View Full Version : Contract questions for the pros
10-18-2006, 12:03 PM
Hello, I have recently been offered a contract for my region by an existing energy drink company.
I have a couple of questions for the pros.
The company is asking for $24. per case delivered.
Is this a fair price for
24 can case - 16 oz cans delivered.
Keep in mind that this product is new to the market.
The company also wants me to pay for 40% of all suction racks, coolers, stickers, and refrigerators.
Is this a fair deal?
10-18-2006, 07:24 PM
1. Well your cost is $1 per can. If you can sell at $2 per can (or a bit more) the profit margin is pretty good.
2. This part doesn't seem that great. If they want to merchandise THEIR product in YOUR store(s) they should be supplying the means to do so. Having to almost split the cost of merchandising materials (FOR A NEW PRODUCT WITH NO PROVEN SALES) seems like a crappy deal. If the product doesn't sell well, you're out the cost of the product and 40% of the merchandising materials!!
Just my 2 cents.
[ 10-18-2006, 07:28 PM: Message edited by: CStoreCatMan ]
10-18-2006, 07:32 PM
I waited to post my opinion(small feat LOL).
CStoreCatMan is once again right on target. A BIG red flag went up for me;charging for marketing aids and POP material is almost 99% never charged back to the retailer.
IMO...if it quacks like a duck then it is a duck.
I would never enter in to a contract with those terms. It apears that this company will make good money selling you marketing materials.
[ 10-18-2006, 07:34 PM: Message edited by: Mr Zabe ]
10-18-2006, 07:36 PM
1. A $24 case cost is pretty much the average for the all the premium brands (Red Bull, Monster, Rockstar, etc) Keep in mind that your gross profits per case will be somewhere around $6-$8 per case (depending on the incentives the manufacturer expects you to pass along to your constumers.) I say this because Red Bull sells for $32 a case and no one is going to pay more than that for an unestablished brand. Realistically, you are going to have to go $2-$3 below Red Bull's case cost to even get in the door. This only further cuts your profitability even further.
2. Regarding the paying %40 of the POS, this is kind of standard as well, but for established brands with a proven sales history. Red Bull provided all merchandising equipment for free until they established their dominant position and their distributors were profitable. Then and only then, did they start co-oping their larger equipment like fridges.
My 2 cents, if you are already in the beverage game with a core business, then maybe this would be a nice supplement to your portfolio and it could be worth the gamble. Howevever if you aren't already a beverage supplier (which I'm guessing is the case from your question) then stay away! The energy drink category already has its major players and hundreds of brands are withering on the vine.
10-18-2006, 11:30 PM
If the company really believes in their product. They wil give you all the POS you need to help build thier brand. If it is a new 16oz, you will need some kind of "buy in" incentive. ie Buy 2 get 1 free. Shelf Space for 16oz ED's are at a premium, you need to incentives the retailer to get shelf space.
10-19-2006, 09:55 AM
You don't say if you are a retailer or distributor, it makes a difference in what you would typically be expected to Co-op. Retailers aren't expected to Co-op some distributors do.
Originally posted by NRGSLLR@:
You don't say if you are a retailer or distributor, it makes a difference in what you would typically be expected to Co-op. Retailers aren't expected to Co-op some distributors do. Ditto! I had the impression that he id going to be a distributor, not a retailer. That would make all the difference in the World.
10-19-2006, 04:28 PM
Energy Life, What is the brand? Assuming your are a distributor, are they offering you exclusivity? if so is there a buy out clause if they decide to offer your territory to another distributor or sell out to a larger national distributor, such as recently happened with Hansen's and AB? Depending on your volume, you should be able to find a number of "existing" energy drink brands that will offer you a more competitive wholesale price structure.
10-20-2006, 10:40 AM
You can charge in the $30-$35 range. I recomend not doing a buy 2 get 1 free. Possibly a buy 3 or 4, and get $$ off each case. And only if your supplier is going to at worse case co-op the buy back deal, or suppliment it 100%. This will help your stores loose that curse word from their vocabulary "FREE"...everything is free, they want this because they are your best store so they should get it for free. They know your boss, so they should get it for free. Take that free word away from them.
As far as the supplier paying for all the POS, generaly this is true, but POS is very expensive. Having worked on the supplier side, if you are not a big distributor pushing a lot of volume, it is very costly to just give a lot of POS. Stickers, static clings, glossy sales sheets, these should be given 100% free and as much as you need. Fridges cost $3-$500, sucktion racks cost about $75 per box, barrels cost like $50-$100 each. These are definatly not free items, and if this company is a start up, as much as you need all this POS, you don't really want them going under from spending all their budgeting money on POS supplies. Remember, they are not just giving you free POS, but all their distibutors. That hits their bottom line profits and may cause them to raise your price for product.
With that said, also having worked on the distributor side, ask for everything for free, and get as much as you can, and every now and then pay of something so you don't seem so greedy.