MILK & HONEY UPDATE - OCT 2019
Hello investors! Hope this update finds you and yours well.
Production - I submitted the liquid PO in June and production was set for Sept. 9th. Lo and behold, on Sept. 8th I received an email from the manufacturer - the date honey did not arrive from Israel and production was delayed to Oct 11th! (Turns out, the manufacturer ordered the date honey but didn't pay for it!)
Of course, sales are up 30% over last year and we're getting orders. Our inventory starts chipping down - 300cs, 200cs, 100cs - and then, the dreaded PO that puts us in back order! Well, the good news is that after seriously sweating things out, and being back-ordered for two weeks, we have product - a fresh 4100 cs of inventory! The new bottles have neckers touting GLUTEN FREE and GLUTEN FREE is on the label (TTB allowed!). M&H Spirits is locked and loaded!
Massachusetts Launch - I traveled to MA late Sept for 10 days for our launch at Horizon Beverage. The trip involved several days of "ride-alongs" with sales reps and series of big GSM meetings where I presented to off premise and on premise teams. The trip was very successful, and we've sold over 200 cases in just a few weeks. In comparison, we sold about 20 cases in our first few weeks here in WI.
I believe we're going to get great support from Horizon - after all, my family owns it. My uncle even made a guest appearance at the off premise sales meeting to emphasize that M&H is a legitimate brand, that "Justin worked his ass off" getting brand ready for MA, and that the sales guys can make money selling it. Our Horizon brand manager told me that last week that sales managers were contacted by "higher ups" to make sure they push it. Just now, I got off the phone with a Horizon sales rep who tells me Milk & Honey is a priority for her team.
Finally, MA has a very large Jewish population. We sold into all the big independent stores in and around Newton. It was really fun selling there because a lot of the old-timers knew my grandfather. We have found that in MKE, Jewish people have come to embrace M&H, and I believe this will also happen in MA. When I started, people said "Jewish people don't drink so don't focus on them". Well, they DO DRINK Milk & Honey. One big retailer has been having lots of fun with the brand, and put up a sign, "The Jewish Baileys" - and it's working! Lol!
Hot Milk & Honey - Last summer, during an investment pitch meeting, a prospect, Luke M, and I got to talking. Luke did a stint consulting for Jagermeister and said, "For on premise bars and restaurants, you need something different. Have you ever tried Milk & Honey served hot?" I really hadn't, so I went home, mixed M&H and Jager, and heated it up in a sauce pan. I tested with all my usual suspects (13, 15, 18, mom)... AMAZING! I spent the next few weeks iterating to create Hot Milk & Honey - The World's First Hot Drinks Program.
Hot M&H was a hit in MA. We spent two days doing ride-withs with reps from Jager and Fernet Branca (an Italian liqueur similar to Jager). We got great feedback and sold in dozens of accounts. The beauty is that these reps get comp'd based on getting their products on menus, and M&H gives them something new and different to push. In a real sense, we've got these reps working for us! And, very cool, the Jager rep told me that, since she started working with Milk & Honey, the distributor is giving Jager more attention! ... Family!
Hot M&H is also crushing in WI. We've now got a rep working the street for us here. A great local lady name Gail Neu. Gail is killing it out there, and getting us into lots of accounts, especially in deep Rumchata territory in Western Milwaukee County. Gail is also managing our in-house demo teams, including hiring and scheduling. I'm getting reports from the street that she is doing a great job and earning a good reputation. We've got over 200 demos and events lined up in WI for the next two months, and we're lining up new sampling opportunities all the time.
Wisconsin Update - In Sept I launched a program I call "Win Back Indies 2019". The goal was to win back independent liquor stores (eg Otto's, Ray's) who fell off last year because Kroger scared them off by selling M&H at a really low price. I am happy to announce that the initiative has been successful. Several key indies have agreed to floor displays with our new stacker!
Ray's reports that the stacker has been driving sales. We've never had real "display love". We knew all along that M&H would sell through with displays; now we're getting a change to test our theory and initial results are very positive.
Also, chains are at set to go. Kroger agreed to keep pushing our brand in their 20 top performing stores from last year, Sendik's is on board big time with displays (first time ever!), and Total Wine is buying deep and pushing hard. Of course, "Nothing in OND is free", and the push is costing us money in terms of retailer incentives. But, this is where the big boys play and we have to compete. I feel comfortable that we've reached the a good balance of push side incentives and pull side marketing.
Influencer Initiative - We hired a social media management firm and launched our first comprehensive Instagram "influencer" campaign. We've organized fulfillment, and sent out our first 30 kits to "microinfluencers" in MA and WI. Initial metrics are looking good - we're getting lots of solid engagement. If you follow us on instagram - @realmilkandhoney - you can track what's going on.
Sales - As stated above, sales are up 30% this year. MA accounts for most of this increase. Distributors operate very just-in-time with inventory, so our big POs should ramp up in November and accelerate through December.
Gross Margins - Our "3rd Batch" order was still at minimum quantity levels, yet we were able to reduce costs by 5% on this order. This is mostly attributable to freight savings we had by shifting from CH Robinson to Globaltranz (thank you Jim & Mark!) to haul our loads.
More good news is that Horizon is paying us $10cs more than Badger Liquor, boosting margin to 56%, an improvement of over 20%. Remember, we're still producing minimum quantities and have not realized any substantial volume discounts. Thus, we can confidently project substantial margin improvements as we move forward.
Exit Strategy - We always operate with exit in mind. To that end, I am proud to announce we have struck marketing deals with three major suppliers that do not have cream liqueurs in their portfolios: Beam Suntory, Jagermeister-Mast, and Fernet-Branca. Each company has given us permission to display our product in connection with their brands and trademarks. This is an extraordinary achievement for a baby brand like Milk & Honey.
Highly Confidential Good News - We were selected to be contestants on Project Pitch It, a WI area "Shark Tank" type business tv show. We taped our segment this week, and we won $5000! The show will air to 80,000 viewers in early February. Perfect timing to jump start our winter campaigns!
In closing, things are going well. We're keeping a rein on spending and doing our very best to make things happen on the street. I believe strongly that the key for us will be to keep things going steady and keep our product in front of consumers. We've got the best product in the category, and that's not going to change.