Back in 1997, Timothy Heitmann had Popcorn Palace popcorn at its storefront in Chicago and thought it was "awesome." He wanted to include it in the items he distributed to convenience stores through his company, Joseph and Edmund's 5th Avenue Deli. But before he could, Popcorn Palace went bankrupt. Heitmann acquired the company's name and recipes. By trying various distribution channels and eventually focusing on a social cause, Popcorn Palace in 2014 had $8.5 million in sales. It's made the Inc. 5000 an amazing nine times. Heitmann shares sales lessons learned.
Giving it away can lead to more sales.
Out of the gate, Heitmann sold Popcorn Palace popcorn (flavors include jalapeño and brown sugar caramel) anywhere and everywhere: e-commerce, wholesale accounts, fundraising, QVC, FTD, corporate gift accounts, and big-box stores like Costco. One day, he got a letter from a boy who used funds raised from selling Popcorn Palace popcorn to travel across the country for a band competition. "At that moment, the meaning of business changed for me," Heitmann says. He decided to focus on selling to organizations, like the child's band, that could use the popcorn to raise money. Most companies selling to fundraisers let them keep 30 to 40 percent of the sales, so Heitmann decided to give them an incentive to choose Popcorn Palace--he increased their take to 50 percent. He ramped up the business slowly, keeping an eye on the impact, and realized quickly that it was a smart move. The fundraising channel saw fast growth in both revenue and profit.
Takeaway -- Maximizing profit margins isn't the only, or necessarily the best, way to boost your company's profitability.
Perils of opportunity cost.
By 2007, as Heitmann was growing the fundraising channel, he was approached by the owner of Bentley's Popcorn, who was looking for a new manufacturing partner. Heitmann considered the offer. Despite a potential revenue stream of $500,000 to private-label for Bentley's, Heitmann turned him down. Popcorn Palace was making about $2.5 million a year at the time, but Heitmann thought that taking on the client would be costly in the long run. "We had to learn how he wanted the product made," he says. "We had to allocate production time for him. This was time and resources that we couldn't apply to our growing brand." Heitmann decided to focus on building his own product's reputation instead of manufacturing for others.
Takeaway -- New revenue streams won't always translate to profit if you have to take your focus off your bigger growth opportunity.
Not all channels are equal.
In 2010, just as Heitmann was shedding the last of his big-box clients, a call came out of the blue from Duane Reade offering a huge order. Heitmann didn't feel great about the deal. He already wanted to get out of that channel, and, he says, "that market didn't fit our product," which is meant to be consumed as soon as possible once it leaves the plant. Heitmann agreed to do the $250,000 deal if Duane Reade paid the entire amount in 10 days--thinking the drugstore would never go for it. To his surprise, it agreed. But the product moved slowly, and Duane Reade held back 10 percent of the balance due for almost a year. This experience solidified Heitmann's resolve to drop noncore clients and channels, a process that took until 2013 to complete without going into the red. Today, Popcorn Palace sells exclusively through fundraising,
e-commerce, and corporate gift accounts. Starting in fall of 2016, Popcorn Palace will give 50 percent of sales of all nonfundraising products to a variety of nonprofits. "Now we can say that every single kernel popped is to help other people," Heitmann says.
Takeaway -- Stick to a channel strategy that's true to your product, mission, and brand.