I am 25, been working in the corporate world for the last 3 years since I graduated from college. My first job I couldn't stand, my most recent job I thought was interesting and I could deal with being there but I wasn't driven and motivated to be doing it for the rest of my life.
I've always had the notion that I was going to own and run my own company. Thanks to my dad who drilled the idea into my head at a very young age. I always just said ..."yeah Dad, I'll do that..." but never really understood why he was so adamant about preaching that until I was released into the corporate life and how I wouldn't just settle for that the rest of my life.
My friends know me as a creative and driven person. I've always had great ideas but never really followed through with any of them. Either I didn't have the time or didn't have the money. We I was recently laid off and thought to myself its either now or never. I don't have a mortgage, family or major monthly bills and now I have all the time in the world. I read a book called Raising the Bar : A story about Clif Bar Co. It was my tipping point in getting my business started.
My friend and I have been doing research on the beverage industry but a lot of the market research is well kept secrets in the BMC report which costs thousands of $$. To much money for a small little startup like ours to pay for demographics and market research.
We just don't really know where to go from here. Do we form our business name, logo, slogan or do we go out and test the product on more people before making the initial investment? If we test this unlabeled product through taste test/focus groups how can we protect ourselves from law suits, say someone, somehow got sick after drinking the drink?
A lot of companies that bottle, fill, label, ship aren't taking me seriously and I can't get solid quotes to see if this is even a sensible idea financially. How do you break through this barrier? I'm young, can't make much of an initial investment, haven't named the company (though we have one in mind)...etc. I think this is why getting quotes has become tough to come by.
If anyone has any experience in the beverage industry or product launches I would love to speak with you directly and pick your brain. It would be greatly appreciated.
I am having a hard time finding out what the next step is and I am overwhelmed at all the directions that need to be explored.
You should do a feasibility study first. Find out if people want it, need it, will pay for it. If you have no customers - you have no business.
Have you tried SCORE. SCORE is a free service sponsered by the SBA. You can search for and contact experts in your field. There is no charge and tons of great information on what you need to do. Just search for a few counselors who have experience in your industry.
Then, come back here - bounce your ideas off of us - lots of great info here too - and let us know what is happening.
Phanio - We have tried SCORE. We met with 3 people last week at a local office. None of them have experience in the Beverage field.
They did have some useful feedback but overall kind of mentioned to do some research, stuff we already did. They said we need to see if the numbers will work. Cost of supplies, bottling, labeling, shipping...etc As I have said I am having a hard time getting quotes or estimates since I am just a start up. They don't give me a straight forward answer.
The other thing is testing to see if people want/need it. We'd like to do some taste testing at different retail stores, gyms, road races...etc but can we make the product in or kitchen or do we need a labeled finish product to test? We don't really have the money to have a contract bottler make these samples. We could just make and formulate the drink in big jugs and just pour into dixie cups for samples. Is that an okay approach initially? Also do you think we need some type of insurance to protect ourselves just for the testing phase?
This is my biggest concern? How to conduct these tests...do you generate a finished product or do you mix your own batch and see how it is received? I'd like to go the latter.
Go with what you think is best - your business - your dream - you should know what is best. Why not pour it into dixie cups? Just have people sign a waiver - you can create one from information online. Go to your friends family. Also go to local colleges or universities and set up close to the campus. Get their feedback. I know it can be a little scary - but, if you let fear stop you on this in the beginning, it will stop your whole business. Starting a new business takes risks.
In regards to SCORE - have you tried online? You can search for counselors online across the nation. Bound to be someone there with real industry experience. Can all be done by email.
Also, search in your area for a SBDC. They should be able to help with market research. They have a lot of tools at their disposal just for this. You might have to attend a few of their classes (usually free) - but they could help you on your way in regards to research. - SBDC =Small Business Development Center -
You know what....thats a good question. I don't have a good answer. If it gets people to try it and give me feedback why not right? That just made something click with me and I'm glad you mentioned that.
I like your idea of the waiver...do you think its necessary or could I get away without doing one at the beginning?
I'll check into the SBDC tomorrow...thanks for that tip.
I'm just glad that being here and posting within a couple hours has given me some direction.
I am not in the beverage industry, but I have some thoughts for you.
You can simply brew up a batch in your kitchen and test it out on your friends and family.
If you want to grab a larger test group that isn’t related to you, contact your local office for Health & Human Services for their food safety requirements first. They will tell you what requirements that they have (if they catch you serving your brew on the corner). Most likely they will tell you that you need to produce your product in a commercial kitchen and give you the guideline for food safety. If they do require a commercial kitchen, I recommend that you check with some local restaurants that don’t serve breakfast, lunch and dinner. For example, find a dinner only establishment. See if they would be willing to lease out their kitchen to you for some hours when they are not in need of the kitchen. They may be willing to let you use their location for a fee since many restaurants are struggling right now. It is a win - win situation if negotiated properly.
Following is a link to an industry beta site by Hoovers.com with some market information:
Sorry, forgot to add that I am not a fan of the waiver. Would you drink a product that you had to sign a waiver for first? I don't think you are going to get many takers. It just creates a negative connotation by saying that you are not sure if your product might make them sick.
Man, you picked a very competitive category to start a business. With beverages, the costs tend not to be so much in development or initial production (although the cost is great enough) but in warehousing and distribution. Then you'll need to think about where your customers are going to go to buy your product. The costs of getting into retail channels have caused many small beverage companies to rethink their reasons for doing this. Snapple is a good example of a beverage company that stayed away from big retail outlets becasue of the cost.
If you want to test this product, you should first figure out who your target market is and why. The 'why' part is huge because that will be the basis for your marketing. With all the bevergae categories out there, you need to know why people want what you have vs other offerings. I'd suggest you do a thorough analysis of this before spending resources on the product.
The reason contract bottlers may not be taking you seriously is because they don't see a beverage product that has a market to serve. It's critical to know what makes your product difference, who wants to buy it and how you plan to get it to your audience.
As far as a waiver goes, I agree with Doug. if you think there is any chance someone might get sick on it, you need to go back to the kitchen and refine the brew.
Doug - Thanks for the input. I'll check out Health & Human Service to find out what happens if I get caught and is there a cheap liability insurance I can get to protect myself. The more I thought about the waiver last night the less I liked it because I came to the same conclusion you did. What if it scares people away. Even if we launch the taste tests with no product name/brand it still might hurt our chances. I've looked on hoovers and while its a good resource for some info it certainly doesn't dig into the financials and market demographics as much as I'd like. Thanks for passing it along and I'll be shooting the ABA an email shortly.
Steve - I agree with you that distributions/shipping is the greatest concern I have for being profitable. I've notice many companies like water bottlers, bottle very close to the source and then only distribute in a few hundred mile radius from there. Then they own another spring to distribute to another region. I need to find a contract manufacture that can produce my product at multiple different locations and disperse from there. Only problem is they want huge orders right off the bat and I have no idea if I need that kind of supply. We want to target active, health conscious people, and we think its a high end market. We will never be able to compete on a volume basis with the huge bottlers, so we aren't even going that route. To touch on the waiver....I was going to protect myself just because you never know what people are going to try these days. Some people jump on the chance to scam there way into money. I think the chances of getting sick off my product if I made it in my kitchen would be no greater then you getting sick from something you buy at the store....very very slim. I'm more worried about someone trying to screw me over, maybe using the sickness as an excuse. What to do?
Thanks again to everyone that has replied. It means so much to get the feedback and pick peoples brains!
I DO have experience in the beverage industry. I helped set up the SF division of Morning Glory Chai and I'm currently putting together the plan for a kombucha beverage. Like they said, storage and distribution are the sink-holes of beverages. that said, you can make it work if you are willing to do the start-up work yourself and you have a strong marketing plan.
you'll need to boot strap at first.
Do you have access to a commercial kitchen?
Do you have access to $2000 to get sample product out there?
Trying to price out options for contract bottlers. Everyone seems to say we need to order by the truckload, need commercial formulation (20-30k cost), a roll out of a new brand would costs 400-600k when all is said and done...etc
Is it not possible to start small? Roll sales into more production and grow it from revenue not from debt/equity financing?
Theres gotta be a way to find a bottler that is willing to do a small batch to start. When I say small batch I mean like a pallet of each flavor(5) that we like. That would be about 10,000 bottles.
All businesses are stressed on growth...but why cant you start off small in niches and grow at a comfortable rate, not a leveraged rate. The reason the economy is in this massive mess is because companies and households grew out of their means using leverage. We DONT want to!
I liken it to climbing the property ladder. You buy a crappy house that you can afford, fix it up and in time sell it for some profit then rolls the revenues into a bigger home and do it again...rinse and repeat.
Why can't you buy a small stock to start a brand, then when you hit your initial investment start another order and grow productions?
EX.... You start with a $10,000 investment. Lets say for simplistic sake it makes you 10,000 bottles. You retail your bottles at $2. Once I sell 5,000 bottles I make $10,000 in sales...my initial investment. So now I take that 10,000 and order another 10,000 bottles. My "inventory is now 15,000 bottles. Now I sell another 5,000 bottles which buys me 10,000 more. Now my "inventory is 20,000...etc
Can it be done...why do you have to leverage to be successful?
Many companies say a real roll out will cost 400-600k!! That's outrageous and not the kind of way I want to launch my product.
Good read, I am familiar with Hint Water but didn't know how they started. She'd be someone I'd like to chat with but we would be in a similar industry...so I doubt she's willing to help any form of competition, even if its not exact.
Don't let the hard feedback and negative responses get you down. There are many great examples of people who have done exactly what you are trying to do. Some of the best examples I can think of right off hand are:
I work with a portfolio company of ours that has experience selling these types of products into large retailers like Costco, Sams, Walmart, etc. We show companies how to FIRST get the PO's and then finance against the PO's for production. Let me know if that's helpful
David: I feel your pain...very common amongst start ups. You need a BUSINESS and STRATEGIC plan. Most start ups have a VISION but no PLAN or they take Action (start doing a bunch of busy work) and have no PLAN or they spend all their time planning and never take ACTION. A Vision without a Plan is just a Dream...A Plan without a Vision is pure drudgery...A Vision and a Plan without Action is very disappointing...However, a VISION with PLAN put into ACTION can change the World.
All the best,
Brenda Horton
Hware.com
Online business and strategic planning made simple
Brenda I understand your feedback. I am working on a plan, trying to develop the cash flow analysis.
Part of me calling/emailing companies is to build the plan. I need to get #'s to see if any of this makes sense financially. Obviously you can have a great product but if you can't get eventually cash flow...what is the point?
So here is the problem right now....I can't get a real quote for production costs or shipping costs. Every company I speak to wants massive amounts of volume right off the bat. Which makes sense because the more volume, the more money they make.
But my plan is to roll out growth from within the initial investment. Keeping the brand local and selling them in targeted niches. Until demand and sales grow enough where it garnishes a larger investment. Most of these companies are looking for me to start in the $250k + range for a start up investment. I can't fathom that kind of investment right now. I'd rather just buy all the bottling equipment for that price and cut them out of the process entirely.
I know it can be done cheaper and still be effective. Like I said I want to grow at the pace of real internal growth and not by some false "leveraged" growth by taking out massive loans or investors on to start.
The story of Fizzy Lizzy is intriguing as is the story of Sam Adams (the beer). They were able to start real small, a production company took a chance on them. They did their own distributions originally and grew small but steadily.
I just started a book called Small Giants and it really makes sense to me, this is how I want my company to grow.
I don't know if anyone mentioned this yet, but from your original post, I didn't see where you complete a business plan? Have you done the projections? You can get a free business plan and other projection documents here: http://www.openafranchise.com/free-small-business-resources.htm
Also, have you calculated what the retail price point is and worked it backwards to see what pricing you would have to produce the item at in order to make money? If you can't get firm quotes try working it backward. Quick & dirty example: if your retail price is $1.29/bottle. Figure out how much you have to pay the store, marketing, rent, employees etc... all of those you can get and have nothing to do with a specific industry, but rather your market. You can figure out what the bulk of your expenses are and then plug in some numbers to see if it is feasible based on the info you do have.
The main reason I think that everyone is telling you $400k+ is because of the profit per item. Meaning, if your net profit per bottle is only 2 cents each then you have to sell way more than 10,000 in order to still be in business just to place a replacement order. If you only make $200 profit on 10,000 bottles you will be closed because of your overhead during the distribution time. Know what I mean?
Industry data isn't what it used to be. I would never say disregard it if you can get it, but when I started my business, there was NO industry data available, but when I did my business plan and projections I was able to use the info I knew and then plug in some different numbers into the stuff I didn't know to see what I would have to find/sell/buy in order to be successful.
Let's say you figure out you need to buy your bottles and have them filled & labeled for $.89 each in order to make a profit. By working it backwards you can figure out what that figure is right? Then you call up the bottling company and say, if I place an order of 10k bottles can you do it for $.89?
You might also try the direct approach. Tell them you are "Your Last Name Inc" and you are calling to place an order. Don't call and ask them how much it costs, ask for the sales department and tell them you want to place an order and how would they like the information? Do they use a RFC or an invoice or an purchase order etc... have them provide you with the order form or document and maybe some info will be on there?
Good luck in your venture, hope this info helps even a little bit.
I like your idea of working backwards into the price and have attempted to do that in some of my analysis.
Here is what we know. We expect the bottle to retail around $1.50. Just from competition prices and where we expect to have our product fall in line, we see that as a reasonable price.
So if we want it on the shelves at $1.50 we need to sell to the grocery/cafe store for what? Is there a standard mark up in the industry or do we just tell them. We are selling it for $1.25 bottle to them and MSRP is $1.50...a 30% profit margin on retailers part.
Lets say they go with $1.25 a bottle to purchase from us. Now we have to take out bottling, labeling, filling costs.... Going to estimate .50 a bottle based on some rough estimates. $1.25 - .50 = .75
Ingredients/flavors.....come out to be about .05 a bottle.
Now at .70/bottle profit.
We will be using a storage warehouse unit that we have for free from a buddy that has hooked us up. So rent would be nothing. We won't be paying any employees because it is just me and the other owner.
Now here is the big unknown....shipping costs. I really haven't nailed down a good estimate. Most shipping companies need to know the product, weight and class. But since I have no idea what my minimum order will be (since bottlers what 100k's) it makes it difficult.
Anyhow...using a basic ton/mile rate I get .14 a bottle.
So costs would be
Bottling - .50 (high estimate)
Shipping - .14
Ingredients/flavors - .05
Total costs .69.
Selling at 1.25
Profit .56 per bottle
Profit margin .56/.69 = 81% (bottled water industry range is 50-200%)
We have experience in breweries industry and also hold one license for Beer Manufacturing. Looking forward for your reply. we can discuss further in details.
Its a real Hard Industry that your trying to get it but i know a way you can make serious money and use it toward your brewing company just reply if your intrested
If you do the leg work and stay in your home town at first. Wouldn't the shipping cost be your time and travel expense?
Here's an idea;
Couldn't you contact small establishments that fit your niche, give them a sample that you made, then see if they would like to order a case. Either have them prepay or give them a case to sell. Try to find a manufacture that would give you 30, 90, or 120 days to pay your invoice. During that time hopefully the establishments have sold your product. Then keep going from there. Eventually hire a marketing company to assist you if your product catches on.
If you use a local restaurant, you will probably have to have a Food Handler's permit first. These are easy to get; contact your local Environmental health agency. I am certified with ServSafe:
Unable to find that right piece of software for you business? Are your locations so spread out geographically that syncing data is a nightmare? Is your licensing too restrictive or expensive?
Check Bevnet.com for suppliers and inspiration. Also, if it's something you are serious about, go ahead and incorporate first, open a bank account - in a nutshell establish the backbone, the "company". While you do your research, you have the "business" already existing or "aging". You'll have to do it anyway, plus potential suppliers/vendors will take you more seriously. Worse case, nothing happens, you can sell the corporation as being "aged". Remember, protect your self and your assets.
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