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   KeHE LEFT ME       $200,000 IN DEBT   

Happy Monday ,  Starting a business is hard, but as many as you have found out, it can be the biggest emotional rollercoaster of your life. I had the opportunity to sit down Jenni and Marcus, co-founders of Modest Coffee who recently experienced the worst of what could happen when a distributor partnership goes bad.What started as a huge win for the brand with a Walmart launch, ended with KeHE returning $250,000 worth of product and the company $200,000 in debt. I want to share a quick overview of what happened, but I encourage you to listen to their full story in our latest Startup To Scale podcast episode, out today.Marcus and Jenni decided to work with a nationwide grocery distributor, KeHE, to go nationwide with their business. A rep from KeHE reached out to see if they’d be interested in participating in an online specialty coffee program for Walmart. KeHE ordered 34,000 bags of coffee from them, their largest order ever by far.To create the inventory, Modest Coffee took $216,000 in loans and worked 21 hours a day for 6 weeks roasting and bagging coffee. They finally were able to deliver all the product to KeHE. When Walmart dropped the deal with KeHE, Marcus and Jenni were left fighting for payments and product.They eventually got a lawyer involved and KeHE agreed to send them back their coffee, but not before charging them a hefty fee.In order to move out the product, Marcus and Jenni decided to fire sale it online for half price. The sale went viral, garnering them 4,000 new customers and a ton of love and support from a range of communities.Without the virality of the sale, Marcus was prepared to go back to work and Jenni had a plan to take the product back, pay the debt back over time and shut the business down.The experience taught them a valuable lesson about the risks that product makers take and the importance of relationship building. It also reminded them that no one is going to build their business for them, it's their responsibility to own it. Marcus and Jenni shared five takeaways in order to avoid the same mistakes: Make sure you have a clear line of communication to any major retailers when working through a distributor. Understand the payment terms, payment holds, and fees that come with working with a large distributor. Be prepared for the worst-case scenario. Have a plan in place in case the deal falls through or the distributor stops paying you. If a bad deal will put you out of business, don’t do the deal. If working through a broker, make sure you are involved in all the conversations and have a clear understanding of the deal. Don’t forget the power of relationships. Even if you don’t have a big name distributor behind you, you can still reach success with the help of individuals who believe in your brand.By taking these steps, you can hopefully avoid any trouble with distributors and make sure that your business is as successful as possible. Additionally, it’s important to remember that no matter what, you are in charge of your own success. So, keep pushing forward and don’t give up.Jordan

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There’s a lot of confusion around trade spending tactics.What are they? & which one is the best one that NO ONE talks about?First, let’s define each

• Temporary Price Reduction (TPR) - tactic that represents spending for the brand during a pre-scheduled duration called a “promotional period.”

• MCB (Manufacturer Charge Back) – The amount charged by a distributor for shipments to a retailer (an indirect customer) who has been authorized by the brand to purchase products from the distributor at a discount.

• Scan -  Discount is applied at the point of sale (POS) to the consumer every time a product is “scanned” through the register.

• OI (Off-Invoice) – A discount amount taken off the sales invoice when a product is shipped to the distributor.

Read the full article and learn which one is best for CPG Brands

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STARTUP TO SCALE PODCAST

91. How Modest Coffee Ended up $200k in Debt From a Failed Distribution Deal

Marcus and Jenni are the co-founders of Modest Coffee and recently experienced the worst of what could happen when a distributor partnership goes bad.What started as a huge win for with a Walmart launch, ended with KeHE returning $250,000 worth of product and the company $200,000 in debt. Listen to learn what happened, their top lessons learned, and how the internet saved their business. 

Listen on Apple Podcasts or Spotify

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