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The Business of Food

by Jennifer Barney

 

Pitching Costco: Part 2
4-min read

We’re going to get into what to put in your deck, but first, some of you want more detail about what to expect from a Costco meeting (catch up here on last week’s post).

When it comes to presenting to Costco, some things haven’t changed. Here’s an excerpt on my experience from my (unpublished) book:
 
I had no clue about the club business but I did at least know that Barney Butter was a little premature for Costco.  Nevertheless, Kim was excited to put me in touch with her broker and I was flattered that she thought of me.  I thought however wrong the timing, it would at least be a good education.  
Talking with the Costco broker sent me off on a tangent.  It’s a whole different business selling into clubs and I did learn a ton.  But the broker wasn’t offering free information; he really wanted to represent us as his client.  He was very persuasive that we should present to Costco now. 
There were a lot of logistics to work out for Costco.  We had to set a price point, simulate new case packs and create an entire presentation utilizing the data from club offerings just for them. It was quite an effort to get ready for a presentation. The date was set to meet with the buyer for the So Cal region of Costco at their offices in San Diego.  
I waited for the broker in the parking lot.  It was classic.  He pulled up in an expensive car and wore a Hawaiian shirt with one too many buttons unbuttoned so you could see his giant medallion necklace.  He brought a soft cooler into the meeting, I didn’t know what for.  We were ushered in by the buyer’s admin, an older lady with a flaming red up-do, too much make-up, and bling-y fingernails, who acted very familiar with the broker. We sat in the employee lunch room, at a round plastic table with people all around eating from vending machines.  The admin lady proceeded without the buyer.  She asked questions and wanted to taste Barney Butter, both to which I very animatedly complied. It was informal so I didn’t think this was the actual meeting, seeing as I had worked so hard to make a bound presentation which sat on the table untouched.  
The broker and buyer were well acquainted, a tired looking woman in mom jeans (this was not cool yet) who did eventually show up.  The first thing the broker did was unzip his soft cooler and set a chilled glass in front of the buyer, and also a carton of chocolate milk - the quart size.  He did this ceremoniously, like an offering, which she seemed to expect. The buyer proceeded to pour herself a full glass right there in front of me as the admin lady addressed her directly, summing up what she had gathered from us.  The broker and I sat silent.  The buyer listened, all the while chugging that tall glass of chocolate milk.  Then, because a quart is 32 ounces, she poured herself another full glass.  The admin lady took some Barney Butter up with a spoon and plopped it on a paper plate in front of the buyer, poked at it, and then lifted the plate towards me and said, “Is it supposed to do that?” It looked like what it was - a glob of nut butter.  “Do what?”  I was confused.  This so far seemed very rude and unconventional.  The buyer finished her second glass of chocolate milk and went straight for the spiral bound presentation I brought.  I started in on my rehearsed spiel but she didn’t want to hear it.  She went directly to the pricing and said, “Holy cow.”  The broker finally piped up getting real sales-y, to which the buyer had every objection.  
It was getting embarrassing and I wanted to put an end to it so I stood up and put out my hand to the two ladies but the broker, not moving from his seat, goes “Wait, what about….” but it was over.

Don’t get me wrong. Costco is awesome. The buyer being late and unnerving is part of the game. The real story here is don’t go after Costco if you’re not ready or if it doesn’t make sense.  For some of you, Costco can be very good. Once you understand what to expect and have worked out the economics, it’s time to focus on getting the pitch deck right. 
 
KISS (Keep It Simple Stupid) 8 – 10 slides max
  • Include an agenda slide (tell them what you’re gonna tell them)
  • Consumer insights -> understand their members
    • One slide showing your consumer target matches their member target
  • Category Insights
    • Show consumption is up, broad base appeal is up, show up, up, up trends
  • Supply Chain
    • Be transparent about where you manufacture, food safety, logistics, quality of ingredients, sustainability
  • Exclusivity
    • Show you can’t get this product / pack size / convenience anywhere
    • Specs & mock up photos of pallet, packaging
    • Do the cutting now
  • Pricing
    • Their cost
    • Member price
    • Comparisons to retail – equivalized – show margin difference
  • Competitive Offerings
    • Show how you stack up on value, nutrition, ingredients, claims, and anything that makes you stand out (make sure you are comparing to other club packs).
A final word on pricing: the buyer will ask you if this is your best price. My advice is give them your best price based on your all-in costs, and be able to defend it. Do not hold back dollars so that you can buy and end-cap as that will not be appreciated by the buyer. 
 
Good luck!


All my best,
Jennifer
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I'd love to hear from you - get in touch at jennifer@3rdandbroadway.com
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