Actually less than 3 months but I would like to hear more from him also
Kelly Whelan
February 27
We had a shareholder inquire about the OEM strategy today. Keith sent him the following response:
Let me address these questions for you to give some clarity that comes from a 20 year career in the OTC space. I have relationships with every major retailer and have a clear understanding what type of products they are looking for to bring in store. Let me take this in pieces.
1. Why OEM first? Retailers on a national level reset their store once a year. In the pain category that happens in the fall annually. Retailers first question is always, "what are you going to spend to get this to sell" if the launch would be nationally, that would take on the order of 3-5mm dollar campaign. The OEM strategy allows us to work with partners who have existing retail presence. The ones we are in talks with have 40k plus retailer store distribution. For us to do that ourselves, it would take 5-7 years to get into that many stores. Retailers also would charge us 3-5 in just placement fees in addition to the marketing money. The OEM side allows us to fast forward that process, maintain 60% plus margins and have the marketing cost handled by the partner.
2. If you place a brand with out recognition into a large retailer it will fail. This process has to come at the same time, just because its on the shelf in a big box store means nothing. WM more than others.
3. The other side of retail is as basic as logistics. These retailers require large infrastructure to deliver product, this is better done with a partner who has this in place. The other side of retail is branding, packaging and customer acceptance. With partners we can drive sales with their existing customers who also are looking for pain products.
The partners we are finalizing things with will give rapid exposure to 50k plus retail outlets. 60% of doctors offices. 70% of all PT and chiros. They also bring over 250 reps both inside and outside to sell the product. Actipatch needs some consumer education to maximize sales. Reps seeks recommendations from doctors who tell patients where to get it in retailers. See the Senekot program, this I built from the ground up.
So in summation, the margins are better with OEM, volume is also higher. It drives brand exposure and customer awareness. I understand things never happen quick enough. If you don't build things correctly in retail, no matter how good the product you are destined to fail. We are here to win, we have made tremendous strides in restarting discussions with great partners who are right at a finish line.
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