When companies shift strategic gears there is bound to be some fallout.
Case in point FRS, which has recently had to cut a significant number of positions as it realigns itself to transition from a sales and marketing model supported significantly via PepsiCo’s warehouse division to one that is staffed by brand incubation house L.A. Libations.
With staff heavily weighted to the West (where the company sells better and where it started) and in Chicago (where the Pepsi division handling FRS is based) and the L.A. Libations network also stronger in the West, some cuts were bound to come in those regions; distributors and retailers have noticed the changes, which began about two weeks ago. To the East, where newer-model DSD wholesaler relationships are in place, fewer cuts occurred.
“They are very hard choices,”company CEO Carl Sweat said. But the company had built much of its field staffing around the arrangement with PepsiCo, which saw that company handling much of the quercetin-based functional brand’s chain business via warehouse distribution, while L.A. Libations has its own people in place in a more decentralized model, with people in place across the country to deal with regional chains.
“Resources tend to follow strategy,” Sweat said. “When we went into the agreement, we added a lot of resources in sales and marketing to fit the model. It’s somewhat natural when we move into a new model we have to make sure we have resources that are adequately deployed.”
The transition of personnel is just one of several issues that are facing FRS as it tries to deploy a sales strategy based around the product not just as a functional beverage but a nutritional system that provides quercetin in powder, chew, and concentrated shot formats as well, and one that is slowly transitioning out of the Pepsi system and into a hybrid DSD/direct ship model.
When asked if it’s hard to get Pepsi to remain behind FRS in the contract’s waning days, Sweat was circumspect. He pointed out success the brand had experienced with end caps in Mejier stores in Chicago, which are a chain serviced by Pepsi (but an account that had ultimately been landed by FRS staff) but noted that “We wouldn’t have expected a lot of ‘over and above’ effort,” he said, “Although there have been examples where the same Pepsi people who believed in the brand at the customer level have been effective… but that’s not the rule.”
Meanwhile, with changes coming, there is still encouraging momentum for the company, Sweat said, including anticipated fourth quarter sales growth in the low-to-high double digits, depending on the company’s speed to enact a large order from Costco and a burgeoning relationship with Walgreen’s, particularly with regard to its shot business, which has launched nationally.
FRS – often guided by L.A. Libations, which has been consulting for several months – has been going through alternate retail channels to win space for its platform, often in the Health and Beauty sections of drug stores and other chains, Sweat said. Indeed, the Mejier placements came through the company’s HBA buyer, who was landed by FRS.
Those kinds of wins are also the reason that FRS isn’t afraid to go without Pepsi behind it. According to Sweat, his company started picking up chain sale responsibilities for non-beverage category buyers – like hunting down the gatekeepers in chain HBA sections starting in early 2011.
“It was still their supply chain,” Sweat said of Pepsi, “Basically our team went out and made it happen.”
Seeing examples like those, and the kind of flexibility a small company can have in the marketplace, Sweat was asked if the company should have decided to stay away from Pepsi in the first place – a situation that was nevertheless a pre-set strategic priority at the time of his hiring. He said that even in hindsight most companies would have made the decision to work with Pepsi.
“I was brought here to bring to life a Pepsi relationship,” he said. “Some of these decisions of big company/small company weren’t so much ones that I had as things that we were brought on to execute, but in the end, we took what any company our size would have done with regard to that experience and opportunity.”
Nevertheless, the game has changed, and the realignment is on.