Understanding Retail Buyers – Episode 4

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 and we've got a special guest today. Our guest is a dear friend and a great expert in the CPG industry. It is none other than David Berenbaum.

Hi, Mark.

How are you, David?

Doing great. How are you?

I am doing fabulous and I appreciate you being here and just so just put a little context on it. David, you've been in the CPG business since what, 1977, right?

20 years.

So kind of giving your age away here a little bit, and you've been with P and G, you've launched a couple of hundred successful products and you basically operate as a consultant and a master broker, right?

Correct. That's right.

So, David, on today's show, what we want to do for the audience today is we want to give them some direction on meeting with the buyers. And what are the buyers looking for today? What are they after? Because we all have, we're in this business, we all come up with great ideas and we have all these different products we want to present. And first off, one of the things I'm going to say to you is sometimes less is more. Sometimes you shouldn't go in because I have 20 SKUs, sometimes you should not show your 20 SKUs.

Absolutely.

And you know what, Mark? One of the things that I've observed over the years is there have been some fantastic innovations, fantastic new products that never made it to retail because they didn't really know how to approach a retail buyer. And that's a shame, isn't it?

I see those too. I see products that I think are wonderful products and no one ever knows about them.

That's right. Well, when you, first of all, when you're getting ready to go to retail, you need to have with you somebody that knows how to deal with retail. You need somebody who can give you that guidance and that information. If you already have that in your organization or you personally have that experience, that's great and you know how to do it. But most startups and most entrepreneurs, they tend to be people from other industries or other fields who are experts, maybe at being an engineer or a doctor or a dentist or an expert at something, but they don't necessarily know all the intrinsic ins and outs of how you go and make a sales call at Walgreens or Walmart or CVS or any place. So that's what we're going to talk a little bit about today.

And they're all different, by the way.

Yes.

And let me add something to that, David, and that is when even the best lawyers hire a lawyer, when they need to go to court, they don't represent themselves.

Right.

And I've done a lot of stuff in the entertainment industry. It's the agent, it's having the agent, it's having the manager. You never see a celebrity go in and negotiate their own movie deal.

That's right.

It's not because they don't know the industry. It's not because they don't even know what they want. It's because you can't. One, you cannot represent yourself thoroughly and accurately. And two, you need people who. That's all they do is make movie deals.

That's right. You need expertise. So at a retail meeting, and like you said, each retailer is different. There's not one formula that works for every retailer in the country. But there are some general things that you need to know and some general guidelines. For example, most entrepreneurs, or a lot of them, I should say, make the mistake of when they get to the retail appointment or when they go to an ECRM or an NACDS Total Store Expo or a GMDC or one of the trade shows, they spend the entire time talking about the features and benefits of their product. It seems like common sense. They take the whole 30 minutes or the whole 20 minutes or the whole hour, and they just go on and on and on about how great their product is. But if you do that, you're not going to get your product in, or at least there's a very small chance you will, because you didn't really address 90% of the other matters that the retailer needs to know from you. And that's why you need somebody to guide you on that.

So I went to a meeting. I want to say that I went to a meeting. You might remember this meeting. You weren't there, but you might remember the meeting, sat with the buyer and the client, and the broker started telling the buyer how amazing this product was. And remember, this buyer is looking at a laptop computer with a pair of glasses down at the end of her nose.

Exactly.

And she looks over the top of the glasses and she looks at him and says, do you think anyone comes in here and tells me how their product doesn't work?

Absolutely.

And that is what they're thinking about. So let's start kind of from the beginning. First of all, you've got to know about the retailer. So whether you're Going to Walgreens or Walmart or CVS or a grocery chain or club stores or a hardware industry. So you've got to know the basic intrinsics about the retailer that you're going to see. I can tell you that one of the pet peeve questions that buyers will tell you is when somebody comes in and says, so how many stores do you have and where are you located? It's like, you gotta be kidding me. You don't even do that much research.

You can't even look on the Internet.

Yeah.

So you have to know the very basic things. But there's other more specifics you need to know. When is your category going to be reviewed? Because, Mark, most categories are only reviewed once a year.

Let's just explain that a little bit, David, and explain how the different, you know, topical analgesics might be different than hemorrhoids, might be different than toenail fungus. So walk us through that.

Right, so for an example, let's say you have an external analgesic that you want to put on the market. You need to know first of all, who is the buyer that has that category? Category meaning group of products, what space do they sell? In this case, external analgesics, who buys that? Now throughout the year, different categories get reviewed at different times of the year. A planogram is how products are laid out and set up in the stores. That doesn't happen by accident. That is very, very purposeful, very calculated and usually very brilliant, very analytical. Retailers do every single thing and put every product somewhere on a shelf. Very purposely planned and calculated. So they can only do that once a year, sometimes maybe a mid year adjustment. But you need to know when is your buyer for your category? In this case, to use the example, external analgesics, when is he or she going to review in that particular case, it usually happens to be August or September or October.

Now, right now it's August as we're doing this show. So if we were looking at a product that is going to have an August, I'm going to say it's an August reset in this particular case. And it's August. I'm a year away from getting on the shelf at that retailer.

Yes, Mark, you are. Because the review process itself will take about six weeks. Then there's going to be another process where different executives and managers of the company get together and they talk about which of the new products, if any, are going to bring back the best return on investment. Which ones are innovative that don't replicate something else that's already on the shelf, which ones can prove or have already demonstrated that there is a demand for the product, that there's a market for the product, which products are going to do the best job of bringing new customers into my store? Because we have it. These are all just some of the factors that retailers look at to make those decisions. They certainly don't want duplication. They certainly don't want consumers just to trade from one external analgesic to the other, unless maybe there's a trade up and they can make more profit on item B than they did on item A. So all these things go into consideration by more than just the buyer, by other people as well. There's a lot of analysts at analytics that are done. And then about maybe two or three weeks later, there will be executives that walk through what they call the planogram room, where they actually set up a room with a makeshift example of what the shelf would look like if they took all the buyer suggestions of what he or she are going to buy. And then they make their decisions. And as you said, then the actual reset on the shelf probably won't take place. The earliest would be like March, but it usually would be April or May, maybe even June before your product actually gets on the shelf. So it's very important not to miss that category review window because if you miss it, you're probably going to have to wait another entire year.

David, some of these retailers have entire planogram stores, don't they?

They sure do. In fact, most retailers scheme their entire store and every single sku, every single shelf keeping unit, everything in the store has been planogrammed wall to wall, aisle to aisle. And let's face it, most retailers are publicly held companies. They're in business, guess what, to make a profit. And so every single planogram, all the schematics in the store, is designed with a multifaceted purpose. The bottom line is they need to make a profit. They need to show that they've made their numbers to their shareholders. Every three months.

Here's a number that'll just stagger people too. The average Walmart has 148,000 different SKUs in it.

And every single one of those SKUs was very well thought out. So as we said in the beginning, sometimes there's some fabulous new products that don't make it. Here's some of the reasons that maybe they don't make it. Let's say you're going to an ecrm, you're going to nacds, or you are lucky enough to get an appointment with One of these retailers, you need not only to know all about the retailer, but you've got to give the retailer the information that they need in order to make their best intelligent decision whether or not to give you shelf space. Shelf space, like real estate. It has value. Yeah.

Real estate by the square inch.

Absolutely.

And that's the way that retailers actually look at their shelves is how much money or what benefits, what ROI do I get for this particular inch of real estate space compared to other choices I have? I may actually make more money just by adding a new flavor or adding a new SKU or a line extension from a big company that I already do business with.

So, David, let me ask you a question. When I'm meeting with a buyer, first off, the buyer, this buyer is going to. Their future is going to be judged on how well their little piece of the store did, right?

Exactly.

That's how they get paid.

So I handle topical analgesics. Let's use that as a comparison. So I handle all the Bengays and the blue emus.

Yes.

My annual bonus, my annual review. My future is going to be determined on how profitable my category did and how much growth my category had, correct?

Absolutely.

How profitable and your contribution to this, to the entire retail chain they look at? Contribution.

So as a buyer, isn't it easier for me to say no to a new unproven product than it is for me to say yes?

Which is why 95% of all new products presented to retailers are not accepted. Buyers may look at as many as 50 or 60 different items, all competing for a few inches of new space. Even if they're only looking at 7 or 8, you still have to be. You still have to make the most compelling case. So what do you do to be compelling? What do you have to.

And let me add to this. If I'm the buyer, let's say I have 60 SKUs on my shelf.

Yes.

I pretty much have a good idea of what next year is going to look like based on this year. If I do nothing.

Absolutely.

And sometimes buyers do skip their category reviews because the safest thing is to skip a year. What they will do, Mark, is if a giant mega worldwide international company has a product, they'll take the time to fit that product on the shelf because they know the risk is so low. Keep in mind that what buyers really look for, for the reasons we discussed, because it's all based on profitability, it only takes one mistake. Just buy one product that fails, that can blow the profitability of your entire aisle. If you're a buyer. So buyers are risk avoidance. I'll tell you a quick story. After being in the business for a lot of years, I once sat down with a buyer who had his job for 19 years and I got him away. It happened to be at the nacds trade show and I happened to get him away for about an hour and we had a cup of coffee at a Starbucks in Boston across from the convention center. And we sat down and I'm not going to tell you his name, but let's say Bill. And I said, bill, I'm going to ask you something. You must be. And we were good enough friends where I could be very transparent. I said, you must be the most difficult buyer for a new company to place their new item in your retail chain. Why is that? And he said, david, I have had this job for 19 years. During the course of 19 years, buyers in other categories have probably turned seven times on the average. Well, I have stayed here. I don't make mistakes. I don't take risk. I just buy what I already know is going to sell. I only buy products that are going to be advertised. I only buy products that have a marketing plan in place. I only buy products where I know they have the budget in order to support their product. I only buy products that I know are going to be good players with my co op advertising program where I know even if they don't sell a single unit, I'm going to make profit because of the money they're going to pay me for displays and advertising. So that's how I make my decisions, David. I don't take chances. I let my competition be my test market. I don't care if I'm not first. And I said to Bill, I said, oh my God, that's the most depressing cup of coffee I ever had. But he was truthful. And I learned a lot from that. And so from that lesson I teach every one of my clients and every brand. Give the buyer your presentation. To take all the risk away from the retailer and the perception that you are taking any risk, you have to give that buyer certain assurances. You have to have the confidence to that. You have an advertising plan, you have a budget, you have a marketing plan, you have the right sales force, you have the right master broker or VP of sales that knows how to manage problems that come up throughout the year. Because as great as your product is, as great as your company is going to be, there are going to be things you just can't control. You're going to have at One point, a backorder or a manufacturing problem or a hurricane or a tornado is going to hit someplace. You know that where you store products, bad things do happen to great companies. You will be evaluated right from the start is how well does that buyer think you can handle a crisis? And what if, heaven forbid, your product doesn't sell? Is this company going to be a company that's going to leave me hanging with all the inventory? And Mark, you and I have had that experience where you and I have had clients that unfortunately, if their product didn't sell, they had no plan in order to take the inventory back. So buyers are going to avoid that type of risk. And candidly, that's why buyers really don't like taking a chance with small companies or startups or entrepreneurs. But they do buy products. And every product on the shelf was once new.

Now there's a flip side to that too, David. So they don't like the risk of these small unknown companies.

Right.

But the small unknown companies have the best innovation. The best innovation doesn't come from the big companies. It comes from a small, never comes.

From the big companies.

Big companies buy the innovation by buying up the small companies.

Eventually, most of the products that large mega consumer product companies have were acquisitions that at some point they bought from an entrepreneur or a small company. When do they buy them? They buy when they reach a certain threshold, when they have distribution in a certain amount or a certain percentage of stores, which they call acv, all commodities volume. That's when they're interested. And boy, do they ever get interested.

Yeah, I mean, when Tide has an innovation, it's because they came out with a larger bottle.

Absolutely.

So innovative as they get.

So the other thing that I was going to bring up here is not only do the small companies bring the innovation, but the small companies bring the margin too, right?

They sure do. Because on a smaller brand or a newer brand, retailers are used to making 40, 42, maybe 50% margins. But on a commodity item or an everyday type of brand or a household name brand, the margins could be as low as 16 to 20%.

So that latai that I'm talking about is a 16, 17% product.

Yeah. In some cases it could be single digits, but the retailer still makes money because of the volume of products like that. And so you would say to yourself, why don't they always buy smaller products with higher margins? Well, because the fact of life is that as great as our product is, most consumers that come in the store are going to buy those big brands. So they certainly have to carry them or they'll lose the consumer to another competitor or to a retailer. But they also need innovation because if a retailer only carries the top three brands in every category and never has innovation, that's an awfully boring shopping experience for the consumer. Now, if a new brand is advertising, if they have a spokesperson or new commercials coming on the radio or on TV and they have a plan, you know what, it's a lower risk to the buyer to take a chance with that product because they have a way of moving that product off the shelf right from the get go. They know that that brand, from the first day I put it on the shelf, there's already a plan in place to start moving product. What they won't buy is a brand that comes in and makes a presentation. And when they say, show me your advertising plan, show me your marketing plan. And if the new company says something like, well, if people, if retailers buy it, you know, then I'll think about doing some advertising or some public relations.

Yeah, that's my favorite. We're going to do PR or we're going to do social media. Yeah, that meeting's over right then.

Yeah, we're going to advertise on Facebook. And it's like, you don't know how many times they hear that.

Yeah, the meeting's over right then the meeting's over.

If you don't walk into that retailer, let me put it this way, if you're not selling insulin or something that is just so innovative and so magical, which by the way is probably less than 1/10 of 1% of all products, no matter how innovative, no matter how much we love our products, very few are what I call insulin. So you do have to have a good product. Doesn't have to be innovative. You've got to sell the features and benefits of the product. There's no doubt about that. Which most entrepreneurs and most new companies are very, very good at. That's one thing they're very good at, is explaining their product. But you better go in there and lay out a plan how you're going to move that product off the shelf. Because retailers are like vending machines. It's not the retailer's job to create the demand for a new product. They just don't do that. Right.

If you think you're going to put a product into Walmart and you're going to build a customer base based on Walmart's customers seeing your product, let me remind you there are 148,000 SKUs in that store.

That's Right now at home, you're probably thinking, well, how can I commit to advertising or anything that costs money when I haven't even had my first order yet? Well, don't worry about it. Because the truth is, is that you're not going to advertise or buy anything until you know that you're going to have business. So you're not going to have to worry about that. You're going to present your plan, presuming you're gonna have business. But if you never get the business, you're not gonna do that anyway.

But don't say that. Say you do have an ad campaign and here's the campaign.

Oh, absolutely.

From hell or high water, this is the campaign.

And you do have an ad campaign.

Because buyers are humans. They still buy on a human basis and they still have the fear of missing out.

Absolutely.

I don't wanna be the only retailer who doesn't have XYZ because they've got this fabulous ad campaign. And I don't want my bosses finding out that Target and Walmart have it. But I don't.

No, because I'm risk avoidance. But I'm taking a risk. I'm taking a risk if I don't carry a product that is being advertised, let's just say on Fox News or something like that, where they've got the biggest audience of any.

David, what you're saying is we need to. Since these guys and gals are risk avoidant.

Yes.

Since they're looking to minimize risk, we need to actually make it as marketers. We need to make the risk being not having me.

Oh, absolutely.

And that's the smart way to approach retail. I'm going to lay out a plan, my marketing plan. And it has to be a professional marketing plan. By that. There's a lot of ingredients to a professional marketing plan. And if you don't know what they are, you better find somebody that is a professional marketer with a lot of experience who's done it at least 100 times, who knows how to lay out that marketing plan. Show the retailer that you know what you're doing or else that you've hired somebody that knows what they're doing. And they better have experience in the consumer products industry in something similar to what you're selling. If they were marketing cars or they were marketing, you know, real estate or something, that's not the right experience. So you better be able to lay it out. Lay out your advertising plan. Show them that on the very first day that that product hits the shelf, it's gonna Start moving the very first day.

Now, let's go back to that meeting with the buyer. You said earlier that the buyer is not interested in trading dollars. So what you mean by that is they're not. If I've got 5, 599 items, I'm going to use itch. If I've got 5 hydrocortisones sitting on.

My shelf, then I don't need a sixth one, Right.

I probably don't need a sixth hydrocortisone because the buyer doesn't get more square inches. The buyer has to make it work in the number of square inches that the bosses have given him, right?

Absolutely.

So for my product to go on the shelf, someone else has to go off the shelf. Is that true?

Absolutely. Yes, absolutely.

Like you said, the aisles don't expand. In fact, sometimes they shrink because if there's a whole category that's hotter than your category, they're going to take space from the category you're in and give it to the category that needs more shelf space.

So they could get a foot of my shelf given to them and I lose a foot of space. So I lost a foot of space that is one, two, three, maybe six shelves deep.

Absolutely.

Six feet of facing.

If I'm the buyer, there's no question about it. So if you come to me with an anti itch product, it better be different. It better be different. And it better be. You better know how you're going to market it and advertise it, because otherwise I'm worried I'm going to get stuck with it. I also can't wait until you get your plan working or until you start executing. The minute I put it on the shelf, it needs to start moving because any 3 inches of shelf space that are dead or not moving is costing me, the retailer, a lot of money. You know, I'm a buyer. I'll get fired. Honest to goodness, I'll get fired if I have a product on the shelf that isn't moving and I can't do something about it immediately.

So as marketers, when we present our product to a buyer, we're trying to show the buyer how the consumer will buy it.

Absolutely.

We need to convince the buyer to buy it. So we have two constituencies that we're selling here. And don't we need to create a situation of plausible deniability? Don't we need to create a situation where even if it fails, the buyer feels that they can go to their boss or their category leader and say, here's why I bought it. And the vice president's going to say, well, yeah, I would have bought that too. I still would have bought it.

Absolutely.

And you take the risk out of it. Now, I will tell you that if you don't take the risk out of it and they really like your product, they will take the risk out of it by telling you, here's what we're going to do. We're going to do something called pay on scan. We're only going to pay you for what actually moves, for what actually sells. It's almost like consignment. You don't want that to happen. Nobody wants that. You could end up on pay on scan for two years before they change it. Nobody wants that. It's not good for your cash flow. You have investors that won't make them very happy. So you better take it upon yourself to say to the buyer, there's really no risk in this because if this doesn't sell, first of all, we'll sell. But if it doesn't sell, I'm going to take it back. And here's my promise, here's my guarantee that I'll take it back. Buyer, retailer, if you do your part and you put it on the shelf and you run the promotions that you promised you're going to run and you have it priced at the right price, whatever that is, this product is going to sell. And if it doesn't, there's no risk to you.

Now, David, one of the things I see, by the way, is I see people go in to see the buyer. They've got a. The buyer knows that they've got an innovative product.

Yes.

And they have no marketing behind it. And what we're seeing now is the buyer saying, well, here's what I'll do. I'll take your product in, but I'm going to private label and I'm going to market it under my own brand.

That happens too. And you know what? Some entrepreneurs might think that's good. You know, well, I can manufacture and I can sell it as private label. But first of all, you may not get the business. They might have some other manufacturer. And, you know, even if you have, I gotta tell you, even if you have a patent or trademarks. Yeah. That's not necessarily going to prevent a private label manufacturer from knocking it off in some way, shape or form where they're not really in violation of your patent. So you don't really want that to happen. The other thing is that most new products are not prime manufacturers. Most of them are contracting an outside manufacturer, which is absolutely fine. But if you're going to get into private label, you can have a hard time paying somebody else to manufacture your product. Then you make enough profit in selling those products because private label margins for the manufacturer are always going to be in single digits or low double digit, paper thin. So go back to I want to sell my brand to do that. Be prepared, be prepared. You're probably only going to get 30 minutes. If you go to an ECRM, you're only going to get 20 minutes. So this sounds crazy, I know, but only use about five or six minutes to talk about your product. And you know what? There really aren't many products where you need more than five or six minutes because you're going to go right to the top line of what makes this product great. You're going to spend the rest of your time talking about your plan, your advertising, your marketing. You're going to talk about co op. The buyer is going to talk to you about co op. They're going to say, they're going to ask you what percentage of your sales are you willing to reinvest in us promoting your product? You better have an answer. Now you also don't want to get killed by that. That's the other extreme.

Absolutely. Because you could end up manufacturing a product and the only people making money is the manufacturer and the retailer and, and not the marketer.

The buyers are professionally trained in negotiation. So the good news is if they are interested in talking to you about co op, that means they're interested in your product. The bad news is that if you don't have the experience or have somebody with you that has the experience, you're probably going to get taken to the cleaners. I have seen and this is when a lot of times I get called when it's kind of already too late, after the bad deal is already made, you know, then I get the phone call.

How do I live with this?

Now I've seen new brands commit as much as 20 or 22% of their projected sales. And by the way, it's projected sales. And if your projected sales aren't high enough, they're not going to take your product anyway. But 20, 22, 24% of your projected sales that you're committing to recycle back into a co op fund for the retailer. How in the world are you going to make any profit?

And that's not counting the ad budget.

That'S not even counting what you spend outside the retailer. Now why do you have to spend money at the retailer? Because almost every product in the store that is Accepted has fulfilled that requirement by the retailer that they're going to be a player, that they're going to participate in retailers own advertising.

So that would be stuff like what David? That would be like circulars or price rollbacks. What kind of things do they want them to be?

Walk into a chain drugstore or a supermarket, you know, or a Walmart or a Target. Let's especially say supermarkets or drug chains. You walk in and you see yellow tags all over the shelves. Everything, you know, all these things are on sale. You might see balloons, you might see a circular in the store, you might see an ad in the Sunday paper.

Buy one, get one free. Buy one get one half price.

And that's their business model. So you know, look, you and I work with some fantastic products that really don't need store in store advertising because we know we're doing enough advertising of our own on television or on radio or online. We know that we really don't necessarily need for the retailer to run our product at $9.99 or something. You know, we know that. But we need to participate in that every now and then because the retailer wants a yellow tag up by your product every now and then so that they can show that in their business model that sometimes even great innovation products are on sale.

You and I have been pretty successful at keeping those in store promotions to a minimum. But that only happens when the product is above the Mendoza line and is moving the kind of weekly numbers that it has to move. Now you've got some flexibility. Couple more things I want to shift to with you. One of the things I want to talk to you about is the pricing strategy. So we're going in with this new product. As a master broker. Do you want to go in with the low price leader or the highest priced innovation?

You know, Mark, I've gotten to the point where I only accept new clients of my own who have a premium price point. I can tell you beyond any doubt that if you go into the market with a premium product at a premium price point, you've already tripled the odds for success. Make your product the most or second or one of the most expensive products in the category. Don't be a commodity. Do not be a commodity because the retailer is going to be more interested because now consumers might actually trade up. We talked earlier. The consumers don't want to trade Apple to Apple but they might want to make that trade. If they can make more money on your anti itch or on your toothbrush or your mouthwash. They might want to Trade up if they can make more money and more profit on your item than an everyday commodity item.

So the customer is buying a 599 toothpaste, and we convince them to move to a 1099 toothpaste.

Absolutely.

Which means that customer now gave five more dollars to the retailer within that same category. So that that buyer's category numbers just went up by $5. And it didn't go up by number of pieces sold, but it went up by $5, which means his gross went up, which means his margin went up because he now has the margin on the extra $5. And if I was competing with Crest, Crest might have been a 17% toothpaste, but my toothpaste is a 35% toothpaste. So they actually sold a tube of toothpaste for less than twice the price, but made four times the number of profit dollars. Do I have that right?

A retailer that sou attractive to me. And so that's part of it too. You know, too many new companies or new brands or entrepreneurs, they go in and they talk about our price is lower than the competition. Well, that's like poison. No retailer wants to hear that. Why would they want to do that? Why would they want the consumer to trade down? Then they're kind of rooting against you because they want the higher price, higher margin item to beat you. So you want to go in and say, I can bring the price point of your category up because I'm going to prove that I can sell this product for $15. When everything in your category is $8 or $9 or $5, guess what's going to happen? We're going to win some share of the market, and sooner or later, we're going to bring the whole category up. Right.

So I'm going to get 5% of all the customers who are buying toothpaste to now spend twice as much money on toothpaste as they used to spend. That's attractive.

You know, many, many of my years was spent at Oral B Laboratories, Oral B Toothbrushes in the Gillette company. I still get pleasure every time I walk in the oral care aisle and I see a $5 manual toothbrush, because I got to be part of that. When I first got into the toothbrush business at oral B in 1982, the leading brand sold three toothbrushes for a dollar, three toothbrushes for a dollar. They were commodities. We put together a whole marketing and advertising plan that, long story short, raised the price point of toothbrushes from three for a dollar to, at that time 399, 499.

Because you made people think they needed a special kind of toothbrush, that not everyone was the same.

Now, right. We positioned Rio Oral B as a professional dental instrument. That's one of the most important parts of your entire day for your health, that you've got to use the very best dental instrument toothbrush that you could find. And that's what we made, Oral B. Of course, the rest was history. We became the number one selling brand, not only in dollars, but in units.

Now, let's stay down that chain for a second. I want to talk about if your product's a category expander. So we'll stick with the toothbrushes. So everybody's going to buy a toothbrush, Correct? Or actually, statistically, you and I actually know 98% of people. Like, I don't want to know these other 2%. But at any rate, most everyone's going to buy a toothbrush. But can I increase the number of times they buy a toothbrush every year?

Yes.

So can I make. Instead of two times, can I make it four times? The other category is can I expand the category? So can I convince people with a toothbrush that they now need a tongue scraper?

Absolutely.

Or like you said about compliance, that we're going to do an advertising campaign and we're going to retrain the way consumers think about toothbrushes, but also how many times they replace it. So we're going to retrain the. We did research and we know that right now a consumer is replacing their toothbrush an average of once every nine and a half months because of our new advertising campaign, our new PR campaign. We're going to educate the consumer on why they really need to change their toothbrush every three months.

Or maybe we make a toothbrush that has some kind of color that fades. It tells you when the color's faded.

You have to replace.

Absolutely.

And that's going to expand your category. So one of the things you want to do when you've got a new product or a new innovation when you go to retail is you want to also use part of your 20 minutes or your 30 minutes to make a compelling case why you're going to bring more dollars, more dollars to the category you're in, no matter what that is, no matter whether it's toothbrushes, mouthwash, external analgesics, or anti itch or wicker baskets, no matter what it is my product that I'm presenting to you, Mr. Mrs. Retailer, is going to make the category for you more Profitable, not just because the product I'm showing you is going to be more expensive and higher, higher margins, but our product is going to set a new bar where eventually, just like the toothbrushes, Oral B did this for about a year and a half with the higher priced toothbrushes. And of course, by the third year, every one of their competitors was also selling toothbrushes.

By the way, I think the ultimate category expander of all time was when the hair care people added conditioner to shampoo. When they came up with here's a bottle of shampoo and now you need a second bottle of stuff.

Stuff why?

Or when detergent came up with, you needed whisk or that's category expanding because now I'm going to buy the original product and I'm going to bolt something else onto my practice.

I've created a new need.

Love that stuff. Now when you go see a buyer, David, we said earlier that this shelf space is finite. It doesn't expand and it might contract.

Right.

There's 40 items in that category.

Right.

My item takes up three and a half inches of facing something that is three and a half inches is going to go, go away, right?

Absolutely.

Do you do your own research and help the buyer decide what to get rid of?

Oh, absolutely.

You go in again, you use part of that 20 minutes or that 30, 30 minutes. You gotta be armed with data. You have to know about the category you're in way beyond your own product. And again, if you don't know the category that well, you better find somebody who does or knows how to find out. You need to know how big is the category in dollars and units? How much market share of that do I think I can get? And why and how. You need to understand the price points, the average price points of that category, the average margins. You need to know what everybody else is doing in that category. And you probably have to make a recommendation as to which items come out, which ones come off of the shelf to make room for your product. Doesn't sound very nice, does it?

Well, if you were doing that. Let me watch this. If you were doing that, I'm thinking there's two criteria and you can help me out here. One criteria would be, I'm assuming that as a master broker, you would go over the IRI reports or the Nielsen reports and let's say we're looking at Walgreens. You would look at Walgreens numbers and you would do what? Find the six products in the category that are doing the worst.

I'm going to Find the weak sisters. I'm going to find a product or a line extension or an SKU that isn't making as much contribution for that three and a half inches, either directly or indirectly. Sometimes is what I'm gonna what I believe my product. Sometimes that means just the consumer that is brought into the store because of my product. One of my clients is Smart Mouth, which is a very expensive mouthwash that's also your client you do all the advertising for. It's like the toothbrushes. We have trained consumers to understand that the cream of the crop mouthwash costs $15 instead of $5. And when I look at the rest of the category and do an IRI analysis or a market share analysis or contribution analysis or a Gem Roy analysis or anything like that, and I find that a lowly commodity item or SKU extension isn't really bringing a higher income or bigger spending consumer into the store as much as my mouthwash can, then I'm going to recommend they discontinue that one. Because not only is the profitability different, not only do I have the best advertising proposal of anybody in the category, but I'm going to bring a consumer into the store who's going to buy my product as a destination item. And she is the kind of consumer that's going to buy your most profitable, highest margin items all over the store, let alone in your aisle.

Now, would you also look at that category and let's stick with that mouthwash. Let's say you see a mouthwash in there that has three different sizes and three different flavors, right? So there's nine facings. Would you look at all those sales? You know, I don't want to put words in your mouth, but would you look at these sales and go back to that buyer and say, you know, if you got rid of the small size of this weird flavor right here that nobody's buying, those few people that are buying that will just move over to the bigger bottle of that flavor anyways and you can put my product there, that's going to bring more money. Meanwhile, you've really lost nothing.

Many times that is the case. So that could be part of your compelling presentation to demonstrate that and show that. But the buyer's not going to believe you if you just say, I think, I think, I think you've got to be able to show the evidence of why you think that's going to happen.

So every presentation that is very, very. There's a lot of homework into every presentation specifically for every retail account.

Absolutely.

It's not A one size fits all pitch.

Absolutely. In getting to know about the retailer before you even go there, know what their business model is. You know, let's be frank here. Family Dollar and CVS don't have the same business model.

Yeah, no kidding.

A drug chain and a grocery chain don't have the same business model.

But even a Walgreen and CVS have different business models.

They have different business models too. So learn everything you can about the business of that retailer so that when you do go make the presentation, you're knowledgeable about it. This will sound almost rude and I don't mean it to, but don't ask dumb questions. By the time you get to the buyer, this is probably the only chance you're ever going to get because you're probably not going to get a second appointment. If you don't succeed in the first appointment because the buyer's got so many other appointments, he or she's going to say, I already saw that. So you have to make the most of that ECRM appointment or that trade show appointment or the in office appointment. That's why you want to have all this done now. You need. If you don't have for example, a VP of Sales or a VP of Marketing with many years of experience in your category or something awfully close who's worked with every retailer, every major retailer in the country, if you don't have that, you better get yourself a very high qualified master broker or somebody who can hire a broker sales force for every every footprint in the United States, in every account. Who's going to go with that broker and make the presentations. And you'll probably go to to make those presentations because you have the expertise on your products. But you better take somebody with you who knows how to work with that particular retailer. And it's not just the business model, it's knowing how to something as simple as filling out their co op forms, making a proposal to them, what goes into the proposal.

With a lot of great brokers, it's the personal relationship between the broker and the buyer.

And that's really true. You know, the brokers are the ones, the local brokers are the ones that have the relationships. The master broker has relationships on a senior level. But the master broker is not going in to Walgreens every day like the Walgreens broker is. But the master broker is the one who's doing the research and is going to be doing the presentation and supervising in managing day to day. The broker. And the master broker knows a lot really about every account in the country because he works with all of them. But yes, the local broker that kind of reports to that master broker. They are very, very close with the one or two accounts that they call on. They may be in the building every single day. So you need that man or woman, you need that person.

So here's one of the things that I, that I always, that I say to clients sometimes, since you're talking about the master broker there. So if you're not familiar with this, master brokers, as David's describing to you, are kind of like you, your vice president of sales and in the individual brokers call on the accounts. So for those of you that are new to the CPG business, understand there are some wonderful brokers out there and.

There'S some bad brokers and some that.

Aren'T the right fit, some that aren't the right fit. But here's kind of something that's pretty solid and that is a good broker has a fabulous set of relationships at one major account, maybe one major account and a regional. But really they make their entire living calling on Walgreens, Walmart, Target, whatever the case is. And that's who you want. So the first thing is don't buy into a broker that says, I call on everybody. Because if you call on everybody, then you have relationships with nobody.

Right. And you don't live near most of your accounts. Right.

The great brokers have offices right by.

The headquarters, right by the retailer. So don't hire somebody in Pittsburgh, you know, to cover Target.

Right.

In Minneapolis. So the other thing I'm going to say is when you're looking at a master broker, I look at the broker when I've got a broker and that broker calls on Walmart. And you and I know several terrific Walmart brokers. But the reality is at the end of the day, that broker, his or her livelihood is going to come by pleasing Walmart.

Right. So where do you think the loyalty is?

So given the choice of should I agree to a co op plan that might not be the best for my client, but it's going to make, make this buyer happy. And I've got three other items to present. And this is why you need the master broker. Because the way I look at the.

Master broker is on the manufacturer side, right?

The master broker is defending the manufacturer, the marketer, and the master broker is keeping the broker honest. He's the person that's forcing the broker to go do the right thing. And when the broker comes back and says, well, they want this, this and this, a great master Broker will say, you know what, I know they want this, this, this, this and this, but you can get them to take this, this and this.

That's right.

We're not going to give them these other three things because you and I are going to go back over there and we're going to work with them and we're going to pull these things back because otherwise we're not going to be profitable.

Absolutely.

But the master broker, he's concerned with the company's profitability, whereas the broker, he's concerned with getting the product in the store, which is what I want him to do.

Absolutely.

And he's concerned with keeping that buyer happy, which I want him to do. But I need somebody else that's going to make sure that I'm not being taken advantage of and that I'm going to make money on this deal.

Absolutely.

And if you try to do it yourself without any broker or master broker, that's fine. If you have many years of successful experience doing business with Walgreens and CVS and Walmart and Target and Kroger and Albertsons and Heb and on and on and on. Right.

So I've got a client as an example in the CPG business who's over half a billion dollars.

Okay.

When you're a half a billion dollar consumer packaged goods, guess what, you have a full time staff.

Absolutely.

You can afford it. When you're a 2 million 5 million, even a $20 million CPG product, you.

Outsource your sales organization.

Right. You cannot afford the level of expertise. You can't afford to pay people that have the skills you need. You can't afford them on a full time basis.

Because if you just. This happens a lot, Mark. Because a lot of the businesses are family businesses when they get started. If you just hire your brother, you know, maybe your brother was in selling, maybe he sold something before and you say, oh, he'll do a great job because he's a salesman, he's in sales. If your brother doesn't have the right experience, he's going to get killed by a Procter and Gamble salesperson. Or frankly, he's going to be killed by somebody like me or by the buyer or by a buyer. He's going to be absolutely overshadowed. He's going to be, he's just not going to win.

Don't think for a minute that the buyer isn't going to say, oh, these people have no idea what they're doing. I'm going to take this product in, but I'm going to clean this guy's clock because he's going to give me everything.

Absolutely.

So you got to make sure that you've got the right players on your team. And for a small company just starting, or even a small company that's been around a little while, and I would really say Anything under about $250 million is by today's standards a really small company because your competition is multi billion dollars. Any company that's small or small to medium, do the smart thing and outsource your sales, outsource your person who leads the sales, outsource marketing and certainly outsource advertising. That's a smart thing to do.

When you look at Kylie Jenner, she's got this makeup line out now and she's doing gonna hit $300 million in sales with five employees.

Yes, right.

But she's Kylie Jenner, but she's got five employees.

That's unbelievable because every, everything is outsourced to experts.

And that is the smart way to do it. I mean, everything from warehousing, certainly manufacturing, sales, marketing, public relations, almost everything you outsource to experts because that puts you on an equal playing field with your big competitors. I always tease my client, my smaller clients, because especially in marketing, because one of my clients happens to be one of the largest consumer product companies in the world. And when I go there, they've got a whole campus of buildings and they've got one building that's just absolutely devoted to sales and marketing, a whole building. And so I tease people in my smaller accounts when I go there and there's two people and me, and we're doing all the sales and marketing management and we're getting market share. I said, just think, we're taking market share away from an 11 story building filled with about a thousand people.

I know, that's so much fun, isn't it?

I love it. It's absolutely great. It's David versus Goliath. And you can win, you absolutely can win. You just have to have the right, very smart people working with you and you're going to get a piece of the pie.

We had a client years ago, the company was sold now, but it was called Salon Graphics. Yeah, graphics was number 375 in IRI when they became a client, we took them to number one in about three and a half years. And I used to, it was Hairspray. And I used to always say, I wish I could be sitting at Tresemme or Clairol or one of these companies and hear the thousand people explaining to their bosses, how are these people In Detroit with a handful of people taking all our market share.

Absolutely. And Mark, I'll tell you, somebody got fired for that. But think so? Oh, yeah, yeah. Because to the big giants, you know, if they've got like 22% market share or in one of the categories I'm in. One player has 44% of the market share. If they go from 44 to 43 and a half, somebody's going to lose their job.

Well, it's big money. And if they're. When you get to be their size.

Absolutely.

And we're happy when we pick up a half a percent of share.

Exactly. You know, my mouthwash client, we have 3% of the mouthwash business. We've gone from 0.8 to 3% in three years. Well, I gotta tell you, the real big mouthwash companies, they are so aggravated about the 3% we have. I mean, we're like a net that won't go away. But we love it because 3% of a giant multibillion category is a lot of money.

David Beerbohm, it has been fabulous having you with us. We're up against the clock. A couple things. One, I'd like to bring you back and I would like to give our people an understanding of SKU rationalization on another show.

Absolutely.

Because I think that's an important thing. You might not have ever heard of it, but you're going to want to hear about it.

You need to know before you go on the sales call.

Yes, it is. So, David, how can people get in touch with you? You have social media out there. And if you go to CPG Insiders with an S.com, there'll be links to all David's stuff. But, David, you're active on Facebook, Twitter.

Right. And my website is beernbaum.com now, how do you spell beer? And bomb B I E R, N, V, a u, m? Beernbaum.com My website's pretty thorough, covers a lot of what I do. You can email me@davidirenbaum.com yeah. Or find me on Twitter. David Berenbaum. But the best thing is, look at my website because it's all on there. And you can write to me on my website as well.

Now, don't you also operate a LinkedIn or a Facebook group on CPG?

I started it about, I think it was 2011. I started a LinkedIn group for consumer product professionals. It's retailers and it's also people that provide services to retailers. We've got 75,000 members now. It's wonderful to be connected worldwide with almost everybody who does everything in the consumer packaged goods business because who you don't know, somebody you're connected with knows. So it's on LinkedIn and it's called Consumer Products or excuse me, it's called Consumer Goods in Retail Professionals. Consumer Goods retail professionals on LinkedIn.

And we'll put a link to that in the show notes also.

It's so valuable. Well, thank you, Mark, for having me. This has been a lot of fun, certainly my favorite topic. And I would just add, and I know you haven't asked me to say this, but if you are starting a business or you have a business that needs a turnaround, you're looking for an advertising agency. There's only one Jekyll and Hyde. They Jekyll and Hyde and Mark. First of all, Mark's a genius. Genius. And I've been in this business for four decades and I haven't said that about anybody else I know in advertising.

Well, that's very kind people.

They're going to get your product on the market with their advertising program. I'll bet you appreciate it.

Well, folks, that's it for the show today. If you have any questions, send us an email. If there's any topics you want us to cover, you let us know that. Other than that, stick with us. We'll be back with more episodes and we will have more episodes with other guests, including bringing David Berenbaum backs. That's it for today.

Thank you, Sam.