For the past couple of years, stoked in part by the rich observations served up at the winter edition of BevNET Live, I’ve inaugurated a new year at my twice-weekly newsletter, Beverage Business Insights, by offering some resolutions that beverage entrepreneurs might be wise to consider. I make no claim of infallibility in proffering them, and it’s easy enough to think of successful beverage companies that violated each precept (I can’t think of any that violated all the rules, and you’re welcome to aspire to be the first!). Since those resolutions have proved popular among my newsletter subscribers, I thought I’d offer a slightly adapted version to readers of BevNET Magazine. Upon reading this, feel free to offer your own resolutions, or to comment on these.
It’s better to be slightly starved of capital than over-endowed.
Having not-quite-enough capital forces you to focus on key priorities and let the distractions go. By contrast, too much capital almost inevitably fosters waste. Besides, once retailers, distributors and prospective new hires know you have the dough, their hands come out. True, you have a brand to build and don’t want to be forced to be continually on the road raising minuscule amounts. Still, keep the round as modest as you can.
Make your mistakes off-Broadway.
There’s much to be said for foregoing the national landgrab and its concomitant capital raise in favor of starting small, in a market or two, preferably your backyard. Until the big Bev Bust, and with it a reassessment by the strategics of the multiples they’ll pay for semi-developed brands, not many paid that any mind. By staying contained, you can nail your positioning while burning through less capital and credibility.
Learn to say no.
“Getting to Yes” may be the name of an evergreen negotiation handbook, but “getting to no” may be a better ambition for entrepreneurs to harbor. Learn to say no to big distributors you won’t be able to adequately support, and to retail chains where you’ll get lost on a bottom shelf and endlessly chiseled for pricing concessions. As numerous capital-side people have been assuring us lately, if you stay contained within your chosen channel or geography and show accelerating off-the-shelf velocity, distributors, retailers, capital providers and strategics all will come around in due time.
Don’t be overawed by the big systems.
The Coke, Pepsi and Dr Pepper Snapple bottling systems are finely tuned machines for moving high-volume, high-velocity products at affordable price points through the chains. That doesn’t mean they’re right for you. Big systems work best for big brands and simple concepts. For fledgling premium brands, the big bevcos’ default reflex at any growth hiccup is to hit the 10-for-$10 button. Maybe their other advantages still warrant a partnership; if so, try at least to maintain flexibility over what distribution option you employ in a given market in the early days.
It’s better to underplay than overplay your nutritional claims.
We’re in an era of heightened regulatory scrutiny and, given the excesses of the recent past, can’t really claim it’s undeserved. So you’re better off underplaying your nutritional and functional claims than overplaying them – that can only increase the likelihood of unwanted attention from regulators, and won’t do as much as you think to impress jaundiced consumers.
Think strategically about the strategics.
If your main game plan is to launch your product, fake it for a year or two, and get taken out by Coke or Pepsi at a nice premium, then you shouldn’t be in this business. Figure you’re going to be in the game a while, and look to strategics that offer real help staying in the game.
Stop pounding on the DSD guys already.
True, some DSD distributors are grasping, whining, endlessly finagling operatives, and maybe that system is not right for your brand. No problema. It’s worth remembering, though, that there haven’t been any shelf-stable brands that have achieved megasuccess without going through the DSD network during their prime growth phase. You may owe it to yourself to give DSD at least a modest trial. Like democracy, it’s sloppy, but nobody’s found a better way.
Stand for something, from the start.
I don’t buy that notion that certain categories – tea, coconut water, energy – are permanently tapped out. As existing brands move through their life cycle or get absorbed by bigger companies, there’s room for new brands to emerge even in fairly straightforward categories. But that’s only true if your brand stands for something from the outset. Trying to add on values or personality down the line is way harder, and less likely to be convincing to consumers. First impressions do count.
Longtime beverage-watcher Gerry Khermouch is executive editor of Beverage Business Insights, a twice-weekly e-newsletter covering the nonalcoholic beverage sector.