Learning to Say No
Bai founder Ben Weiss, left center, and Suja CEO Jeff Church, right center, both advised entrepreneurs to pass on investment and distribution offers when they don't fit your business model.
Aside from those brand owners who are truly regionally-minded , many beverage entrepreneurs carry ambitious, coast-to-coast dreams for their products. They come into the market with confidence and with big plans, but also with naiveté. The trick is to execute those big plans without time and resources running out — but the confidence, attendees learned at BevNET Live in New York, can sometimes lead entrepreneurs to make the wrong choices in seeking any opportunity for success.
“All entrepreneurs believe that they will succeed in their new business venture,” Bob Bloom, the director of business development for Wild Flavors, said in his speech at the conference last week.
With their enthusiasm boiling, companies often jump at the first opportunity for distribution or investment, Bloom said. It’s true that some of these opportunities could elevate a brand by providing that first major push to market. And after borrowing money from friends and family, after pounding the pavement for sales, for many entrepreneurs, anything that could be perceived as a “win” can seem like a relief. But accepting too many disparate offers has the potential to spread a brand too quickly or even to gut its identity. Therefore, several speakers echoed Nancy Reagan, advising entrepreneurs to “just say ‘no.’”
Don Vultaggio, the co-founder or AriZona Beverage Co., was one of these speakers. He’s taken pride in establishing AriZona’s identity and refining its business model with patience and judiciousness.
“You have to say ‘no’ to bidders who want to buy your company and turn it into something less wonderful,” Vultaggio said.
During a panel appearance, Ben Weiss, the founder and CEO of bai, said that he regularly turns down offers from mass and grocery stores outside of his strategic focus — even though the stores are in the same retail channels that have carried his brand to success. Sitting next to Weiss, Suja CEO Jeff Church said that he’s constantly looking to minimize investment rounds, despite a number of tempting offers.
“Taking too much at an early stage, you really get diluted,” Church said.
That dilution can have a domino effect on future investors. Josh Goldin and Trevor Nelson, managing directors for the Alliance Consumer Growth Fund, both spoke about their growing interest in investing in beverage brands — but said they would rather work with companies that have fewer investors and more potential. Looking to catch the next great brand before it explodes in the marketplace, Goldin and Nelson said they offer investments of $2 to $10 million, depending on the company. Goldin said that less equity division often makes a brand a more appealing sell. With too many hands in the business, brand flexibility and freedom can be difficult to reach.
Bloom used his speech to help younger brands avoid what he called common traps of entrepreneurship: too much confidence, distorted perceptions of the market and a lack of research, to name a few. He said that volume-per-outlet (VPO) typically serves as a good indicator of a brand’s readiness for expansion.
“Until your VPO increases, you need to remain disciplined about keeping within your resources,” Bloom said.
He also said that if VPO isn’t increasing, question everything about the company — the brand, the marketing strategy, the team — and consider hiring a board of experienced advisors and a cranky accountant. These people, he said, need to feel empowered to offer their opinions, rather than feel at risk.
“You need to rely on the people around you to give you the tough news,” he said.