Interview Transcript

What's the penetration rate of indie brands in drugstore? You mentioned roughly 25% to 30% private label in drugstores.

Yes. The indie brands, they would take space away from the national brands, but they wouldn't be considered exclusive brands to the retailer. They like these new up-and-coming brands. They typically have a short shelf-life, so a lot of brands come into the shelves and they're there for 12, 18 months, then they leave the shelf. Maybe one out of 10 stick. It's about a 10% survival.

How can they choose that, though? Could you walk me through that process? Let's say I'm pitching a new brand to Walgreens.

It's not really scientific how the buyers pick those brands. It is really, "I like this brand." There's no science or method behind it. Other than the buyer says, "Oh, I really like this brand." Maybe it has a good following. "I think the products are really great. I think I can do something with this because it sits within our customer price range or whatever." There's literally no science at the retail level to say, "This is the right brand to add."

You'd purchase, what, a month's inventory? What's the kind of contract you'd have?

No, they would do a six-month cycle because of the capex that a brand has to spend, and it may only have a six-month life and will not make the return. These brands get super excited, but the buyer's like, "It's not really doing that well." They do not have any science again to say, "It's going to take 18 months for this to start getting some traction, to get the payback on the fixture, this is what the partnership needs to look like; are we in it for the long haul?" It’s like dating. These indie brands are dating these retailers.

Yes. What is that decision then? Because if you're taking let's say Coty [Beauty] or a national brand away, you're taking away one which guarantees at least sales per linear foot or even profit per linear foot and taking a risk on this. If it's not scientific and it's a bet on the new brand, how do they look at destocking a national brand?

They'll say, "What's my lowest dollar per linear foot? What's my lowest profit per linear foot? What's the brand that has the lowest loyalty rate?" That part is scientific on, "What should we delete?" Because those are known facts. Those are things that they can use to take decisions. The combination of that and the weighting of loyalty is different by retailer. Only sales are known to the supplier community.

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