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Nick Kozak for the Toronto Star
Case Studies
Posted: January 7, 2014
by Barb Gormley

Gum maker woos mega grocery chain, but needs big sales, fast

Name:
PÜR Gum
Owner:
Jay Klein
Address:
8 King Street East, Suite 1905, Toronto, M5C 1C3
Offering:
Consumer package goods
Employees:
22
Revenue:
$10 million in 2013
Active:
4 years
Core customers:
Health conscious consumers, pregnant women, vegans, diabetics

Jay Klein is in a position that many small business owners would envy. After just three years of selling to mostly small independent health food stores, the founder and CEO of Toronto-based PÜR Gum has his foot in the door of food giant Loblaw, which has recently committed to selling his product.

 

But while many entrepreneurs regard cracking the big-retailer channel as a ticket to riches, Klein is more cautious. The year-long Loblaw supplier-approval process taught him that the demands of big league clients can be formidable, even before the deal is sealed.

 

Klein is thrilled to have successfully cleared the first hurdle of introducing his niche product — a chewing gum that is sugar-, aspartame-, gluten-, nut- and dairy-free as well as vegan- and diabetic-friendly — to a broader market. But he sees a second more-daunting hurdle coming fast: Once on the shelves, PÜR Gum needs to quickly grab the attention of Loblaw shoppers and induce them to buy.

 

The food retail monsters — such as Loblaw, Sobeys, Metro and Longos – are all scrambling to grow their share of the burgeoning $3-billion-plus Canadian natural health products sector. However, vendors who don’t meet performance benchmarks in these highly competitive markets are swiftly de-listed without ceremony, with the vacuum quickly filled by the next eager brand.

“You have to capture the attention of the consumer, or they’ll walk right by,” says Klein. “Stores want your product to turn and to immediately create revenues.”

 

When Klein launched PÜR in 2010, his first goal, he says, was to simply sell one package of gum to a stranger. He sold that first pack for $1.39 and since then has sold over 10 million packages of gum.

 

Revenues have been explosive since year one, at least tripling each year as the company has aggressively pushed its way into about 10,000 independent health food stores, cafés and gourmet shops in Canada, the U.S. and 18 other countries. Typical customers are health conscious consumers, pregnant women, vegans and people with diabetes.

 

According to Klein, the health food store sector has embraced the PÜR brand thanks to its strong value proposition (PÜR Gum is the “healthier chewing gum option” that “kicks aspartame,” says the PÜR website) and its marketing strategy that focuses on social media (PÜR has 3369 Facebook fans and 5232 Twitter followers), in-store product sampling, special promotional prices and, most importantly, education of front-line employees. His three-person sales team takes considerable time and a personalized approach to educating and motivating store employees.

 

“If you speak to a staff person at The Big Carrot or Noah’s Natural Foods in Toronto, for example, you’ll get some level of education about our product, because we’ve been developing relationships with these employees for years,” says Klein, who keeps his own sales skills sharp by conducting informal market research on airplanes while distributing packs of PÜR.

 

Though Klein realizes it will be impossible to present education sessions to every single employee of the grocery chain — which has hundreds of stores across the country, thousands of employees and multiple work shifts per day — the plan is to continue with the current marketing approach that has proven so successful in the health food sector.
Klein hasn’t considered hiring a sales development consultant — he would rather continue to invest in his team’s own ideas than put all his eggs in one basket, he says — and the company doesn’t have the budget for an all-out billboard, television and magazine advertising approach.

 

Eric Matusiak is the retail industry lead at Toronto’s Satov Consultants. He notes that while marketing is typically the responsibility of the vendor, some grocers include marketing support as part of their agreements, and this can help kick start sales.

 

“Vendors pay upfront monies to get set up in the grocer’s purchasing and supply chain systems, and they often also pay a marketing fee that covers all forms of advertising, including flyers, print, television, radio and internet,” he says. “But these costs can range into the thousands of dollars, so a small company needs to do its homework to ensure its profits are not adversely impacted.”

 

Thinking ahead, Klein already has his eye on other grocery chains where he might pitch PÜR. But in the meantime, his goal is to make a successful first leap into the grocery world, advancing PÜR one step closer to becoming a dominant player in the global chewing gum industry.

 

“This new phase of business has a steep learning curve,” admits Klein. “We’ve been given the chance to perform. If we don’t, we know there’s another person with a dream waiting for the opportunity.”

EXPERT VIEWS

As Interviewed by: Rosemary Westwood

This a great story. Loblaws is one of the leaders from a mass retail perspective in the health market, stocking a lot of brands. But the marketing they’ve been doing isn’t going to work because of the sheer scale of this deal. They need to be aggressive with their online marketing and how to get people on their website. They should look at a social media campaign to promote the gum and give away coupons, generating sales. They need to spend money on in-store promotions, shelf displays, floor displays and sampling, say giving away a few pieces of gum in a pack, so the costs to them are cheap. PUR Gum is too small for in-house marketing. For Jay, this is going to be a cost, and he needs to hire a marketing firm. He can still direct how it’s done. It’s not like giving them the keys. The firm will be able to do anything he wants, and he can negotiate to come up with something that works. But he won’t be able to do it alone.

by Mark Simpson - GBC

Jay is right to approach his new listing at Loblaws with hesitant excitement. Continued effort and budget will be required to maintain necessary merchandising and inventory turnover rates. The current sales method of relationship-building and educating won’t be a differentiator for PUR now. PUR has a strong brand and social media presence—these will be key for merchandising and turnover at Loblaws. The packaging and in-store displays PUR puts on Loblaws’ shelves should have links to PUR’s social media sites, which themselves should have ongoing integrated campaigns—discounts, loyalty rewards, coupons, as examples. Commanding shoppers’ attention, demonstrating PUR’s online brand community, rewarding purchase, and driving legitimacy for increased loyalty will be key for PUR through this next stage of growth.

by Brynn Winegard - Ryerson

This is a great problem to have. He needs to figure out how to sell a huge volume right away, but he says he doesn’t have the money to do it. It’s not clear what the details are of the deal with Loblaws, but he is going to have to get out there and market the pants off it. Online, social media. And you don’t want to go to his existing customers and lure them away from the small health food stores he’s currently in and damage his business with those stores — it’s actually building a whole new customer base. That’s tough. And it will cost money. There’s no way around that. He needs to get buzz going, and he could do it in house. It depends on how good he is at marketing himself. If he doesn't spend the money, how much time does he have? He could launch a campaign a few months in if sales looked like they were struggling, but it might be too little too late.

by Deirdre Fitzpatrick - GBC