CHAPTER

So you are back from the stores with the knowledge gained from your research. Let’s use it to get started on your big dream. We will do that in a simple way by looking at a typical store layout, as depicted in Figure 3-1.

You can see the location of departments such as produce, meat, seafood, dairy, baked goods, snacks, chips, and beverages. In the last decade or two, additional categories and specialty categories have been added, many of which are part of the natural foods industry. These include super fruit, dairy alternatives, functional juices, other functional beverages, shots, antioxidants, and probiotic beverages. Dozens and dozens of products line the shelves, and many of them look similar and do similar things. How do you make your product stand out?

Figure 3-1. Where do you see your product?

You do that by thinking very carefully about packaging and what it costs. Your package is the face of your company and should include the images most crucial to representing you. Picking the correct packaging is like preparing for the most important meeting of your life, so it has to be right from start to finish or your meeting will fail. Now, to give you an idea of what you need to do to get ready, let’s use the example of Michael’s Perfect Pickles. Michael decides on a clear jar to display his organic dills. Clear jars are most popular for pickles and they look cool too (see Figure 3-2).

As Michael envisioned his package design, he needed to remember that it is not just about what customers will see on the shelf. It is also about what will be seen when he promotes his product in print, on the Internet, in a point-of-purchase display, or on television. Your design work will be helped by more research: talking to a local printer, meeting with your teenage cousin who designs websites, having a chat with a sales rep of a newspaper where you live, and so forth.

You want to make the right decisions for your key retailers. For example, many natural and premium retailers are shying away from canned products because of the risk of BPA (bisphenol A) and are looking at glass alternatives. Premium retailers are also shy about aluminum-packaged products, because aluminum has been connected with Alzheimer’s disease. Existing aluminum products on the shelf might have been “grand-fathered in,” but there is a good chance that consumers will demand a change, retailers will change ingredient and packaging policies, or both. You would be surprised how many products have had to have their packaging changed in response to these types of requests. Perhaps as a consumer you’ve seen soda brands change from a can to a bottle. This is most likely a result of a request by buyers and a changing market. Make sure you research your key retailers to ensure that you don’t use materials and ingredients they have banned or are shying away from. If you start right you won’t have to change down the road when it costs you a lot more to do so.

SHELF CHECK 2

Lock Your Package and Product Before Printing and FDA Approval

After you create your package and get FDA approval, make sure you lock it down because any change later will cost money and time.

The container will need to have a label that answers consumers’ questions as well as meeting the demands of packaging regulations. Your product’s most important attributes should be listed in plain sight. For example, words like organic, low fat, sugar free, low sodium, dairy free, and low carbs are eye-catching. However, note that you can’t claim to consumers, retailers, or buyers that your product is organic, kosher, or non—genetically modified organism (non-GMO) without certification.

Certifications are extremely important in the natural foods world. Natural market consumers will pick up products with kosher, non-GMO, and certified organic certifications because of their chosen lifestyle.

Of all certifications the following are the most important.

USDA Organic

In many way this is one of the most important of the certifications. Why? Think about it. When someone gives you a “certified organic” product, what’s the first thing that comes to your mind? This is a healthy, quality product. I feel safe eating this organic food. I feel safe washing my hair with this organic shampoo. I know that from farm to table the farmers, ranchers, and processors of this product have followed rigorous U.S. Department of Agriculture (USDA) standards, including what can be added and how any animals have been treated.

What does this sense of security equate to? Sales!

WEBSITE: WWW.USDA.GOV

NON-GMO

As stated previously, GMO means genetically modified organism. When a product is certified non-GMO it means that it was not created by scientists genetically modifying a variety of the product. There is a lot of food out there that is GMO. Now you must wonder why one would genetically modify food. Genetic modification started when scientists were searching for a way for plants to resist certain pesticides and herbicides. For example, when farmers spray their genetically modified corn most of the pests will be destroyed without affecting the corn.

GMO crops can grow larger because they can fight pests. In some cases, farmers can actually use a more environmentally friendly crop spray and less of it too. This all sounds great, right? Sounds good but there is a downside.

Pests will become resistant to the sprays, and then spraying crops will become useless. When GMO plants pollinate nearby similar crops, they transfer the modified genes, which ultimately transfer to humans and animals. GMO is often found in corn, soya beans, and sugarcane. This is why natural and organic foods stores will often require organic and non-GMO corn, soya beans, and cane sugar. Natural and organic foods stores hold themselves to a higher standard to meet their customer demands for certified non-GMO foods.

The Non-GMO Project is a nonprofit organization that works to preserve and build the non-GMO food supply. What it does is educate consumers and provide verified non-GMO choices. Its members believe that everyone should have an informed choice to consume or not consume genetically modified organisms.

The Non-GMO Project is governed by a board of directors who collectively decide whether a product meets the required certification. They are a collaborative network of technical and communications advisers from all backgrounds and sectors.

WEBSITE: WWW.NONGMOPROJECT.ORG

Kosher

Kosher is another certification that will open your product to a multitude of opportunities in the kosher marketplace. Kosher practices govern the types of food that an observant Jewish person may eat and the ways in which they may be prepared. To be certified kosher, all ingredients in every product—and the process of preparing the product—must be certified for kosher compliance too. This means demanding inspections but it’s worth it.

WEBSITE: WWW.OK.ORG

These certifications will be important in many markets, and often certification is the deciding factor for acceptance, rejection, buy, or not buy. Some markets don’t take any products without certification. In fact, certification is becoming increasingly imperative. If any of these certifications relate to your product, get them. It’s worth it.

Once you have your certifications in place and your packaging is set, don’t change them. However, if you must, I recommend waiting a minimum of a year or two after consistent placement on retail shelves. You want to establish a loyal and identifiable consumer following. So evolve before launch. Take time to create what you want and to be confident in your packaging before you send it off to be reviewed by your accounts.

Distributors and retailers will request product images for all setup and ad deals. If you change packaging after launch, old images will be published in all ads and books. Once published, distributor books and ads cannot be changed for at least three months.

Retailers’ ads have similar restrictions for making changes after their publication deadlines. And all changes will require much correspondence, time, and, above all, money. Packaging and promotion changes in the first year of launch are an unnecessary way to lose money and time right out of the gate. It’s best to take an extra month or two for final decisions rather than twice as much time and needed operating cash for clearing changes after launch.

Once your product formulation is locked, your packaging is complete, and the FDA confirms that you will not harm anyone with your product (or at least your package has the required warnings), the next step is to acquire a Universal Product Code (UPC), although you can also apply during your product and package design process.

The UPC is the bar code commonly found on the side, bottom, or top of a product. It is what stores scan at registers and use to process deliveries and various orders. It’s also the code that distributors refer to when selling your product. When retailers order product, they do not do so just by name. They will use the UPC, or an assigned distributor coding. I refer to item numbers (or distributor coding) in Chapter 4.

The only company you should use to obtain your UPCs is GS1, found on the Internet at www.gs1us.org. GS1 is the standard compliant UPC that is recognized at major retailers across the globe. It is a nonprofit international organization that develops and maintains standards for supply-and-demand chains across multiple sectors. UPCs come in batches of 10 sequential codes, each referred to as a family of UPCs. This is the industry standard of UPCs. When someone says, “Are you GS1 compliant?” you should be able to say, “Yes!”

SHELF CHECK 3

Do Not, Under Any Circumstances, Change Your UPC

I’ll put it simply: If you change your UPC at any time, you will kill your product.

I worked for a company I’ll refer to as Lemon-Lime. It launched four stock keeping units (SKUs). All four were accepted by 500 retailers such as Lassens Natural Foods & Vitamins, Clark’s Nutrition & Natural Foods Market, and distributors such as UNFI (United Natural Foods, Inc.), KeHE, and Nature’s Best. Lemon-Lime decided, within a few months after placement, to change its aluminum cans to plastic bottles. This was a massive undertaking. And, hitting everyone involved like a tornado, it simultaneously adjusted artwork and altered product names! The bottles looked nothing like the old product’s packages, and the SKUs had changed. Neither consumers nor retailers could recognize them as the same brand.

Dozens of demos, ads, and other marketing activities promised to land the accounts in the first place were performed with old packaging. What a waste! We needed to change the names and packaging information with all the distributors. The sales director was caught in an avalanche of administrative work. It took days to fill out distributor paperwork with questions asking everything imaginable—from weight, height, tie-downs (i.e., pallet dimensions), pallet sizes, product images, insurance, UPCs, packaging details, sourcing, and shipping, all the way down to ingredient breakdowns—from our co-packers. In a small start-up, this meant two to three weeks of wasted labor, resources, and capital.

Don’t think you can slip a change by anyone either. Retailers and distributors will notice if you switch in an altered product and don’t communicate. Your shipment will be rejected as not matching the original specifications. You will be hit with shipment/return costs and the likelihood of your product being placed on hold. Old product will be listed as out of stock or, worse, discontinued. When a retailer attempts to buy your product, there will not be an explanation.

The results for Lemon-Lime were months of nonsales, sabotaged product deliveries, and choked cash flow. The worst part? This was self-induced.

To change packaging officially, the company had to recall the product and replace it with new product at all retailer and distributor locations. Unfortunately, retailers did not appreciate the change because it confused customers. I remember the frustrations that just seemed to multiply. Lemon-Lime had even changed the UPC on one of the new bottles. The company ran out of the family of UPCs because it had another product line in a similar category and shared it with the new one. Then the company realized it had to buy another family of UPCs, so another family was purchased and thrown into the mix. It really does not matter what your reason is for wanting to change a UPC—don’t do it.

Total Recall: Sometimes Bad Things Happen

If you contract out work you will still be responsible for its quality. So you must continually assess the quality of your contractors’ work. You might have a co-packer that is bottling your product. Let me define a co-packer. A co-packer is a company that manufactures and packages foods or other products for its clients. A co-packer will be absolutely necessary unless you want to run a factory to manufacture your product. More often than not entrepreneurs need to pass the ball to a co-packer. However, you end up paying if you don’t catch the co-packer’s mistakes.

I worked with a company that had a fine beverage but, unbeknownst to them, their co-packer changed their lids ever so slightly. The change wasn’t even visible to the naked eye. Nonetheless, it was enough to let air get into the bottles. The result: mold and leaking. And worse, the mold and leaking were just in one or two bottles in every tenth or eleventh case. It took numerous complaints and a loss of sales and retailers to get to the bottom of the problem.

As is ever too common in this industry, this beverage company was aware of the problem for over six months. When their junior management became aware of the issue and let superiors know, they still refused to pull existing product. The rationale? Overstocked. They waited until every single moldy, leaky bottle sold. This was out of my decision-making control and was demeaning to the reputable company I represented. The biggest sin of this beverage company is that they were lying to customers, distributors, and retailers. In fact, McLane had a total recall on this beverage just before the big 7-Eleven show. The whole thing was, to say the least, embarrassing.

So what do you do when a crisis happens? Find out which companies have received bad product and put your best PR hat on. Visit every affected account, replace the product, and assure them you are there for them. Chances are retailers will stick with you if you have a good product. They just want to be heard. They want to know you will be there if there is a problem. The result? You will retain all your customers and keep going. Almost every manufacturer at one time or another experiences a problem. The key is how you respond. A company is not judged just by the actual problem it has but also by how it resolves it. So if this happens to you, take a breath and deal with it one retailer at a time.

I was faced with cleaning up the moldy situation. It had some retailers and distributors on their heels. If you move as slow as molasses in January you will lose accounts, distributors, and industry respect. So our team of brand ambassadors and merchandisers went to every retailer and replaced the moldy product with fresh product within forty-eight hours of the complaint. The result: no business lost. In fact, we made stronger ties, thanks to the shared adversity.

However, it took another four months for this mold problem to completely disappear. I was putting out fires every step of the way. The manufacturing problem needed to be repaired, but, unfortunately, production is often about three to four months ahead of actual store delivery to ensure that product is available in distributors’ warehouses. I had inspectors go to every distributor warehouse to remove any compromised product. As annoying and time-consuming as it was, it just had to be done. When retailers or distributors witness a manufacturer faced with that kind of adversity cleaning up a mess as gracefully as a samurai, they give respect. These retailers or distributors have your team’s direct contact numbers in case anything goes wrong again in the future. To retailers, that level of comfort is priceless.

SHELF CHECK 4

Initially Launch Three to Five SKUs

A modern and complex consumer-centric landscape almost demands that you and your team launch multiple SKUs from the beginning. Most manufacturers launch a minimum of three to five SKUs. This aids a new brand in becoming immediately visible. In the case of Michael launching Michael’s Perfect Pickles, one lone pickle jar on the shelf won’t cut it, but three taste variations of the original would be smart.

Now Michael has four products manufactured and four potential SKU placements. Time to start developing a few more SKUs. Pay attention to sales trends. If one SKU is not performing, consider dropping it. Upon the next retail category review, you can present your new item, which shows you to be a nimble, adaptable, and smart vendor.

SHELF CHECK 5

Remember: New Items = ATTENTION

Note: I am not advocating accelerated growth early on. Three to five SKUs is a conservative, modest start. The reason I suggest this number is that one SKU will get lost in a sea of other products, but three to five SKUs pop on the shelves. And let’s face it: Not every SKU will be a hit. Sometimes you launch five SKUs and one of them just does not sell as well. Or in some markets they want only the top one or two. I worked with a company that had to discontinue one of its SKUs because it just was not selling enough. However, with customer feedback it invented another SKU to replace it. The company found later that everyone was replacing this one failed SKU with this breakout hit. The result: same shelf space, more sales.

Fortunately, most start-ups can achieve a feel for the market with a launch of three to five SKUs, in part because new items bring energy and excitement to retailers and distributors and, most important, to customers.

Obviously the number depends on the category. There are dozens of spices and herbs used in cooking, so to get noticed a spice manufacturer would want to launch with a larger than normal number of SKUs, perhaps ten to fifteen. One of the positive aspects of items like spices is that they don’t weigh much. This means direct sales and shipping will be relatively inexpensive. Beverages, on the other hand, are heavy and expensive to ship, and a large number of initial SKUs would be too costly.

One way to hit the market at a perfect time is to offer holiday SKUs. This can be very lucrative although competitive. There are popular trade shows with KeHE and UNFI completely dedicated to holiday SKUs. If you can get the holiday hit it can boost sales in magical ways. An example is the vegan line Gardein. It launched a vegan product called Stuffed Turk’y. This limited-edition holiday SKU is available around Thanksgiving and Christmas and becomes one of the most popular SKUs. We all wait anxiously until the holidays to buy Stuffed Turk’y. I often buy this at Target. Yes, Target! Gardein has not only hit the big time in the natural foods industry with this SKU but crossed over to the mainstream.

MorningStar Farms is another delightful vegetarian company. Their Grillers Prime has turned the veggie burger into burgers that can fool any meat eater. To date, at every barbeque I have thrown I have had meat eaters demanding the Grillers Prime vegetarian burgers. This item is such a hit it is often sold out or close to it at retailers, so I usually need to buy the jumbo box to ensure a supply.

Companies like Gardein and MorningStar Farms have their own section at Target. Ten years ago it would not have been possible to support such a section in Target. Now, not only is it possible to have meatless options at Target, it’s very profitable. How great is that for the natural foods industry!