Jonny said:
Miss Meerkat: Your post was very helpful, don't get upset if I send you a pm sometime =). I need more fully work out distribution channels and in what scale I want/can to produce before I dive any further. I need to find some juice and drink companies then, nice. Once the formula is completed do you think it would be wise to to have production in low-cost countries i.e Eastern Europe or even Asia, or will the transportation costs eat up the revenue? I guess when the business reaches a certain level this inevitable though.
Hi, sorry for the delay in getting back to you.
In terms of producing in low cost countries, the deciding factor here is the perishability (is that a word!?) of the drink. If it has a shelf life of a few days, this is clearly not a good route. However, if we're talking a red bull/coke type drink, then yes this may be a good idea. Distribution costs will be dependent on a combination of size and weight. I would allow an additional 5 - 15% of the product cost for distribution. You also need to mindful of time to deliver. If bringing in from abroad, you are likely to be using ships. When products arrive at customs, they usually sit about for a around a week wiating for customs approval then the lorries do their thing - could be up to another week (particularly if your volumes aren't massive - you won't get the same service as Mr Tesco, that's for sure!). If you're bringing in from Asia, you need to mindful of forecasting accurately for your stock requirements. an order will need to placed quite far in advance. Typical timescales might be production leadtime 30-50 days, shipping 3 months, customs and uk delivery 2weeks. There's not much room for error if you're product flies out (you're waiting months for your next delivery) or you're stuck with tons of stock with a sell-by date on that you'll have to clear at cost or less!!!
Bringing stock in from Asia also impacts on cash flow. the supplier will want payment soon after the order is placed 9what ever terms are agreed, but first order is likely to be pro-forma), but your stock is on the water for 3 months and by the time you ship it to customers and wait for their payment terms (60days?) you could be up to 6 months without cash!!!
Also, when I quoted my £2k dev costs, that was a best case, so please ensure you get quotes before you start using that for your startup costs. You've not said what type of drink you were doing, so that will have an effect, as well as the pack format.
Hope all this helps, feel free to pm me if there's anything else you might need help with.
lex
