DNA Brands Inc (DNAX)

[Ed the Trader]

"He doesn't have a product run yet, and no orders. Why get a warehouse now?"

Look... this is pink land. I will completely agree that Adrian's statement that he is about to acquire office and warehouse space could be pure B.S.

However, assuming that he does plan to order a production run, once he does do that, it is going to arrive SOMEWHERE pretty quickly. People can say, "Well, what's the big deal about renting space? That is easy and takes no time at all."

These are people who think renting commercial space is as trial as renting an apartment, and they are wrong.

For a serious attempt at a business, space is one of the most important early steps they can make, and it is vital to do some research and a whole lot of shopping.

Location is critical. The space has to be large truck friendly because drinks ship on palettes in big trucks, not in envelopes delivered by the mailman.

To reboot the energy drink business, Adrian is likely going to have to take the first step of ordering a production run BEFORE he has any orders so he has product to sample to retailers and to be ready to instantly supply product on when a retailer agrees to buy product.

It is unlikely that any distributors are going to do any distribution deals up front until DNA again proves that it can move product. Like it or not, in the eyes of the beverage industry, DNA is a FAILED product. They effectively went out of business in 2014. Now, in nearly 2017, no one is going to commit large resources (like purchases of palettes full of product) or rare resources (like shelf space in retail chains) to a failed product unless it first proves itself again as a viable product.

That means Adrian will have to get small, independent retailers to stock a few cases of energy drinks in each store to again prove that DNA products will move.

This means that Adrian has to plan that he may have store products for many months before inventory from one production run is exhausted. DNA is not based someplace with a cool climate; DNA is based in Florida where it is still 80 or 90 degrees here in late December. Canned beverages do not age well in heat. So, a climate controlled warehouse space is vital. Pittman's idea of using a storage space is not going to cut it.

Once you have the truck loaded with your production run drive up to your warehouse facility, the product has to be unloaded somehow. It doesn't magically get out of the truck and into the warehouse.

So, you need a facility with a loading dock. Palette trucks and forklifts do not magically levitate into trucks to pull out palettes of product.

The warehouse must either be large enough to allow each palette to sit on the warehouse floor, or else you need palette shelving. Stacking palettes of canned drinks on top.of each other is an excellent way to crush and destroy lots of product. Does the warehouse have shelving? Probably not, but it is an item to find out when shopping for space

Forklift and palette truck purchases/rentals are also on the to do list but are not part of space acquisition.

Lease terms are make or break for a new business. Not just cost per square foot, but who handles the costs of repairs and maintenance?

If the building owner handles repairs and maintenance, what are their requirements regarding how fast a repair is made? What if the A/C goes out in June in Florida and the warehouse is full of product that Adrian cannot move for 6 months? He cannot afford to allow his product to cook in a hot warehouse for months before the building owner gets the repairs made.

What discounts are built into the lease for a variety of payment options and resigning incentives, among other things?

What are the penalties for early termination of the lease?

What type of utilities, including Internet service, are available to that location?

Those are just some of the more important things to consider when looking for space. I did not address planned expansion which involves having additional warehouse space to grow into. I also did not cover requirements for office space at all, but Adrian has to plan for that as well. He has to lease something big enough that it will support growth but not so big that the cost is a drain on the profits and thus prevents growth.

None of this is rocket science, but it is a big deal to shop around and choose very, very wisely.