10. Reasons it failed and what I’d do different.
After reading what I wrote I realized it probably seems like it all ended so fast, and you’re asking why it didn’t work with so many key retailers and so much PR?
Ultimately my strategy was wrong, which was to go thru Traditional Retail and to do it without the appropriate funding. I gained points of distribution faster than I could develop the brand in those markets, and I learned the hard way it wouldn’t work.
Just to give some clarity here are a few reasons in detail:
- Funding
The business model I chose to pursue, which was thru traditional retail requires a lot of capital if you plan to launch in these larger retail chains and distributors. It’s an investment that costs a lot on the frontend and for new brands you have no “leverage” to negotiate favorable terms on things like payment terms, allowances for deductions, etc.
Example:
Let’s take one of the distributors we were working with.
“The Distributor” required the following terms 2% 10 net 30. What this says is if they pay with 10 days they take 2% off the total but they are required to pay with in 30 days the full amount. In reality we would be paid closer to 45 days and the 2% was always taken.
The Distributor required each vendor to attend at least 1 of their Food Show each year at a cost of $6,500
While at these shows, 90% of retailers in attendance asks for a “free fill” — in other words if they want your product you are required to fill their stores with one case of each of your products — for free.
With “this distributor” each quarter you are required to discount the product 15% for a 30 days. So what do you think they do …most of their orders are issued when it’s on discount. Nice huh!!
On top of that, “The Distributor” would deduct $1,000 for any new Distribution Centers they started carrying us in.
One time in particular I sent an invoice for around $7,000 and received a check 45 days later for $67.
I never received the full amount I would invoice — which was news to me.
You need deep pockets to go this route, and I didn’t have that. If I was going to continue I needed to be profitable in the short term ….and it wasn’t going to happen going thru these distributors.
I didn’t have much of a choice if I planned to go the route of working with larger retailers — so I plowed ahead in hopes I could increase my sales volume enough to cover the deductions, etc.
I was hoping that if my sales volume and sales velocity would increase I could raise addtional capital to scale the operation.
2. Baking Partner
The issues with production were constant and from the start. On multiple occasions we had cookies that were not baked correctly get out in the market — and over time it hurt our sales and brand considerably! Sometimes they were over baked, sometimes under-baked, and sometimes they were way too thin resulting in mostly broken cookies. I’m sure a lot of consumers who tried them for the first time never bought them again.
Trust me finding another bakery was at the top of my list — from 2014 until the very end I was constantly looking, but was never able to find one that was a fit for us. We would do test bake after test bake but were not able to replicate the cookie at another bakery …and the bakery didn’t have interest in continuing to try with a small volume customer like us. I was in touch with close to 40 bakeries after it was all said and done, but couldn’t get it worked out for a variety of reasons.
What made my product unique
- The fact that our Chocolate chip /w Pecan had the nut allergen eliminated a lot of bakeries that would’ve otherwise been able to do it.
- The type of package (Standup Pouch) also eliminated bakeries that didn’t have the equipment to package it as it isn’t a very common package to put cookies in — and most bakeries didn’t have the ability.
- I had about 10 bakeries run test bakes throughout that time but none of them could ever get close to the correct cookie.
- Some bakeries were too small which would have increased my costs considerably.
- Some were too big and their minimums were more than double of what I could sell.
- Other things but you get the point ….
If you don’t have cookies, you don’t have a cookie business and I’d built the business hand-in-hand with an unreliable baking partner. I kept thinking that if I could just get my sales volume up I would become more of a priority for them and it would also give me the leverage I needed to go to a ‘larger’ bakery in the future.
3. Sales Velocity (Units Sold — Per Store — Per Week)
- Although we were getting into these really large retailers, our sales weren’t great in those stores.
- We got in and eventually kicked out of a handful of chains such as World Market (300 stores), Cracker Barrel (700 stores), Hyvee (100+ stores), and others.
- It was a combination of things such as merchandising issues as I talked about in “The Crumbling” post, pricing on shelf, correct product mix, and lack of marketing to increase consumer trial and develop a consumer base.
There were other things at play, but those are the main ones.
If I could do it over again, I would have:
- Started smaller in all areas (smaller bakery, smaller target market, smaller budget, etc.)
- Worked to succeed with sales online and a handful of stores first, and then expand. Not adding more stores as fast as possible with out a consumer base, which is what I did.
- I assumed the product would sell itself once in stores. You need more than a pretty package and a tasty product for rapid growth. You need to create “value” — something that differentiates you from what is on the shelf such as cookies with protein, keto cookies, cheap cookies, cookies that make you run faster, cookies that help you concentrate, cookies that give you magical powers, etc.
- Focused on a niche first instead of a wide audience — and develop the product around that niche. Expand only when you’ve been able to do that.
- I would have tried to grow at a slower pace as opposed to a “spray and pray” strategy running as fast as possible. I needed to make sales fast as I was having to meet the minimum production runs at the bakery …and the cookies had a shelf life….and not to mention had to support myself and the business.
I would have done a lot of things different, but I didn’t and here we are.
As my Dad always says, mistakes are not wasted if you learn something from them. I definitely accomplished that.
Thanks for reading.
If you want to read them here are the links:
