And Caribe Crash was well positioned. Orangina comes in an 8.45-ounce size. Caribe Crash would be 10 ounces. It was targeted at women, but at that size men would buy it, too. A 10-ounce serving would also leave people thinking, as Randolph puts it, "Gee, if only there were just a little bit more." It would bring people back for another bottle.
Moreover, Kavanagh saw the drink as more than just another upscale gourmet drink. He knew he could sell it to a broader market: convenience-store shoppers. "It used to be that women never went into the c-stores," he says. "They were seen as dirty, high priced, and crime-ridden. But that's changed. For women ages 18 to 35, c-stores have become destinations, not emergency stops." Kavanagh labels this group "cherry pickers." They shop selectively for a few items, including high-quality beverages. Kavanagh also knows that "almost 75% of the shelf space in convenience stores is taken up by groceries, but they account for only 28% of profit and volume. The fastest-growing areas are food service and beverages. The convenience stores could happily get rid of grocery space tomorrow and fill it up with something else." What Jack Kavanagh saw filling convenience stores that day when he met Octavia Randolph and Deborah Pepin were bottles of Caribe Crash.
Kavanagh's advice may have been sound, but Oualie couldn't follow through on it. Money was again the problem. By January 1989 Randolph found the inflow of investment capital slowing. Having received commitments for $200,000, she decided it was time to launch the company.
But with only $200,000, Randolph and Pepin had to make a hard choice. They decided to produce the four products with the highest margins and the greatest "synergy": the two jams, the chips, and the salsa. Sales from these would hopefully break loose the additional $100,000 in capital Oualie needs to produce the other two products: the pepper sauce and Caribe Crash. The drink had a thinner margin, and Randolph and Kavanagh further reasoned that it made sense to wait on it until the business was better capitalized. It would have been fatal if they had started producing Caribe Crash on a shoestring, run into huge demand, and then not been able to meet it.
Oualie has established relationships with four co-packers who will produce its products under contract agreement. Two co-packers are in New England, two in the Caribbean (Jamaica and Dominica). Of its first four products, three will come from one co-packer in New Hampshire, which will ship directly to retailers during the company's first year of operation, with Oualie picking up the UPS bill. The fourth product, the chips, will be handled through Roberts & Associates, the food broker.
In Oualie's first month of distribution, September 1989, its first four products will go to approximately 70 outlets in the Boston area -- high-end specialty grocery stores. By the end of Oualie's first year, Randolph foresees servicing 250 retail accounts with an average monthly order of 25 cases per store. She expects sales for the year to reach nearly $800,000, with a net profit of $45,000.
By the second year, Randolph sees Oualie going through standard distribution channels with Jack Kavanagh's help. Sales, she projects, will climb to about $3.2 million, net earnings to $1 million.
Randolph believes that by starting local and overseeing distribution in the first year, she will establish better rapport with retailers. Oualie will do a lot of in-store demonstrations and tasting of the line, as well as stocking of the shelves, hiring trained professionals on a part-time basis to do much of the work. Specialty retailers welcome this kind of active involvement by manufacturers. It means free promotion, free labor. Going the specialty-store route accomplishes two other aims. First, it allows Oualie to sidestep the slotting fees that food companies pay supermarkets just to put their products on the shelf. Second, selling through the specialty trade gives Oualie more control over quality of presentation, something Randolph is obsessive about.
By limiting availability, Randolph can worry less about the capital needs and quality-control problems she would likely face if demand were to soar. By starting small and staying select, Randolph believes she can build a local and loyal following among Oualie's target audience: educated and working women, ages 25 to 44, with family incomes of $30,000 and up.
But if Randolph is cautious, she is also ambitious. She foresees a tripling of sales from year one to year two -- with her juice product still not yet in distribution. She sees Oualie as a national brand, which means getting her products into supermarkets. That's a long shot, considering that each year 8,000 new food items are introduced in the United States, and the average supermarket stocks only 10,000. Is Randolph intimidated by the odds?
"No, not at all," she says. "Our aim is to produce sales figures in the specialty stores that we can then confidently take to the distributors, persuading them to carry the product." The distributors then will approach the supermarkets with the Oualie line, which Randolph asserts will be wanted. Why? "Supermarkets these days are looking even more for products that provide the long dollar." Grocers want higher-margin products like Oualie's.
Jack Kavanagh has an expression to describe many of the hopefuls who want to break into the food business: "Everybody wants to get to heaven, but most people aren't prepared to die to get there." He explains: "An awful lot of people who come in here have wonderful ideas, but I'm also looking for enthusiasm and commitment. That's very, very important. Octavia has shown me a lot."
In May 1988 Randolph heard that the CEO of Ocean Spray Cranberries Inc., Jack Llewellyn, would be speaking at a seminar in Boston. She called his office, saying she would be there and wanted to know if Llewellyn might have a few minutes to speak with her. No, said his secretary, his schedule that day is tight. Thanks very much for your interest. Good-bye.
