Learn why working with regional distributors may be a better path for your business. I talk with Sid from Wild Bay about how his kombucha company started self distributing and now distributes for other brands.
Startup to Scale is a podcast by Foodbevy, an online community to connect emerging food, beverage, and CPG founders to great resources and partners to grow their business. Visit us at Foodbevy.com to learn about becoming a member or an industry partner today.
Jordan Buckner: [00:00:00] If you've been following LinkedIn or any of the news recently, you have been seeing the trouble brewing for distributors, especially working with emerging brands. The larger national distributors have been having a ton of pushback from the overcharges and the high fees, and in some cases let's just say less than.
Above the line business practices and the charges for brands, and it's becoming a huge issue. And I think over the next couple of months we're gonna see some real changes in the industry. And, you know, for talking about this conversation, I want to bring on my guest today to talk through both what it's like as a brand to experience these challenges and then also how that's led to him creating his own distribution company and arm to solve that problem both for his company and then also other emerging brands as well.
So I'd like to welcome Sid Sharma, who is the founder of Wild Bay Kombucha and Wild Bay Distribution onto the show. Welcome, [00:01:00] Sid.
Sid Sharma: Thank you so much for having me, Jordan.
Jordan Buckner: So tell me a little bit about Wild Bay and the journey that led you to opening up your own distribution company and self-distributing.
Sid Sharma: We started the company back in 2015, and our focus really was just the kombucha.
I started the company with two childhood friends and we took their family recipe
and brewing out of a side of a juice shop. You know, very grassroots, very small scale. And we started to get into stores locally, a lot of cafes and restaurants. And about six months in, we got in our first couple Whole Foods locally. So at that point it was a little bit tougher for us to distribute ourselves.
So we partnered with a local distributor ran into some challenges there, so we pivoted to working with a local company that was delivering flowers and other goods at the time in a refrigerated truck. Eventually, we outgrew that and ended up bringing the distribution of our kombucha in-house. During the pandemic, a lot of our [00:02:00] customers that we were working with in the Maryland area were struggling to meet minimums with distributors to get things such as water, sparkling water, things like that.
So we started to bring on really the basics and it's carried through, you know, past those times of the pandemic and it started to blossom. And I think you touched on the reason why. It's not only difficult for brands to work with a lot of these larger distributors, it's also difficult for mom and pop stores and, and smaller cafes and restaurants and places like that.
Jordan Buckner: Well, that's awesome that you've kinda taken that into your own hands. What were some of the challenges that you experienced of kind of getting your own self-distribution off the ground? Because I know that can be its own thing.
Sid Sharma: I think the biggest challenge was figuring out what's the best type of software to use for routing?
Should we lease the vehicles versus buy the vehicles? Things like that. But tons of people have done this before us, so there were enough resources or people for us to [00:03:00] reach out to learn from their mistakes. And I think that's been awesome for us.
Jordan Buckner: Have you found that retailers are open to you coming in as like a smaller distributor and stocking product there, or have there been any like pushback towards wanting to work with some of the larger distributors?
Sid Sharma: It really depends on the retailer. We've run in a couple where, you know, they really love their partnerships with those large distributors. They like that only a couple trucks are coming a day to occupy their docks. But then other retailers really welcome the idea of working directly with the manufacturer or working with a distributor that's smaller and a little bit more nimble.
Jordan Buckner: So how many stores are you distributing to now in the Maryland area?
Sid Sharma: So right now we're distributing to a little bit over 500. And the area we serve is from Northern Virginia through Delaware.
Jordan Buckner: Awesome. And are there primary retail accounts that you are serving or are they mostly just like mom and pops and independence?
Sid Sharma: [00:04:00] There are some larger retailers that we're serving directly. We go direct to Giants Warehouse, we go directly to the Harris Teeter stores in the area. But some certain retailers, it's a little bit more challenging, right? They only wanna work , with the big guys.
Jordan Buckner: Awesome. And then have you primarily started working with beverage brands then or now, or do you have the expansive kind of catalog or of companies you're putting on your trucks as well?
Sid Sharma: So we're exclusively working with beverage brands currently, and that was really just a result of what people knew us for at the time. I do see us, you know, eventually expanding outwards, but we really want to build that portfolio first. Like I mentioned, the customers we're working with are, you know, cafes grab and go fridges.
A real focus on that. So the types of products we are really targeting are, you know, staples that you typically see in those types of refrigerators, but brands that really take those and elevate them or make them their own.
Jordan Buckner: And [00:05:00] doing that. I'm curious, like, are you leading them with the kombucha and then are you also doing like sellin for some of those other products that you're bringing along as well?
Sid Sharma: Yes. So often when people reach out to us, it's mostly for the kombucha, but when we reach out to other people, we really are pitching it as a full service distributor. So we will take all of those other brands with us and we will sell them into the fridge, right? Because if we're taking our truck to these stores, it's in our best interest to sell more products in.
Jordan Buckner: Awesome. Yeah, that totally makes sense.
I'm curious on your thoughts of the larger kind of distributor industry right now, because there's definitely been like a ton of consolidation. I think as this, like KeHE just acquired DPI and there's been a lot of kind of talk on like where the industry goes from here because it seems that.
The distributors are focusing more on, you know, mid-tier brands, at least during like 20 millions dollars in [00:06:00] sales and up. What happens to distribution for the smaller brands?
Sid Sharma: I think people for a long time looked at those larger distributors as the only pathway to building a larger footprint. But I think, you know, this environment will push people to start to go.
Deep into their market instead of necessarily wide right away. And when they do go wide, I think they'll start to look for more creative solutions, smaller distributors. You know, I think doing great things that might not be doing it at the same scale as those guys. And , as we've learned about distribution.
And you take a step back and you look at their model, you understand why it's so challenging for smaller brands to work with them because it is unsustainable to charge the tiny markup they are charging to some of these retail stores, right? It's such a small percentage. It's razor thin margins that they're marking it up to some of their larger accounts, so they have to [00:07:00] make up that margin somewhere.
And where do they make it up? On the backend with things like chargebacks, things like, trade shows, , things that they're able to charge the brands for that don't cost them nearly that same amount.
Jordan Buckner: Yeah. You know, it's interesting. So with my brand TeaSquares we're selling with, you know, KeHe, U N F I and number of regional distributors and it's interesting once you start diving into the pricing, because I think there's This estimate that people say like, oh, expect 15 to 20% for distributor margins.
But what's tough when you get into the business is realizing that, you know, U N F I might actually only charge Whole Foods cost plus 7% versus their list price, which might be cost plus 25%, but like very few retailers pay that unless they're just ordering a couple cases. And so, you know, that average is a huge range.
And it forces them for some of those, like business practices, like you mentioned, like where's the profit? If the number of brands that they're really selling to these stores is [00:08:00] relatively flat or slowly growing, they have to find , that money elsewhere
for a lot of them.
Sid Sharma: Exactly. And when you take a look at the fact that they'll charge you the slotting for every new store they put you in. But then on top of that, you actually have to pay for your own data to know if this product actually ever reached a store. Yeah.
Jordan Buckner: You're like, what's everything that someone could want or not want? And then how can we charge them for it?
Yeah. I mean, that's why I'm a big advocate of working with regional brands. I think for a number of reasons, right? I think that building a brand regionally where you have people on the ground to support the stores is a lot more effective than growing a brand. Spread thin nationally. I think it's very appealing, right?
To get a Sprouts deal or Whole Foods dealer or other retailers that can take you nationwide and think, great, we're gonna get hundreds of stores and a large PO that looks really awesome on the surface, and then realize that after all the fees. Just from [00:09:00] the distributor, you're only maybe getting like 70 to 60% of that invoice paid anyway.
Plus all the marketing that you have to spend with demos and promotions and everything else, where a lot of times you're, you know, barely breaking, even though you might even lose money on the first PO. Even it's for a couple hundred thousand dollars.
Sid Sharma: And that's what we learned as a brand, because for us, we never had a large marketing budget.
We're a small brand, so we really focused on gaining awareness of our brand through visibility in these smaller stores that we're serving. We're one of five, six beverages in a whole Foods. We're one of 14 kombuchas. Yeah, it's just so much harder to gain that brand loyalty or awareness or knowledge of the product we're even offering.
In those retail environments. So I think when brands partner with us, they also can elevate those sales in those retail [00:10:00] stores no matter who's servicing them, because people who live in this area will see their product in their local cafe, in their local store places that
Jordan Buckner: Sid, I'm curious, what's your thoughts on this question I get from founders? One of those is, you know, hey, I want to do this larger rollout, but my buyer wants me to work with a Kehe or U N f I. Like, how do I convince them to work with a small, a regional distributor?
Sid Sharma: I think it's difficult, right? Because if the regional distributor , doesn't already have a relationship or already isn't in the system of that grocery store or retailer, I think it's a bit tougher. But you can always work with someone like us or another regional distributor to promise that buyer a little bit better of a price flowing through to them, right?
Because if you know you're not paying. That additional 15, 16, 17% on the backend you know, that you can afford to possibly offer them a better deal or [00:11:00] work with us in a way that, you know, fosters a little bit higher sales or velocity by telling them, if I get into this regional distributor, I'll have better sales because there'll be more visibility in the area beyond just your store.
Cause we aren't present there yet.
Jordan Buckner: And then you know, isn't it more work to manage this spider web of regional distributors versus working with one or two national ones?
Sid Sharma: I don't think it is because when we need more product, we just order it from you.
I guess on the transportation side, maybe a little bit, right? Depending on how you're warehousing your product. It might take a little bit more work to send it to three people instead of one, but I think it's worth it for the additional sales, the additional product care, right.
You're never gonna run into an issue where we didn't rotate product. You know, we only have eight brands. If we don't rotate product, there's something seriously wrong.
Jordan Buckner: Yeah.
You know, it's interesting because I hear that from one perspective, but I know from experience, right? Like, unless you're doing 20 [00:12:00] million with these national distributors, if you're trying to get in touch with your buyer or someone to like actually take action on something I.
Sometimes it'll take like weeks for them to respond. So sure, maybe you're only emailing one or two people, but you have to wait weeks to get a response, let alone maybe a meeting, let alone like an actual decision on something. So that process can take months over time versus having someone who's smaller that you can call reach out to you and you know, actually build a partnership together.
Sid Sharma: Exactly, and that's really what we focus on, is building a partnership with the brands we bring in. We are obviously more selective about the brands we bring in versus the larger guys. You know, they'll bring on almost anyone because they'll gladly take your money. For us, we really wanna bring something in that will flow into our warehouse and out the door because it fills a need in these fridges and.
There's tons of awesome brands out there. You know, even friends brands. I wish we could carry them [00:13:00] all, but we're just not in that position.
Jordan Buckner: Sid, what's the best way for the founders who are working with you or any like regional distributor to build that partnership so that you're empowered to do everything you can to sell them into stores and make sure they're successful? And then what does that like great
relationship look like
Sid Sharma: For us, I think., the main thing is just continuing to make a fantastic product, right? At the end of the day, taste is everything. If people love like walk in and they taste your coconut water or sparkling water, and they absolutely love it.
Whenever they go back to that shop or cafe, they're gonna continue to grab it. So continuing to maintain that. I think just consistency, right? Like ability to serve. Us as a distributor consistently, right? So if we place a PO and your lead time is two weeks, you know, next time we order, we expect the same lead time.
You know, if that extends to five, six weeks, you know, as a smaller distributor, we're not holding the same type of [00:14:00] inventory. A U N F I might hold or KeHE. So it's really important for us that, you know, the product turns over and is coming in the door and it really , flows in that smoothly way.
Jordan Buckner: Awesome. I love that. And then see, are there any challenges or obstacles that you see that brands should just be aware of in working
with smaller distributors?
Sid Sharma: I would say some smaller distributors, at least when we've reached out to them, we'll have a huge emphasis on additional support. They'll be very focused on, do you have a salesperson in this area? Do you have someone doing demos? Which really makes sense if you're focusing on retail, right?
Because for our own brand, you know, we have a merchandiser in this area, we have a demo person. But for the types of customers we're servicing and focusing on, it's actually not as important because we're handling that backend sales piece and we have account managers in house that reach out to every single one of our customers if they haven't ordered for a certain period of time.
So we're handling [00:15:00] that side for them. So it's a little bit more full service, I think, than typically.
Jordan Buckner: Awesome. I love that. Sid, thanks so much for joining today and sharing these experiences. I mean, I think the one takeaway I want founders to really come away with knowing is that, you know, building region by region and working with partners like yourself and others is a very viable way to build an awesome business and not get cut on the back end from all the fees and charges.
So definitely something I want our listeners to look at at pursuing. So thanks for joining
Sid Sharma: Yeah, of course. No problem. And I think the one thing I think about as well that I think brands should focus on a little bit more is the value of these up and down the street accounts, right?
That's what makes Coca-Cola, Coca-Cola, you know, you walk into every shop and you see them, and that you can get incredible visibility by working with smaller distributors as well.
Jordan Buckner: I love that it seems like a little bit more work upfront, but it has a huge payoff in terms of the longevity of your brand.
Thanks so much, Sid.
Sid Sharma: [00:16:00] Thank you.