

Before.

How many months before that am I working to get the appointment with that buyer?

Generally about six to 10 weeks in advance. For an example, I'm working with established brands for the most part right now. But I just learned yesterday that for a certain category Walmart is going to review starting the last week of April and into the first two weeks of May. So let's see, today is March 5th. I found out on March 4th that Walmart's going to start reviewing around April 20th, something, let's say 25th until about mid May for this particular category.

Okay. So you need to get an appointment with them to go in and present your product. Now in your case, you're, you're now becoming a very well established brand, so you're going in there probably to review the products you have and maybe present some new SKUs.

Right now, as a new brand, I.

Would be showing them my product maybe for the first time.

Yes. And, and I'm, I'm still very much involved sometimes with new brands too. So we go through that exercise as well. But for a new brand, you still have to wait officially until you know, either from your broker or your master broker or just because you've read it somewhere, that appointments are starting to be set up for a review. I would advise not to wait for that to start getting your brand in front of buyers. The best procedure, really, or the best tactic is to start discretionally emailing your buyer who's going to be your buyer. Send a couple of samples, send a couple of teasers, send a couple of really strategic type emails or letters and let the buyer know that when review time comes up, you would like very much to have an appointment, usually that's turned over to an assistant or a scheduler, and then the scheduler will let you or your broker know that they're starting to book appointments.

What percentage of new brands or new products get that appointment on their own without hiring somebody like you.

Without hiring a master broker, and without using a broker that really is really is going to go out and do everything for you. The likelihood is probably less than 10%. And the 10% that does get an appointment, they're selling insulin.

Jeez.

So when do I cross the line from pestering a buyer versus I'm informing the buyer so obviously you don't want me to send them an email every day.

No.

What, what kind of, what would you. Is it every week? Every other week? What, what, what would be the time?

So let's go back, Mark, to our scenario of a February reset, let's say, for next year. And we kind of heard from the Grapevine that they're probably going to do reviews, let's say sometime in August or maybe early September. But even if I don't know that I'm going to as soon as I'm ready and I have something really to show, like a really good prototype, better yet a real product or really good pictures of the product and I've already buckled down and prepared extremely well what I want to say about it in six bullet points or less or a couple of paragraphs or less. And a photo of the picture, not as an attachment but right on the body of the email to make sure it gets seen. I'm going to start campaigning for that now. So if I'm all ready to go, it's March now, I might send the first one in March. Then I'm going to follow up. If I don't hear a response at all, I'm going to follow up again in May. Okay.

It's a pretty good gap there. Okay.

Yes, absolutely. Yes.

And it sounds like you're saying that from a communication standpoint at this point, less is more.

Correct.

Don't send them a 40 page PowerPoint presentation.

No. You might blow your appointment before you even have one.

So you're going to send them a graphical email with a photo and some bullet points.

Think of it as almost like an advertisement. My goal is to get an appointment, so I'm going to pretend, let's say it was television or radio. I'm going to pretend that I've only got 30 seconds or 60 seconds to try to make my point. To get that appointment on an email, it's probably five or six bullets or a couple of paragraphs where every single word in the paragraph is informative and doesn't waste any space. And I'm going to send a picture or two.

So brevity matters.

Yes, that. Actually, I feel like that is great advice because when we talk to people, we go to nacds, we, we used to do ecrm and I think we're going to get back into that. When you're talking to some of those people who are having their first meetings, they'll have a 40 page deck.

Oh my God, I've seen 80.

Yeah. And we'll, we have 20 minute appointments with them. And I can't even imagine what those retailers are going through with those appointments time after, you know, just back to.

Back every 20 minutes.

It has exhausting for us when we.

That's a really good topic too because ECRM is very popular and really is the very, very best way to get.

Started are those 20 minute, 20 minute appointments.

20 minutes. And what usually happens is a brand new company, an entrepreneur who's usually, let's say from a different profession or different field, maybe a dentist, maybe a lawyer, maybe an engineer, whatever, or an inventor. Usually they go in and use the entire 20 minutes to talk about what they know best, which is the features and benefits of their products. And you would think that that's what you ought to do, but it's not. The retailer is going to size you up in 20 minutes. It'll take the retailer five minutes really to know whether or not they have any interest at all in the product. And there's definitely points that you've got to make to get them interested in the product. They have a lot more to do than just with all the features and benefits. Then you have to show the retailer that you understand something about their business that's extremely important. If you don't show the retailer or if you don't have somebody with you that knows the retailer or knows how the retailer operates, you could present a cure for biggest disease in the world and you're probably not going to get in. You have to be able to demonstrate verbally and with part of your PowerPoint that you understand how retailers, and specifically the one you're talking to, how their decision making process, what it's based on, what's the criteria. Don't ask those questions. Find that out before you get there. It's easy to find out or have a master broker or at least a broker with you because they know. But show the, you know, demonstrate by conversation in your PowerPoint that you understand what it takes and that you know how much money it costs and that you know how you're going to be funded and able to do it. And that you know that you have to have an advertising plan or some kind of a marketing plan that you can discuss right there. These are all things that need to be discussed. You need to be prepared to discuss co op while you're there.

How much of that 20 minutes is going to be spent discussing the product versus how much is going to be spent discussing the marketing program?

Mark, I think that you really have about eight minutes out of the 20 to really dig in and sell the product itself. And again, buyers here, when they go to an ecrm, it's exhausting. They're there for four days and they. I don't. I think they see about 15 or 18 companies a day and start to.

Blur after a while.

It does blur. And the same thing with the gmdc, it's even worse because they're sitting at tables and the meetings are eight to 12 minutes.

And at NACDS, I describe NACDS to people as speed dating.

It is speed dating. So even when you're talking about your product, resist the temptation to say cliches like there's nothing better than this. They hear that all day long. Tell them specifically, specifically, what is the point of difference from what they already carry. A point of difference could be anything from more effective based on ingredients. It could be how you're going to market the product could be your point of difference. For an example, years ago, I launched Mineral Ice, which is a topical analgesic, which is one of the first of its kind. It wasn't really that different than a lot of other products that already existed. But our point of difference was that we were going to have every local radio talk show host who dominates their market talk about the product. So it was our approach, that was our point of difference. Nobody had ever done that before with that type of product. We also explained that chiropractors all over the country or going to be endorsing and recommending the product. That's a point of difference. So it could be your advertising or marketing approach is your point. It could be your price point, could be your point of difference. It could be the premium nature, it could be something on the packaging, it could be the delivery system. There's a lot of possibilities. But be specific about what that is. No buyer wants to just hear that. All my friends told me it's the best.

Well, as you're talking, you know, and I'm going to butcher the phrase here, but it's the saying, a person who represents himself in court or is his own lawyer has a fool for a client. You're exemplifying that here, where you bring a different perspective, that the manufacturer, the inventor, whatever, doesn't have the experience and you're their advocate to this courthouse, if you will. If so much is at stake and so many of these clients that we see have so much at stake, they have their own money wrapped up in it, why wouldn't you bring somebody who is an advocate who knows the landscape? Because it is so intricate and detailed and having a Distance like you have with the products is critical. You know, knowing what to say and what not to say is vital in 20 minutes.

Very critical. And some of the biggest mistakes that people make, whether they're going to an ECRM or GMDC or even to their first meeting, is making the assumption that the buyer wants to help you. Some buyers are very, very nice, and they will be very kind and generous and give you information and then move you on. Reminds me of when you watch Shark Tank and some of the sharks are very nice. And they'll say, you know what? I'm not going to be. I'm not going to buy into your company, but I'll be a buyer of your product because you convinced me it's a really great product, but you haven't really done anything to convince me that you have a plan in place to make this product sell or to build a demand. You've got to. You've got to go in there and be able to explain in the buyer's language, even though you'll hear a million times that they're not expecting that. Well, maybe they're not expecting it because hardly any new company knows how to do it. But if you do know how to do it, you're way ahead of everybody else. So take somebody with you or appoint somebody or hire somebody that knows what the heck they're doing. If you. If all you have in the room are people that are doing it for the first time, you lose.

Yeah, you're in trouble. You and I discussed something on a call recently. It was a thought I brought up. And I think this is what people need to do, and that is remind yourself who you're trying to be a hero to. And in this particular case, you're not trying to be a hero to the consumer. You're trying to be a hero to the buyer.

Right.

So you're not there to sell the consumer, you're there to sell the buyer.

You just need to be able to explain how you're going to sell the consumer more than selling the consumer. You have to explain what your plan is on how you're going to get the consumer to know who you are so that they walk into that retailer store and buy the product. Because it's not up. It's not the job of the retailer to figure out how to sell your product for you.

If you're listening to this show and you're trying to get a product in, hit back 30 seconds and write that note down. I feel like that is the most succinct, best piece of advice that we run it. I mean, we run into it when we're at these shows where they're selling the hell out of the product to the consumer instead of how are you going to make me money? And that's really what it comes down to.

Right.

Hit back. Well, now, 45 seconds and right.

Who do you want to be a hero to? It's the buyer.

Great, great point.

It's the buyer. And what you also have to keep in mind, what you should know before you go in there, is that it's up to the buyer today at the ECRM or wherever you are on whether or not to put you through the rest of the process. At some point, that buyer is going to have to convince some other people. The buyer is going to have to convince his or her boss. The buyer is going to have to convince the skew rationalizers that they're wrong because they're going to say that SKU rationalizers never think that anything new is a good idea. They just don't. Skew rationalizers are always looking through a rear view mirror. So you've got to get beyond that. And the buyer might even have to convince a category captain and a merchandiser. So also keep in mind that you're not only trying to sell the buyer, you're trying to prepare the buyer to sell your product at a meeting that you're not going to be in.

So, David, walk me through this process now. So I figured out when the review is happening, kind of figured out when I'm going to, you know, when the shelf happens, when the review happens, when I start sending emails, I get this meeting and let's say that that buyer says yes. That's not the end of the process, is it?

That's just the beginning and the yes.

So now what does it look like?

Well, the yes at that point just means I'm interested in taking you or letting you go to the next step. However, if I'm really a transparent buyer in saying everything on my mind, I'm going to share with you that there's a good chance that by the end of this event I might not remember much about you. So I hope I have the information by my side or some reminders or the right packaging or the right products to remind myself of what I was interested in. And when you get back home, you better follow up and you better follow up the right way. If you do nothing and wait for the buyer to call, you might have a lot of gray hair before you hear back. So these people are very Very busy.

Walk me through the vendor application. Because that's another thing where I find people are just shocked when they say, well, the buyer said yes. I'm like, well, did they send you out a new vend package yet? Well, what's that?

Well, almost everybody goes to a trade show and comes back and says, we did great.

You ever notice that everybody at nacds said everyone said yes to everything.

Every person we meet with at NACDS is getting into retail tomorrow.

Everybody. And 5% of them will. That's generous for the most part. Like I said before, buyers are nice people. So they're going to say something nice first of all, so they can get away from you, walk away from your booth.

It's speed dating. Nice to meet you. It was great to meet you. Thank you for stopping by.

Yes.

It's not, it's not me, it's you.

So the follow up is critical. So when you get a vendor packet and again get somebody on your team that's done it about a thousand times.

So how big is this vendor's package? I happen to know the answer to this, but I want you to explain.

It could be fairly large in size, but more importantly is what's on it. So you're going to have to basically explain everything. Now the tricky part, Mark and Rob, is on the packet. When it asks you things like what's your advertising spend going to be? Which they do ask you, you better put down a good number. Because between you and me, if you don't get into retail anyway, you're not gonna spend anything. You're not gonna spend it until you're in. So put down a good number because if you do get in, you're going to need to spend that. When they ask you what items should come out in order to make room for your product, Popular question. Find somebody who can get that answer for you. Don't just walk into a store and say, I don't think that one sells or that one's not as good as mine.

Yeah, my box fits back where this one can come out.

You know, somebody has data and knows what's not performing well. Get that data and make the right recommendations.

Other David, you would do what? You would look in IRI and you would look for, let's say we're talking at topical analgesics. Let's say there was 45 SKUs in the store.

Yes.

You would what? Look at the bottom five.

Yeah. Or, Mark, if somebody's down, you know, 40% from last year, they're, they're pretty vulnerable. They're very vulnerable.

Specific number.

I don't know where that came from off the top of my head. But if somebody's down that much, even if their number overall is still better than the bottom five, that's a good candidate to be discontinued or to be deleted.

So you would just show the buyer, well, look how hard this brand's dropping. The chances are they're going to continue to do that.

Yes, because trends are even more important than the current number.

It's a good point. The product that's, you know, the 45th product out of the 45 could be showing week over week over week growth right now.

That's a winner.

Yeah, those people aren't going to get nailed. Yeah.

So we're really looking for not only the low seller, but we're looking for the. We're looking at the momentum.

Your buyers are definitely looking for momentum because that's how they predict the future. So if a brand's down 40%, the odds are it's not going to make up that 40% next year, even if they do everything right next year. Now, new competitors have come in. Consumers have already switched over to other brands. It's going to take them a long time to build that back. If I'm a buyer, I know that because I seen that movie a thousand times.

Now, what else is in this application? What else do I need to provide them? Because I'm going to tell you something. You ever done one of these applications? It's like applying to sit on the Supreme Court. Well, for one thing, these things are like 50, 60 pages deep.

For one thing, you're going to have to know all your specifications. That means how much will the product weigh? How tall is it? How wide is it? How much will the case weigh and cost? How much, what kind of a box is it going to be in? What kind of corrugate am I using? All those things are going to be on the application and you really need to have it all.

How many pieces in a carton? How many cartons in a master carton?

All those things. So that's part of it which has to go on there. But again, get some help with even how to fill that out. Because even if you know all your own specifications, which really, frankly, a lot of brand new brands haven't even really thought about and how they're going to do it, that's the good time to plan it. But there's right and wrong answers with that, too. So don't just make a guess or decide what you think it should be. Sit down with somebody that has the expertise, that knows what they're looking for. Another thing that's going to be on the vendor packet and this is really tricky. How much are you going to offer me for my co op spend? What are you going to commit to? Oh boy. It's got, I'm going to, I don't.

I'm going to do zero. I don't want to do any co op spend.

Okay, that made it easy. Where's the shredder? Yeah, I don't need to do any co op because when people find out.

How much better my product is, they're all going to buy it.

It's going to be word of mouth.

Yeah, I'm going to make a viral video.

As soon as people try this, everybody will buy it.

And don't put down it's negotiable or, you know, it's open for discussion. That's just, just asking for them to throw it away.

What is reasonable, David?

Well, the best thing to do because they're going to ask you also on the application, what is your, what do you think your first year projected sales are going to be? So don't put something stupid down like something that's higher than the best selling brand and don't put something unmotivating down like it's not going to do as well as the bottom five.

So David, let me stop you right there for a second. When we're looking at the big players, Walmart, Walgreens, cvs, Rite Aid, Target. Let's start with Walmart. If I'm bringing in a consumer packaged.

Good.

What is probably the dollar level that I need to do in the first year to survive?

You need to, it's also the store movement. So you need probably to think that you're going to do somewhere close to a million dollars. I'm talking about retail dollars in the first year. Does that mean you're going to get kicked out if you do 851,000? Not necessarily. Again, it depends on your trend. If you're working at a pace of 851,000 or you're working at a pace of a million dollars with your 851,000 and it's near the end of the year, you're okay. But if you did the same amount of business every month all year long and you're only at 850,000, you're probably not going to make it. So don't put down that the first year you're going to do 850,000 because what you're saying to the buyer is that my brand's going to be one that you're going to discontinue in a year. So talk to somebody that knows your category and knows the space and they know what the threshold is. And you might as well put down that you're going to at least make the threshold because if you don't, you're not going to make it anyway.

So let's say I'm in that analgesic business.

Yes.

I'm at Walmart. Walmart is going to expect me to do what? Sell what, one and a half pieces per week per store?

Yeah, it depends on the dollar amount. Depends on the price and the cost of the product. You know, the lower cost the product is, the more your turns have to be more pieces.

So the $5 product is going to have to sell four or five pieces a week per store.

Yes.

Where the $20 product might be okay, selling one piece per week per store.

Correct? Yes, that's exactly the way it works. And that's a great analogy and example, Mark, because that just happens to be about what it is.

So can I ask the buyer, when I'm having that meeting with the buyer, can I ask the buyer, how many pieces per week per store do you is the minimum that I need to do with you?

Absolutely. That's a good question. Be careful, you know, how you ask it or how you position it. Don't ask it like you're afraid. Don't ask it like you're not optimistic. It's okay, though, to ask the buyer, what's the threshold these days? I'm just curious because I also want to be able to make recommendations to you about who this product can replace.

So my buyer tells me why I need you to sell a piece per week per store. And if my product sells for 20 bucks, then I pretty much can do the math and figure out what my first annual year sales need to be on that. On that application.

Yes. Yes. Now, if you have knowledgeable people already on your team, before you get there, they already know the answers to those questions. So you can do the math before you get there, which is really cool. You already know and indeed is going to be on your vendor packet too. They're going to ask you those things on the vendor packet. So the worst thing to do is either leave it blank or say negotiable or put something stupid down that's either too high or too low. Be realistic, because buyers know what realism is. You better know too. Before you fill out that packet.

Can I ask a candid question? Because sure, so if I'm a new brand, I've already got my money tied up in packaging and prototypes and maybe I've made some product. What does it cost to enlist an expert to advocate for me to these buyers? I mean, imagine I'm me, I'm an inventor. I do something else and I make a product. And now I'm having to remortgage my house. What does it cost to hire you to go be on my side so I can get this product off the ground? I've already spent my nest egg. I've cashed in. What does it cost me?

If you hire a master broker, which is by far the best way to go, because even if you just hire somebody to help you fill out the form, it doesn't end there. You're going to need constant expertise and information, inside information. You're going to constantly need more and more and more. So if you hire a master broker, particularly if he or she has experience in the category you're getting into, they already know all those answers or they have a broker network that already has the answers in that category, you're going to be fine. As long as you hire a good person and they hire a good broker network, you can hire a consultant. They wouldn't do it on just an ad hoc basis and say, help me fill out this form and I'll pay you some money. Do it on a retainer basis because that's really what you're going to need. And then if you ever get to a point where, you know you don't need the consultant anymore, you can reevaluate it then. But as far as the cost, a master broker, and everybody's different in how they structure it, I'm a little different now because I've been doing this for so many years that I have a lot of security and I don't really, candidly, I really don't need new clients, so I can be choosy. But at this point in my career, because I've been doing this for so many years, I might be more interested in equity than I am in raw dollars. But typically, typically a master broker is going to earn about a 2 or 3% override net net sales on your, on your sales, the, the everyday broker is going to make 5%. You're going to make about a 2 or 3% override over and above that. If you're a master broker, you have to figure out cost is going to be about that percent times how much sales you think you're going to do. And Your profitability. And I would advise you always to start out with a high price. It's really stupid, really, to try to be the lowest price on anything. You're going to need the money.

Well, you can't be. I mean, especially if you're a small company. If you're a small company and you want to compete on volume and you want to go up against Unilever, Procter and Gamble, you can't out volume these guys.

No, you will not. You'll lose. So the way to win is, the way to win is to provide a profit opportunity not based on volume and not even based on your own sales. But my product is going to bring a prize consumer into your store and your aisle that you really want that the big guys aren't going to bring. I'm going to bring you destination customers for my brand. Not a commodity shopper. And because my brand is premium and it should be, if you're going to be new, my shopper is going to have a shopping basket that's going to be loaded with the most profitable items you sell wall to wall on your whole store and certainly in your aisle. That's what I bring to the table that the commodities aren't going to bring.

So David, as we're doing this application, how much information is going to be there regarding my company's financial stability?

Yeah, well, that's really important because the retailer is risk avoidance. The biggest nightmare a retailer has is if they finally really get the nerve or the confidence to put in a brand new item with no track record or, or certainly with people behind them with no track record. What happens to me and my job and my butt, if you will, if this item doesn't sell and I can't send it back and I can't get my money back, or if this company goes out of business while my product, while the product's still on the shelf, or if they can't pay the co op or if their sales don't keep up with their co op commitment or.

If they get a recall.

Or if they get a recall. And that does happen.

So what do we need to demonstrate? What do we need to show these people? We need to show these people that we're financially solvent.

You're financially solvent. You have experienced people on your team, either on the team or outsourced that are under some kind of a contract with you. They're not going to go away. You should talk about how you're going to be financed. It's okay to say I've got investors and you don't have to tell them their name. You don't tell the buyer their names, but you need to be able to talk about them, what kind of investors they are, where they come from, what qualifies them. Or am I doing an ipo? You've got to tell the buyer, maybe even on the app, how am I going to finance this? And you need to take the risk out of the mind of the buyer. You know that the buyer is already worried whether they. Whether he or she brings it up or not. What's going to happen if the item doesn't sell and I'm stuck with it? Well, tell them. Tell them, because they know that there's a chance your product might fail, even though you both are really optimistic it's going to do really well. But sometimes great products fail for reasons you can't control. Tell them what you will do about it and how you'll solve that problem for them. Way before it happened, you bring up.

A point and you were talking about, you know, it's okay, tell me, have investors. The thought that hit me when you said that was that when you're meeting with a buyer, you almost need to treat the buyer like you're talking to another investor.

Yes, you are. They are an investor.

Yeah. I mean, there's risk involved, right?

Absolutely. And many times it's their job that's involved.

You know, I'll tell you a really, really quick story. One of my favorite buyers of all time, and I'll say it. He was a buyer of cvs. He's retired. He's a great guy. Good friend of mine. I once had a cup of coffee with him at an nacds. He wanted to get away from the convention, and we were good friends. So he went to a Starbucks. Of course I was going to say.

Was it a Starbucks coffee?

Of course it was Starbucks. I asked him, I said, I'll make up his name. Now, Joe, I've got to tell you, I've been doing business with you for 15 years, and you're the hardest buyer in the whole country to convince to carry a new item. Why am I striking out with new items with you? What am I missing? He said, well, I've had this job for 19 years. At the same time, my competitors have had 7, 8, 9, 10, 11 buyers for the same job that I have because they bring in new items. I never bring in new items. I just bring in the sure things. Now I'll never win a prize or a trophy for being the smartest or the shrewdest or even the buyer that picked the right new product. I won't be that guy, but I'm going to be the guy that gets to keep my job until I'm ready not to have it. Because I don't make mistakes. I don't take any risk.

It's safer to say no.

Yes. Because he could put in an item from Proctor or from. Right.

A known winner.

He's going to win. Yeah. You know, he might not make as much penny profit. He might not make. You know, he's not going to have a gargantuan winner because Proctor is going to be the winner. But he's got a sure thing that, first of all, it's not going to fail, it's going to succeed. But if, even if it's the one in a thousand items that really doesn't make it, he's got leverage. He's got products all over the place. Store at that same company has on the shelf. So he knows he's going to get his money back.

Right. They're big enough to pay that retailer to do markdowns and clear it out if they have to.

Right.

And they will do that because they have so many other items in that store.

And if anybody from Proctor is listening, Proctor, I love you. Okay. Just wanted to do that disclaimer.

Us, too. We love you. Absolutely.

We love you. So talk to me about this money now, David. So I'm proving I'm financially stable. The big guys are going to bring me in. How do I anticipate my cash needs? How fast are they going to pay me? How much money do I need on hand? Do I need to have inventory standing by? You know, am I going to get reorders? What's going on there?

There's a ton of great questions that you just asked. So let me try to cover what I can and then remind me if I leave something out. But you have to, first of all, count on that the first time around. The first orders of maybe the first two orders, you're going to have to be patient. Before you get paid, you will probably give terms of, let's say, 2%, 30, net 31. They're going to ask you for a lot more lucrative terms than that. And for the first couple of, you know, orders, you're probably going to negotiate something, but you don't want to cave in and say, okay, you can have 60 days forever or you can have 90 days forever. Wrong. But you can, if you're prepared and well enough financed to say, I'm going to take the risk. Some of the risk away from you or out of your hands for the first couple of orders. You know, you've got 60 days to pay the first two or three or whatever orders you probably, or you might have to do that inventory.

By the way, in the industry that's called dating.

It's called dating now, just so you.

Know the term folks. Go ahead, David.

Yeah, and some retailers, usually drug chains and a couple of food retailers might ask you for something called pay on scan. I can tell you right now the answer is no. But what Pay and Scan is is basically consignment.

And they're getting more and more pushy about wanting pay on scan.

Yeah, they are. And believe me, the answer is always no. And even if you're extremely confident that your product's going to sell, don't agree to it because you're almost better off not to do business with them rather than to do Pay and scan because you're probably, you're probably not going to come off of it for two years or ever. And they are not in any hurry to pay you. You're last on the list to get paid. It's not like you're going to really get paid on scan. You're not.

Right. They're not sending you your $12 because it just passed the cash register.

You're probably going to wait a minimum of six months or eight months or a year before you see the first penny.

Really?

That bad?

Yeah.

Now what about Walmart? Walmart tends to pay quicker though, right?

Yeah. And I've never experienced experience pay on scam with Walmart. I'll tell you why I think they did that. Walmart, you know, sometimes they get a bad rap, you know, for being big or a bully or dominant, all those things. But they're really one of the easiest retail customers to work with. That's not to say they're easy to sell. They're certainly not. But the rules are really easy to understand. They're very simple. Give us the best everyday low cost so that we have the edlp. Everyday low cost, everyday low price. You better ship us on time, don't ever backorder us. Or if you do, you better have a solution for it. They give you a report card, and you should see that report card before you ever get any item in there and let them know that you know what the report card says. And if you listen to Chad the last time, then you know what kinds of things they're looking for. But they're pretty simple because there's nothing tricky about it. The rules are really laid out and easy. They don't even charge slotting allowances. You don't pay for promotions when they want to promote your item. They just do it everywhere else you buy the promotions.

Back to Mark's question, do they pay faster than eight months? I think that's where.

Yeah, because Walmart doesn't do pay on scan.

Right.

They pay in 30 days.

They pay in 30 days and they're great about it.

But they're not usually the first to.

Bring in a new product very seldom.

So David, I'm in one of the big drug chains or two of the big drug chains. You're telling me that I could be waiting months to get my first payment.

If you're on pay and scan? Yes. If you give them some kind of special terms which they're probably going to ask for, they're going to ask you how about if we don't have to pay you for three months or five months or six months or I could.

Have a slotting allowance where my first hundred thousand dollars of product is just going to go to pay slotting fees. Right.

Or you have a co op fee that you've already agreed to and let's say that you projected that your sales are going to be a million dollars the first year and you put that down in your form and then let's just say you agreed that your co op is going to be 10% of your projected sales. So 10% of a million dollars. So they're going to take 10% of a million dollars and they're going to take that $100,000 and divide it by 12 and they're going to deduct every month 1/12 of your $100,000 that you've already committed to. Even if you, if you sell nothing, you're going to get a bill for it. You're going to have to pay them.

So, so I could actually be writing a check to the retailer.

And it happens. And it happens. So you might be writing checks instead of the deductions, but even if you are able to do more business than the monthly co op charge, you have to budget and know that in that particular case for that account, no matter what your projection is, x percent, let's say 10% is going right back and it's going to be taken every month as a portion. But yes, you might have to write a check if your sales can't support it.

Now I want people to understand something too. So I've got a product in, I've just shipped enough product in for 8,700 stores. And let's say I shipped in three pieces per store. So I just shipped 25,000 pieces of my product in. I might not get paid for several months, but if my product is selling, I'm going to see reorders right away.

Correct.

And I need to fill every one of those orders on time.

Yes.

So what I'd like people to understand is I just shipped in 25,000 pieces. I could be 60, 90, 120 days from being paid. And meanwhile, I'm getting more purchase orders every week to fill more orders. Yes, by the way, that's considered a good problem, but it's a cash flow.

Issue and you have to be prepared for that along with your other expenses. And really the startup expenses are c than most of what you're going to have to pay for after that. But if you didn't agree to any special terms other than maybe 60 days in the very beginning for the first two orders or the first order, you'll probably get paid in a fairly reasonable amount of time. But it probably isn't going to be right at 30 days for the first order or so because they got a. They got to get a good feeling about you and they have to oil their machine and the system has to be working before they're ready to pay you.

Speaking of good feelings, or we're going to have to change this show to, oh, shit, I decided to become a manufacturer. What's the positive here?

We don't want to scare anybody.

I feel like we're talking people out of making products or innovating retail. What are some positives we can get?

The positives is building a fabulous company and making boatloads of money.

Thank you.

You know what? Rough and tumble. Let me tell you something. Rough and tumble. I think that the products that you and Mark and I have worked on together, we have a really good batting average that most of them have succeeded really well. Now why do they succeed really well, besides the fact that they were smart enough to hire us, is because there's a process and there's a formula. Not everybody has the same formula, but there are ways to be very, very successful. Yeah, we've talked about a lot of scary things today, but we're really only talking about scary things so that you don't make the mistakes. If you don't make the mistakes and you're prepared and you've got the budget for it and you negotiate well in your first meeting, you are going to make a lot of money. There's a lot of consumer product companies that are Making lots and lots and lots of money. I'm sitting in one right now.

And keep in mind. So, Rob, I'll explain this for the audience and you, that if I have purchase orders from Walmart and Walgreens and CVS and they're not pay on scan purchase orders, unless I have some really deep problems in my financial history, I can go to most reasonable commercial banks and borrow money against those purchase orders.

Right. It's money in the bank to pay.

For that stuff because those are vendors where the bank knows they're going to pay the bills.

And I just brought that up because I want to make sure that we do cover the positive of this.

I'm glad you brought it up because I was starting to get the same feeling like, oh, my goodness. Yeah, you know, I don't want to scare people out of it, but at the same time, we don't want people to lose all their money because they didn't know these things.

But it is such an exciting business.

It's great. There's nothing like consumer products.

Isn't that true? I mean, you have this product that is a thought, something that is an idea that you had and you brought it to reality and you put it on the shelf and people vote for your idea with their money.

They do. And now let me say something that sounds kind of counter to all the scary things. It's really not that hard. It's really not. You just have to have the right people, the right advertising agency, the right master broker, the right brokers, the right information. If you do all those things and you succeed in. It's really not that hard. Then it becomes amazingly easy. It becomes like a money machine.

David, you bring up a good point. All three of us in this room have experienced spectacular products that failed miserably.

Yes.

And mediocre products who have succeeded spectacularly.

Yes. It's process. It's process.

So, last question I'm going to hit you with, David, unless Rob has another one, is we talked about this timing of when does my planogram, when do I reset and when do I go pitch? How does our listener find that information? Where do you get that?

Really? With people that already do business with that specific retailer. They know everything because the retailer doesn't.

Publish a list of when.

No, they certainly do not. In fact, they're very stingy about giving out that information because they don't want 5,000 calls.

Yeah. I always relate. Finding out when review comes is very much like when they elect a new pope.

Yes.

You kind of just sit outside of Walgreens and you wait for the smoke to come out of the chimney.

That's exactly right. So you know. I know. So. I've experienced this so many times where I end up getting clients who didn't listen to somebody the first time. And so they went to their first meeting or their first DCRM by themselves. And now it's really hard for me or you to fix it it. So get somebody. Get people on your team right from the beginning. Get an ad agency. And I recommend Jekyll and Hyde. That I did.

Me too.

You got to have this ready to go because if they do take your item in, you got to be ready to go from the very first second. I've seen buyers product the first minute. It's on the shelf to your point.

I've seen buyers and all three of us have seen this where you'll see somebody with a booth at nacds. They're on their third year, fourth year at nacds. No majors brought them in and no major is now interested in them because everybody keeps saying, I already saw them. I already saw them. I already saw them. I already said no to them before.

Which is why an ecrm, you've got to make sure that you know what you're doing for those 20 minutes because you may not ever get another chance.

Right. This really is a case of you get that one chance at a good first impression.

First impression when you're new is gold if you do it the right way.

David, how can listeners learn more about you or contact you or read stuff that you put out? What's the place?

I provide a lot of information for free about the industry and a lot of good tips. @ Bearnbaum.com it's B I E R N B A U M dot com. A lot of information on there. Or you can write me@davidirenbaum.com and then.

You have a Facebook page, too, for the industry.

I have a LinkedIn group that has about 80,000 members now.

It's LinkedIn.

That's correct.

How do I find that?

It's called Consumer Products Professionals and Retail Professionals. And you could get on. There is about 80,000. We'll publish it somewhere. Just ask to join the group.

And we'll have links to all that in the show Notes.

It's consumer goods and. Yeah, consumer goods and retail professionals. Yep.

And we'll have links to it@cppg insiders.com right. Rob, any last thoughts for you?

No, I think that was good. I wanted to do a key takeaway, but David, kind of covered it right before we went into this segue. So I think we're good.

All right, David, thanks for being with us on CPG Insiders.

Maybe our listeners should listen to the end first.

And folks, as always, if you have questions from any of the topics we discuss, you'll be able to find David's information in the show notes. You can always reach out to myself or to Rob or anybody here at Jekyll and Hyde Advertising. We love this business. We love this industry. We are always ready to try to share information with people. And you can find us at Jekyll, Hyde. What's the best one? Jekyll Jekyll Hyde Labs Jekyll hydelabs.com We have a couple of URLs. I wasn't sure. Jekyllhydelabs.com that's it for today on CPG Insiders. And by the way, if you have a topic or a guest you'd like to hear on the show, contact us, let us know, we'll cover the topic. Till then, we'll see you on the next 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 agency with a guaranteed result. Just go to jekyllhideagency.com or or feel free to give us a call at 800-500-4210.