What Happened When Premama Pulled Out Of 8,000 Retail Doors To Focus On The Bottom Line
A year after Dan Aziz raised $3 million in 2016 to expand his maternity wellness brand Premama, he scrutinized the results it was achieving in 8,000 doors at the likes of CVS, Walgreens, GNC, Target, Sprouts Farmers Market and The Vitamin Shoppe, and wasn’t thrilled with what he discovered.
“We realized that all these retailers were great at creating topline sales, but we were making no money on a lot of them,” says Aziz. “We did a deep dive into our retail relationships. What’s our door count with each one? How are we merchandised? What’s the buyer and broker relationship? What are our mandatory fees?”
It turned out Premama was strong offline at Sprouts and online on Amazon with no marketing dollars, but the rest of the retailers it was carried in weren’t pushing the brand into the black. Part of the problem was Premama wasn’t fully exposed at them. Sprouts and Amazon had its complete range of eight products, but other outlets didn’t. GNC, for example, had three. And many retailers didn’t stock Premama across their networks of stores. It was in a tenth of CVS’s units, a third of GNC’s stores and an eighth of Walgreens’ locations.
Aziz felt something had to be done to improve Premama’s balance sheet. He made a dramatic decision to pull out of retailers that had driven 82% of its revenues in 2017. Aziz focused on recasting Premama as a higher-end brand priced at $19.99 to $64.99 rather than every product at $19.99, zeroing in on profitable direct-to-consumer distribution and improving its standing in the retailers it would go into. Aziz says, “We had to take a step back to take a big step forward.”
In January 2018, he attended the trade show ECRM, unveiled the revamped Premama to retailers and informed them he wouldn’t put it in their stores unless it could have placement in a majority of them. Target was the only retailer that bit. So, Premama rolled out a new cleaner design and steeper merchandise (a switch from synthetic folic acid to folate that’s easier to digest thrust the cost of goods up 40%) to Target, Amazon and its website.
“We had to take a step back to take a big step forward.”
What happened? In 2018, Premama’s sales were flat. In previous years, it had notched at least 100% growth. However, the brand halved its net loss. “We had much greater control. We spent one third of the marketing dollars to get the same sale, and we could directly understand how our marketing was working,” says Aziz. “When you are marketing to retail, you don’t know if it’s one person buying 10 products or 10 people buying 10 products. We pivoted to DTC to truly measure the lifetime value of the customer and gather customer feedback on why they might like or dislike a product.”
In 2019, Premama returned to growth, with its revenues jumping 107%. This year, Aziz predicts its business could surge 130%. The brand is on track to reach $5.5 million in sales. Premama has added The Vitamin Shoppe and Sprouts back into its retail mix. Retail contributes roughly 10% of total sales, its own DTC channel 60% and Amazon 30%.
Aziz says Premama is “continually getting closer to closer to profitable when we look at our net loss compared to total sales. We are covering all of our expenses except for G&A [general and administrative]. We have a 3X lifetime value in comparison to our customer acquisition costs on the low end and, on the high end, it’s almost 7X. Now, we are growing in all channels, Amazon, direct-to-consumer and retail.”
Aziz conceptualized Premama while he was a 22-year-old single male student at Brown University in Prof. Danny Warshay’s entrepreneurship seminar. Interested in supplements, which he had taken to help recover from a broken back at 13 years old, he stopped by a Whole Foods in Providence and happened upon a pregnant woman in the Whole Body section. She was dissatisfied with the options for prenatal vitamins. Subsequently, Aziz interviewed 300 pregnant women and learned 96% weren’t fans of the available prenatal supplement offerings. He figured he’d give them a different offering: a drinkable prenatal supplement.
“In reality, if you look at who is successful in those chains, it takes so much money.”
In 2011, Aziz’s business plan for Premama won $25,000 in cash and $25,000 in services from the Rhode Island Business Plan Competition before he secured $250,000 in funding to launch the brand. For Premama’s first two years on the market, Aziz pursued mom-and-pop stores for its distribution. In 2014, the brand broke into Target chain-wide. Aziz drew $1.4 million in a funding round led by Cherrystone Angel Group to support the brand’s entrance into Target and, in April of this year, Premama announced it had amassed $3.5 million in a round led by District Ventures Capital. Aziz aims to raise a $5 million round by early next year.
Pharmapacks, the e-commerce company with expertise in Amazon, is among Premama’s recent investors. With its assistance, Aziz envisions the brand’s Amazon penetration increasing to possibly 40% to 50% of its sales. “We do like to control conversations as much as we can with our customers, but there are some people that just like shopping on Amazon, and there are some people that like that high-touch relationship,” he says. “I myself am an Amazon shopper. I never go to a brand’s website. I like to buy it all at one place and have it all delivered.” Premama’s own DTC channel will remain its No. 1 priority, and Aziz doesn’t expect to enlarge its percentage of sales from retail.
Premama’s selection has come a long way from its drinkable roots. The brand still sells its Prenatal Drink Mix, but also has the products Postnatal Vitamin, Birth Control Cleanse, Digestive Relief, Energy Boost, Fertility Support For Him, Fertility Support For Her and Lactation Support in its assortment. Aziz says, “We were the first company to launch products for every stage in the fertility journey.” Skincare and devices are in Premama’s pipeline.
Looking back at Premama’s startup journey, Aziz has no regrets about his decision to pull it from retail and recalibrate. “It gave us such a better understanding of our customer and more control of our spend and our profitability,” he says. “I think one of the learnings is we were this younger company, and we were so excited to hear CVS, Walgreens, CVS and Sprouts wanted us. Those were big POs, but, in reality, if you look at who is successful in those chains, it takes so much money, and you have to be willing to lose money for years to make it.”