Transcription
So, uh, as Stephanie said, I'm Felipe Gonzalez Gordon. I'm a partner at Kangulan Partners. We're a communications agency that specializes in the beverage alcohol industry. So, we help a lot of entrepreneurial brands and also established brands here in the in the US.
I'm going to talk about the less sexy part of our business. So when we when we talk about um about brands when we we have to think about a number of aspects. First of all is identifying the opportunity. Uh we need to see if there's a market for what we are trying to sell. Then the other thing is sizing that opportunity. Are there is there enough demand for what we have to bring to market? Then, and I'm just going to touch on this very briefly, but Mark will speak to this much more in depth, is we got to think about our pricing uh pricing strategy. And then, of course, there's got to be some marketing. This is a very uh saturated uh industry. There are a lot of brands out there. So, we got to find our way to stand out. And I think that uh both Jason and Diego are going to talk about how to tell how to tell uh your stories. And then I'm just going to give you some tips and um advice in terms of um what makes some what makes brands succeed and what other brands are doing wrong so that you can avoid those um those uh uh errors.
So the first thing that everyone has to take into account is that you have to take a consumer centric approach. What does that mean? At the end of the day you are selling to someone. All right? And there are plenty of brands plenty of brands out there. So the recommendation is to look at consumer behavior. What are consumers into? Where you know is it a you know health consciousness? Is it flavor exploration premiumization and analyze the white space? Try to try to look for what isn't out there. What demand what latent demand isn't being served right now. um you know, is there a tequila that there's no tequila that does this. There's no rum that has this ingredient. That's what you got to look for because it's much easier to compete in a white space than in a category that's already crowded. Um to do that, you can also monitor, you know, just look outside of the beverage alcohol category. Look at what culinary innovations are happening. Look at what flavors consumers are favoring. Um, look at, you know, sustainability. That's a that's a big demand. That's a big concern uh for consumers. So, how can I bring that into my into my brand? And of course, I mean, if you get uh uh the trade input, I mean, at the end of the day, you're going to need the trade to help you put those brands in in the hands of consumers and the pallets of consumers. So if you get feedback from your distributor, you get um uh feedback from on premise buyers, from retailers, what what do where do they see the next opportunity? That's also very important. Mixologists, what kind of cocktails do they like to to mix? What what is what are they missing? Uh and of course, you know, there are bunch of data sources. Most of them you have to buy the reports, but you will see the trends. You'll see how many brands are available, what categories, what product categories are growing. And this is important also to to look at to see where the opportunities are.
And this is this is an interesting model. Um there's a TAM SAM model. Basically, it's it as you can see here, it's a pyramid. The TAM is a total addressable market. So that is the overall category. And I don't don't take these numbers at heart. They're just examples. But say you're in the gin category. What is the overall gin market in the US? Let's just say it's actually one uh 1.7, but I just put here because I checked that number before, but I put here $3 million $3 billion total category. Obviously, you're not going to capture that entirely. You're not going to have the resources most likely to go after the entire market, but it's good to know. Then from there we move to the serviceable available market which is your your category where within that general category are you? So in this case say you are pre you're a premium gin your price point $35 and up. All right that's my category that's what I'm doing. All right the these the category that I can service is 900 million. And unfortunately, you're not going to be the only player there. So then what you got to do is this serviceable obtainable market and you got to set realistic goals for yourself. You got to know, you know, what the category is. But then you say, what is the realistic capture? You know, how much of that serviceable market can I own? And in this case, you know, just put, you know, you could do 3%, you know, 3 of a percent, five of a percent. That's your estimation based on the resources that you are willing to devote. Are you willing to dedicate? We just put here as an example, you know, 0.5. So, okay, my total market is, you know, $4.5 million out of a $3 billion category. But that gives you a sense of a numerical sense of what you can um what you can obtain.
Um Mark is going to go a lot deeper into into costs, but it's important for you to know your your cost structure. You got to understand what it costs you to produce and at the same time you know there producers that go with a at a cost plus say how much does it cost me to produce this? I just add a margin and here we go. Uh you need to do a little bit more work here. So you got to look at you got to analyze your the other brands in your category who's competing there analyze what you know the the shelf and analyze what on premise uh just to position yourselves who you're playing who you're playing against and of course the supply chain here in the US for those of you that are international but even for also for domestic brands is tiered. We have the three tier system. There are a lot of you know intermediate steps before your brand gets to a consumer. So you have to factor that other people along the supply chain are going to need to make money as well. So you need to factor in those those those margins. So typically I mean this is just an example but you got to calculate that if it cost you uh a $35 uh bottle on the shelf is probably FOB out of your facility it's going to be 12 $12. So you got to work all of this and Mark is going to go into in in into a lot more detail.
Then the other thing is a big question is okay how much do I need to spend in marketing and this is a this is just an example but typically you're going to want to invest ahead of your business. So you're going to need financing. uh you know, you can say, "Okay, I'm going to invest 20 or 30% of my year 1 and year two revenue." That's a that's a guess. You you're projecting those sales. You're going to say, "Okay, I'm going to I have a 5,000 case goal. All right. My brand says sales at $200 FOB per case. So I should be thinking of a budget of $200 or $300 to invest in marketing before I have sold the first case. But you got to put the marketing dollars ahead of the cases years ago. I mean in the past it was easy. You came up with an innovative brand with uh quality and that was sufficient to sell. But I mean you've been here all day. I'm sure you've been walking around. You see how many brands are there is quality alone is not sufficient is is expected but then you got to put dollars to support your brand and here is a you know what you what you need to think about don't take these numbers exactly but just as an exercise as a framework in which to think okay I'm going to put 30% to trade activations and events 30% into PR 20% into digital ads sampling 10% on you know just developing all my clerical all of my collateral materials special packaging for the holidays whatever but this is the model that you got to that you got to think I would like you for to for you to walk away from this session not with the exact numbers but with the framework of how to think about your how to think about your business.
Uh another important thing is when am I going to make money right? So you got to think about your break even point and that's also an estimation. Uh if you're following politics Here you'll see that you have part of the political spectrum saying okay there's no deficit we know and uh we're going to recoup we're going to reduce we're going to reduce a deficit and the other part of the political spectrum say oh no this is going to increase our debt. All right? Why why there are estimations there are calculations there assumptions that you're that you're making and in our case it's volume right? But you need to know what the what the building blocks are. So you need to look at your fixed costs and you need to look at your variable costs and then that's going to help you calculate your um your your break even volume is going to be your fixed cost divided by your contribution margin. What is my contribution margin is what I am selling at minus my variable cost and these are all formulas are all out there but you need to do this theoretical exercise to know what volume do you need to get to before you make a dollar. All right. And you also got to you got to account for risk. You got to have a sensitive sensitivity analysis because things can go wrong things. You know, on paper you can do anything. But you got to say, okay, well, did my distributor take that order? Uh do I all of a sudden my supplier uh increases, you know, the bottles or are the tariffs if I'm working internationally? So you got to have some sensitivity analysis in order to get to this uh break even point.
And then I think what is most important uh of it all is when you're not launching a brand, when you don't have a white space um and uh Diego and Jason are going to talk about about this. When you when you when you're not walking into a white space, you're not just selling you're not just selling your product based on taste. You're competing among other aspects that you have to have aligned up. You're competing with your brand story, shelf presence, uh price balance, margin, uh distributor leverage. These are and consumer awareness. And consumer awareness is the most critical thing. It often comes in six figures. But you got to put money behind because okay, why should I buy your brand and not this one? Right? If if my brand is unique, if my if there's no other alternative uh to my brand, then great. That's a great starting point. But if there are, then you're going to be the loudest in the room. Otherwise, it's just going to be slower sales, lower repeat orders, and difficulty to get the distributor attentions. How many tequilas do I need? How many rums do I need? How many wines from Spain do I need? Right? So, that's that's very that's very important. and think about okay well if my bottle disappeared from the shelf today you know who's gonna miss it you got to create create that uh so some some advance some you know some some recommendations if you are in a in a crowded category which we all are unfortunately um you know find find your wedge find what makes your brand different don't go don't try to imitate the established categories try to go for some try to go for something else but but Don't forget to audit your competition. Understand the pricing tiers. Understand the distribution footprint. Understand, look at the packaging design. You don't want to be less than them. And then also hone your brand, your brand tone and your brand story as a point of differentiation. Ideally, you know, overinvest in in branding and trade. You got to brand to create that brand recognition to get that consumer recognition, but trade to get market access. Niche niche down to breakthrough. You got to find specific category where you fit. You got to find that hole um and it doesn't have to be just about product and flavor. It can be about uh usage moments. You know, I could put there as an example a pricey bourbon or brunch ready gin. So, it's not just about the product quality, the product, how the product is produced, but also when it is consumed. And there's a lot of opportunity there to look at. Prepare for the long game. This ain't easy. It ain't uh it ain't short. It takes a lot of, you know, uh dedication and and just plan for those longer profitability timelines. And again, validate your why. Why why is my brand relevant? You got to really work with that. Clearly articulate that. If you can't if you can't get your if you're you if you're having trouble articulating your brand, you know, if you can't convince consumers, you're not going to convince trade, you're not going to convince distributors. So, you really have to work on that on that messaging that makes you relevant.
Um, all right. So, if entering a c a crowded a crowded category, you will need a unique angle or a serious war chest. Ideally, both. But just plan for that. Keep that in your mind. What makes brands succeed is, and I think Jason is going to talk a little bit about this and probably Diego as well, have a strong foundation story. Authentic origins, compelling founder narratives, unique production method. These are things that will help tell your story and set you apart. Great liquid, it is just, you know, that is the basic. I mean, that is that is taken for granted. You need you need great liquid packaging. Before people taste your product, particularly on the shelf, they need to be attractive to it. So, invest in a in an attractive packaging that's going to help the product sell itself and have a clear clear positioning who you are and who you are for. And then just keep at it. It's consistent execution. Show up in the right places with the right messages again, again, and again. it doesn't one market visit and then not be here for a year is not going to is not going to be very helpful.
So just to wrap it up some uh hard truths some uh mistakes to avoid you know is not having a real point of difference is going to make it very difficult uh weak distributor relationships. Think of your distributors as as logistics partners. You got to build relationships with them and you got to help them sell into account. So build those relationships and don't be confused with um with with the pricing strategy. Consumers are only willing to pay that much. So think who you're selling to and get your pricing. Get your pricing right. And don't just think about the packaging. It's all that it takes. You got to invest in packaging, but also in distributing. Think about not becoming a meto product. Think about, oh, I'm just going to go wild. my brand is going to go viral because I have this influencer. Oh, maybe, maybe not. Think about that. And then work on your route to market. You got to get your product on your shelf. You got to get your product in in distribution. And you're going to need cash.