US Market Entry for Food Brands: A Strategic Guide

[00:00:05]the broadcast is now starting all attendees are in listen only mode all right good uh morning everybody back in Sunny Queensland hope everyone's doing well back there uh and welcome to the first one of our new webinar series that we're hosting here at tiq trade investment Queensland North America um ask an expert webinar Series this one is around how to successfully break into the US natural products food and beverage Market um so just a quick overview of our panelists so my name is David cingo I'm the trade and investment commissioner to North America for trade and investment Queensland um joined with me here in Houston Texas is Stephanie Grandy uh Business devel Development analyst for tiq and also the person that's uh been able to put this webinar on for us um Stephanie manages our food beverage and natural product strategy for the North American Market uh and our guest today Mr Bob Burke who's in natural with natural products Consulting and I'll give you a little bit of Bob's bio a little bit later on in the webinar so just just for those of you that don't know who we are I'll just spend a couple of minutes giving a quick overview of trade and investment Queensland so tiq is essentially the Queensland government's international business agency supporting Queensland exporters to enter into new markets all around the world we have 15 trade offices around the world uh this office that we cover is based in Houston and we cover the US Canadian and Mexican markets from uh from here and the kind of support that we provide to queenan exporters is uh facilitation support So helping them understand some of the opportunities in the market try to provide some educational um forums such as this one uh some particular one-on-one business matching where appropriate with potential Partners uh helping them find customers Distributors agents Etc uh in the US market and uh and then we also run a number of activities to help support those objectives and and Endeavors um and and one of those that we have coming up is something that we're doing around the food beverage and natural products uh space in early March and I'll hand it over to Stephanie just to talk a little bit about what she does in the food beverage and natural products and and even what she's doing at Expo West hi everybody thanks David for the introduction um my name is Stephanie Grandy and I manage the food nag natural products and beverage sector for the tiq US office um so I help Drive growth and build a presence for Queensland companies in the US by facilitating and uh fostering relationships with key industry Professionals in this space um so we strive to create a pathway for Queensland companies to export their products to the US uh by creating value added uh activities like this webinar today with Bob Burke um and by having a presence out at Food trade shows like natural products XO West um so what you can see here on this slide um Expo West is one of the largest food trade shows in the US that takes place annually in California where over 80,000 buyers Distributors Brokers uh manufacturers key IND industry professionals that attend um so this is one of the best uh shows to attend and meet with Professionals in this natural and organic food product beverage and healthy living space so tiq is going to be hosting activities across these two days surrounding Expo West for about eight Queensland companies already signed up um so as you can see on the slide on that Wednesday tiq will be hosting education briefing sessions that will run most of the day sessions like 101 Consulting with Bob Burke um and briefing briefings to educate Queensland companies on the legal taxation PR marketing uh fulfillment warehousing e-commerce and Regulatory Compliance elements uh one needs to consider when doing business in the US um and then on that that Thursday March 9th we will be hosting business matching for the Queensland attendees um to talk business with natural products brokers in a speed dating type format um and then that will be followed follow by the Queensland Australia Great Barrier Reef uh reception where companies will have a chance to further meet uh professionals and showcase their products uh to attendees of Expo West and the larger business community in Los Angeles um so if if you would like to join our mission to XL West definitely please you know reach out to me after this this webinar and I can provide uh you more additional information the registration flyer and uh the program and all the costs involved and Bob will in fact be another speaker again at Expo West this year has been last year he's been so kind to spent some time with some of the Queensland companies uh one-on-one in advance of the show itself to provide some consult consulting services so it's a great opportunity if you're interested in the market or even planning to be at Expo West or just happen to be in the US um and are interested just let let us know so um with that and without any further Ado I'm gonna just provide a little bit of intro to our guest speaker Mr Bob Burke before I do I'm going to just share a couple of administrative details and that is um so Bob's gonna basically present on opportunities in the US market in this space and Pathways for entering the US market and then we'll have um quite a bit of time at the end to allow for Q&A uh which I think is probably the Crux of maybe a lot of the people here that are joining the webinar that'd like to have some specific questions answered so the way that we're going to manage that is um two ways so you can either type your questions on the right hand side of the panel in goto webinar there there's a section that allows you to type in your questions so we can collate those um during the course of the webinar so you can write them at any at any time during the webinar during Bob's presentation um that's the first method and then the second method is at the end of of Bob's presentation uh you can actually raise your hand apparently they tell me there's a little hand symbol somewhere on the top left of your your side panel that you can raise your hand we won't physically see your hand raised but we'll see it virtually and uh and then we can unmute you and you can actually have the floor to ask a question to Bob or myself or anyone else on here so with that um quick intro into Bob so bobber he's been Bob's been a consultant for almost 20 years since 1998 providing assistance in bringing natural organic and Specialty Products to the market including work across strategic planning writing sales marketing and business plans budgeting pricing building distribution and broker selection and management uh organizational development strategic options such as financing branding uh trade spending management US market entry plans for international companies obviously very relevant today uh and assistance around m&a due diligence and uh Venture strategy groups Bob is also the co-author and co-publisher of the natural products Field Manual and the sales manager handbook he currently serves as an outside director for a number of different companies in this space I'm not going to list them off um we can always direct you to his website uh and he also serves on the editorial Advisory Board of nutrition Business Journal and is the co-founder of the Gina group a share group of leading natural and organic manufacturers um and we won't hold this against him but Bob also serves as a beach heads advisor with the New Zealand trading Enterprise so um he has some experience with uh companies from our part of the world doing business in the US so with that um we're going to give Bob control to manage the slides and we're going to hand it over to you Bob thanks so much Bob for uh giving us your time this morning uh thank you thank you David Stephanie and morning everyone um let me just uh make sure I have control here there we go um so what I'd like to do this morning is uh try to provide a little bit of an overview of the US market especially the natural and Specialty channels uh talk a little bit about the importance of putting a sound plan together uh so many of the companies I work with are very entrepreneurial uh very ambitious aggressive uh they they tend to be a little rambunctious where they just want to get out there and get it done which is admirable but it can also be very costly and um provide you know inadvertent setback so having a thoughtful plan with a realistic set of expectations is uh very important and so we'll talk about those expectations on the part of Distributors retailers Brokers uh what some of the challenges and opportunities might be and some of the costs you might expect of breaking into the US market and I really like to frame those up more as intentional deliberate strategic Investments rather than thinking of them as simply as cost of doing business and so this is 2017 after all so for a lot of you a great way to get started is by going online and so Ecommerce is absolutely exploding across all categories I'm sure you've all heard of Amazon uh they are the 800 pound gorilla but there's many more Beyond Amazon uh and it's a great way to get some validation on price points product selection uh case pack and sizes and different bundles uh without the significant significant expense of going into retail and one one aside I want to make right now is um all this content that we're showing on on the screen will be shared to you afterwards and there's a lot of sort of bonus material so we're going to go through around 26 or 27 slides and I'll go through it uh rather briskly uh but then in theend um afterwards you'll have about 50 something slides that have a lot of really good content that you can read at your own pace afterwards so after going online what I highly recommend for most people is is thinking about going narrow and deep I.E starting in a single region where the main objective is cracking the code of what does it take to sell off the shelf um a lot of companies um end up you know expanding distribution very rapidly they find themselves in 500 stores a th000 stores uh maybe they've had The Misfortune of someone like Whole Foods being smitten with them at a show and wanting to blast them out nationally and all of a sudden they're in 11 regions of Whole Foods there're in 11 distribution centers of UNFI there are in hundreds of other stores and the stuff isn't selling and that's not a great place to be so I think initially ideally you start in a single region you want to go through your operational Shakedown meaning your products in a public Warehouse house it's getting picked up by a distributor or you're shipping directly to the store um and you see evidence that it's selling through uh and I'll talk about that in a moment um the majority of these products especially into the natural and Specialty channel are being purchased through Distributors but it is feasible to sell direct meaning uh UPS or DHL or FedEx going directly to the stores and it's a good way to seed a market where you'll have virtually perfect sales information meaning you'll know how many units per skew are being sold at each store um you get great unfiltered feedback in terms of from the store staff and others and as your business starts to scale it's much easier to go to a distributor and say I'm in 50 stores or 100 stores I want to hand this over to you than just walking up to them saying I've got this great product you should stock it um as I'll talk about in more detail later um you can use these key customers to get leverage into a distributor when you do go into a distributor uh and I'm sure it's the same uh in Australia sometimes uh be very mindful of your agreement with them which usually comes in the form of a new item setup form and the large National distributors in the the us such as UNFI and kahe um when you're filling out their new item form you might think you're filling out a tax return um lots of details uh lots of fields and cells and if anything is confusing vague ambiguous by all means don't skate over it because it'll be the basis of you doing business with them uh for years to come and so you definitely want to get clarity on things if you're not quite sure what you're signing up for and as I said earlier you know be careful about going too broad too fast so when I talk about cracking the code it's really you want to validate the assumptions you had coming in and the first of which is do you have something that's highly differentiated um something that really has a reason to be in the market and so this is something I'm sure you do every day with your own customers you want to make that case that we've got this terrific product it's Unique it's going to attract uh a new consumer it's going to grow the category it might trade people up to a more premium item something that results in higher Penny profit or a higher ring or more more gross margin for the retailer and do some homework on the category you can always purchase data through people like spins you can go to spins.com they're the natural equivalent of AC Nelson or iri if you're familiar with syndicated scanning data but there's plenty of public information available as well so the people who put on Expo West are New Hope natural media and if you go to new hope.com they've got a lot of great content there on category Trends um consum Trends what's going on in the industry what's going on with key retailers and Distributors they might have done a spotlight on your category that talks about how big it is how fast it's growing what are the key segments who are the key Brands and so on and on the specialty Gourmet side you can go to Specialty food.com they're the people who put on the Fancy Food Show the biggest uh specialty Gourmet show in the US and they likewise archive lot of the back issues of their magazine and have a lot of content uh on their site as well so you want to test uh what is that optimal price point where it's going to sell through on an everyday basis how to merchandise it you know what part of the store should it go into uh how to promote it how to demo it you can uh activate your social media you might be working with a local PR firm or digital marketing firm or bloggers and uh see what the impact that has on your business if you go into Whole Foods they have a terrific tool called The Whole Foods Vendor Portal where you can have access to your data at Whole Foods so whether you're in a couple of stores whether you're in a region for example uh the Southern California region is called the Southern Pacific region uh um you can look at your brand units dollars average price by store by week by quarter by month by year and see exactly how you're doing um spins as I mentioned is more syndicated category data and depending on your category for example if you're a single serve beverage or a snack and you're going through what's known as a DSD direct store door distributor they have something called depletion data which allows you to see how you're selling by store and so being focused on this sell through is absolutely Paramount for everyone but especially when you're new to the market when it comes to channels or classes of trade um most people start in the natural and Specialty channels uh they tend to be less expensive more forgiving a better match with the consumer but invari if you're going to grow your business you're going to get pulled into um the multiples which we call the grocery Channel or supermarkets what we call Mass are people like Target and Walmart uh Club of course would be Costco BJ Sam's Club chain drug you may have heard of uh CVS Walgreens R A and others convenience store uh people like 7-Eleven and others and then I have a sort of a laundry list of channels and these are classes of trade I've worked in over the years with a lot of different companies and so of course if your product lends itself Food Service can be very significant um Airline table top is what we call people like William Sonoma uh department stores like Macy's uh we have retailers called Bed Bath and Beyond who sell a decent amount of specialty food especially snacks and confection um also in that category is um the the the chain TJX um which would be people like Marshalls TJ Maxx HomeGoods who over the years have started selling a lot of uh specialy Foods even Beverages and some perishables uh and then of course online I think everybody should be looking at that and again we have a lot of content on that at the end and so it's really important to think about um what is our basic game plan to go to market you know who's going to be responsible are we doing this regionally are we doing this nationally what are the channels we're going into what are our expectations you know um year one we hope to be in 300 stores with four items averaging five units a week uh we're have a budget to spend maybe 15% of sales on trade spending we're going to be doing um x amount of in store tastings or demos and so on and so on so map out a plan and this is something that uh the tiq people can help with or by extension some of the other resources they use like myself and others uh and also Brokers are very important and so uh Brokers or agents uh in some Industries they're called manufacturer reps um they're an extension of your sales effort they do headquarter calls they do uh inore retail merchandising they work with Distributors and retailers and they certainly have a lot of local knowled of what works in their geographic region so they're a good collaborator for you in refining your goto Market plan and so so from a simplistic standpoint um getting a beach head with a key customer uh which could be a region of Whole Foods it could be a regional chain like a Wegman's uh which is in the Northeast United States uh maybe it's a preponderance of Independence 30 40 50 60 that all can help leverage you into a distributor um I'll talk about distributors in a moment but they will want you to participate in some of their programs which could be advertising in their catalog running promotions and so on which will then get you access to more of the stores they go to and when I refer to A and B stores I'm simply talking about size and volume potential um when we talk about the natural channel it's somewhere in the range of 12 to, 1500 a stores and those would be chains like Whole Foods and Sprouts Earth Fair and others as well as high volume Independence and uh smaller retail groups and then as you start to uh roll out into other regions and start to gain National Distribution uh you'll start going into the Super Markets who pull from these natural Distributors and essentially you know all the supermarkets in the US all the multiples are doing a fair amount out of business with natural organic and Specialty Products and so when you're sitting down with a retail buyer uh or especially a distributor um especially if they're natural the first thing they're going to look at as your ingredients so do you meet their standards and if you go to the whole foods website you know wholefoodsmarket.com uh there'll be a link that says quality standards and they'll list uh their standards or more accurately what sort of verboten for them like what they don't allow in food beverage Personal Care supplements and they'll have special standards for things like animal proteins and dairy and other things like that so in the absence of a sort of a a national federal definition around what constitutes all natural Whole Foods in many uh cases is sort of the de facto standard uh they're sort of the proverbial gatekeeper for the industry so if it meets Whole Foods as standards chances are other natural retailers will accept it as well uh as will the the national and Regal Distributors the second thing that a distributor will want to see is do you have listings or authorizations in the retailers that we Supply and so as I said earlier you know getting into a region of Whole Foods or a chain or some Independence will help you get into that distributor they'll then want you to participate in some of their marketing programs uh which again advertising in their catalog promotional programs they have you know everything from truck advertising and speed to Market programs to sample boxes to coupon books um when you're sitting in front of a distributor buyer you'll start to wonder after a while who's selling whom because they have so many marketing programs that you can participate in and then they want to see that somebody's going to be working the line that you have a sales effort whether it's your own sales team or your sales team working with a broker Network um and then there's a lot of pruner things on you know what's the shelf life lead time for orders minimum orders can they pick up and so you really need to think through when you get product uh you know from Australia to the states what port are you likely to go into uh where you going to be storing product are you using an importer who's going to hold the product who's going to sell to other Distributors so obviously having all that worked out along with your pricing and all that will be important um this is simply saying the US market is huge um over a trillion dollars which is hard to wrap your head around uh but it's an immense immense Market a little more uh food and beverage is sold at retail than food service but food service is uh very large as well uh the specialty Gourmet portion of this is uh well over 100 billion uh the natural side of that is about the same with a little bit of overlap but when we talk about the natural Channel we're really also including things like Personal Care supplements cleaning products and so on whereas specialty food is going to be mostly food and beverage um this is a very rough sort of value chain when you think about how to ladder up your pricing and so I would say almost like working backwards if you have a Target retail in mind I would say most premium retailers work on roughly about 40% and I'm showing 33 to 50 because it varies by retailer it varies by product category so if you're in a high velocity category like yogurt or salty snacks or some single Ser beverages the retailers will likely work on a lower margin because it's very competitive and they're selling lots and lots of volume where whereas if it's a more specialty product or things like supplements and personal care they're going to sell closer to a 50% margin likewise Distributors broadly work on 25 to 30% uh but in some categories like specialty cheese it might be a little higher um and I'll show in a couple of examples where they work lower when they're working um with larger customers like Whole Foods and others and then depending on how you're doing this you might be using an importer um who's working on a margin uh that is going to help support a lot of the marketing activities and all of that or you might be importing it yourself um and then a broker is generally going to be involved they typically uh work on about a 5% commission on sales of product to Distributors although for a brand new item with minimal distribution in the market they might work on a modest retainer as well so in talking about some of the key players here's sort of a laundry list of the major food retailers and you can see Walmart is Far and Away the biggest uh kroger is uh a very large supermarket chain Costco is a club operator and you can kind of read through this at your own pace but this will give you at least an idea so for example if you're at the show uh you'll have some familiarity with some of the key players um here's a little Spotlight on Kroger uh they're they've been one of the most Innovative uh large supermarkets in the country over 2600 stores with a number of different banners some of them are simply Kroger but they also have Ralphs in Los Angeles QFC in Seattle Fred Meyer in Portland Oregon and so on um they did uh a new own label or private label program that did 1.5 billion in their first year called Simple truths and it's across many categories of uh and they're doing it as natural and organic offering so that's been a real game Cher for a lot of people on the natural side we have large chains so Whole Foods is the probably the most strategically important customer they've got about 420 stores plus or minus in 11 Regions they're moving toward centralizing buying in their Headquarters in Austin Texas um Sprouts is mainly on the west coast uh California Arizona um they do centralized buying so if you go to the headquarters in Arizona in Scottdale which is next to Phoenix Arizona Iona you can have a headquarter meeting and get listings in all 225 stores and then I list a few others such as natural grosses and Earth Fair and then there's some of these independent groups so the national Co-op groceries Association um is about 200 stores across 37 stores and you can actually go to uh the Twin Cities Minneapolis and St Paul meet with an office there and they can put you into advertising programs and other things that can help leverage you into their Network and likewise there's something called infra it's an acronym for the independent natural food retailers Association uh which has over 300 stores and that's also a great buying group um and then I list some of those smaller Regional chains and some of the uh Independents and others so these are if you think of the natural Channel um there's upwards between 9,000 and 11,000 stores but if you think in terms of 8020 these 12 to 1500 stores are the ones you'd want to focus on in terms of leveraging into Distributors and getting the Lion Share of the volume opportunity when it comes to how these uh retailers buy product most of what they're buying is through Distributors and so you have some national Distributors the largest is UNFI they also happen to be uh the primary supplier for Whole Foods kahe um is the primary supplier for Sprouts they both do a lot of Supermarket chains as does DPI DPI uh is much smaller in skews a little more towards perishables um but they also do some Whole Food and they do some supermarkets and others some recent news is Haden house was acquired by UNFI Nature's Best was acquired by khee and then uh in the third column you see some Regional buyer uh Regional Distributors so for example where I'm based in New England uh in the Boston area we have some Regional Distributors such as Associated buyers as well as checks CHX Finer Foods where they would Supply people like Whole Foods some of the premium supermarkets and a lot of independent natural food stores and independent uh specialty Gourmet stores starting out with someone like them is going to be a lot lower cost and lower risk than going Bang into a large National distributor like UNFI or khee and then some of the retailers have their own uh in-house Distributors so Kroger for example works with uh Payton and uh up in New England um Hanford Brothers works with Progressive and so on uh there we go so in terms of um let's see am I doing this right yeah there we go so some of the cost of going to Market is uh in in l of like listing fees or in lie of uh slotting a lot of Premium retailers like Whole Foods expect to get what they call a free fill and a free fill is a case per flavor per store build back to you at wholesale for food and if it's a supplement or personal care it's three units and what's important for you to keep in mind is you might sell it to a distributor for 20 bucks a case a distributor might wholesale it for 25 bucks a case you're getting build back at that wholesale price of 25 and so just when you build out your plan and you put your budget together just keep that in mind there's those advertising costs that I mentioned uh with Distributors and retailers doing promotional allowances whether they're off invoice or billback or scan down uh inore demos samples for your brokers the commissions for the Brokers there's um as we've referred to a couple of large National shows such as Expo East and West for the natural Channel Fancy Food Show uh for the specialty Channel and then a number of the Distributors including kah and UNFI have their own uh distributor tabletop shows which tend to be buying shows and then we'd strongly encourage you to build in travel to the market for yourself for your salespeople so you're not doing this all over the phone or over the email from far away and then eventually as you build out distribution and you've got some business going on you may want to start to look at some consumer programs including coupons and others sorry I have a little bit of a lag here on advancing the SL SL so some of the cost of doing business uh in addition would be um in addition to those intentional and planned programs uh you might have unauthorized deductions uh some of them you're aware of things like setup fees uh most Distributors expect payment terms such as 2% 10 net 30 in terms of how they pay you um they may want to have X amount of sample product for the distributor sales team and others uh it's common for them to get introductory deals so when you first ship to a distributor they might get a 60 uh day or 90day introductory deal at 15% off I mentioned ad programs and then forward buying which is common throughout the world is basically when you're on promotion with them let's say you're on the promotion for the month of September at 15% off it's not unusual for them for the last week of September to order another two months worth of product at the discount so that's something you should plan for as well uh MCB is just an acronym for manufacturer chargeback uh so when you do things like free fills or retailer specific programs a lot of that's admitt ministered through the distributor and they'll simply deduct it from the invoice uh because they can you know um and then freef fills I mentioned K stack deals are where you might say to a retailer if you bring in a minimum of 20 cases and build a nice display I'll give you uh 15% off edv just stands for everyday value so instead of getting quarterly promotions I might give you five or 10% off all the time hit pocket deal is just a jargon for giving the broker some discretionary power to if they need to uh give a retailer a special promotion to bring in the line that they're authorized to do that in supermarkets especially it's common for anything that goes out of code or gets damaged or spoiled that they get credit for that and then again unauthorized returns or anything that are sort of unexpected human error and so on it's important that you know when you get deductions from retailers and Distributors that somebody's going over them with a fine tooth comb to make sure it's what you've agreed to and if it's not there's a whole process and protocol to charge them back for those and you should get in the habit of uh doing that so when you're thinking about your pricing of how your product is going to price out at retail um Distributors are all basing their price on what's landed into them so if you're delivering it to the distributor that's their landed cost if the distributor is picking it up at a public Warehouse or from your importer they're going to add a freight factor which they'll tell you what it is um that becomes their landed cost and then from there they'll add their say 25 or 30% margin and that's what gets published as the wholesale price in their catalog now some of their big customers like supermarkets get some kind of a volume discount Whole Foods uh works on costs plus 8% from UNFI uh some supermarkets have similar Cost Plus programs which could be 15 or 20% depending on the service level and then gave an example at the end where let's just say uh the illustration only if your item lands into a distributor at a dollar and they work on a 25% gross margin that's 25% of their selling price as in what you'd see in a p&l or an income statement so a dollar divided by 75 would give that distributor a 25% margin on a133 selling price likewise if a retailer works on a 40% uh gross margin and they're buying the product at full wholesale at a133 divided by 6 means it would roughly come out to 221 which really means anywhere from a buck 99 to 219 as the likely retail here's another example using that whole foods with Cost Plus plus so if it lands uh into Whole Foods I'm sorry if it lands into the distributor and then they add 8% it would be this 1335 uh to hold Foods they work on 40 that would get you a 3.99 uh per this example and yet one more example where if let's say UNFI is selling to Safeway or rals or one of the supermarket chains it might be Cost Plus 15% and you can see how it would price out and this is something again that a broker would have good Intelligence on so as you're working with that broker to refine your go to market plan they'd be able to give you good guidance on that so you can see where your product is going to uh price out and then I mentioned you know in that addendum portion that we're supplying with you um we have a lot of information on each one of these key Ecom players but I can't tell you how important this is for most categories um I'm working with a startup company that's been on the market for about 18 months uh they're doing they're following my advice by going through um you know a small Regional area first to sort of crack the code of what does it take to sell off at you know to sell through at retail and while they're doing that they're averaging $500,000 a month on Amazon alone which is really helping to float the company it gives them tremendous credibility with retailers and they're able to go in with confidence and say look at these reviews we have on Amazon and look at how much you know we're selling at these price points and we can show you how the flavors Rank and all that but depending on your category um people like Abes Market which is bought by direct eats uh if you're doing supplements and personal care and energy bars people like Vost and ierb are very important Thrive Market uh recently raised $450 million uh they claim to be a cross between CCO and Whole Foods so people buy a membership and they get discount every day they can buy stuff by the case and so on so online is very very important and often a great way for international companies to uh break into the US and now uh happy to take any questions you can I guess uh virtually raise your hand or uh type them into the chat box and we'll do our best to answer them thank thank you so much Bob I really appreciate it Bob we had we had a few questions that had come through pre-webinar that had come through sort of in advance when people were registering for the webinar um I might just go through a couple of those while we wait for any of the attendees if they've got any specific questions so one of them was um obviously you talked a little bit about agents and Brokers and the need for them uh in a market like the US particularly for a foreign company that has no representation on the ground to to provide support what is there have you got any advice in terms of the best way to to identify credible agents that um can support International companies uh sure so um a lot of uh the process you would go through to hire a broker or an agent is similar to the same process you go through to hire salesperson you know so for example there are directories available such as uh the one that's in my field manual which I'm happy to share with you and I can send it to uh David and Stephanie and they can email it out to you uh but also uh you can talk to some of your peers so maybe some of your uh fellow Australian companies already doing business in the US who are they using if you're at an industry event like a trade show and you're talking to retailers and Distributors you can certainly ask them um who's calling on them and who's working with them and who they think might be a good fit for you um if you're at a trade show you can certainly talk to your neighbors uh so other exhibitors about who they're using and who they know about um and then when you start to talk to them you're going to want to understand their capabilities around geography classes of trade experience in your category and Far and Away the most important part of the conversation is agreeing on expectations and it's you know proverbial uh smart goals as in the acronym uh specific measurable achievable realistic time specific so when you're sitting and talking to a broker you think you might work with you really want to understand what they think is realistic for them to do with you over the next three months six months 12 months around how many stores to get in what it's going to cost um what kind of volume you might ECT and so on and then hold them accountable to that and just like your own employees have a formal review process um so you're looking at results against objectives in terms of what kind of job they're doing for you I have heard from my work with New Zealand trade and Enterprise and the Irish food board and other similar organizations that you know they'll meet these people at a show they'll promise them the moon uh they start paying pay them retainers and meanwhile 6 months go by nine months go by and there's nothing to show for it and so it's very important to get very specific around what they think is realistic have some milestones and uh hold them accountable and have a review process to do that and like anything you know check references um get an understanding of what other lines they're working with try to reach out to those companies whether it's LinkedIn or through your own network um talk to the people at tiq or you know by extension people in their Network like people like me you know what do you know about this broker are they reputable and so on so it's a very important decision okay really have to go through a process to vet them yeah that's good advice the uh he just along those lines we had I think previously seen some broker lists uh that almost referred to us from some of the retailers like Whole Foods is that is that common practice where they might say here are the 20 or 30 Brokers that we recommend or we work with yeah um it's um it's yeah I mean it's the equivalent of um you know somebody calls a company for a reference and HR just gives you you know gives them the uh the dates of their employment or something you know um I think unless you have a dialogue with the buyer where the buyer likes what you have uh they want to see you succeed and you and you ask them of the Brokers working with you who do you think might be a good fit for me and for my company that I would put a lot of stock in but if they simply give you a directory of Brokers then you really do have to go through your own diligence of who's good who's not so good who has experience in your category and so on so yeah it's a good starting point yeah but you still have a lot of work ahead of you yeah and Bob what when uh I know I noce some Brokers ask for some type of a retainer up front particularly for a new company coming into the market um maybe at least for a minimum number of months three months perhaps six months do you have any advice in terms of you know what's common practice what's sort of accepted um or just any general advice with regards to that you know when when should a company pay a retainer and when should they just be paying commission only yeah so I'm in the camp of I would rather work with an a player as an ABC I'd rather work with a top tier much in demand broker and pay them a modest retainer then settle for a b or c player who's just working on commission and so in terms of what to expect if it's a smaller region let's say it's Southern California then retainers might be 500 750 a th000 a month uh if it's the whole West Coast it might be somewhere between 1,500 a month maybe as high as 3,000 a month but rarely is it you know uh anything remotely related to what it would cost you to put your own person in the market uh so in addition to that value of access to the customer knowledge of the local market having a team of people going into stores and doing all these things on your behalf I also think it's uh better and easier for you to hold them accountable if you're paying them for something rather than if they're just getting dribs and drabs you know 70 bucks a month 100 bucks a month where the line's just not that important to them so I do think if you know now having said that you might meet broker who is just blown away by what you have they're really excited they normally get a retainer but they're so eager to work with you retainer doesn't even come up and I mean that's certainly fine it's not like you have to say wait a minute let me pay you a retainer um you might go just straight to commission and they're Off to the Races but most Brokers will say look there's a lot of upfront work a lot of heavy lifting uh ahead of when we can realistically expect some kind of an income stream through commissions so we'd like to get some kind of retainer it also shows a commitment on your side uh that you're willing to invest a little to get their help and you value what they bring to you um so heay a modest retainer it's it's generally worth your while okay yep thanks B we're uh we're starting to get a few few more questions one one of the other ones that was that came up pre-webinar a couple of times actually was with regards to FDA uh compliance approval registration can you give any maybe just sort of general advice with regards to well any company really in this space as to what their expectations should be in to ensuring that they are FDA compliant what are the kinds of things that they need to consider and plan plan for well um so this is an area that's a little out of my core expertise but what I do know is to begin with um fda.gov is going to have a huge wealth of information that spells out exactly uh what's required by them in terms of nutritional label ingredient panel you know how big the fonts need to be what the format looks like what needs to be on your principal display panel around uh product description uh net weights and ounces and grams and all that and so there's a lot of uh easily available information there um I also know people uh that I can refer to you guys who make a living reviewing your labels and it's it's rather inexpensive where they can review your label for FDA compliance and that way you'll you know be assur that you're doing it all properly then there's a whole other category of review for example if you're doing Personal Care supplements or functional products where you might be making uh things akin to health claims um the real you know sort of guidance is you can't make any claims around uh diagnosing uh treating curing diseases and so there's something called desay regulation it's an acronym for dietary uh dietary supplement education uh Health act it's like dische and it allows you to make struct structure function claims as opposed to curing disease so if you have a product for example that's high in antioxidants you might say it supports a healthy immune system you wouldn't say it prevents cancer as an extreme example yeah but there are I I probably have a list of three four five attorneys who specialize in FDA regulatory matters who again for a modest fee I think it's three four or 500 bucks a label will review your label to make sure you're not out of bonds anywhere and you'll be at low risk of uh getting FDA warning labels or worth uh class action lawsuits yeah perfect thanks well a few people have commented that they're uh they're interested in in connecting with some of those professionals and just just for everybody's knowledge we will have a uh some a representative from a legal firm at Expo West in one of our sessions that we're hosting uh with that with our trade Mission that'll spend some time with some of the companies um giving some insight into you know their requirements for FDA compliance to do exactly that around labeling so um one uh yes so just going to some of the online questions the um we've got a specific one from a company that has deals with alcoholic beverages um using natural ingredients and whether you have any sort of insight into that into that either in the e-commerce space so do the likes of Amazon or any of the e-commerce um or Internet retailers playing that space and and just if you've got any any experience in that so uh I don't have a lot of experience there other than at a high level um and so the the tired joke is there are 50 different ways to sell alcohol in the US uh referring to each one of the states and so um every single state has their own rules and regulations around how you can be sold so some states for example are called control states where uh Spirits like hard hard Spirits uh whiskey vodka gin rum Etc can only be sold through state liquor stores in some cases they allow beer and wine to be sold in supermarkets in some cases not um and then there's a lot of restrictions about selling online so I don't know if I don't think Amazon is doing anything with alcohol but I haven't really checked but there are sites like wine.com and others um that are highly highly restricted and regulated terms of how they sell so um I know Stephanie had reached out with some questions about a uh I think a sparkling alcoholic beverage and I did come up with some uh names of people I know who have U more expertise around suggesting importers and stuff like that so that might be one of those things where um there are you know one or two degrees of separation from me where I can suggest people who have that expertise yeah great thanks Bob appreciate it so one of the one of the other questions is I'm just going to read it out verbatim is there a database for us to investigate and understand before we select a specific region to launch our products which is organic skincare so I think you kind of touched on some of the databases that where you can find some um Market data maybe even consumer data or retail data um earlier in the presentation yeah so did you want to May revisit yeah so um do I have uh control of the screen still or Stephanie or David if you want to scroll down to that uh yeah just scroll down slides in the addendum got it yeah all okay I you yeah yeah so what I was going to show you whoops so here some of the Whole Foods regions with the number of stores they have um here's some information from spin here's some where the UNFI distribu centers are and this is what I was looking at so um this is a little bit of a bird's eye view of the US it's a heat map where Whole Foods and Trader Joe's have cited their stores which also tracks with population density it also tracks with income and so you can um assume that you know the areas in red with the color uh are going to be high concentrations of well-educated affluent health conscious consumers so if you're thinking about where to launch I mean it's no big surprise right it's going to be west coast East Coast uh some of the are in the middle are college towns um the biggest uh demographic driver for natural products is education so college towns and others will be where you'll have a lot of success um when I mentioned spins data um spins is syndicated scanning data just like iri and AC neon you can get Regional breakouts from them so let's say you know using personal care as an example let's say it's skin care or it could be hair care or something else you can look at total us and then they can also give it to you by northeast southeast Midwest Rocky Mountain region Northwest Northern California Southern California and so on so you can look at the size of the market how you know what are the dollars in each of those regions and where um it might be more attractive for you to go to so yeah there's a lot of information there help and and then also part of it might just be you know travel right so it might be easier if you're visiting the us to go to the West Coast and go to New York or New England or Florida and so you might start in on the uh West Coast and then within the West Coast you might either pick a small mark market like say San Diego um or you might take a larger region like Southern California or Northern California which is San Francisco in the Bay Area or actually a great Market is the Northwest which is Seattle and Portland Oregon primarily which index is very high for natural products but it's a much more compact market in terms of population and geography and less expensive to enter than say Southern or Northern California yep perfect that's great Bob that's really helpful I think uh what so one of the other questions is around working with a brand manager and I think really the Crux of the question is at what stage should a company consider working with a brand manager is it of any benefit to do that um early on initially yeah or um so I just want to make sure we're using the same term so brand management companies are in fact usually contract sales organizations and 20 years ago they used to be referred to as Master Brokers is that what you're talking about um I'm guessing yeah I'm EI either that either that or or possibly a PR manager um I'm guessing I'm not really so I I'll talk about so so um let's say you launch into a market um you can either get your own employee to have them on the ground and base there or if you're the founder CEO whatever managing director you may say look I really want to commit to the success here I'm gonna make a commitment of traveling every month to LA or you might move over for six months or a year whatever you're able to do or there are these organizations called brand management companies or contract sales organizations where they are in effect your outsourced sales team where they would manage Brokers they would do all the things that your salaried employee would do but they're doing it on a part-time basis for a retainer or commissioner they're not a broker they're not doing doing all the things Brokers do but they're managing Brokers just like your own employees would do or you would do yourself and then when it comes to people like PR firms social media firms digital marketing I would I usually suggest that you want to have some amount of distribution in place before you activate them which always beges the question of you know Chicken and the Egg and all that but I think the one thing you don't want to do is get a lot of publicity and not have people have the ability to buy the product so if you're on Amazon or other e-commerce platforms then you know pretty much anyone in the country can get the product at least online um but if you're going into a geography uh Southern California Northern California so on then getting into a number of stores and then activating the the pr you know where they might be going out to food editors or they're going into other you know more conventional media uh or they're blogging you know they engage uh bloggers around specific uh Focus areas whether it's gluten-free or anti-aging or whatever the case may be having a little bit of distribution first is usually a better Roi for that investment yep good advice um there's one other question that came up I think kind of know the answer to this is regarding uh specific question regarding net Pro the net profit margins that they can expect for their product category being snacks and I think you kind of hit it on the head earlier Bob with regard to really you probably have to work backwards from what you think a consumer willing to pay or comparatively where you might position your product uh for a retail price and then work backwards from what a Retailer's expected margin is distributor's margin if you've got a broker commission Etc so um did you want to add add anything to that yeah yeah so um David what you just refer to is um sort of lading up your landed cost into a distributor to where it's likely to come out on the Shelf so it's important to go through that exercise um so if you do a little bit of homework on the category and let's say the prevailing price for your item uh in the category among your uh greedy avaricious competitors is $499 it's good for you to know if you're coming out at $4.99 5.99 or if you're in the stratosphere at $999 or 1099 so that's important to see how competitive you can be and does your pricing reflect your positioning in the category are you premium are you parity are you value priced but then I would go when when you use the Expression net profit what I would say for each of you as a brand ideally you're starting out somewhere in that 40% gross margin for yourself so that after you factor in 15 or 20% for trade spending something for consumer marketing something for the broker but hopefully you're netting down to five 10 15% for yourself so that this is a a profitable uh Endeavor and you're not you know hopelessly you know years away from breaking even uh based on the whole margin structure of your brand and your category and The Upfront cost of breaking into a market like the US so that's important to understand your gross margins and what you can be prepared to invest in in growing the market perfect and uh and a follow one question actually the same person is regarding who does who does the instore merchandising for um for retailers is it the distributor themselves um not so much anymore so in other words um Distributors for years uh have based the margin they add for each customer based on the service level the customer is getting and I'm using customer as retailer and so for example an EXT streem example might be a full service program where the distributor sends somebody into the store on a Monday they take an order the product gets delivered on a Wednesday they send in a merchandiser to pack out the product onto the shelf and that would be a full service program um and and the distributor might be working on say 30% margin for that a what they call a dead net program is where they're just dropping it at the back door where they might be working on say 15% now when it comes to merchandising the Brokers will do some amount of merchandising in those like a stores so if you're using a natural broker to go into Whole Foods they're probably going in there once a week where they're checking on the Shelf are all their items in stock are they being priced correctly if there's a big promotion coming up will they you know help in terms of getting an offshelf display or an endcap or things like that now if you're a snack company or a single server beverage and you're going through a direct storeo distributor then they're very Hands-On so snack Distributors might have their own trucks going to store by Store where the drivers are going into the store and stocking the shelves but that's mainly in snacks and single Ser right excellent um any other questions out there I think you really covered a lot of ground Bob um yeah that's great no I think we're getting getting some great feedback Bob look if there's no other questions out there I think we might kind of gone for a little over an hour so we might let you end your night there on the east coast and just want to say a huge thank you for taking the time to put for the presentation and answer all these questions and um and for those of you coming across the Expo West you'll have a chance to meet um Stephanie and myself U but also Bob at the sessions that we're hosting out there and again Bob thanks so much for your time and everybody back in Queensland and thanks for spending your Friday morning with us here on this webinar so um and we'll we'll look forward to hopefully doing more events like this in the future thanks so much Bob and thanks everybody all right well good night bye bye bye bye e