Entrepreneurship is central to what we do as a digital marketing agency. Being so close to startups and organizations makes us more aware of the impressive number of challenges and opportunities they face every day. I, Rob Elbaz, Paid Media Specialist at Bloom, wanted to sit down and discuss those common challenges with some of Quebec’s most innovative and successful CEOs.
We are kicking off this interview series with Gil Michel-Garcia, Co-owner, and CEO of WAFU, a well-known and loved Montreal-based company. Founded in 2001, WAFU offers Japanese-inspired award-winning sauces and dressing across Canada and the US.
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Interview Highlights
You prefer reading over listening? No problem, read parts of the interview down below.
What’s next for WAFU?
Rob Elbaz: We will start at the beginning, how did WAFU got started?
Gil Michel-Garcia: WAFU got started with our partner Mari Toyoda, who’s one of the shareholders of the company. She created all the products basically in her kitchen. So, WAFU, from a product perspective, is her. We, WAFU as a company, came into existence when we join forces with Mrs. Toyoda in 2006. After she finished her venture doing package sushi, we spun off that venture into exclusively a salad dressing. We chose one product: WAFU original dressing. It was a product that didn’t have very much marketing behind it, didn’t have any branding behind it, and it was still a very successful item in groceries, by itself.
The Canadian Market and Online Groceries
Robert Elbaz: Let’s talk about the shift into online. I notice you have an online store. I believe you were doing some online sales through other channels as well.
Gil Michel-Garcia: Yes, but Canada is a very underdeveloped online grocery market. Most people do not buy their groceries online in Canada. My personal opinion of that is because, Canada has a much more urbanized development model in the population base, much less of a suburbanite population base. There’s less of a commute of a large population, especially the younger population. They don’t commute as much. Which means that they don’t have a lot of storage space, which means that they shop often, which means that most of the purchases are not large purchases online on a weekly basis like Amazon does.
So, most of the grocery purchases, although there are some that are made online, occur at grocery level. Most of our sales online, in Canada, are consumers that can’t find a product at retail that would look for it online because they are unable to find it locally.
Marketing Strategy and Distribution Structure
Rob Elbaz: So, let’s talk about online marketing and where you are at right now. I guess probably more of a brand awareness strategy?
Gil Michel-Garcia: Well, right now, we don’t have the cash to just drive brand awareness as an expenditure. So, like BOGO (buy one, get one), anything that we do has to be directly correlated to conversion and sales. We just don’t have the marketing budget to just exclusively build brand.
RB: Well, from what I have seen, WAFU has blog articles on the website and recipes. So, even if it’s not a paid spot there’s still some kind of branding going on.
GMG: Yeah, we obviously have a content strategy, but developing the content isn’t terribly expensive. It’s expensive to push it out. So, it’s the pushing out that’s hard. You need to find ways that are cheap, that piggyback. Reality TV has been very successful for us. You get on TV for free. We did “Food Factory”, we went on “Dragon’s Den”, we did “L’Oeil du Dragon” in French. I did “Moment Décisif”. I always try to take advantage as much as possible of participating and pitching for reality TV shows, because it’s just a great way to get free marketing, right?
And, obviously, having a website, having recipes, having social media… But, in the end, I’ve read, in the United States, most people are introduced to new products through YouTube. So, if we want to penetrate the US market, we have to be YouTube ready. That means developing content. So, that’s been one of our strategies: how do we develop content in a way that we can afford. Then, we can put it out there on our YouTube channel and be able to drive sales.
However, before that, we need to set up a full distribution infrastructure in the United States and that’s not that simple.
RB: So it’s kind of two sides of the coin: you need to know what you have to have ready on the marketing side and then you have to be ready on the distribution side. You can’t have one without the other.
GMG: But, to push that you need content. So, first comes the distribution structure and the distribution structure is complicated… to do it profitably. We’ve tried penetrating the US market. But, the fragmentation of the US market results in smaller companies like ours pretty much losing their shirt when they try to penetrate retail. We tried three different ground games approaches with three different distributors. It just became too expensive to push.
Because you’re gonna have a shelf entry costs, you’re gonna have the margin of one distributor, the margin of several warehouses, you might have the margin of a second distributor sometimes because one doesn’t go to all the stores. Then, the retailer marks it up. In the United States basically, you take the full head of the promo. Retailers do not want to participate. They want money up front for listing fee, plus they want you to take the entire cost of the promotion. That means you’re taking dollar for dollar on the chain. One dollar off means one dollar off to you and not through the chain of distribution
RB: Any coupons that WAFU offers, WAFU pays full price.
GMG: Yes, that makes promotional spend quite unprofitable because you’re really reducing margins in a negative cash flow scenario. And then if you don’t promote it then retailers will see it as a none successful product and that’s going to create a bad perception of the brand.
We decided that instead of just battling it out and just throwing money at this issue we just let the US market go without any investment.
What’s next for WAFU?
RB: So, let’s talk about 2019, the rest of the year, and into the future 2020 and beyond.
GMG: So 2019 is about finishing to set up our online distribution structure for Amazon and the United States. Launching WAFU and Amazon as a brand and as a product for immediate delivery to consumers in the United States with marketing push on Amazon with Amazon consulting experts that know what they’re doing in terms of operating the Amazon space. And then follow that in 2020 by developing content and a YouTube channel to both create brand awareness in the United States and drive online sales on Amazon.
And what happens when you do that successfully, you will get sales data. And, the sales data is what allows you to present yourself to a retailer and say: Here is my demographics, here is my sales data in your geographic space, this is why you should have my product. The people that buy from your store are the same people that are buying online, within your region. That’s a much more convincing argument. When the buyers have never seen your product, to come in with retail data, with e-commerce sales data behind the proposition that your product would work in their store.