Too often we hear CPG brand builders bragging about how they have finally achieved shelf placement at some big box or chain store. But, broadly distributed CPG brands are only as good as their ability to maintain and expand their retail shelf presence.
With our experience building a large national brand, nothing could be scarier. Before you gain placement in the big box store, the big box store couldn’t discontinue your brand. But once you are in the big box store, you are suddenly vulnerable. Now you cannot only be discontinued, but you can quickly get the national reputation for being a “non-starter”! Your competitor’s salespeople will be quick to warn all the buyers about your poor performance.
Rather than celebrating your initial placement in the big chain, you should be shaking in your boots. You only get one chance at bat and you’d better knock it out of the park. If you strike out, you will never get another chance. There’s just too much competition and not enough time or space to give you a second chance to perform.
So, how do you mitigate the risk of being discontinued? How do you maintain and expand your retail shelf space so you can grow your CPG brand in the retail stores? What is the mindset you must subscribe to in order to survive in this harsh, unforgiving, and competitive environment? Here are 5 ways we found to keep our product on the shelf and build a national and international brand:
1. Mindset. What is the real work and who’s doing it?
Quality and Price Won’t Get Your Product Through Distribution
There are a couple of deadly mindsets that can kill your CPG brand at retail. One is that somehow, your CPG product’s quality and price will be so compelling that it will get through the distribution channel on its merits. This mindset is based on the mistaken idea that the concerns your ultimate consumer has for price and quality are the same concerns that everyone in the distribution channel entertains. They don’t! They are more concerned with strategic advantages over their competitors, achieving their sales quotas, earning their commissions, and sometimes, just feeling important! Who’s going to do that? As the CPG brand producer, you are!
We thought that operatives within the distribution channel who stood to make big money on our products would keep our products in stock, deliver them correctly and on time, merchandise them, and promote them. It was a real wake-up call for us, as it is for many first time CPG brand producers that this is generally not the case!
That’s when we found out what we call “the real work” is when you are attempting to sell a CPG product through retail distribution channels. It wasn’t something that we signed up for …or even imagined. But in order to succeed we had to learn it fast and do it fast before we were discontinued through no fault of our price or our quality, but simply because we were out-of-stock and lost our shelf space!
Prepare for the Cost of Sales
The cost of building and maintaining a small army of representatives to go into every store on a weekly or monthly basis to make sure we were still on the shelf was daunting. Our representatives would quickly get spread too thin if we expanded our market too quickly. They simply couldn’t get around to all the accounts fast enough to keep our pricing correct, our reordering codes accurate, our products in stock, our signage in place, and our UPC codes scanning correctly.
This is just a small part of the big cost of sales. Not the cost of goods, mind you, but the cost of sales. We grossly underestimated this cost and it almost killed us! Today we see hundreds of CPG brand builders making the exact same mistake. In their minds, it’s someone else’s responsibility, it’s someone else’s fault! This mindset is a surefire way to get discontinued!
We highly recommend that CPG brand builders start small, and make their mistakes and learn their lessons in a small market. Then, take copious notes, and get their act together before they take their show on the road. Because, when it comes to building a CPG retail brand, it’s better to not be there, than to be there and get discontinued!
2. Merchandising. How do you remove the obstacles?
Once you understand that you are responsible for almost every aspect of the distribution channel, and once you realize the cost of supporting retail sales, you will think twice about expanding faster than you can service what you sell. This is why we advise our clients with CPG brands to think twice about the cost of sales in each and every new territory before they take that leap. Can you afford what it costs to remove the obstacles to the sale of your CPG products from the retail shelf?
Everybody in the distribution channel has a different reason for working with your CPG product. The ownership of your distributor wants to know if you have been presold to a major chain in their territory. They want to know that there is demand for your product before they carry it. They want to become more important to that big retail chain by carrying the brand the chain wants. So, who makes that pre-sale so you can “back door” that distributor? You or your representative does.
The Sales Manager
But the sales work is not over. It’s just beginning. The sales manager at that distributorship wants to achieve his “numbers.” You or your representative will have to convince that sales manager that you will help them achieve those sales numbers even if his own people can’t do it.
The Distributor Salespeople
Distributor salespeople are basically “coin-operated.” They’re in it for the commission and the sales bonus. But it doesn’t stop there. They expect you or your representative to make most of the new placements for them! You may even have to call in the orders yourself. Further, you will have to police the new placements that you’ve made for them to make sure that there are no obstacles to sales and, if so, remove them.
We once got a call from our distributor in Minneapolis telling us that our product wasn’t moving in the top store in that metro. This was before we could afford a representative in that territory. We suspected something was awry since we were moving in all the other stores.
I personally boarded a plane and flew out to see what the problem was. Someone had put the potato chips display in front of our brand. So, our products were not visible. We were not selling because we were physically blocked from sight. As we began to sober to the harsh realities of the marketplace, we wondered how many other stores this was happening in.
3. Management. How do you get reordered?
It doesn’t do you any good to sell in a retail store if you don’t get reordered and put back on the shelf before you run out of stock. The retail buyer just looks at a screen. On the screen is the summary of the scans of your UPC code out the front doors of his stores. It is possible that your product sold out and didn’t get reordered so it was discontinued for “poor sales!” It was a victim of its own success! We hear too many new CPG brand builders complain, “Well, isn’t that the retail stores’ responsibility?” Or worse yet, “Isn’t that the distributor’s responsibility?” It’s your responsibility!
Our Hawaii Experience
When we started Barefoot Wines, we were looking for the low-hanging fruit like most CPG brand builders. We were looking for a market where our brand would be readily accepted with increasing sales. We needed to look no further than Hawaii with its beaches covered with bare footprints and half the bars were called “Barefoot.” It was a natural, we thought. And sure enough, when we went to Hawaii, everybody bought it. We were successful in getting into most of the retail stores, bars, and restaurants. They loved the label, they loved the theme, and it appealed to their recreational economy.
The only problem was it didn’t get reordered! We went back to Hawaii to see what happened. The retailers told us, “Oh, that Barefoot Wine, it was a great seller! It sold through!” It “sold through” all right, and now they were through with it! And why? Because when it sold out, our distributor’s representative sold in another brand that he was making a bonus on at the time. He was glad Barefoot sold out because it gave him the shelf space he needed to get the placement on the new product and make his bonus.
That’s when we realized that we needed to have a representative in every territory to manage our sales, inventory, merchandising, and anything else that could possibly stop sales. We also realized that we could not afford a sales representative in Hawaii at that time. We had to pull out of Hawaii and abandon the market for over two years until we could afford a full-time representative in the islands.
Distributors’ Desired Inventory Level
Everybody in the distribution channel wants to maintain the minimum inventory they can. They all want just-in-time delivery. So, the chances of running out of stock are great if your person isn’t in there to watch those inventories at every level.
4. Programming. How do you get noticed?
So now you’ve bitten the bullet on the cost of sales. Now you know what you have to do to keep your product in stock. Now you understand that you will be discontinued without constant vigilance on the shelf, in the back room, at your distributor’s warehouse, and at your own production facility. The future of your CPG brand is the function of your distribution management as much as, or even more than, your quality, price, package, or even marketing.
But even if everything is running smoothly, you still have to get noticed on the shelf. This is a Herculean task considering the thousands of other CPG products out there vying for the consumer’s attention. How do you get noticed in an environment like that? Programming.
The Marketing Plan
With most chain stores you have to submit a marketing plan six months in advance. You have to orchestrate this plan to coordinate alternating pricing for temporary price reductions, along with quantity purchases for displays, along with seasonally-themed merchandising and marketing display materials. Today more than ever, bricks and mortar retailers know they must provide an entertaining experience to keep shoppers coming back to their stores. According to the Department of Commerce, almost 1 out of 10 retail purchases are now made online and it is the fastest-growing segment of the retail market. So brands that can provide retail entertainment will be increasingly in demand by bricks and mortar retailers.
The 7 Selling Periods
Ideally, the CPG brand builder should offer retailers a full year of such programming. The retail selling year is divided into at least seven distinct selling periods, each one with a bank holiday or three-day weekend. Each one begins on the first day after that holiday. For instance, the year starts out with the Martin Luther King three-day weekend. Then there’s Valentine’s Day selling period which usually ends on Presidents’ Day. That’s followed by the Easter selling period, and during some years, the St. Patrick’s Day selling period. Then comes the Memorial Day selling period, the Independence Day selling period, the Labor Day selling period, the Halloween selling period, the Thanksgiving selling period, and then the Holidays.
Peppered in between these major selling periods are other events like Super Bowl Sunday, and the World Series, Mother’s Day, and Father’s Day which you can also include in your programming.
In order to catch their attention and discover your product, your retail buyers must see your CPG products differently throughout the year. Those products must be presented in light of what is already happening during the calendar year. This makes your CPG brand more relevant and compelling.
5. Marketing. How do you get the end-user customers?
Point of Purchase
The most effective place for marketing materials is at the point of purchase. It is the only place where the customer, the product, the money, and the decision all come together. But retail space for signage is severely limited. To get noticed your marketing materials must be simple, readable, compelling, and most important of all, in place. Just another job for your representative to be responsible for.
Packaging, Logo, Brand
Your name, logo, packaging, color choices, and signage must be readable and recognizable from at least 4 feet away. The customer must resonate with the images and messages you communicate. Your message must be clear, crisp, and definite. There is no room for vagaries, fanciness, or mystery. Simple and clean wins the day.
Negotiate with the retailer for freestanding, side-stack, and end-aisle displays. Look for opportunities to cross-merchandise your products with other categories to attract impulse and notion buyers to discover your brand. Most sales are off the floor, not off the shelf, so push for floor displays in as many stores as possible. It’s one of the best ways to build your CPG brand.
Do as many in-store product demonstrations as you can. Use a bar height table, order in extra inventory to support the demonstration, handout inventory at the point of demonstration (do not send them to other places in the store), coordinate the demonstration with a special price reduction, keep track of the sales you made, and most importantly, ask for a large reorder to support the new customers you have just achieved. You’d be surprised at how many well-meaning CPG brand builders conduct product demonstrations without covering all these bases.
Bring new customers in the door asking for your product. Do this by conducting as many demonstrations as you can for nonprofit events and notifying attendees exactly where to buy your products. Supporting local nonprofits is the best form of advertising because you are giving the members of an already tightly networked organization a social reason to buy and advocate your brand.
And sure, commercial advertising can’t hurt. But be aware that the people who sell you the advertising will be quick to point out that you won’t get traction unless you advertise repeatedly. And of course, you can’t quit because then you will be conspicuous by your absence. Commercial advertising can be effective but it is very costly with sometimes questionable ROI.
So, keeping your CPG branded product on the retail shelf is more important than getting on the shelf in the first place. Use these 5 techniques to maintain and grow your shelf presence. CPG brand building is a real estate game. Remember, they can’t buy it if it ain’t there!
Who We Are
Michael Houlihan and Bonnie Harvey co-authored the New York Times bestselling business book, The Barefoot Spirit: How Hardship, Hustle, and Heart Built America’s #1 Wine Brand. The book has been selected as recommended reading in the CEO Library for CEO Forum, the C-Suite Book Club, and numerous university classes on business and entrepreneurship. It chronicles their humble beginnings from the laundry room of a rented Sonoma County farmhouse to the board room of E&J Gallo, who ultimately acquired their brand and engaged them as brand consultants. Barefoot is now the world’s largest wine brand.
Beginning with virtually no money and no wine industry experience, they employed innovative ideas to overcome obstacles, create new markets and forge strategic alliances. They pioneered Worthy Cause Marketing and performance-based compensation. They built an internationally bestselling brand and received their industry’s “Hot Brand” award for several consecutive years.
They offer their Guiding Principles for Success (GPS) & Shelf Smarts courses to help consumer product brand builders achieve success. Their book, The Entrepreneurial Culture: 23 Ways To Engage and Empower Your People, helps corporations maximize the value of their human resources.
Currently they travel the world leading workshops, trainings, & keynoting at business schools, corporations, conferences. They are regular media guests and contributors to international publications and professional journals. They are C-Suite Network Advisors & Contributing Editors. Visit their popular business site at www.thebarefootspirit.com.
To make inquiries for keynote speaking, trainings or consulting, please contact firstname.lastname@example.org.