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Not just a one product company, Vertical
Branding, is a successful consumer products company that is recognizing the
results of their layered revenue strategy, bring one product after the other
to market and layer on their retail distribution
Services
Specialty Retail
(VBDG.OB-OTC: BB)
Vertical Branding, Inc.
16000 Ventura Boulevard, Suite 301
Encino, CA 91436
Phone: 818-926-4900
Nancy Duitch
Founder, CEO and Director
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published – April 27, 2007
BIO:
Nancy Duitch, Founder, CEO and Director
Nancy Duitch is a successful and influential entrepreneur and CEO with
thirty years retail and direct to consumer marketing experience. She has
held management and consulting positions with companies like Pep Boys and
Spa Formula Cosmetics and Kent & Spiegel Marketing. She has been responsible
for marketing programs, which have generated over $1 Billion in revenue for
brands like Hercules Hook ™ Bun and Thigh Max ™ and Botopical ™. Mrs. Duitch
has a legendary ability to develop successful products and marketing
campaigns. The founder of Vertical Branding, her insight also extends to
finding and developing the people who have helped her build this business,
many of whom have been with her for over ten years, and who provide the
backbone of our Company staff. Mrs. Duitch is also very active in Industry
and philanthropic organizations, including the C.A.R.E Foundation.
Company Profile:
Vertical Branding, Inc. (OTC
BB:VBDG.OB) is a consumer products, branding, marketing, and distribution
Company. The Company takes an integrated vertical marketing approach to
brand building utilizing a variety of media channels, including television,
online media, and print advertising. The Company also has established
retail, catalog, and international product distribution channels to drive
consumer sales. The Company's focus is on finding appealing and high quality
products that meet a real need in the marketplace with emphasis on the
health, beauty, relationship, personal care, and houseware product
categories.
CEOCFO: Ms. Duitch, what was your vision
when you started Vertical Branding and where are you today?Ms.
Duitch: “We are executing
the vision that we had planned six years ago when we started the company.
The vision was to bring high quality consumer products to the marketplace
utilizing transactional marketing as our media vehicle brand and transact so
that for every $1.00 we spend on media, we get at least $2.00 back in
revenue. In addition, we wanted to push these products through for great
continuity program. How it has changed and how the vision has actually
morphed into a more positive business model for us is that in August of
2006, we acquired the asset to a retail distribution company. It has
relationships with all the major big box companies such as Wal-Mart Stores
(NYSE-WMT), CVS/Caremark Corporation (NYSE: CVS), Target Corporation (NYSE:
TGT), Walgreens Co. (NYSE: WAG), Kmart (merger Sears, Roebuck and Company -
NASDAQ: SHLD), Kohl’s Corp. (NYSE: KSS), Bed Bath & Beyond Inc. (NASDAQ:
BBBY), just to name a few. Therefore, starting in the month of August, we
had an immediate distribution into every major retailer in the country. By
the end of last year (2006), we had actually shipped almost every major
retail chain. What that did was it allowed our net profit to grow because
even though our transactional marketing has great gross profits, our retail
and our continuity really make up the biggest proponent of the net profit.”
CEOCFO:
What do you look for in the products you take on?
Ms. Duitch:
“First, many of the products are internal products; these are products that
we create ourselves. In addition, we get over 100 product submissions a
month to our company. We look at products that fit into categories such as
beauty, personal care or household how to make life better, easier, how to
make me more beautiful and younger and feel good about myself today. They
have to be products geared toward our core demographic. We are extremely
focused on our core girl. Our girl is between 28 and 55 years of age, she
has an average income of between 50 and $65,000.00 and she aspires to
greatness in life. We make sure that we try to bring high-quality products
to her; products she can afford and products that are going to bring value
to her life. However, there are a lot of products that come to us that
definitely even Merlin the Magician couldn’t make work. They also have to go
through financial and operational metrics for us. Even though a product
might fit marketing strategically for us and it may be the right product, we
will not get involved if we can’t buy it at the right price, can’t purchase
it properly or the lead times are too long and we can’t find a secondary
manufacturer. In addition, we do not even touch a product with patent
issues. Therefore, about 20 metrics go into our decision-making process.”
CEOCFO:
Do you own the projects or do you have a contract to represent the company?
Ms. Duitch:
“We do not ever represent any product. We either own products 100% outright
or we have exclusive licensing rights. We control every aspect of a project
from financial to marketing, to operation, strategy, and PR. We do not allow
any control to go outside of our company.”
CEOCFO:
Are there a certain number of products you represent; do you try to have a
mix in the categories or is it just what is available?
Ms. Duitch:
“For example, two weeks ago, we had a Greenlight meeting and we had 80
products. Out of those 80, we chose 6 to move forward on. Out of those 6 it
just so happened that 2 of them are beauty, 3 are household products and 1
is more of a personal care and self-improvement type of product. It was not
calculated; it just so happened that those were the best products that we
felt that we could do a great job with and make the most amount of money on.
How many products we do relates to how much cash each product takes to make
successful. For instance, we have done extremely well with our Hercules
Hook™ product that has been out on the market for the last ten months.
However, that particular product is very capital intensive; it took about $2
million of working capital, because you have to buy the merchandise from
China then ship it to the retailers and the individual customers. We feel in
the year 2007 our goal is to have 4 new project launches on top of the 13
products that we now currently own or have exclusive licensing rights for
that are at retail and/or one of our channels of distribution. Then in 2008;
our goal is to have six.”
CEOCFO:
How do you know if a product will do what it says it will do?
Ms. Duitch:
“On beauty products, we do not take on a product unless we perform, or what
come with those products are third-party clinical studies. They have to be
substantiated studies done by an outside third-party laboratory and there
has to be a minimum of two studies for those products. Just because somebody
comes in and says they are representing a product that will make me 20 years
younger that we would all love and can be done without going under the
knife, doesn’t make it so. We have an advertising attorney review all
substantiation. On a household product, we will go to a consumer-testing lab
and we will do testing of all of our products before we make any decision to
go forward on them. We have legal counsel to make sure that whatever claims
we make, can be substantiated with scientific backup that we have.”
CEOCFO:
What does Vertical Branding know about the whole process that makes you so
successful?
Ms. Duitch:
“What we have done is come across a magic formula of the following; first is
multi-channel distribution, because you cannot be successful today selling
anything without multiple channels of distribution; it is always about
optimizing your profitability mix. Just because you are very successful on
emails, does not mean you should not be doing banner ads as well, because
the banner ads could be causing people to go to search, which could be very
successful for you. You have to take a look and analyze. We analyze every
piece of information that comes into this company. We analyze how many
click-throughs we get, how many respondents we get to our email campaigns,
how many calls a week we get for every television ad we run, what the
conversions are and how do we change those conversions. If we change one
word in an inbound script, change the background color of our site, or email
campaign, we want to know if that causes people to want to buy more
products. How can we increase this by .50 cents or $1.00, the cost per
order, how can we decrease our cost? That is what the analysis does for us,
it helps us with our cost efficiencies and it helps us how to get more money
for every order that we generate in the company. In addition, we are clear
and focused in on the product category and we are very focused on our core
demographic. We evaluate top-notch management in the company. Everybody here
is expert in what they do; almost everybody in this company has worked for
me 4 to 12 years. We have been together a long time. I think that is part of
the reason we are successful is that everyone here is better than I am; they
are smarter than I am, have better degrees than I do, and I think I have
surrounded myself with brilliance. Those combinations have made us work
well.”
CEOCFO:
You mentioned continuity; as time goes on people tend to get tired of
products and move to new ones, how do you address that issue?
Ms. Duitch:
“We communicate with our customers on a regular basis. We will call them and
send them gifts in the mail with our products when somebody cancels. Our
goal is to bring customer service in-house, which is something that we have
in our plan for the end of 2007, but right now, we outsource our customer
service. We have a save-the-sale program and we always try to make sure
there is an offer, an opportunity for somebody to buy another one of our
products once they are tired of the product that they have already purchased
from us. I think we are very good at communicating with our customers and
giving them what they want. If somebody is not interested in continuing, I
think the best thing you can do is give them their money back. Then you have
made a customer happy and you have allowed them to say nice things about
your company, so that when we do have something else we can go back to them.
What we have found is we go back to them a month or two from that point and
they are always happy to try new products.”
CEOCFO:
Do people see a relationship between your products and should they?
Ms. Duitch:
“With our beauty products, yes. We send out the brochure with our skincare
products and it will show the plethora of other products that we have in the
company. Do the customers for our beauty products know about our household
products? No. However, our household product customers do know. Hercules
Hook™ customers now know we have ZorbEEZ™, which is our new hit product that
we have been testing since January and we just are ramping up now, ZorbEEZ™
is a non-woven fabric that absorbs water 27 times more than a cotton cloth.
They all know we have a flashlight called the Extreme Beam, which is a 21
LED flashlight. They all know that we have about 5 really core household
products; those customers all know that and the retailers all know because
one of our big customers is the retail industry and they all know. Because
we have an excellent reputation with the retail trade, they know that if we
come in with a new product, we are going to take care of the retailer.
Therefore, they know that we are the same people that brought them Hercules
Hook™, StarMaker products, ZorbEEZ™, Extreme Beam LED Flashlight, DermaFresh,
and all the product lines that we have today.”
CEOCFO:
What is the financial picture of the company?
Ms. Duitch:
“We finally got financing in August of 2006, and we did $5.4 million in Q-3
with just a small amount of EBITDA, so we still had an earnings loss up for
that quarter. For Q-4 we did about $10.7 million and we had over $1 million
of EBITDA and over $300 thousand of bottom-line profit. We are proud that we
have been able to turn the company around once we had actual operating cash
in the company.”
CEOCFO:
You mentioned customer service going in-house; what else is ahead for you?
Ms. Duitch:
“We are always open for new opportunities. Bringing in-house our customer
service is definitely a strategy we will focus on and we are in the process
of implementing all new systems in the company. We are making sure that our
operations are extremely efficient; cutting costs down wherever we can and
making sure, we do not slow the growth of the company. Our big goal is to
make sure that we do not stagnate this company, and continue with the growth
the way we have been."
CEOCFO:
Why should potential investors be interested and what might people overlook
that they should realize about Vertical Brand?
Ms. Duitch:
“What is happening today is that we are getting a lot of press and there are
a lot more people looking at our stock. However, people are going to have to
wait and see how we performed 1st Quarter, and once they see that
there is a pattern and see what the results are, then they will to take an
even closer look at us. We just went public in November of 2005 and our
stock was traded by appointment only. We caught peoples’ attention when we
started making the announcements about how the company has grown and made
money. What is important is the fact that we are not just a one-product
company, but we are a successful consumer products company that is really
recognizing the results of our layered revenue strategy. This strategy
involves making sure that we bring one product after the other to market and
layer on our retail distribution, our continuity, and our transactional
marking campaign in a timely fashion so that we have a good basis for the
company. Our success is not hit-driven; it is based upon having good,
successful solid products out there. I think that people are going to look
and say wow, these people really have something going on and that we are not
all over the board.”
CEOCFO:
In closing, what should reader remember about Vertical Brands?
Ms. Duitch:
“What we are doing is different than other companies; we have taken this
magic formula to utilizing transactional media and pushing everything now to
retail and continuity, so that we can have great net profits in the company.
Therefore, we feel that this will bring value to our shareholders in the
company.”
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