In 2010, Groux changed directions somewhat, bringing in a strong group of sales reps to create a national network for client companies. The network launched with a huge party in Newport Beach at a swank hotel that was intended to impress and persuade the distributors on hand.
It seemed to be a good idea — take the retail relationships brought by his highly-paid reps, add in the experience he had with distributors, and create a virtual sales force for a portfolio of brands. It didn’t work as well as he’d planned. While OhYeah! protein drinks became a modest success, Groux endured some rockier times with the rest of his portfolio, which included at one time or another HER Energy, Kronik Energy Drink, Celsius, Activate Drinks, Xing, and New Leaf Teas. Groux seems to have been especially partial to Kronik and New Leaf. He said that Kronik was one of his favorite clients — great guys who had the passion, work ethic, intelligence and product to make it work. However, retailers were tired of new energy drinks and didn’t need anything aside from the market standards. Even when Groux landed retail authorizations for the product, it couldn’t get the necessary pull.
“They just ran into a buzzsaw of the energy overpopulation,” he said.
New Leaf was a different story — it had the pull. Founder Eric Skae said that the brand was doing well on the East Coast and hit about $800,000 in one month. However, when Skae began searching for his company’s next round of financing, he ran into complications. Skae had to begin conversations with investors not on the company, but on a distraction. Otherwise, he said that Coast Brands did exactly what they promised: authorize New Leaf across the West Coast.
“While the charges were high, they were less than it would have costed you to staff it to get to the same place,” Skae said. “So they were fair.”
Skae concedes that New Leaf did try to go too far, too fast; he said he remains in touch with Groux and works with him when he can.
The New Leaf example presents an interesting case study of the Coast Brands model. Skae said that the broker’s monthly retainers were pretty high for a young brand. He approximated that Coast Brands once charged about $20,000 per month in California. However, that money doesn’t come close to what a national sales force would cost. That was the proposition, but clients have complained about the expense.
A Change of Direction
Groux said that his company has altered its model and, as a result, the rates are considerably less than what they once were. He fully believes in the value of his strategy, which advocates his clients to choose proactivity over reactivity.
“We save them hundreds of thousands of dollars if not millions of dollars in mistakes that they would otherwise make,” Groux said.
A partnership with Coast Brands entails a range of assistance, depending on the stage of the brand. It could involve consulting and strategic planning, such as writing Pro Forma Income (P&L) and cash flow statements and developing go-to-market and channel strategies. Coast Brands also sets up DSD, warehouse and hybrid distribution in specific markets. Many of the sales executives who started with Coast have gone; other key employees remain loosely affiliated.
Ken Sadowsky, another former Snapple distributor and the senior beverage advisor at Verlinvest, an investment holding company, said that if the route-to-market is done efficiently and effectively, brokers like Coast Brands earn their fee. However, he recommends that brands understand this “labyrinthian path” and ensure that it fits their business plan. He commonly advises brands, sometimes pro bono, and often tells them the same message.
“You have to learn the words ‘no’ and ‘not now,’” Sadowsky said.
It’s long been known, Sadowsky said, that if you can’t say “no” and “not now,” and you go too big, too fast like New Leaf, two things happen: 1) you never get a second chance to make a first impression and 2) once you’ve been discontinued from an account, it’s three times as hard to get back on that shelf.
These words can be counterintuitive to the game plans of quick-moving brokers, however, which brings things back to Little Miracles. Groux said that he feels confident in the direction of Little Miracles because of its gradual, focused approach.
“They didn’t come here saying we’re doing this, this, this and this,” Groux said.
Instead, the team behind the brand has hired industry veterans, absorbed the input and spent several weeks together before parlaying its partnership with Coast Brands into a deal with Acosta Sales and Marketing, which will act as the national sales force for the brand.
These groups plan to take Little Miracles to a variety of channels — natural and specialty, mainstream grocery and convenience, among others — in four initial markets: Los Angeles, Chicago, New York/New Jersey and Las Vegas. The national push will follow.
What kind of goal does Groux have for the brand? It could be Snapple, he said. It could be Honest Tea.
However, before we get too giddy about the prospects, consider Groux’s comments about the downfall of Kronik Energy.
“You’re fighting a battle that is so big,” he said, “it’s difficult to overcome.”
The fight for Little Miracles is no smaller. We’ll soon learn if the organic energizers — and their broker — have the gumption to overcome.