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Category: Sales

An Alternative To Venture Capital In The Food And Beverage Industry

If you are an entrepreneur with a small food or beverage company looking to take it to the next level, this article should be of particular interest to you. Your natural inclination may be to seek venture capital or private equity to fund your growth, but that might not be the best path for you to take. We have created a hybrid M&A model designed to bring the appropriate capital resources to you entrepreneurs. It allows the entrepreneur to bring in smart money and to maintain control.

We have taken the experiences of a beverage industry veteran, a food industry veteran and an investment banker and crafted a model that both large industry players and the small business owners are embracing.

I recently connected with two old college mates from the Wharton Business School. We are in what we like to call, the early autumn of our careers after pursuing quite different paths initially. John Blackington is a partner in Growth Partners, a consulting firm that advises food and beverage companies in all aspects of product introduction and market growth. You might say that it has been his life’s work with his initial introduction to the industry as a Coke Route driver during his college summer breaks.

After graduation, Coke hired John as a management trainee in the sales and marketing discipline. John grew his career at Coke and over the next 25 years held various positions in sales, marketing, and business development. John’s entrepreneurial spirit prevailed and he left Coke to consult with early stage food and beverage companies on new product introductions and strategic partnerships.

Steve Hasselbeck is now a food industry consultant after spending 27 years with the various companies that were rolled up into ConAgra. His experience was in managing products and channels. Steve is familiar with almost every functional area within a large food company. He has seen the introduction and the failed introduction of many food industry products.

John’s experience at Coke and Steve’s experience at ConAgra led them to the conclusion that new product introductions were most efficiently and cost effectively the purview of the smaller, nimble, low overhead company and not the food and beverage giants.

Dave Kauppi is now the president of MidMarket Capital, a M&A firm specializing in smaller technology based companies. Dave got the high tech bug early in his business life and pursued a career in high tech sales and marketing. Dave sold or managed in computer services, hardware, software, datacom, computer leasing and of course, a Dot Com. After several experiences of rapid accent followed by an even more rapid decent as technologies and markets changed, Dave decided to pursue an investment banking practice to help technology companies.

Dave, John, and Steve stayed in touch over the years and would share business ideas. In a recent discussion, John was describing the dynamics he saw with new product introductions in the food and beverage industry. He observed that most of the blockbuster products were the result of an entrepreneurial effort from an early stage company bootstrapping its growth in a very cost conscious lean environment.

The big companies, with all their seeming advantages experienced a high failure rate in new product introductions and the losses resulting from this art of capturing the fickle consumer were substantial. When we contacted Steve, he confirmed that this was also his experience. Don’t get us wrong. There were hundreds of failures from the start-ups as well. However, the failure for the edgy little start-up resulted in losses in the $1 – $5 million range. The same result from an industry giant was often in the $100 million to $250 million range.

For every Hansen Natural or Red Bull, there are literally hundreds of companies that either flame out or never reach a critical mass beyond a loyal local market. It seems like the mentality of these smaller business owners is, using the example of the popular TV show, Deal or No Deal, to hold out for the $1 million briefcase. What about that logical contestant that objectively weighs the facts and the odds and cashes out for $280,000?

As we discussed the dynamics of this market, we were drawn to a merger and acquisition model commonly used in the technology industry that we felt could also be applied to the food and beverage industry. Cisco Systems, the giant networking company, is a serial acquirer of companies. They do a tremendous amount of R&D and organic product development. They recognize, however, that they cannot possibly capture all the new developments in this rapidly changing field through internal development alone.

Cisco seeks out investments in promising, small, technology companies and this approach has been a key element in their market dominance. They bring what we refer to as smart money to the high tech entrepreneur. They purchase a minority stake in the early stage company with a call option on acquiring the remainder at a later date with an agreed-upon valuation multiple. This structure is a brilliantly elegant method to dramatically enhance the risk reward profile of new product introduction. Here is why:

For the Entrepreneur: (Just substitute in your food or beverage industry giant’s name that is in your category for Cisco below)

1.The involvement of Cisco – resources, market presence, brand, distribution capability is a self fulfilling prophecy to your product’s success.

2.For the same level of dilution that an entrepreneur would get from a VC, angel investor or private equity group, the entrepreneur gets the performance leverage of smart money. See #1.

3.The entrepreneur gets to grow his business with Cisco’s support at a far more rapid pace than he could alone. He is more likely to establish the critical mass needed for market leadership within his industry’s brief window of opportunity.

4.He gets an exit strategy with an established valuation metric while the buyer helps him make his exit much more lucrative.

5.As an old Wharton professor used to ask, What would you rather have, all of a grape or part of a watermelon? That sums it up pretty well. The involvement of Cisco gives the product a much better probability of growing significantly. The entrepreneur will own a meaningful portion of a far bigger asset.

For the Large Company Investor:

1.Create access to a large funnel of developing technology and products.

2.Creates a very nimble, market sensitive, product development or R&D arm.

3.Minor resource allocation to the autonomous operator during his skunk works market proving development stage.

4.Diversify their product development portfolio – because this approach provides for a relatively small investment in a greater number of opportunities fueled by the entrepreneurial spirit, they greatly improve the probability of creating a winner.

5.By investing early and getting an equity position in a small company and favorable valuation metrics on the call option, they pay a fraction of the market price to what they would have to pay if they acquired the company once the product had proven successful.

Dean Foods utilized this model successfully with their investment in White Wave, the producer of the market leading Silk Brand of organic Soy milk products. Dean Foods acquired a 25% equity stake in White Wave in 1999 for $4 million. While allowing this entrepreneurial firm to operate autonomously, they backed them with leverage and a modest level of capital resources. Sales exploded and Dean exercised their call option on the remaining 75% equity in White Way in 2004 for $224 million. Sales for White Way were projected to hit $420 million in 2005.

Given today’s valuation metrics for a company with White Way’s growth rate and profitability, their market cap is about $1.26 Billion, or 3 times trailing 12 months revenue. Dean invested $5million initially, gave them access to their leverage, and exercised their call option for $224 million. Their effective acquisition price totaling $229 million represents an 82% discount to White Wave’s 2005 market cap.

Dean Foods is reaping additional benefits. This acquisition was the catalyst for several additional investments in the specialty/gourmet end of the milk industry. These acquisitions have transformed Dean Foods from a low margin milk producer into a Wall Street standout with a growing stable of high margin, high growth brands.

Dean’s profits have tripled in four years and the stock price has doubled since 2000, far outpacing the food industry average. This success has triggered the aggressive introduction of new products and new channels of distribution. Not bad for a $5 million bet on a new product in 1999. Wait, let’s not forget about our entrepreneur. His total proceeds of $229 million are a fantastic 5- year result for a little company with 1999 sales of under $20 million.

MidMarket Capital has created this model combining the food and beverage industry experience with the investment banking experience to structure these successful transactions. MMC can either represent the small entrepreneurial firm looking for the smart money investment with the appropriate growth partner or the large industry player looking to enhance their new product strategy with this creative approach.

This model has successfully served the technology industry through periods of outstanding growth and market value creation. Many of the same dynamics are present in the food and beverage industry and these same transaction stru7ctures can be similarly employed to create value.

Sales Funneling – A Marketers Guide

Sales people often feel that all marketing needs to do is to drive loads of leads their way. If this is the approach in your organisation, then you are missing sales and lowering potential profitability. Careful management of the tone and quantity of your marketing content across a planned sales funnel can deliver pre-qualified leads to a sales person, significantly improving the chances of conversion.

Many of us will have experienced a sense of ‘information overload’ where we simply switch off, or the frustration of wanting to know more about a product or service before we commit and not being able to find it. Both happen regularly, and when they do – you’ve lost a sale.

For almost every purchase we make, we run through a broadly similar decision-making process (I say almost, as the impulse bar of chocolate at the supermarket counter is quite a different process). Typically, and particularly for more complex purchases, our thinking will go something like this: ‘My laptop is heavy – I saw that ad for really light weight ones, who was it again?’ (Latent need); ‘There’s that ad, it’s X-brand’ (Awareness); ‘I’ll just check out their site’ (Interest); ‘Hmm, well the weight certainly compares well, but can I afford it, what are the other options?’ (Evaluation); ‘I’ll pop into Y-shop to see what it feels like and ask a little more about it’ (Trial); ‘I’ve researched the best price, I’ll get it from there’ (Purchase). Kotler and others have spelt out various different versions of this process, there’s bound to have been one modelled for most markets. By understanding the way people make buying decisions, you can map your sales funnel: 1. Awareness, 2. Interest, 3. Evaluation, 4. Trial, 5. Purchase.

Against this process you should map and measure your sales funnel, you’ll steadily whittle down your audience at each step, with interested parties moving through the funnel and those who either don’t want what you offer or who are turned off by your messaging going elsewhere. To maximise the conversion at each stage, marketers should consider two key elements; tone and quantity.

What do I mean by tone? As short-hand, think emotion. Against the sales funnel, there is an appropriate tone at each step. If you imagine a continuum from emotional to rational, typically your marketing material will need to start at emotional and move to rational through the funnel. To really get noticed, you need to appeal to our most human side, our emotions. If you hit a nerve, they notice you. However rational you are, e.g. ‘we’re cheap’, if they don’t feel a need for what you’re offering they’re unlikely to notice your communications in the first place. Successful emotional appeals, in marketing terms, usually hit on a negative feeling and say that you can take it away. This is called finding the point of pain. Once you’ve established that emotional appeal, your communications need to move into more rational territory, where proof is needed. As a sanity check on the tone of your marketing materials, map out each stage of the sales funnel and look at the material (offline, online, sales person, in-store, etc.) and then judge the emotional appeal – are you delivering rational messages too soon? Is your material providing further emotional messaging, when your buyer is looking for rational proof?

Quantity, in regard to sales funnelling, is a fairly straight forward concept – start ‘short and sweet’ and then provide more information at each step. Where most organisations fall foul of this is on their websites. Home pages are often jam packed with information. In a typical sales funnel, an organisation’s website is the second or third step – this means that people typically reach you looking for an emotional appeal (what’s the benefit for me?) and they are looking for key messages. Again, map out your journey and assess the quantity of information you are serving at each stage, it should start small and increase at each step.

So, if you’re experiencing lots of web traffic, but low numbers of enquiries – or lots of footfall and low sales, think about the sales funnel. An initial assessment against tone and quantity will signpost where your blockage might be and put you on the path to a free flowing sales funnel that has a tangible link to your bottom line.

Copyright (c) 2008 Bryony Thomas

How To Take A Slow Sales Season Head On

Slow sales seasons occur in virtually every industry, whether its during the summer when everyone heads to the beach, or during the holidays when everyone spends time with family. To keep the momentum going, you can utilize these proven tactics to ensure that your sales team makes the most of this downtime.

Sales Incentives

There are a few tactics you can employ to increase your sales sales incentives being chief among them. If youre trying to grow during a slow sales cycle, consider offering sales incentives to representatives for meeting their quota during slow months, or for bringing in the most sales. This will increase their motivation levels and will help point your sales in a positive direction.

Seasonal Sales

One method that helps draw in clients and prospects during these times is to offer seasonal sales. Promote certain products that are either relevant to the season, or that are known to be slow movers during that time of year and you just need to get rid of overhead.

Prospecting

Summer months are a wonderful time to prospect. Get creative and use your prospects out of office notifications to setup future meetings and connections with them. Save the dates on your calendar to contact them upon their return.

Get Experienced

Slow seasons are great times to attend events and conferences. Find conferences and events specifically related to your industry or your clients industry and send your sales staff. You can make these events exciting by selecting those that take place in more popular destinations.

Review Your Tools and Strategies

Down times are also a great time to review the tools and strategies your sales staff currently uses to prospect and close sales, and to research new tools and strategies that you can incorporate for greater tracking and communicating.

Slow seasons are stressful for you and your teams. Make sure that you lay out realistic expectations to keep everyone from becoming discouraged and to keep everyone motivated.

Electronic Cigarette Timeline

E-Cigarettes: A Brief Timeline

Electronic cigarettes are basically a new phenomenon in the United States, and a lot of people (including smokers) still have not heard about them. But they have been around for years in other parts of the world.

Here is a brief timeline of the electronic cigarette (e-cig for short):

2003 – Beijing based SBT Co. registered a patent for the first e-cig.

2004 – Ruyan, another Beijing company, is now the head; they merged with SBT Co to become SBT Ruyan Technology & Development Co.

oMay 2004: Ruyan sells its first cigarette in China; sales for 2004 total 1.7 million US dollars.

2005 – Sales reach 17 million US dollars

2006 – Sales reach 37 million US dollars

oApril 2006: Ruyan introduces the e-cig in Europe

July 2009 – The FDA releases a warning against electronic cigarettes and states that they may be unfairly marketed to young people.

January 2010 – A federal judge stops the FDA from blocking e-cigs coming into the country from China.

February 2010 – FDA files an appeal of Judge Leon’s ruling.

March 2010 – US Court of Appeals overturns Judge Leon’s ruling, giving the FDA the power to ban e-cig imports.

I wanted to share this information because a lot of people might be interested in e-cigs, but dont want to try something completely new, fearing that it hasnt been properly tested or might be unsafe. But as you can see, the e-cig has been manufactured, tested, and distributed long before its arrival here in the United States.

Hope this helps any of you who are sitting on the fence wondering if you should give them a try.

Why Smartphones Are Popular

Cell phones have gained considerable popularity in the world. It is not surprising that it is the one gadget that accompanies more and more people. While many people still use cell phones as originally designed for making and receiving calls, a greater segment of society is beginning to see it as an instrument for productivity. For this reason, cell phones are constantly evolving to meet the new demands of society

Cell phones have over the years evolved into minicomputers or smartphones. For example, in 2008 for which data was available, out of the 1 billion camera phones shipped, smartphones which currently represent the high-end of the cell phone market, made up about 10% of the market or about 100 million units. Current smartphone brands on the market include BlackBerry, iPhone, Palm, Nokia and Samsung. These products are an- Internet-connected multimedia devices with a multi-touch screen or a sliding keyboard. The phones may function as a camera phone, portable media player, GPS navigator, and an internet client: with text messaging, email, web browsing and local Wi-Fi connectivity.

Interestingly, the rise in sales of smartphones will come at the expense of declining cell phone sales, currently 90% of the market. The bourgeoning of the smartphone market is much about the new technology as it is about the consumer. The smartphone- basically a pocket computer with cell phone capability-allows people to carry information and to access it everywhere they go. Just as portable lap top computers permitted desk-top users freedom of mobility, the smartphone allows its users the function of a desk-top PC with the portability of a laptop, and the utility of a cell phone.

It is to be expected that in every economic down turn people will shy away from luxury consumer spending such as the purchase of a smartphone. Rather, more and more people are opening up their wallets to smartphones. To be sure, the sales of iPhones, Blackberrys and other smartphone models are rising rapidly. It is estimated that smartphones will grow by 25% this year alone. Other new models have either come on the market or are expected to be launched during the course of this year. These new additions will certainly help to fuel the popularity and growth of the smartphone industry.

For a growing segment of the population, the social expectation is that one must stay connected and be reachable almost instantly by voice or email. The smartphone gives people that dual ability to stay connected, and therefore they can justify the cost of buying a smartphone. Smartphones are also seen as a status symbol. Just as it became socially unacceptable in the late 1990s not to have an email address, it will become increasingly unforgivable in the next several years not to communicate via smartphone.

The demand for smartphones can be attributed to the fact that they are perceived as being tools to enhance productivity in a society which is constantly on the move. Indeed smartphones were introduced to address a given market segment. For example, the RIM BlackBerry initially focused on enterprise/corporate customer email. Interestingly, it was the introduction of less business-oriented phones first by Blackberry that scored a hit with the general public and led to the widespread use of Blackberry which doubled its customer base from last year to 25 million. The smartphone wave is continuing to gain momentum, and although sales are rising fast, smart phone sales still account for only 25% of the total cell phone shipments this year in the US. However, the launching of new smartphones together with software offerings from companies such as RIM , Nokia, Apple, Microsoft, Google and others this year, smartphones will continue to make considerable inroads into the cell phone market.

Currently, smartphones are not cheap by any long shot. The handsets even with discounts from the wireless carriers typically cost a few hundred dollars, with the high-end going for several hundreds of dollars. Their data and calling service plans are typically up to a hundred dollars per month. One of the keys to lowering prices in the long-term is the breeding of vigorous competition among the brands. But considering that the market for smartphones is large, new entrants may find it expedient to identify a niche in the market rather than compete with the more established brands. However, the best avenue to making smart phones affordable to consumers is through innovation in smartphone technology that allows users to call and to connect to the internet no matter where they are at very reasonable cost.

It cannot be denied that even regular cell phones are getting smarter, and it’s only a matter of time before all cell phones have the advanced levels of functionality associated with today’s smartphones.

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