Sales Growth or Production Growth? Introduction to Texas Cannabis Beverage Market Expansion

“I have a great craft beer distributor who is all in on the craft cannabis beverage sector! We have an amazing formula and a flavor profile that cannot be topped! Lets go all gas no brakes on this. I don’t think I need to hire a sales rep or account executive, we should put all that money back into manufacturing more product to meet the growing demand!”

-CEO John Doe of "Rando" A cutting edge TX CAN-BEV-PRODUCER with exclusive Lime Flavors and secret recipes (sorry Mr. Doe for the call out).

First off I would be lying if I said I haven't had the same pervasive thoughts of Mr. Doe. We have all been there in the consumer package goods space especially in an emerging market sector with the training wheels starting to come off (I am speaking of course of hemp derived can runs here guys). I even understand and empathize with the logic and the sentiment brands have when they say this....

"Look, we’re in a brand new category, we just spent all this money on cans and we are going to sell out. We might as well order another run and sell out again and avoid hiring sales and marketing teams, and as cool as it is, most brands do not have a slush fund yet...."

Slush fund - /?sl?SH ?f?nd/ noun

A slush fund is a sum of money that is set aside as a reserve and that is kept for no particular purpose. A lack of stated purpose and opacity regarding where its funds come from has led slush funds to be viewed negatively as a platform to potentially finance illicit or unethical activities (wink wink).

Emerging craft cannabis brands have trade offs and hard choices to make, put money into creating as much supply as possible or put money into creating as much demand as possible. On one side create a team focused on sales growth or scale and invest in manufacturing more of the product that is moving off the shelf. Two sides of the market expansion coin.

It’s a balancing act that everyone must race to figure out. Obviously having supply to meet demand is priority, however, not investing in sales and marketing to set themselves up for scale they will miss out on market opportunity and healthy production forecasting and local marketplace owning. These emerging and naive brands think that because they produced a bunch of product and found a good distributor that their work is done. That is far from the truth. A distributor is just stop number one to market reach for your product. Tune into any beverage distributor manager meeting as they onboard these new brands and they will say...

"Your success is in direct proportion to your local market pull through and marketing push."

-Rando Beverage Distributor Tom Bob Sr. III

If you don't invest in potential marketing in the field that your beverage distributors are moving your products in you are missing out on what they love. They love sales and marketing support. They love money moved into the field or territory your distribution partner is in. If you don't do this it is a huge miss. Marketing, sampling, sales support, and push through all equal sales and marketing support.

Sell-Ins vs Sell-Through

Sell-in

Sell-in is a term that refers to the practice of purchasing goods from a distributor or manufacturer to sell those goods in a retail store. This transaction allows the retailer to purchase the goods at a discounted price. A manufacturer or distributor can also refer to a transaction as a sell-in when a retailer agrees to purchase goods to sell in their store. So, the term applies to both sides of the selling and purchasing relationship.

After making a sell-in transaction agreement, the distributor or manufacturer invoices the customer when they ship or deliver the goods. The retailer must pay the invoice based on its terms, such as all at once or in installments. After paying the full invoiced amount, the retailer no longer owes the distributor or manufacturer any money. So, the retailer can keep all the revenue received for the products within the store.

Sell-Through

Sell-through is a transaction in which a consumer buys goods or products directly from a retailer. The term shares its meaning with sell-out, which retailers may use when they run out of a particular product in their stores. One aspect of inventory management is calculating the sell-through rate of various products, which helps retailers determine how much inventory to purchase at a time. A high sell-through rate shows that a product is especially popular, while a lower rate may lead to more returned goods.

Sell-Ins are a vanity metric (cough cough liquid deceased). Sell-through is what matters the most with the "BRAND" and "WHOLESALE DISTRIBUTION". The brands that are winning and going to continue to win, understand that it isn’t about the number of shelves you’re on and how much you have sold into the store but rather, it’s about the number of shelves you fly off of and how many deliveries you are making to restock.

Having local sales support, tastings, localized events, local marketing teams, local people to help build a brand, build a community, make brand champions, and ultimately build a sustainable moat, gives brands an insane advantage in any market they’re in. Of course, the opposite of this is true as well If you’re all brand-focused with a hot garbage product that tastes like a MUTTS? Canine Cantina LaCroix Water collaboration with hemp derived D9 (not for me or the pups), it’s only a matter of time before everyone knows it.

For all those brands out there who think the consumer will just choose their product off the shelf because of ‘the best quality’ or ‘natural ingredients’, or the best cannabis, your sell-through is more like a f-u at the retail level through wholesale channels. Feet on the ground need to educate that consumer, and distributors can’t do it all for you, they’re too busy, and you have time and bandwidth to throw events and show up. Retailers will love it. Nothing beats having team members and account executives in store selling to shoppers.

RITA is going wholesale. Yeehaw Texas.

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