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Bai learns a big break also brings bigger expectations

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Ben Weiss, CEO and founder of Bai Brands, expects to triple his revenue in 2014 to more than $66 million.
Ben Weiss, CEO and founder of Bai Brands, expects to triple his revenue in 2014 to more than $66 million. - ()

Ben Weiss remembers getting the word from Costco that his product had earned a spot on its coveted shelves.

But just as vivid in his mind is time he found out his product was being taken off.

It was a moment of truth for Bai, the antioxidant-rich beverage made from coffee fruit that he started producing just four years ago out of his basement in Princeton.

Weiss, who thought he had made it big when Costco agreed to sell his product regionally, learned another hard lesson in the retail industry: Getting your product placed in a big chain only offers a chance for success.

And plenty of chances for failure.

In Bai's case, it was as simple as having the wrong number of flavors in a variety pack. When Bai noticed it and told Costco about the problem, the wholesaler deemed it a "quality control issue" and sidelined Bai for five weeks to give the company time to regroup and make sure such a mistake would never happen again.

"They have such high standards," he said. "It's a pain in the neck to deal with them, but because of dealing with them, you become a better company. I think we're a better company because of the standards Costco employs."

One that is projected to reach $66 million in sales next year.

Bai's four-year life story is one of extreme success in a sector riddled with road blocks and barriers to entry.

For a small beverage business, scoring a contract with Costco or any other big retailer can be life-changing — as it has been for Bai, now headquartered in Trenton. But the industry is cutthroat and complicated, even for those who hit the proverbial jackpot.

Big contracts with major retailers can lead to sky-high sales, but those are insanely hard to get. And even if you do score a deal with the Costcos of the world, can your business handle the windfall?

Domenick Celentano, an adjunct professor at Fairleigh Dickinson University and cofounder of The Foodpreneur, said that's something many food business entrepreneurs don't consider when looking at landing a contract with a Costco or a Target, for example.

"For many people, it is the dream," said Celentano, whose Foodpreneur business coaches food industry startups. "What it means is a significant exponential increase in revenue, but it also means that the smaller food entrepreneurs need to manage their cash in a way they never did before."

And that's still a good problem to have in the beverage industry, where those lucrative contracts are hard to come by.

One of the biggest problems food entrepreneurs run into is finding a product that is truly unique, Celentano said.

"You've got to have something that will answer the buyer's question: 'Tell me what I don't have in the store,'" Celentano said. "And there's too many lookalike products."

Shelf space inside supermarkets and big box stores is also a big issue, Celentano said. Shelves in those stores rarely have holes to fill, which means that when a beverage maker is making the pitch to have his or her product sold in a particular location, that person also needs to make the case for why another product needs to be downsized or cut out of the store's inventory entirely.

"And that's got to be a really compelling argument because any new products coming into the market have a high risk," Celentano said.

Then there's a string of other, seemingly innocuous things that can knock a brand out of contention for prime grocery real estate. Costco, for instance, is reluctant to work with smaller brands that may not be able to handle a huge influx of orders for fear of running them out of business. And even shipping a store too many items in a single case can be bad for business, Celentano said.

"Little things like that throw you out, and you can't get back into the buyer very quickly, either. Many times in the category, they're only buying for the category once or twice in a year," Celentano said. "The food business is fraught with these little gotchas."

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