Welcome to the Community Call Podcast.
I am Melissa Travers, Director of Community here at BevNET & NOSH, here with my co-hosts Jackie Brugliera and Mike Schneider.
If you're enjoying the show, please follow and review us on Apple Podcasts or your listening platform of choice.
So I had a chance to talk to Johnny Locarni last week of Magic Cactus.
I would like to welcome him to our Community Slack, first of all, which everybody else can join by going to slack.bevnet.com.
We'd love to see all of you there.
Anyways, I'd like to welcome Johnny Locarni there.
He has a product called Magic Cactus, which is a sessionable THC beverage in New Beverage Showdown.
Jackie, I know this is something that perks up your ears.
Tell us what you think about sessionable THC beverages.
What do we need to know?
What do we like?
Yeah, I mean, my fridge is full of low-dose THC beverages.
It's kind of like taking up the real estate of some of my maybe RTD cocktails in my fridge.
You know, it's great for, like, maybe if you just want to have one at night and just get a little bit of a buzz.
I like that they're really calling out the no grog, because that's a lot of, like, times why people don't want to consume THC is because they don't want to feel groggy the next day.
But it also is interesting because they're calling out THC, THC-V, and then also CBD.
There's just so many cannabinoids out there now.
I just don't think people know.
I had to Google what THC-V is.
I have a secret.
Yes.
What's your secret?
My fridge is also full of THC beverages, but I'm scared to drink any of them.
I'm so excited for Mike to get back on the horse.
I will take them off your hands.
Start low and slow, right?
Jackie's like, I'm not going to teach you how to do it.
I'm just going to drink them for you.
I'm just going to show you.
Jackie, I'm so glad you pointed out the THCV because I was also reading all of the CBDs and THCs on the can.
So they have two milligrams of THC, six milligrams of CBD, four milligrams of THCV.
So THCV is tetrahydrocannabin.
Can we just say THCV?
Did you not like the way I said that?
The V is for, what's the V for?
For very much not intoxicating.
Right, right.
There we go.
That's an easy way to remember it.
And you know what I saw?
So supposedly it suppresses your appetite, and there are people are calling it diet weed.
Oh yeah, they're calling it diet weed.
I've seen that too.
Isn't that wild?
Have you tried it, Jackie?
I wanna try THCV.
I haven't tried it yet.
Let's find some THCV.
Let's do it.
What about CBN?
Have you had CBN?
That's supposed to be the one that helps you sleep, right?
Sleep, yes, I have these mints that actually have THC and CBN in them, and I, oh my God, I just pass out.
It's amazing.
So that CBN helps you sleep, is that right?
Yes.
Yeah, it has nothing to do with the THC.
Nope.
Because there's 20 milligrams in that.
Yeah, right.
I just pass right out.
Well, they always say like the more pieces of the plant you use, the better off you are.
So if you have like all of these cannabinoids in one product, then you're gonna have a better, well-rounded experience.
You will.
I know that from experience.
It's gonna be a round experience.
That's for sure.
Mice, what's your plan for dipping into the THC, all the Vs, all the letters?
Well, the Vs, I'm fine with.
And the CBD, I like CBD a lot.
And I like THC, I mean THC-V in theory, I like a lot too.
But to get back into THC, I'm just gonna, you know, I'm just gonna try to microdose it and start slow and see what happens.
I like it, I think you should keep a journal.
You can document all your symptoms.
Yeah, we can give journal updates.
Symptoms, that sounds awful.
Feeling an extraordinary sense of calm.
She's been waiting for this.
I want this as an experiment.
This needs to be a podcast.
All right, well.
It just so happens.
I think I've said before that I'll do anything for Jackie, so I guess we're on.
That's power, Jackie.
That is raw power.
Anyways, I'm looking forward to hearing all the updates on your THC journey.
Oh, God.
In the meantime, I'm struggling with a very important question of my own.
I'm trying to figure out whether to renew my Costco membership.
I let it expire about a year ago, and there are certain things that I buy there that I'm out of, like their Parmesan cheese and Pecorino are amazing.
Chosen Foods avocado oil and a huge drum that you can't find anywhere else.
These Lotus food millet brown rice ramen noodles I love.
I just don't want to buy them anywhere else.
Do you guys have Costco memberships?
I used to.
I just got my first membership this year.
I thought I didn't need one because I don't really have a family.
I'm not buying in bulk, but the thing that keeps bringing me back is, honestly, the alcohol is so cheap and such high quality, especially even Kirkland brand, like if you tried the Kirkland vodka, some people say it's as good as Grey Goose.
But beyond that, especially around Thanksgiving, they have a pumpkin pie that is like three pounds.
Is one of those people you?
I want to party with Jackie.
Jackie, I need to party with you more.
I want a three-pound pumpkin pie, some Kirkland vodka, and we're just going to have Thanksgiving right now.
That sounds like the best Thanksgiving ever.
And then the final piece is just a tub of bitchin sauce that you can slather on anything.
Yeah, yeah.
All right, well, with that, I will figure out whether or not to renew my membership.
And in the meantime, I'd like to introduce this episode of Community Call with Jeremy Smith, founder of LaunchPad, talking about how to crack the Costco code.
Please enjoy.
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Jeremy, thanks so much for hopping on.
Well, thanks for having me on.
I'm really excited to be able to answer the questions and share some secrets, not all of them.
You're going to hold some back.
Yeah.
Otherwise, we'll be on the call until tomorrow.
That's right.
So I look forward to hopefully answering every question that we can.
Fantastic.
You've been doing this for 24 years, is that right?
24 of the longest years of my life, yes.
Well, we're very excited to put them to good use today.
So let's jump right into it.
Costco is certainly known for being a low margin, high volume retailer.
I think one of the questions that you and I sort of pointed out is being maybe the most important is when does it make the most sense for a brand to land in Costco?
How much scale does a brand need for it to make fiscal sense?
Yeah, and that's going to really depend on the size of your company and the maturity of the company.
You have to look at your overall business and figure out, because everybody wants to go to Costco.
They look at how much business you can get there.
It's very important to you, but Costco is not the most loyal retailer.
They're really loyal to their members more than anyone else in the Costco ecosystem.
And so you've got to really be honest with yourself and sometimes push back with your investors or your board, because if you go too early, your profit margins are going to be even lower, because most companies early on either have their own plant or they have a co-packer.
And you really need to be able to negotiate much lower rates on your ingredients.
You've got to really have that supply chain locked down.
It's a different type of company to work with than Whole Foods or Wegmans or Kroger's.
And so it's really all about numbers and operational sales.
And so you've got to be honest with yourself what the best timing is.
You've got to have the right amount of distribution.
Our data has always shown that if you don't have much distribution in a Costco region, your sales are usually short by about 15 to 30 percent versus what they would be if, let's say, you had a 12 percent ACV in a region, but now you only have a four.
It's vital that you think about those things and not get caught up in how much you want to go there, because I'll give you a good example.
I have a new client.
We just got approved at Costco for January in the bar category, and sales, the opening purchase order is close to $375,000.
For a small company doing a million to five million, that's a lot of money.
It would take them a lot longer time period, maybe a year or more, to get $375,000 out of a few grocery stores.
So it's tempting to go, but it's more important to go at the right time for your organization, where you have a good mix of distribution.
Your supply chain is in order, because Costco is not patient.
If you aren't able to deliver on something, they're not the nicest people to deal with, because they are, again, totally focused on the member.
They don't want to disappoint the member.
And so it's really important to understand those things.
Plus, when you look at your company financially, let's say you've got, over the next year, $200,000 to spend that you've allocated for.
Is it better to invest that in Costco on a low-margin business?
And you might just do an eight-week rotation, and then you're out, versus spending that money with a grocer, who as long as you meet the numbers and generally pay the slotting fee, you're going to be in there every single day and not have to worry about that.
So you've got to look at all of those things, and it's really important to allocate the time to figure it out and what makes sense.
How do you boil that down in terms of understanding whether it's the right time or not for you?
Are there distribution numbers or revenue numbers that we might be able to softball?
That's a good question.
Generally, I don't think you should go until you're...
or at least start planning to go to Costco until you're at least on a path to 2 million in sales.
Or you are, let's say, at 1 million, but you've got an overabundance of distribution in, let's say, the Texas region where Costco has an office.
That would make sense because you have a high ACV in the Texas region.
But it wouldn't be smart if you went into the Midwest region where you have little to no distribution because you're just making it harder for you to be successful because every category at Costco has certain sales thresholds.
Costco is focused on sales per week per warehouse as to where most retailers are focused on dollar sales, Costco is, or unit sales.
Costco is focused solely on dollar sales per week per warehouse.
Excellent.
We have a question here from Elise from Bad Tea Company.
Great to see you on here.
She would like to hear your thoughts on road shows and some of the pitfalls that come up with those.
Road show is a question I get asked about a lot.
If you've got a really good marketing budget and you want to figure out what, which flavors are going to do best at Costco, they can be advantageous.
They can also be good marketing events for you.
But the most important thing, and this is where a lot of brokers fail and a lot of brands fail, is you've got to get a commitment from the buyer.
Well, if I hit this sales number that you're looking for, will you bring us in?
If you don't do that, then you've given the buyer a free rein to do the road shows and make a decision at the end where she doesn't bring you in.
I try and avoid road shows whenever possible, unless it's part of a marketing budget or because Costco buyers will ask you, what are your top flavors?
And if flavor number one is 26% and flavor number two is 25% and flavor number two is 25% and flavor number three is 24%, that's a very different situation than number one is 26%, number two is 19%, number three is 14% because you've got a much wider gap and it can create doubt with the buyer.
There are some regions that lean a little bit more into doing road shows.
And it's important to understand, you're not going to make money at road shows.
Almost no one does.
If you break even, that's a good day.
But the question, at least from my perspective, that I would bring up is, why can't we just bring in a few pallets into a building and just do a quick test and we'll support it with demos instead of doing road shows?
And again, road shows can be very valuable as a marketing tool, but they generally don't have a high percentage of success.
They're very beneficial for Costco.
Done in the right way, they can be successful for you.
But most of the time, you're better off trying to get a smaller order in to test the item.
Because the good thing at Costco is you don't have to create a new pack.
You can use your existing retail pack.
They don't expect you to create a club pack for a road show.
So you can use your existing item, which could cause you some friction if you're using the same bag size at a road show that you're using at Whole Foods or at Kroger's.
So you always have to be mindful of that.
But generally, it's a mix-and-match situation where let's say it's four flavors for $9.99, and they can pick any three flavors out of your assortment that you're there.
But you want to first make sure that you have the employees to support the road show.
You can use Costco's, well, it used to be their demo company, CDS, but it's owned by another broker now.
But anyway, you can hire those employees.
And then you've got to hit the sales targets.
And if you don't hit the sales targets, then your opportunity to go in is an everyday item, is a much longer process.
Your tip about asking if you could start off with a few pallets is such a great one.
Thanks for that question.
I've got another question here from Maheed.
It sounds like he was recently communicating with Costco and got a response back with questions on distribution for their new Spirit brand.
Then when they got back to Costco saying that they would self-distribute in Florida, they disappeared and won't respond to any emails.
Any idea what's going on there and how they might be able to get someone else to respond?
Yeah, so that's called going dark at Costco, and the more senior buyers don't do that very often, but some of the younger buyers have a tendency.
And then there's a couple regions, like the San Diego region has a reputation for going dark more than some of the other regions.
Why that culture has developed there is baffling.
I'd have to really know more information, but I can make a few assumptions.
And generally, what happens is the life of a Costco buyer is incredibly challenging and is very busy between plant tours, meeting with brands, and then their general day-to-day of running their category.
They're incredibly busy, and sometimes they see an item and they get excited about it, and they'll tell you they're going to go ahead and submit the item for approval, but they never get around to it.
So in those situations, I'm going to assume for this discussion that you're talking to the main buyer, but I would go to the assistant buyer and try and find out what's going on.
Let's say you spoke to Pam, and Pam said she wanted to move forward with us.
Other times, Costco sometimes, it can take 40, 50 calls, and obviously you don't leave messages each time to get hold of the buyer again, but you've got to figure out what time of day does that buyer seem to answer the phone a little bit more.
But Costco does have a reputation due to the extreme, intense workplace that sometimes buyers just disappear.
I've had buyers make commitments in meetings, and you always have to remember that buyers don't approve items.
The items get submitted to the general merchant manager or the GMM or the assistant GMM.
And so when you communicate with the buyer, they'll tell you where we're going to go submit it for approval.
But a lot of it can depend on skews as well, if they're over skewed.
And sometimes we get right around this time of year, they're starting to get ready for November and December.
And so you're running up against that timeline.
And the buyer just, you know, they have to organize their day in, you know, what's the top priority?
And then they've got fires to put out.
So I never take any of these things personally.
And I always just forge ahead and keep calling until I get hold of them.
And, you know, even sometimes I'll send them an email.
Hey, I'm not, I know how busy you are.
I'm not trying to be a pain, but I thought you wanted to move forward.
Maybe I misunderstood, blah, blah, blah, blah, blah.
But you just got to be persistent is all a hack.
And that gets into another subject, which is when you do hire a broker, you've got to hire a broker that understands these type of things.
Not all of them do.
And so you've got to be incredibly persistent and disciplined on calling on Costco.
Pleasant persistence is certainly something that applies to all retailers.
That's such a good point.
Can you explain the review process that Costco uses?
You know, many other retailers have a category review cycle.
Can you talk about what the process is for pitching and then having your product accepted?
Well, first of all, Costco doesn't have generally a review cycle unless it's for seasonal items like ice cream, water beverages.
You know, because of the supply chain issues, they started buying out earlier than they normally do so that the vendor would have more time to make sure that they hit the commitment.
But it's, you know, it can be confusing at times for brands that don't have experience with Costco.
And so it's really important to remember that you really need to focus closely with, you know, what your strategy is going to be.
And now for me, I'm a big believer in brands.
I think brands make a big difference in the potential success of an item, because every entrepreneur that starts a food brand believes that their product is the best.
And no one call, I have to this day, almost 25 years, I've never had anyone call me and say, I've got a lousy product, I still need to get it into Costco.
Mine's the best tomatoes, there are no tomatoes like mine, Jeremy, you have to represent my tomato company.
It doesn't matter what the category is, everyone believes that.
Now, between your own reality distortion field that sometimes people build up, Costco is an operational sale.
So when you're presenting, it's kind of like the old TV show, Dragnet, which 90% of the people that are on here probably don't know the show.
He used to say, just the facts, ma'am, because the character would sometimes go off and start talking about her garden or whatever it might be.
And so he would always say, get the facts.
And that's what Costco is.
But the first thing you want to do, whether you're using a broker or you're going to Costco directly yourself, you want to focus on your brand and your brand's story.
And the buyer has to feel that your brand is different enough than what's available to him or her currently.
And so we limit presentations to no more than 10 to 12 slides.
We generally don't use the PowerPoint presentation for anything more than a leave behind.
I don't like working with people that have to use, salespeople that have to use a PowerPoint presentation because it's kind of like if you went to see Denzel Washington in a play and he sits down and starts reading from the script, that would be kind of boring.
And so what you'll see happen in those type of meetings is that the buyers start reading the PowerPoint presentation and skipping ahead.
And you're just droning on and on while the buyer is somewhere else in their head reading something else in the presentation.
So you want to have a nice and strong conversation with them about your brand, who you are, what your supply chain is.
Sustainability is very important at Costco.
And then it comes down to obviously the offer that you're presenting.
Are you offering the right value for Costco?
And that's a whole subject into itself, is how you price your product.
Because while retailers are focused on value at retail, Costco is focused on value at cost.
And so that has to be part of the discussion generally, whether you're meeting in person or you're having a phone or a Zoom conversation.
You've got to know your numbers backwards and forwards.
And Costco buyers are actually incredibly smart, and they will ask questions that other retailers won't ask about.
Like, if you've got a dairy-based product, they'll ask you about sometimes, what grass do you feed the cows?
And most brands I've worked with are shocked after the meeting how in-depth the buyers understood the category, but also how the product was made.
And so you've really got to have people in the meeting.
It's kind of like you can't have a salesperson who works for you, who's kind of like the Alec Baldwin character in that sales movie.
You've got to have a person that understands Ops more than understands...
Always be closing.
Yes, always be closing is probably the worst way to sell.
Young entrepreneurs, because that's all they've heard, sometimes buy into that.
That's going to result in failure at Costco.
Because in the end, think about your own personal sales experiences in life.
And most of the time, like you go buy a car, the salesperson blows a lot of smoke around the room.
And they don't stick to the facts.
And so Costco can smell baloney right away.
Great information.
So certainly something everybody should be prepared to understand walking into meetings.
I've got a couple of questions, actually.
The first one is from Jeremy from Bex Brands that actually came through our Slack community.
Jeremy wanted to know about any ingredient trends that you're seeing out there.
So he had heard that sugar alcohols and keto are on the way out.
Is that something that you can confirm?
And are there any other trends that we should know about?
Yeah, I don't know.
Keto is not out of Costco.
Keto is actually done really well.
It's paleo that's more on the out than keto.
Keto pint is one hell of a great story about a brand who went into the ice cream category and came out of nowhere and has just done a fantastic job at both branding and getting their message across to Costco and Costco members.
But, you know, the Costco is very reactive to what's going on in the marketplace.
And, you know, with Arithetol right now, they are asking vendors, and definitely sugar alcohol.
You should avoid that whenever possible going to Costco.
Doesn't mean that you may not see a product because a lot of bars use sugar alcohols.
But sugar alcohols, I always remember this because more than any other ingredient, when we would have a bar company send us products, the ones that would give people the most problems, digestively speaking, were always the sugar alcohol bars that were sent to our company for tasting.
And so most of our employees wouldn't taste sugar alcohol bars after a while.
And so Costco is a very strict palm oil policy, which you need to make sure when you go to Costco and you get the new vendor packet that you read about it because they're really trying to crack down on the waste that goes into a lot of ingredients.
And the bottom line is that Costco is going to do what Costco wants to do.
They're the big gorilla in the room.
And if you want to get into an argument with them and defend your ingredients, you're going to lose.
Costco has an extensive in-house lab.
They get around to testing just about every product that's there.
And so you can spend your time debating or make a change and start looking to go to Costco.
Or you may want to wait until you extend your product line and bring a different product to Costco, because usually these things become factors.
I would say supply chain is probably the biggest issue.
They want to know that you have the right supply chain.
And they're getting really focused now on wanting to have items that are local to the Costco region that you're selling to.
It's important to them.
If there's two bar companies with like ingredients and somewhat similar branding and marketing, the one that's closer to the region may get the nod because they want to reduce their carbon footprint.
And so that's very important.
And you never know what's going to come up.
I had one buyer, she was insistent on, she loves bees and the way she bought products if they had some sort of element of honey or something like that.
She wanted to know what the brand was doing to help the environment that way.
The thing you have to remember with Costco is Costco, unlike traditional retail, can be in and out of an item very quickly.
So for example, years ago, goji berries became the rage.
I mean, there wasn't a...
The only thing they didn't have was toilet paper with goji berries in it at one point.
There was so much goji berry products, and then it stopped selling.
So while Safeway and other retailers were stuck with their year's supply of goji berries that they bought, Costco was out of it in 90 days, and they were into the next item, whatever came after that.
I think it was low carb.
And so, you know, I really think that you always have to be conscious of...
I use a term a lot called moving at the speed of Costco, because Costco can move very quickly.
You know, paleo was the hottest thing for a while.
Now it's not.
And so Costco tries to follow trends, not fads.
And so, like if you're in the animal protein category right now, beef sales have slowed at Costco a bit.
But those same consumers are moving towards, you know, not plant-based, which I was kind of surprised to hear, but they move to buying more chicken and more fish.
And so, as the price of beef continues to rise, I think you're going to see a shift like that.
And that's usually what happens at Costco, is that people replace items with things.
I think plant-based has cooled off more now at Costco than initially.
I think it's over-saturated, and there's like too many plant-based items fighting for a small amount of space.
And I think there's not enough differentiation at this point, and it's not a big enough market.
You have to remember, an item has to do at least $1,500 a week at Costco if you want to try and be in there every day.
And in some categories, it's much higher than that.
We have got a number of questions coming in.
Let's see if we can hit these in the next...
Let's see if we can hit these in the next 15 minutes.
If not, we can also answer them in Slack afterwards.
So slack.bevnet.com.
But let's see if we can get to as many of these as possible.
So Michael Schaefer wants to know if you can expand on the value at cost equation that you mentioned earlier.
Sure, I'll do that real quickly.
It's the least understood thing at Costco.
And so value at cost, Costco wants you to compare when you bring your pricing to them, FOB price now, the lowest price compared to either the distributor or if you're selling directly to a retailer, if they're getting a lower price than the distributor, which usually they're not.
But so for example, if you're working with UNFI or Cahey and you're selling to them at $10 for your product, Costco wants to be a minimum of 20% to 25% below that.
So you'd have to sell to them.
If you're selling to UNFI at $10, you'd be at $8 or $7.50 at Costco.
And so that's the value of cost.
So generally on shelf at retail, to get to a 20% value of cost, you're going to be somewhere around at retail 48 to 54% below on the shelf price compared to Whole Foods or whoever your retailers are.
When you say 48 to 54% lower, which price is that in reference to?
Is that the retail price or cost?
Yes, that's the retail price.
Your retail price will be somewhere around 48 to 53%.
For example, some people think that they can explain to me, but they can't because mathematically it doesn't add up, that you have a 20% value at cost and you have a 30% value at retail.
It's just not possible.
The numbers don't make sense.
So if you're at whatever it is, $10 an ounce, $10 for the unit at retail, you've got to be at least 20 to 25% below with your FOB sale price to Costco.
Okay, gotcha.
And then we've got another question from Louis Heimel from LinkedIn.
He wants to know what the average Costco markup percentage is.
I know that was in there, but could we pull out what their markup percentage is?
So in all honesty, the challenge with answering that question is that you never know what else in the demo program that the vendor is offering, but the overall margin that they want to hit is around 14% is what they'll...
They won't go above 14%.
The overall category, when you include every item sold at Costco, is around 11.9.
Next question is from Emily Newcomb.
What are the key metrics or performance indicators that Costco uses to assess the success of a product in their store?
Dollar sales per warehouse is what the measurement is for every category.
Sometimes there's items that will stay at Costco because every time they pull them out...
And I don't want to mention the brand because I don't want to embarrass them, but the buyers don't necessarily want to keep it.
But the members scream when the item is taken out.
So they keep it in there, even though it doesn't perform quite as well as the overall category.
But the members go crazy when the item is taken out.
But most of the time, at the end of the day, it's really all about sales.
And so one important thing to note is that in order to be in there every day, because that's what we're looking to do, is $1,500 per week per warehouse is the lowest threshold in most of the categories.
There's always some exceptions to the rules that you have to be at in order to be considered to be in there every day.
And so it's a little bit different on rotational items, but on items that are in there every day, some categories you got to be at $4,000 to $10,000 a week.
You just mentioned rotational items.
Are there some items that you get a longer commitment for and some items that you get a shorter rotation?
How does that work?
Well, Costco buyer will tell you there's no guarantee that any item will be an everyday item.
They don't like it when you talk about everyday items, because that's their decision.
But again, it's all about the sales thresholds that are required for the particular category.
So, you know, yogurt used to be around $1,200, but then Shabani came in and completely threw the category into a whole new league.
And so now it's closer to $3,000 or $4,000.
So some of it depends on the specific category.
Like crackers generally don't sell as well as yogurt does.
And how long do you have to prove yourself at Costco?
I'm sure it depends on the category.
Every day.
You know, and they're, you know, even Shabani got taken.
You know, brands like Shabani, Stacey's, Pita Chips, they all got taken out of Costco because Costco wanted to try a different item.
They also want their members to understand that there's a sense of urgency on every item at Costco.
You know, it may be here on Monday.
It may not be.
Okay, excellent, excellent.
Let's take a look at these questions here.
And then Mary Pelletieri has a question.
Does Costco like exclusives from local companies?
It depends how you define exclusive.
So, for example, we created a bar for the Bay Area that was mostly sold in retail with peanuts, but for Costco, we created an almond product, and almonds generally in the market are much more expensive and have a stronger value offering to consumers than peanuts.
So sometimes that can be there, but Costco is basically a value proposition, meaning the member is buying the product somewhere else, and then they see it at Costco, and it's a great deal.
The downside to it is that you generally get one flavor or two flavors as to where you go to the grocery store, you can buy all six skews and you can buy any quantities, but you pay a premium for that.
So at Costco, it's really your number one and number two flavors that they're most interested in because they want to maximize the sales.
We have a question here from Marissa.
Marissa, I'm not sure I understand the question.
If you could reframe this, that would be great.
Marissa is asking about Rainforest Distribution or Doras, but doesn't Costco have a much different distribution system than other retailers?
Can you explain their distribution system?
Yeah, it's much more efficient than any other vendors out there.
They don't deal with distributors generally, except for short shelf life products like cheeses and things like that.
So somebody like DPI brings in a lot of the cheeses, but most of the time, you're shipping to...
So let's say you're going to Region A, whatever.
It doesn't matter what it is.
Costco has a depot system.
So you ship to the various depot, and then Costco...
That's where you deliver the truckloads, and then Costco will distribute it out to their buildings.
And they generally...
Like, I've dealt with Sam's Club before, which I can't stand.
We don't work with them anymore, but Sam's Club gets a truckload, and it might be out two, three days as to where...
If that truck gets into a Costco depot at 6 or 7 a.m., it'll be on the floor that day in the building usually.
Actually, anyone who becomes a vendor, it's pretty cool.
You should go in to make an appointment and go into one of the depots and take a tour of it, which they allow.
And it's an incredible experience.
And is that something you just arrange with your category manager?
For your buyer.
Either the broker can arrange for it, or if you're dealing directly with the buyer, you can ask them.
Now, you got to make sure you know obviously where it is, because it could be 300 miles from where you are or more.
Just anecdotally, from what you've seen, what percentage of products have you seen that really thrive at Costco?
And I guess when I'm thinking thrive, I mean, they stay on shelf for a good long time.
Well, as I mentioned before, Chibanes won.
You know, they're generally items that just resonate very well.
Sometimes they're unusual items where, you know, sauces are...
Like right now, one of the hot trends are Japanese and Korean sauces and chili flakes.
So those seem...
You know, you never know how long it's going to last for.
But more, especially on the West Coast, more ethnic items.
And I don't mean items that are...
There's a lot of brands that go and make a Korean item, and then they Americanize it or taco bell it.
And I'm talking about authentic items that are almost like food card items.
Those are becoming really popular, especially with millennials.
You know, it's definitely seeing a shift in those type of products becoming much more popular than they were previously.
But the quality is vastly improved over some of the stuff that the big companies produce that's more commercialized and is high in sodium.
It's more like a TV dinner.
When you get the authentic ones, I think they just resonate really well with the members.
But you never know how long they're going to last.
But so far, the Japanese barbecue sauce is doing really well there.
What do you typically see as the scaling strategy for brands?
Is it most common to launch in a region, prove out your success, and then grow region by region?
How does that work?
Well, Costco doesn't want to be more than 25% of your business.
So some of that is a factor.
You know, everything, as I said earlier in the presentation, is based on what the numbers are.
So you want to give yourself the best opportunity of going in.
And certain items have to go to corporate, like if it's health and beauty aids or pharmaceutical items, protein powders, those have to go through corporate.
And then you don't have the advantage of being able to go into a regional office and just, you know, pick a region that you think you'll do really well in.
So it's really all over the place.
I've had a brand that did an Indian coffee ice cream, and they only wanted to be in two buildings in the Bay Area region.
So for the first year, that's all they were in, and that allowed them to control the growth.
Now, you don't get the volume discounts that you'd normally get, but that was the way to build the business.
So there's no one pad answer to that question because it's going to depend on the company size and what makes sense for them.
And sometimes smaller has some advantages, so you get your feet wet and understand whether or not you can meet Costco's needs.
Jeremy, thank you so much for joining us today.
We learned so much about Costco, and I feel like we only hit the tip of the iceberg.
For folks who would like to follow up with you, what's the best way for them to reach you and get in touch?
LinkedIn or through our website at launchpadgroupusa.com.
That concludes another episode of the Community Call Podcast.
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