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Fact or Fiction.................On premise payoffs?

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  • Fact or Fiction.................On premise payoffs?

    Just started working for a small distributor in the Boston area. Stopped into a bar and was told by the manager that they move 40 cases of Redbull per week and were paid 15K to carry it exclusively. Was he pulling my leg or could that be possible? How the hell can they make any money paying out that kind of money? If it's true, it should be illegal, unfair business practice against the smaller guys. Thanks in advance.

  • #2
    I'm doing private label Red Bull clones. The product is identical to RB, but with full custom shrink wrap with the customer's design. I ran into a lot of the same BS from bar owners.

    If you do the math, 15K/yr over 2080 cases/yr (40 cases/week) gives you a rebate of $7.21/case. If the RB's distributor price is $32/case, this means the bar ends up paying $24.79/case. This is impossible. They may be getting what Red Bull has estimated as 15K worth of promo and free product every year, but not 15K in cold hard cash.


    • #3
      The next time a manager or owner tells you they got money to be an exclusive ANYTHING... you ask them this, "How much did they give you to tell you how to run YOUR club!"


      • #4
        That guy told you that to get you out of his club. He knew that you couldn't or wouldn't compete with such an outlandish price.
        They may give him promo material and free cases that , by RB terms, total 15K but like TTB said, No Cash!. BTW free product is generally counted as either retail price or some percentage higher than wholesale and Promo material(POP, Table Tents,Stickers, etc) is generally jacked up 200-300% to show value.
        Whether you think can or think you can\'t, you\'re probably right!


        • #5
          Money changing hands for exclusivity? Welcome to the world of beverages in the good old USofA! This has been going on in retail and schools for many, many years.


          • #6
            Sales Guy..I also work in the boston area. What was the account. can probably tell you if it's legit or not. also, what brand do you represent?

            you can PM me the info if you don't feel like sharing with the whole board...


            • #7
              Believe it or not, I have been told that a profit could still be generated minus the payoff. I have been given the authority to try and close this deal, of course at a smaller dollar amount. Any chances, Redbull would counter, if they do indeed payoff some on-premise accounts. Obviously, could never compete with them in a bidding war over an account. Eggbeater, I will PM you, if that is okay, I don't want to sound like I am pushing a specific product on this board. Thanks again in advance


              • #8
                I've seen some Red Bull on premis contracts. There is sometimes some cash, usually POS tables umblrellas free product, things like that. There is obvious value to them. As far as using the thinking that Red Bull is paying them to tell them how to run their busines...thats stupid. It does limit him to what else he can carry, but that is up to the owner. He can cancel the contract at anytime and buy what ever he wants. Red Bull will still service that busines. But the owner probably view all the free merchandise and promotions as worth more to his business than bringing in another energy drink or two.


                • #9
                  Back when red bull first hit this market they not only paid places to carry the product but also gave it to them for free.

                  To create the mystique around the brand they limited it to only the trendiest of the velvet rope clubs and would not sell it to other clubs even if they called looking for it.
                  They made sure only the hottest hardest to get into clubs had it. In some cases having to pay and stock the club.

                  I doubt very much that just any venue in Boston gets cash from red bull to carry the brand.
                  However if a club is getting discounts or free goods to stock red bull exclusively it would behoove then to take this deal. None of their guests are asking for sum poosie and vodka they are asking for red bull.


                  • #10
                    Lol... how did I get into this??? I guarantee you if they did carry SumPoosie many would order SumVodka !


                    • #11
                      First of all Red Bull DOES pay cash for some accounts in addition to free goods and POS.

                      Second of all, forget about the economics of the deal. For the higher profile accounts, making a profit is a secondary priority to the exposure the brand can get JUST BY BEING THERE.

                      At the end of the day On premise sales represent only a SMALL percentage of the overall sales of all succesful energy brands. Red Bull Makes their living in the off premise (c-store channel mostly) and uses the on premise to drive customers to the convenience stores to buy more RB. Consider bars and nightclubs one big huge friggen commercial for Red Bull.

                      That's not to say Red Bull makes no money in the on premise channel.. they do, but very little off the big accounts that they have to pay off. It's essentially a robin hood strategy where they take the profit from all the small/medium sized accounts (which they don't give diddly to) to pay off the big guys JUST TO BE THERE...

                      When dealing with bars and clubs..Stop thinking in terms of "will I be able to turn a profit from this deal" and start thinking about "how much am I willing to pay to have my drink seen in this account" and you'll be better off.


                      • #12
                        Great post! It's all about exposure.