An excellent, straightforward reference for checking the health of your beverage business is calculating your gross profit per case. Many route accounting systems have report functions that will give you an estimate of this figure, but route accounting systems don't take into consideration all of the outside influences; such as samples, free cases, breakage, discounts, promotions, or theft. I use a simple spreadsheet program that will give you the exact figure once you have entered the neccessary sales information. At the end of the month, I enter my individual case sales, gross dollars by individual case, any promotional dollars and then, in a flash, I get my figure. It stands at $4.65 a case at present, which is up substantially from three years ago, when it was a stagnant $3.87. In fact, my margins have also increased a nice 3 percentage points to 26.4%.
Analyzing your gross profit per case will undeniably impact your margins and profits in a positive manner. This simple report will also give you needed guidance in reducing unneccessary discounts, rationalization or elimination of unprofitable SKU's, monthly forecasting and ordering, and a wealth of data about your portfolio.
This program is built using simple excel formulas that you can develop very easily. If you want an example of mine, you can download it here.
Monday, March 03, 2008
Calculating Gross Profit per Case
Tuesday, January 15, 2008
Start a Beer Distributing Company
So you came up with a wonderful idea on how to get rich by starting a beer distributorship. Are you crazy? Are you drunk? Or.... do you have what it takes to work 16 hour days, seven days a week to be your own boss? Do you like pushing one of these things in the picture on the right? Do you enjoy setting your own goals, interacting and conducting business with many different people with multiple demeanors and diverse backgrounds, and analyzing progressive consumer trends and habits in the marketplace? I enjoy teasing the folks that think beer distributors just deliver beer and make tons of money. Nothing is further from the truth. Beer distributors are entreprenuers that evolve everyday. Change is eminent and constant. Believe me, the breweries change marketing focus and organizational structure every few months. To be a beer or beverage distributor, you have to be able to go with the flow and always do what you say you'll do.
Following is some basic information to see if you've got what it takes:
First you need a federal license to sell alcoholic beverages and a federal permit so you can store them.
Second you need a state permit for the counties you service. Once you get a state wholesaler permit you will receive a tax roll of all the accounts that hold a retail license for the area you service. This roll is important because it will be your universe to which you can sell alcoholic beverages. Its also where you will keep up with taxes collected from retailers.
Third you need an operational strategy. This means vehicles and warehouse space. You will also need a decent route accounting software system to keep up with your invoicing, distribution and sales reports.
Fourth you need products and customers. Call and email every supplier you can find...from alcohol to non-alcohol. Check the margins they offer, terms, pos, support, etc. A good starting point is BevNet.com.
Fifth you are going to work your tail off. Do you have a sales force? If you can do all this on your own...you are my hero. I consider owning and operating a beer distributorship with no employees to be the Holy Grail of the beer wholesaling profession. That is, if it could be done.
I hope that doesn't scare you off. I admire that you want to do this. It is a rewarding business and can be very fulfilling, but you have to know that it can also be excrutiatingly painful, depressing, and all-time and all-thought consuming. I know a lifetime of answers to any questions...feel free to email me at any time, my knowledge is at your disposal. For more information online, see how to start your own Beverage Distribution Business.
Now make a list of questions to ask yourself, your retailers, and prospective suppliers. Some examples:
- FOB's and laid in's for different brands and packages.
- Rising fuel, freight, insurance, taxes, and supplier demands and their effect on the beverage business.
- Your location and your competitors.
- Demographics of your territory.
- Service level expectations and payment procedures of various retailers.
- Laws affecting transportation and distributing alcoholic beverages in your area.
- Credit terms with suppliers and retailers.
1. Contact all of the beverage distributors in your area. Don't tell them all of your plans, just say you are conducting research. Ask about the brands in their portfolios and see if they handle the full package line from some mid-major brewers. Start with the Pabst supplier. If the distributor is not carrying some Pabst packages you can request these brands. A few other breweries to contact are Gambrinus, Pittsburgh, Cold Spring, or any small regionals in your area. It will take time to build a product line. Also, you will have to be ready to order and deliver as soon as you start getting the product....remember beer is perishable.
2. Ask about their non-alcohol portfolios...there is more margin in soft drinks and you don't have to pay sales taxes in most states. The only drawback is some retailers will ask for credit terms (larger ones) and Coke and Pepsi control the cooler sets. But sometimes we get lucky with these new niche products..many did with Snapple, Red Bull, and Vitamin Water. Try to get a few of these beverages. A couple to look at are Cocio Chocolate Milk, Hat Trick Beverage's Pumped Fitness Water, and IrnBru. Go to BevNet and research some of these brands. Don't be afraid to call or email them. They will send you samples and pricing.
3. Contact the National Beer Wholesalers Association and ask about your State Association and who the local distributors are. You can also find a wealth of information about starting a beer distributorship on the NBWA website, as well as your state association's website.
4. Never pay for any franchise from anyone in the beverage business...you get the rights from a supplier based on the expectations of your performance at the levels agreed upon in the beginning of entering a contract with a supplier. Any payment to a supplier should only be for inventory and promotional items that help you sell more product. At least, that is my conviction.
5. It would be best to start off with some non alcohlic drinks first, unless your market is heavily skewed to the on premise. Many breweries nowadays let you order small pallet quantities to help with cash flow. So do the smaller soft drink companies.
6. You need to make at least 25% margin on beer and 30% plus on soft drinks.
7. Look in to adding beef jerky, cups, or salty snacks to your routes.
8.It is imperative that you have a superior understanding of computers, the internet, excel, word, and power point. You wouldn't be able to order or sell the first case without 'em.
Hope that helps a little, at least you have a starting point now. Anyway, feel free to email me with any questions. I believe that with consolidation of more and more beer distributorships, there will be breweries and beverage companies that will welcome smaller wholesalers. There is a niche for small, nimble wholesalers...you just have to patient, hardworking, and lucky. Just remember, the beverage business is about making friends...that is forgotten when you're trying to sell 500 sku's.
Tuesday, September 04, 2007
The Pros and Cons of being a Red Bull Energy Drink Distributor
Many people recognize Red Bull Energy Drink as a phenomenon in the beverage industry. Retailers are in awe of the power of Red Bull Energy Drink. I find that these same retailers that will not budge an inch during beer cooler resets, will give Red Bull two to three shelves and a display piece for nothing (usually the Red Bull Full Bull contracts are for one case, one shelf per quarter, like I said, nothing).
Red Bull is defined by its mystique, its originality, and its significance as the de facto creator of a category. This carries over from the ranks of the supplier, Red Bull North America, and spills over into the retailer side. It kind of skips the hard working people that really built the brand into the powerhouse it is today…the distributors. I see Red Bull NA terminating beer distributors very frequently these days. Red Bull is fortifying its ranks with Red Bull only wholesalers that sell Red Bull Energy Drinks exclusive. These terminated distributors are left with nothing to show of the brand because of the biased distributor agreements from Red Bull NA. That being said, Red Bull is still a cash cow for the remaining wholesalers. Now, a look at the good and the bad of being a Red Bull Energy Drink wholesale distributor:
The Pros of being a Red Bull Energy Drink Distributor
1. Exceptional product awareness and quality.
2. Two-year shelf stability.
3. Ordering process. Freight is included in the price and the turnaround time from ordering to delivery is always less than two weeks.
4. Excellent margin.
5. POS designed for any retail establishment.
6. CMA programs for retailers.
7. Huge allowances for sponsorship opportunities.
The Cons of being a Red Bull Energy Drink Distributor
1. Red Bull Distributors are buried in a glut of paperwork. Full Bull on and off premise programs, daily sales number requests from Red Bull chain departments, and incentive programs for distributors sales forces.
2. The contract between Red Bull NA and the distributor is worthless, unless the distributor was given some sort of special, perpetual rights of the brand.
3. Red Bull Distributors received a general price increase in January and were advised not to raise the price to retailers.
4. Red Bull chain department sells different programs to different chains and retailers. Some retailers get more than others. It’s hard to keep up with who is getting what and retailers get extremely angry when they find a competitor is getting a better deal.
5. Red Bull NA wants Red Bull only van teams. In other words, separate sales forces that sell Red Bull only.
6. Coolers and display racks that were once free to the distributors now have to be paid for by distributors.
7. We used to have one representative from Red Bull NA, now we have seven different people to deal with.
We have found that our profit margin from Red Bull has been cut nearly in half by these cons, but the huge volume increases have more than made up for it in dollars. I’ll take the bad with the good any day because when its all said and done, Red Bull Energy Drink is a proven winner on the shelf.
