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Serenity   Thursday, 11/12/09 03:47:44 PM
Re: None
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show details 3:39 PM (6 minutes ago)

Hello Moderator Team –


From: Eric Lehner
Sent: November-12-09 3:38 PM
To: Shareholder X
Cc: Paul Knopick
Subject: RE: Shareholder Question: Revenue vis Store Count

Hello Mr. XXXXXX,

Thank you for the opportunity to explain what may appear to be a paradox.

Winning Brands has an attractive business model. We supply a product that can be sold widely throughout the community (ie many store types) because of its usefulness across so many lifestyles and because of its relative affordability (most people can come up with $9.95 for something they want). However, for this model to be fully operational, two conditions must first be satisfied – the widespread availability of the product (ie many stores) as well as a high rate of purchase from those stores by consumers (ie product purchased daily). It takes a high volume of transactions of a few dollars per bottle to add up to millions of dollars. Fortunately, in our category of products, millions of people are purchasing something every day, or at least having an unsatisfied need every day. Millions of stains occur every single day. Many are left unattended due to the lack of a familiar, satisfactory, easy solution.

For the past 3 years, Winning Brands has been striving from the ground-up to determine which of its products would be its lead product, and then to secure store listings for it. We, and our lead product Winning Colours Stain Remover, were not known by retailers. It was very difficult to get into any stores. You may be surprised just how hard it was and the gruelling effort required. This is typical of any “quirky” new brand that comes out of nowhere with a proposition that is out of the ordinary. Yet it is those quirky brands that stand the best chance to become iconic favourites over time because they have genuine personality, rather than being massaged into just another “me too” line extension of established brands. In the computer world, the early unusual approach has evolved into a style leader. There are many other examples. That is why respected larger manufacturers buy new brands – it is less costly to buy a proven winner than to try unsuccessfully to create a portfolio from scratch because of the failure rate of new product attempts.

Gradually, we were able to add some Canadian retailers of significance for Winning Colours Stain Remover and are now in discussions with U.S. significant retailers, some being highly advanced. Therefore, the material growth of store count for Winning Colours Stain Remover has only happened very recently – and remember, store count is only the first part of our model. The second part is to generate enquiries by consumers and lift sales within the stores to leverage this growing geographic footprint of stores that carry Winning Colours. We need to convert the sales rate from a bottle per week (or less) per store, in some cases, into a bottle per day per store, and then into several bottles per day per store. It is during this implementation of this second part of the business model that the sales growth of the company will make itself felt in dollar terms. The good news is that we are now seeing an increasing number of stores moving up from early low turnover counts. This is happening because of personal satisfaction by many consumers and their eventual re-purchase, word-of-mouth by those satisfied customers to friends and family, local advertising in some places and in-store audits by our field personnel to provide retailer staff training and display touch-ups. In the early days, we considered ourselves fortunate if a store sold 7 bottles in a week. Now, the most advanced store (in terms of merchandising and training) has reached 56 bottles per week, although that varies with the location of the bottles in the store. There are now many stores that sell more than a bottle per day.

In summary – 4,000 stores purchasing a case of product (12 bottles) once may generate approximately $200,000. But the same 4,000 stores supported to increase sell-through to a bottle per day, for this one product, in the one size translates to nearly $6 Million dollars. 10,000 stores selling a couple of bottles per day would generate $30 Million and so on. I have been reliable from the outset of us being a public company to speak realistically about things. I have always been plain spoken about the challenge of initial operations. Any realistic assessment will reveal that we are still, by and large, unknown to the vast majority of investors and consumers both. This is what makes Winning Brands so attractive in my opinion. This is the opportunity for us as current owners – the current shareholders and staff (who are also shareholders). We are just barely emerging from relative obscurity with many predictive indicators that suggest that our up-side outweighs the down-side risks; particularly because we have survived the initial 3 years that usually take the toll on new junior public companies, and because your management and staff are so clearly focused on their mission. Rarely is there a company with so much verifiable linear progress toward a stated goal, that has such massive potential, with precedents to support it. This is why we have more “longs” than most of our peers amongst junior public companies. Our longs are not “in love” in the sense that their judgment is impaired, but instead they love the fact that here is a company whose progress is demonstrated right before their eyes concretely through pictures of products on the shelf. They appreciate that we have an accountable management team that understands that it is an honour and privilege to serve the interests of these stockholders. Your management and staff also understand that we must accomplish something truly meaningful for these stockholders in order to earn their respect and to earn a reputation of being a cut above the rest.

Accordingly, the current sales figure being less than a million (and don’t worry it is higher than $200K) is nonetheless real, unexaggerated, verified through listing of business partners by names, address and telephone numbers – all working toward an outcome that requires tenacity and creativity to achieve. We have plenty of these qualities at the headquarters of Winning Colours Stain Remover, the emerging favourite stain removing product - and home to other fine products that even earlier in their life cycle. We have limitless reserves of tenacity and creativity. The marketplace has not even seen a fraction of what we are capable of.

I am thrilled to come to work each morning because we are building a business success story that will be worthy of study in the future. Our shareholders are in part the authors of this success.

Thank you again for your interest in Winning Brands and your kind support.

Eric Lehner, CEO

P.S. I will share this with the board moderators in fairness to other shareholders, with your name removed.

From: Shareholder X
Sent: November-12-09 2:20 PM
To: Eric Lehner

Hello Eric,

Congrats on reaching the 4000 store milestone! I think this company has come a long ways and you are going a terrific job. I have one question, in spite of having 4000+ stores selling winning colours now, how come each time there is a Form D filed the revenue listed on there is still under 1,000,000. Having so many retail outlets and still doing revenue under 1,000,000 just does not make sense. Would you be kind enough to share you thoughts on this!


Shareholder X

Be kinder than is necessary, you never know what trials people are going through.
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