Sunday, June 02, 2002

New products compete for shelf space

Specialty stores offer toehold in marketplace

By Yvette Armendariz
Gannett News Service

        Kim Brownlee knew her homemade toffee was good; she just had to figure out a way to persuade retailers to put it on their shelves. The 33-year-old America West Airlines flight attendant, who launched Toffee Chips two years ago, now is in five retail outlets and on the Internet. She is one of thousands of small-business owners who constantly flood retail buyers with calls and goodie packages in their quest to command shelf space.

        More than 32,000 new products, from food and beverages to health and beauty aids to household items and pet supplies, were introduced nationally last year, according to Productscan Online, a database of Naples, N.Y.-based Marketing Intelligence Service. That's up 1.9 percent from the 31,432 products introduced in 2000 and more than double those launched 10 years ago.

        Retail buyers say there really is no magic formula for what will be selected. Sometimes a package, flavor or product catches a buyer's eye, not necessarily the sales pitch.

        “If we feel they have a great product, we can work out a deal,” said John Sporri, a category manager for AJ's Fine Foods, a chain of gourmet grocery stores. “Many of the people who pitch new products to us are mom-and-pop companies.”

        Once a business lands the deal, however, the key to success is a quality product, the ability to fill orders and customer acceptance. And small-business owners must be willing to take a huge risk.

        At AJ's, six managers gather monthly to evaluate items delivered by budding entrepreneurs hoping to grow a business. In April, managers evaluated 25 products and chose four.

        When pushing a product, proof that the item will sell is critical, said Edie Clark, spokeswoman for the International Mass Retail Association.

        “If the market research is sufficient, you can approach (buyers) with credibility,” she said.

        But even if the product is great, small-business owners need to evaluate the risk of mass marketing, said Michael Adams, a merchandising analyst in Scottsdale, Ariz., with California-based retail consulting firm RMSA.

        Often, he said, there's a lag in payment of 30 to 45 days. Another consideration: If sales boom, the businesses must have capacity to fill orders. A big deal could mean a half-million dollars or more investment for manufacturing and distribution. And if sales sour, a business can end up with lots of product and nowhere to sell it.

        “There are no guarantees,” Mr. Adams said. “Usually (small companies) are better off to start at the specialty end of the market, so you learn and get placement.”

        After months of research, Ms. Brownlee decided to focus on specialty stores so she could command a better price for her Toffee Chips. She's in four of six AJ's in the Phoenix area and a Nordstrom in the Kansas City, Mo., area. She's in negotiations on other deals.

        Ms. Brownlee said packaging and taste were important. But in the case of AJ's, she sealed the deal with product demonstrations and a provision that doesn't allow her to sell at other area grocery stores.

        Jeff Barthold, who has sunk about $50,000 into launching Liquid X, an energy drink, originally marketed the product to Circle K to reach a large number of consumers. He said he offered an exclusive deal and a low case price, but his follow-up calls were not returned, so he began concentrating on nightclubs, bars and tattoo parlors.

        Circle K looks for proven sellers, spokeswoman Julie Igo said.

        “Our research indicates people coming to a Circle K know what they are looking for,” she said.

        For Mr. Barthold, the focus seems to be working. About 25 bars have picked up Liquid X since he began marketing it five months ago.

        Goodyear, Ariz.-based Southwest Specialty Foods, which produces the Ass Kickin' hot sauces and products, focuses on specialty shops because of product pricing and not having to negotiate shelf fees, said Linda Jacobs, vice president of sales and marketing. The product can sell for $5.95 a jar, about $2.50 more than mainstream competitors.

        The 16-year-old company points to product labeling, new product offerings and historic sales as key to making deals.

        “When we come out with more items, they've been willing to give us more shelf space because of the success they've had with the (other) products,” she said.


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