food and beverage distribution

May 20, 2020

eCommerce: Thriving in Our New Normal

Written By Betsy McGinn and Bill Sipper

I started working with Betsy McGinn several months ago. Betsy is the leading expert on selling on Amazon and has written and excellent book called The Amazon Roadmap: How Innovative Brands are Reinventing The Path to Market.

Betsy has given us an MBA in Amazon and since we have started working with her and since she has been coaching us our clients have greatly increased their Amazon sales. Betsy handles the strategy and we handle the execution.

Betsy and I decided to co-write an article a few months ago. However, I will be the first to note that Betsy is the author of this article and I am just the “co writer”. The information contained in this article will hopefully help you understand and prepare to increase your Amazon sales…

A byproduct of the threat of COVID-19 is that it’s taken eCommerce in the US to new heights. Amazon.com has hired 175,000 new employees, Instacart has been forced to scale in ways and at a speed never dreamed of, and high demand has resulted in continuing out-of-stocks on some essential items we all need. The subset that so many of our clients play in – grocery – has grown in ways no one predicted, and may even accelerate the adoption of online grocery by 4 to 5 years. Brands are scrambling, not only to meet consumer needs, but to up their game in eComm. eCommerce no longer represents incremental “nice-to-have” sales; it’s now essential to a brand’s success, and maybe even its survival.

But here’s the challenge: eCommerce strategy and execution aren’t one-size-fits-all, and can’t be relegated to a single division within your company to handle. Everything about this new retail dynamic requires a commitment of the whole organization to truly understand, and to meet the needs of this varied and often confusing channel. Here’s why: Amazon is nothing like Direct-to-Consumer (DTC), which is nothing like Fresh Direct, which is nothing like Instacart. Yet, many companies lump any retailer with a .com in their name into one bucket.

Let’s break it down.

Amazon is the beast of eCommerce. Whether you love ‘em or hate ‘em, they account for 49% on online sales, and are by far the largest online grocery retailer. Their 105 million Prime members convert at a rate exponentially higher than most other eComm options. Seems like a no-brainer to take advantage of the power wielded by this giant, right?

But here’s where it gets tricky.

First, all but the largest CPG brands must sell their products in Amazon’s 3d Party marketplace, which works beautifully for many of the companies we work with, the digital natives that are scrappy and nimble. But it can be anything but simple for many others. Because 3^rd Party marketplace means you’re the seller. You own the product, and if you use Amazon’s fulfillment feature, Fulfillment by Amazon (FBA), you’re essentially adopting a consignment model for your brand. So here are the questions: is your company prepared for this? Is finance able to adapt? Can operations label and ship product to Amazon’s fulfillment centers and meet Amazon’s standards? Do you have the right product packs (selling a single unit of most grocery items will not be profitable for your company)? Lots of considerations for your team to work out.

Secondly, there are eComm partners like ThriveMarket and Vitacost, which you may sell through one of your distributors. They provide a basket-building model where individual selling single units does make sense, so are they really any different than any other of your retail accounts? Your major involvement will be around pricing, discounts and promotions – just like your brick-and-mortar partners. So, should your eComm team be responsible for managing these partners?

Third, there is eCommerce through Brick-and-Mortar grocery – either click-and-collect or delivery. Often everything about this business is merged with the processes and model of the grocery store itself – rather than a separate buying division, warehouse or operations structure. Promotions and advertising align with what is going on in the store which raises the question: is this a job for your eCommerce team? And to further complicate matters, there are variations on this theme, where a retailer like Walmart will sell some products on their site and the same products in their stores plus some products only through their Third-Party marketplace.

There are also dedicated grocery delivery partners like Fresh Direct, Peapod and Amazon Fresh that purchase product directly from a brand or may use its distributor. Are they eCommerce or simply another grocery account that happens to deliver?

Is your head spinning yet? Because we have a few more questions:

What about your own DTC? Should you sell from your own website (we say yes) and if you do, will you ship your products to your consumer, or use a fulfillment partner? Or fulfill from your Amazon FBA inventory? Do you sell the same products as you sell to other online and brick-and-mortar retail partners or a differentiated set of products? And who in your company manages this completely different model than eComm retail partners

Finally, there’s the “Grubhub of Grocery” – Instacart. They don’t buy or sell anything, but instead, act strictly as a delivery mechanism from grocery stores. But they have instituted features, like coupons and advertising, that can benefit a brand regardless of the retailer the consumer chooses to purchase from. So where does this business live in your company?

All of this is to say it’s time to get serious, figure out how to make this complex opportunity work in your organization, and get in the game. Grocery eComm was already a fast-changing, fast growing channel, and the pandemic crisis has increased that exponentially. Creating an eCommerce team, and putting all these diverse business models on their plate simply won’t cut it. Every brand has to decide if they have the bandwidth to embrace the unique business models listed above, and if they do, figure out how to structure themselves around each one of them.

Albert Einstein said, “In the midst of every crisis, lies great opportunity.” And as devastating and painful as the crisis we’re facing now has been for so many people and companies, many of the brands we work with have not only avoided loss, but have been able to able to thrive. By taking time to understand the landscape and doing what it takes to adapt, amidst the chaos, they’ve found their own great opportunity while also providing a great service to their customers.

Written by Betsy McGinn and Bill Sipper

May 12, 2020May 12, 2020

How to Cut a Sound Trail thru the Amazon Thicket

As published in Beverage Business Insights May 11, 2020.

There’s little question that online sales’ continuing inroads in the bev biz have become accelerated as conventional shopping has become more tortuous during the coronavirus pandemic. Data shared on Monster Bev earnings call last week showed that rival Celsius may be still modest at retail but it owns 10% category share on Amazon. BellRing Brands’ ceo said ecomm has jumped to 10% share of sales and may stay that way even post-pandemic. Those are eye-popping stats. Should your early-stage brand make the leap? Does the chaos of the current crisis make this a good time or a bad time do so? Bill Sipper, partner at Cascadia Managing Brands in Ramsey, NJ (CascadiaFoodBev.com), offers a primer here on what factors should go into your decision-making and how to plot your strategy.

“Our vision is to be the earth’s most consumer-centric company; to build a place where people can come to find and discover anything they want to buy online.” That’s Amazon’s mission statement. From a consumer perspective, they have achieved their goal. But what is missing from that mission statement? You, the vendor.

As much as Amazon cares about making consumers happy is as little as they are concerned about their vendors. Amazon can be daunting for even the most experienced food and beverage executive. (It certainly was a learning curve for those of us at Cascadia Managing Brands.) It is even more difficult for an early-stage entrepreneur with limited understanding of their digital space. And as I noted, Amazon doesn’t necessarily work hard to make it easy and intuitive for you. Having been steeped in these issues for our clients in recent years, I’m offering a few guidelines for navigating this challenging but potential rewarding channel.

A word first about timing. Much has been said about Amazon focusing on “essential items” during this pandemic. Yes, food and beverages typically are considered essential, but your early-stage brand may not be so essential at a time many consumers are more focused on staple items. Does this imply you should put off a launch until things settle down? Not necessarily, because of the time frame involved. It will usually take 8 weeks or more to get items listed on the platform. Amazon people are very meticulous and want information the way they want it. For example, quite often Amazon will ask you to prove that you are the brand owner and require specific, and somewhat odd, documentation to support that. It is not uncommon to receive approval to steps in your account only to have them unapproved the following day, as the company requests additional information. So the sooner one starts this process the faster the products will find a berth on the great ship Amazon.

If you decide the time is right to proceed, you first need to determine which Amazon platform is right for your brand. Amazon is not one unitary service. Rather, it offers 3 options, each with its pros and cons: Amazon Vendor Central, Amazon Seller Central Fulfillment by Merchant, and Amazon Seller Central Fulfillment by Vendor. Which platform do you choose? It all depends on your brand’s needs and your operational strength. You need to think this through because success on Amazon starts by choosing the optimal platform.

Product type and packaging are important here. Take ASC Fulfillment by Merchant, in which the order is placed on Amazon but the product is shipped by you, the seller. This is a much better platform for pills and powders, refrigerated products and glass packages (9 out of 10 times Amazon will not ship glass directly). Then there is ASC Fulfillment by Amazon, where you deliver your product to the Amazon distribution centers on consignment and it is shipped to the buyer by Amazon. This most often is better for shelf-stable and RTD food and bevs. Each of these platforms offers different options and opportunities. For example, Vendor Central allows you to participate in Amazon Pantry, Amazon Fresh and Prime Now, while the other platforms do not. ASC FBA automatically gets you a Prime designation while ASC FBM Prime offers that possibility but not a guarantee. This may all sound like gobbledygook to you now, but these are essential, crucial distinctions.

Your digital shelf on Amazon is completely different than your retail shelf. Although you will find some level of uniformity, realistically there is much more flexibility in digital. For example, in traditional brick & mortar you would most probably want to offer each one of your sku’s, sometimes individually, sometimes in multipacks, and sometimes in cases. However, you are limited to the room a retailer allows you on the shelf. The digital shelf is much different. You can offer any pack you want, whether a 3-pack, 4-pack, 6-pack or 12-pack. Variety packs and packs that meet a consumer subscription cadence are the gold standard on Amazon. So this is a key part of your strategizing for this platform. You need to settle on the right size and the right pack count with the right order cadence, and of course make this all work with your supply chain.

Price is also important – but maybe not as important as you might assume. When Amazon shoppers are polled on what’s most important to them, the top three responses tend to be: (1) free shipping, (2) most likely to have the product I want, and (3) better prices. According to Consumer Research Report by Salsify, 2019 69% of consumer will abandon a product page for lack of information or details, a significantly greater driver than price.

Therefore, the content on your digital page (again, think of it as a shelf) is critical, from the type and number of photos, to the titles, to the bullet points. All these things affect your search ranking. Reviews also help in the search rankings and consumers like to see what other people are saying. Focus on getting quality reviews, not quantity.

Last but not least is promotion and advertising. You don’t have an Amazon business without marketing inside Amazon and out. But don’t spend one penny until your content is right. Amazon offers programs ranging from pay-per-click (PPC) to brand sponsorship, product sponsorship and brand store. These need to be combined with search engine optimization and key words on your pages. Yes, it’s a complex matrix, but again, you won’t have a successful Amazon business without thinking these issues through.

I should note that one of the downsides of Amazon is the lack of overall data you will receive about your consumer. Yes, Amazon captures a great deal of data about its shoppers and their purchasing habits, but it doesn’t share much of it. For vendors using Seller Central, the only consumer data you will be able to see is age, household income, education, gender and marital status. Amazon owns the relationship with the consumer. Vendors would receive a lot more consumer data if they sold their products on their own website. But consider this simple bit of arithmetic: Amazon receives 200 million unique views per month, while the average food and beverage startup’s website will receive no more than 50-100 visitors. So do the math. More often than not, even with a lack of consumer data, the sheer consumer volume on the Amazon platform will offer greater sales. Brands would have to spend a considerable amount of money to secure enough views of their website to come close to Amazon’s sales potential. It is a tradeoff that needs to be considered.

If you have a very large brand and if you have a lot of capital to invest in Google search terms and pay-per-click ads, and you have a large database of social media followers, you might opt to sell your product from both your website and Amazon. That could yield incremental sales and capture your consumers’ data directly. However, if you don’t have a large amount of capital (although you still need some to support your Amazon marketing), then it is best to focus on selling your product on Amazon. If you happen to generate sales from your website, that is great. But I would not invest a lot of time there. It is worth noting in this context that Amazon is the #1 search engine for retail products. More than 70% of online consumers begin their product searches with Amazon, versus just 11% with Google. Think about that.

If you’ve read this far, you understand that Amazon can be very difficult to set up if you don’t know what you are doing. It is not as easy as just throwing some photos and words on a page. Today, many brands launch exclusively on Amazon because the barrier to entry and costs are relatively low compared to the requirements of operating in the bricks-&-mortar world, from recruiting distributors to paying slotting fees to running in-store demos. Amazon sold $8.2 billion of grocery items in the US last year (compared to Walmart’s online business of just $2.4 billion). It can be a great place both for large brands and small ones. But only if you have a plan.

May 4, 2020May 4, 2020

So you Want To Launch A Brand? Why You Should Start Now

I started writing an article showing the steps and timeline for creating a new food and beverage brand. I wrote more than I expected so I decided to post the article in bite size pieces here on a bi-weekly basis.

The pandemic, amongst other things, has caused many entrepreneurs to pause and re-think their strategy. Many entrepreneurs who have great new food and beverage ideas are waiting to see what happens. I can say, that is a very bad strategy for entrepreneurs because while they wait, others will be moving forward and will be the first to gain shelf space when the country goes back to our new normal.

Let’s look at a typical timeline for a new food or beverage item. For arguments sake, let say you already have an idea in your head. What do you do next?

Research and Development

Let’s start with research and development. You might be able to create your product in your kitchen today but it will be much difficult once you move to the production phase. For a very basic example, let’s say you are using Heinz ketchup as an ingredient. If you were to order Heinz ketchup in a 50-gallon drum, the minimum size you can usually order for a production run, it would be very expensive. Depending on how much you use, Heinz Ketchup may make your product too expensive to sell or too expensive to make a profit. Heinz ketchup has a certain taste profile. When you move into production you will most probably need to buy a less expensive but high-quality ketchup. Where do you go for that? How do you sample the different types of ketchup being sold in bulk? Will the manufactures send you free samples if you are a startup?

This all leads up to you probably should hire a person or company, like Parkside Beverage, Beyond Brands, or Metabrand amongst other reputable firms. Get your recipe or formula done right the first time. In the grand scheme of things their fees are not a lot of money and you need to get it right the first time. Re-formulating takes time and money.

I have been on the floor of production facilities with clients who created their own recipes and were trying to adjust the formula on a fly. It was a disaster. I remember one time being on the production line when someone’s formula would not work because the ingredients were too thick and they were clogging the filters. That costs a lot of money. The client had to pay for the entire day of production even though he/she was never actually able to produce their product. My advice, stick with the professionals and they will save you a lot of money in the long run.

Now let’s look at the timing and timeline. Formulation companies aren’t waiting for new entrepreneurs to contact them. Even during these Covid 19 times, reputable formulation companies are still busy. They point is you can’t just pick up the phone and expect them to get started immediately. It might take two weeks until they can accept your business. It might take them time to order special ingredients.

Once they create the first batch of samples for you, and I am sure this will not be the last batch of samples, and you consider the time it takes for them to mail you the samples, and the time it takes for you to review the samples and send comments back to the formulator, and they eventually finalize the formula, consider 4 more weeks go by.

Now you have your formula. Great start. Do you want it to be GMO free? Organic? Kosher? These processes take time and someone has to fill out all the paperwork and get all the information for the certifier. My last go around with a GMO-Free certifier took 6 months because they are backed up. However, let’s say it takes 3 months. However, assume you can work on other parts of your product during that time period.

Shelf Testing

Let’s consider the next step being Shelf Testing. Before you produce your product, you want to know what happens to your product after being exposed to different levels of heat, cold, light, etc. Are any bacteria growing? What about yeast, pH, mold, salmonella, E. Coli, listeria, staph, aureus etc.? How long will your product be on the shelf before the color or taste or aroma begin to change? And this isn’t just a “nice to have”. Retailers and Distributors may request to see the shelf life test results.

According to RL Food Testing Lab, Product Safety Testing will take different times depending on the type of item you are testing.

Here are a few examples:

Beef Jerky 9 months – 1 year
BBQ Sauces 4 months – 6 months
Pasteurized Dairy Products: 3 weeks
Raw Juices 5 days
Cakes, Cookies & Other Bakery Goods WITH preservatives 30 days
Salsa 3 months – 4 months

But now, you need to test for shelf life. How long will your product last before going bad or before losing taste, aroma or even color?

The rule of thumb regarding shelf life testing, depending on the product, is that a product needs 1 week of testing for every month of shelf life you are looking for. But, that timeline may be a little bit over cautious. For the sake of this article, let’s say it takes you 90-120 days until you get your test results.

Cascadia Managing Brands is a strategy, brand management and sales execution firm that helps startups succeed. In this bi-weekly series Bill Sipper, Managing partner, shares his insights on:

Product Formulation

Certifications & Testing

Future articles will discuss:

Brand Positioning and Logo and Label Development

Intellectual Property and FDA Compliance

Point of Sale Material and Presentation

Liability Insurance

Distribution Strategy

Sales Execution

Overall Timeline