Marani Brands Inc. (MRIB)

[Matthew Berg]

An increase in the number of stores, even by ONE, is an EXPANSION! That's not even debatable!

Call it what you want but it's a clear exaggeration and rationalization. One interesting thing I stumbled on recently might explain it. Costco has a strict policy for all of their tests and new products. They will not under any circumstances stock a product if the resulting sales represents more than 20% of a company's overall sales. That said I'm wondering how Marani got in in the first place? Obviously anything sold at Costco would far exceed the 20% limit. Closer to 95% I'd imagine. Did they perhaps fib a bit? Regardless, maybe the one store expansion is the limit given whatever total sales they told Costco they had.

There might be some traction in that scenario. Perhaps MRIB used the 1600 "already paid for" cases Margrit talked about as that total sales number. 20% of that would be 320 cases a year. As long as sales stayed at or below that threshold on an annualized basis Costco wouldn't have a problem. But expansion, if controlled in such a way would be very limited. Maybe one additional store was all the could do. Say two cases a month average per store or roughly 300 cases. Adding another store would put them right at the limit at 324.

So, maybe they'd like to expand more but policy gets in the way. That would be somewhat good news. The bad news is that if there's anything to it, sales aren't very significant and without other sales elsewhere can't grow past a certain point and/or very slowly given sales outside of Costco. Basically for every 120 cases sold outside of Costco they can add an additional store at the 24 case a year run rate.

Might all be a little far fetched but I've been told Costco is very strict about the policy and the addition of just one store is odd.