CPG start-up Marketing Strategies

Do retailers expect any promotional spend on the shelf?

That was the last part of what I would tell you the cost that people fail to realize. When I tell people that they’re not going to make money the first two years, they just laugh at me. You’re not. You’re going to lose money as a start-up the first two years in retail. The expectation is that first year, you’re going to spend somewhere between 30-40% on promotional activity. Now, ongoing, and for established business, it’s between 15-22% annually on promotion.

You will promote, and you’ll have to promote. Two reasons you have to. One, to keep your turns at that relative number that you need to make sure you’re hitting, and more importantly, because your competitors are going to be doing it. If they’re out there promoting it and you’re not, there’s no way you’re going to hit your turn numbers. That first year, they expect you to have new item in induction, which is part of this 30-40% promotional activity. You get to have a new item introduction. You got to have sampling; you’ve got to have trial. It’s just monumental activity that you’ve got to put forth to get that barbeque sauce to turn. That ends up costing, for a new item, around 40% that first year. 40% of all the revenue you turn is going to be promoted product.