“That didn’t go well,” I said to Maura afterward.
“Really?” she said sarcastically. “But I’m sure the fake New York accent won them over.” Then shaking her head and exhaling, she said, “Whew, tough crowd. But Mark, next time try to just be yourself.”
Why was I so nervous? Was it that the guys walked out or looked like they might throw me in the river if they didn’t like Zico? Or maybe because I knew, and worried they might find out, that my posturing about Zico being a sure thing was just that? The truth was that Zico was barely still in business.
I had told my investors before the Fancy Food Show that Zico could gross $400,000 in sales during that remaining half of 2004. In the end, we had sold only four thousand cases during that time, at an average price of about $12 per case, bringing in a whopping $51,290 in sales. The total cost of the product landed in the U.S. was about $6 per case so that meant that we had a “gross margin” of maybe $25,000. That didn’t come anywhere close to covering our sales team, office expenses, legal fees, accounting, and distribution and marketing expenses.
I clearly would not be able to pay myself the salary I had negotiated with the investors at our meeting in El Salvador, or anywhere close to it, making our family financial situation shaky. If sales improved, I might be able to pay myself enough to cover our mortgage and some basic expenses. When I received our personal American Express bill that November and saw we owed $2,300, I told Maura we had to cut back. She grabbed the bill, scanned it, and said, “Mark, look, there’s groceries, car payments, insurance, phone and Internet, stuff for the house we both agreed we needed, and some clothes and snow boots for the girls.” Then she handed me back the bill and asked, “What do you want me to cut?” We were so desperate that the few thousand dollars we expected to receive from the sale of Maura’s car in El Salvador would help us tremendously. I also got a notice that due to our failure to repay the money I borrowed from my 401(k) the previous year it would be treated as taxable income, bumping up our looming tax bill.
And here we were; this was supposed to be our big break—the big leagues. But until Big Geyser sold and paid us for their first allotment of five thousand cases, we were deep in the red. It was our big spring launch but I wasn’t sure we’d still be in business come summer.
Driving home with Maura we had a lot to talk about. A year and a half before, I was running a $100 million business spanning twenty countries with over three hundred employees. We had a beautiful home in San Salvador. I was making over $300,000 per year; we were saving lots of money and could still afford fabulous help, luxurious vacations, and had money left over to make a difference in the lives of others, both through volunteering and donating money to good causes. Now I was posturing like an idiot in front of a room full of sharks while behind the scenes we were teetering on the brink of bankruptcy. Is this what it meant to be an entrepreneur?
FOLLOW THE YOGIS
After my disastrous speech to the Big Geyser route owners, I quickly realized that the Geyser contract alone wasn’t going to be Zico’s breakthrough moment. After our spring “launch” everyone at Big Geyser, from the top management on down to the route owners, told me they weren’t going to go out of their way to make Zico a success. Until I proved beyond a doubt that store owners were going to stock the brand and that people were actually interested in buying and drinking it, I was just some wannabe entrepreneur who was getting in their way.
Building the brand was my job and—as much as I would have loved a sudden increase in sales—Big Geyser was actually doing me a favor by reminding me of this fact. If your brand communicates personal meaning, turning it over to someone else, especially a distribution business, isn’t going to work. Early on it’s critical that you find the people who understand the meaning your product and brand embodies. You don’t just want customers; you want converts.
When we conceived of Zico, we had in mind consumers who would not just buy our beverage but become our brand fanatics. So who were they? Of course I had my Google alerts set so that anytime anyone mentioned the word “Zico” on the Internet, I’d get an e-mail notification. If I needed my spirits lifted, clicking on those links would always do the trick. Zico was building a great reputation on blogs devoted to yoga, running, health, and better living in general. Watching the blog posts and the comments they elicited, I could witness in real time consumers sharing information and trying to figure out what Zico was all about.
“I have recently become hooked on coconut water. It has a very light and refreshing taste and more potassium than a banana,” wrote a blogger who called himself NYnerd. “All over the tropics people drink coconut water every day, but here in New York it’s very new on the scene. You heard it here first, Zico is the next Snapple.” I might have been the only reader of NYnerd’s blog, but I can’t tell you how a personal plug like that boosted my spirits.
Zico wasn’t an easy sell in many settings and it wasn’t the sort of product that you could expect to gain momentum by simply putting it on random store shelves. I knew this from having spent days in the aisles of Costcos around the Tri-state Area as part of a failed Road Show, as they called it, pouring out samples of Zico. It would take five years for that spark to take. Selling to suburbanites who had carts filled with Coke six-packs and cases of beer wasn’t going to work immediately.
In other settings, however, our message seemed to resonate: Zico was a natural sports drink packed with electrolytes and the perfect form of post-workout (or night out) replenishment. The triathletes, who are notoriously obsessed with what they put into their highly toned bodies, were at first suspicious of the free Zico we tried to hand them at the end of their races. But after only a few of these events, herds of racers followed the winners right up to our tent after they crossed the finish line and asked where they could buy more for their daily workout.
When I talked to the yogis and people who managed yoga studios, especially hot yoga, Zico was an easy sell. Bikram yoga, which was becoming increasingly popular, offered a challenging routine of twenty-six poses over ninety minutes in studios where the temperature was cranked to 104 degrees with 40 percent humidity. You finish these sessions dehydrated and deeply thirsty. Studios stocked crossover sports drinks like Vitaminwater, but they generally didn’t like the idea of selling their customers a big dose of sugar after a workout intended to improve bodies and calm minds. That Zico was a balanced and natural way to rehydrate seemed especially relevant to Bikram students.
The yoga clientele is where I first got the sense that Zico had its own momentum—that there were other people out there advocating for the brand. At the time, a few hundred hot yoga studios existed across the country, mainly in hip, urban communities that Whole Foods was also targeting. In many of the studios, Zico was taking the place of Vitaminwater as the go-to after-class drink. So I figured building a passionate base of consumers in the yoga studios would help when we expanded into Whole Foods by creating an existing base of awareness and interest in our brand.
One day I got a call from the manager of a Bikram studio in San Francisco. He told me that some of his clients were from New York and that after classes they’d ask him how he could run a hot yoga studio without selling Zico. What exactly was this Zico stuff, he wanted to know, and how could he get some? So I began to do a healthy business shipping to Bikram studios in major metropolitan areas.
To get to know these customers better, I began to take Bikram classes around New York. The demographic was a marketer’s dream: the clientele were in their mid-twenties to mid-forties, fit, and if the labels on their tote bags were any indication, fairly well-to-do. I also had the gut feeling that I was surrounded by early adopters; they were cultural leaders, who were the first to try something new, and had already brought other major brands into prominence. Lululemon, to take the best example, had appealed to this same demographic and was on its way to be a billion-dollar brand selling yoga wear. Watching these yogis buy Zicos f
or each other and guzzle them, often in one long gulp, made me certain that these were our brand’s potential fanatics. Here was an audience that reflected what we had built Zico to represent: people intent on taking personal responsibility for their spiritual, mental, and physical health through hard work and developing a personal understanding of their natural selves.
The obvious passion this population had for Zico had more value than the sales it generated. Not only were they acting as brand ambassadors, each yoga studio also became a pin in the map indicating the geographic areas that would be most receptive to Zico. Once we sold into the yoga studio, the next stop was the bodega on the corner and then the one down the street. With this knowledge about our core consumers—our potential brand partners—I had a new way to approach and utilize our partnership with Big Geyser.
CLIMBING UP IN THE WORLD
The traditional way to get the attention of the Big Geyser route owners was basically to bribe them—or rather “incentivize” them with big prizes like that Ford F-150 that Vitaminwater had offered. Given that Maura and I were worried about how we were going to make our own car payments, that sort of incentive wasn’t an option for us.
Instead, I decided to focus on the route owners that delivered to the neighborhoods with the yoga studios in which we had already made headway. I started with just three Big Geyser distributors. They all had their nickname they went by: Johnny One Drop, Mike Matco, and Steve LES (which stood for Lower East Side). Not coincidentally, these were also the only three drivers who would give me the time of day after my disastrous kickoff speech at Big Geyser. I asked each one of them if I could spend some time with them to get to know their routes.
I worked on getting to know Steve, who owned the Big Geyser route that covered a yoga-heavy part of the Lower East Side. He had two drivers making deliveries and stocking shelves, while he focused on making sales and personally checking in on his retailers. He wasn’t much on making small talk but after a number of attempts, he let me ride with him as he checked in on each of the stores in his neighborhood.
“So you want to hit some Hispanic markets?” he asked me as we drove out of the Big Geyser lot on the first morning. “Zico’s an ethnic play, right?” By the time we had reached lower Manhattan, I had convinced him that we were starting with a much different clientele. I pointed out the yoga studios along his route where Zico was selling well and told him that he could sell the brand in much the same way he was selling Vitaminwater. The only difference was that Zico was healthier.
“Okay,” he said. “I get it. I know the sort of places where the yoga chicks shop.”
A half hour later he was introducing me to the manager of a high-end corner bodega that had an Odwalla cooler and offered a variety of fresh organic fruits and vegetables. I made my pitch while he went to check the other brands he stocked. I offered the manager a special first-month deal of buying three cases and getting the fourth free. The manager hedged and then asked to think about it.
As he was about to turn away, Steve stepped to my side and took over. “Here’s what Mark is going to do,” he said, regaining the manager’s attention. “Tomorrow he’s going to show up at seven a.m. with a free case of Zico. Make that two free cases. He’ll stock it himself, make it look all pretty. If it sells, you reorder. What do you got to lose?”
“Sure, okay,” the manager said. “See you tomorrow.”
“Thanks a ton, Steve,” I said when we were back on the sidewalk. “Not only are you giving away Zico, you’re having me deliver it.”
“Look, Mark,” he said not unkindly. “This is what it’s going to take to get going. The reason you are going to deliver it yourself is that you are the best salesman for your product at this point. You are going to get to know these guys. Besides, if you give Big Geyser route owners free product to give out, they are just gonna sell those extra cases at a discount and pocket the money. Even my drivers are going to do that. It’s free money to them. To make it in this business you are going to have to . . .”
“I know,” I interrupted, “give until it hurts.”
“Right! And then give some more,” Steve laughed. “Big Hal taught you well.”
So for a few months in the summer of 2005, I had my feet in two worlds, learning as much as I could about both. One day I’d be riding along with the rough-and-tumble Big Geyser route owners and the next morning I’d be sweating it out among the upper-income yoga students. I remember one of those classes that spring with crystal clarity. It was the end of the week and I showed up already pretty beat from the early morning ride-along from the day before—a condition made worse by having shared a bottle of wine with Maura the night before. The 104-degree studio felt like summer in Death Valley and I struggled through the poses trying not to tip myself or anyone around me over.
Finally, the teacher led the class into the final move: Savasana, or dead man pose. Basically you are just lying on your back relaxing. I can do this pose. “Let the work you’ve done do its work on your body and mind,” the teacher said in a soothing voice. “Relax your head. Your eyes. Your shoulders. Your arms. Your legs. Just sink into the earth. Know that nothing else matters. You are connected with the universe. It’s all okay. There will be time for stresses and problems but that time is not now. Take this last three minutes and know at the end of that you’ll feel refreshed, renewed, and can face anything, and of course finally have that Zico you’ve been craving all class.”
CHAPTER 7
BOTTLE IT UP
ONE STEP FORWARD, TWO BACK
If we only needed to work hard to make Zico a success, we’d certainly have been in the black by the end of 2005. We had made progress on several fronts but we hadn’t broken through or built up the sort of momentum that would get us over (or even close to) the hump of our expenses. My strategy of building relationships with a few Big Geyser route owners at a time was working, but progress was frustratingly slow. When we focused on the neighborhoods with Bikram studios and took the time to educate the route owners, sales really picked up. But that hands-on approach was time intensive. On a one-to-one level, we could almost always convince a store owner, driver, or customer of the value of Zico but with just a couple of us, this method was hard to scale. On the positive side, by the summer of 2005 sales had doubled at Big Geyser. But that was only from 500 cases per month at the end of 2004 to just over 1,000 cases a month by late summer 2005—around $12,000 in sales per month. Depending on which side of the bed I got out on, that was either the start of exponential growth or a pathetic number that I could practically drink with a few friends.
Getting the route owners in Big Geyser’s network to embrace Zico enthusiastically remained elusive. Most days of the week, I’d get up at four a.m. and, after a run, drive to the distribution center to try to chat up the route owners and get a sense for how I could help them sell more Zico into their accounts. I’d put on my best game face when I walked into the warehouse and come out feeling beaten up. If I even got to talk to them it was often: “I need more free samples.” “Your display at that deli on Lexington looks like shit.” “No, I don’t need another fucking T-shirt.” “Your price is too high.” “Those Vita Coco guys are kicking your ass.” These guys gave new meaning to the word tough.
I had taken Hal’s advice to “give until it hurts, then give some more” to heart. I gave distributors a constant supply of free cases but it never seemed to be enough. I was also learning about the dark side of the beverage distribution system. I’d hear about some accounts paying $18 per case of Zico, not the $15.99 it was supposed to be. The “deals” we gave at that time were buy five cases get one free and buy ten get three free and sometimes buy twenty get five free. They were supposed to be linked to an individual account to build customer loyalty and encourage higher volume orders. But when I talked to retailers, I learned that some distributors would take the free cases and simply sell them to other accounts.
These weren�
�t the type of guys you wanted to call out even if you knew they were taking advantage of you. A few times early on I had complained to Big Geyser about the way Zico was displayed or being sold into accounts, only to later get a dirty stare and the cold shoulder from the offending parties. It was prison yard rules: no crime worse than being a rat. I learned that I had to deal with distributors directly and if I had an issue to iron it out with them personally. As I got to know more of them I could see that they were mostly good guys trying to make a buck in the brutally tough daily grind of New York City retail. But “give until it hurt” was still the mantra of the day and, man, did it hurt.
Zico was still getting good press and we had a growing base of loyal customers. That momentum, little as it was, had opened up the possibility of dozens of potential pathways and partnerships for growth. I had received inquiries from distributors in Massachusetts, Indianapolis, Austin, San Francisco, Barbados, and even one in Korea. The Vitamin Shoppe had asked about carrying Zico, and every week I’d get a call from another yoga studio that wanted me to ship them some cases. Zico was one of the first beverages ever carried by Amazon.com and sales were showing steady growth as well, although the whole Amazon food initiative was still in its infancy.
I was faced with what scientists call a signal-to-noise ratio. I had an ever-increasing amount of data about how consumers, retailers, and distributors were reacting to Zico, but it was difficult to determine how much was useful and potentially actionable information and how much was just random noise.
The only real way to figure out what would work was to experiment with my options. I basically needed to place bets with my effort and time and find out which ones would pay off. Distributing through United Natural Foods (UNFI), for instance, looked like it was worth the gamble. They were the major player in the natural foods industry and primary distributor for Whole Foods nationwide.
High-Hanging Fruit Page 12
