Brand Analysis: Noodler's Ink (Part 2)

Welcome to everyone who found their way here from the Pen Addict podcast! I'm really grateful for Brad's recommendation and hope you all enjoy it as much as he does!     -JD

Last week’s post on Noodlers Ink spurred an interesting discussion on reddit and several commenters made an important point: there’s no requirement for Noodlers to be run as a profit-maximising firm. I completely agree with this; the owner of Noodlers, Nathan Tardif, is free to run the business as he pleases. The intention of that post wasn’t to be critical of those choices but to explore their implications. Today, however, I do want to get critical.

One of the most powerful things I’ve learned from economics and philosophy is that it isn’t enough to say something is good or bad on its own. Rather, we need to map out all of the costs and benefits – all of the pros and cons – and compare those to the most appealing, realistic alternative. For example, we can probably all agreement that democracy has some serious flaws, but its still a good system of governance because the benefits are greater and the costs lower than an alternative system.

I hope that my previous post didn’t come across as pushing a particular view, because the intention was to map out the pros and cons of running Noodlers in that particular way. There are some good features (cheap inks, huge range) and some bad features (quality and supply issues), but overall we can’t make a judgement about whether it’s preferable without looking at an alternative. In today’s post, we’ll explore what an alternative might look like, and use that as a foundation to compare the two and to consider who would benefit and who would lose out if Noodlers were to be run competitively.

To ensure that our comparison is somewhat realistic (and take that particular claim with a grain of salt), we’ll start by considering an alternative strategy for the business. The foundation of this strategy is my claim in Part 1 that Tardif’s real strength is innovation rather than business management. That’s no criticism of him, either: there are a lot of qualified business managers in the world but I don’t know of anyone else with his skills and expertise. With that in mind, the core of the strategy is replacing Tardif with someone who can take over the day-to-day management of the business, enabling Tardif to move away from management and ink production to focus entirely on indulging his creativity.

Of course, running that business is going to be a challenge, even if Tardif did take an entirely hands-off approach: there’s a truly humungous product range, quality concerns (whether justified or not, the concerns exist), supply issues, and retailers who struggle with the brand. Most challenging of all is that Noodlers probably comes close to breaking even, and it’s been said that the business runs at a loss for some products. The upside is that most consumers are extremely loyal to the brand and there isn’t a great deal of competition in the market; in other words, there’s breathing space in which changes can be made.

Breathing space is important because the business is trying to do too much with too little. I don’t think anyone is surprised that a business with one employee and 100+ inks is struggling to maintain a consistent supply. Noodlers needs to focus on doing less but doing it well. Insanely well.

To do that, I’d start out by identifying a small range of products that are popular and have high margins – a selection of inks, maybe eight in total – and stop producing everything else. Once Noodlers isn’t trying to do as much, isn’t trying to do more than it can possibly manage, there is time and energy to focus on the intensive, behind-the-scenes work of building a business.

To build the business, to make it large enough to survive Tardif’s retirement (or burnout), it needs to grow. The past approach put a lot of emphasis on growing the number of product lines, but this hasn’t led to sustainable growth. It’s just left Tardif overworked and led to the supply issues. The alternative is to have a small number of product lines and produce as many identical products as possible. To achieve this means focusing on three key areas: capacity, distribution, quality.

To increase capacity, the business needs staff and it needs a large facility. Finding staff – good staff, who can trusted and will stay with the business – is hard and it’s slow. Once they’re found, it takes time to train them up and start developing the skills and nous that can only come with experience. Alongside that, the business needs to find new premises: a facility that can handle a much higher workload that Noodlers has previously experienced, with space for production, product despatch, a lab/workshop, and some offices. Finding a good space and having it fitted out is another time-consuming task, after which staff will take a while to adjust and get familiar with things. While this stage can be frustratingly slow, it is the necessary building blocks of growing the business.

As production capacity grows, the business needs to reconsider its approach to distribution. Playing favourites with retailers – providing a full range of stock to some retailers, partial or intermittent supply to others, and leaving a few with the scraps (if anything) – is a terrible way to treat people that actually want to sell your product. Much less encourage them to promote the product over the other inks that they keep in stock. There need to be discussions with retailers, one at a time, to develop and grow relationships: to learn their businesses, their customers, and their needs. This is probably easier than it sounds, even when a relationship has been bad in the past: both parties want to make things work and retailers are usually pretty happy to be honest and open with manufacturers. They’ll happily talk about their customers, their products, how much inventory they can carry, how quickly they need restocking, how much notice they like to have for new products. These conversations can take place as production capacity is growing, retailers can be given assurances about a reliable supply, and a solid distribution network can be established and gradually grown.

Capacity and distribution need to be grown in parallel to ensure that production levels are equal to demand. A gradual approach also works because it enables staff to gradually become more experienced, the systems to be tweaked, and minimises the operational loss that the business is running. Growing sales means the business starts to enjoy some economies of scale, where the average cost of making each bottle of ink falls further and further and increasing the business’ profits more and more.

Once the business is in a position where everything is humming along nicely, it’s time to scale up further and start looking to international distributors. Right now, very few retailers outside the US are able to get any supply, which limits the potential size of the business and the potential benefits from economies of scale. Building the international business means costs can be pushed down even further, increasing profits and strengthening the business without raising prices or making consumers any worse off.

Once the international business is on a solid footing, I would begin thinking about bringing back some of the old products. The first step for me would be finding a reputable chemical laboratory, asking them to test the ink quality and publishing the results online. If the results are good, it will silence the brand’s critics and if the results are bad, it’s a sign that the ink formulation needs to change: something users deserve to know. Once the ink is reformulated, it’s back to the lab. An independent, transparent report goes a long way towards building up and reinforcing the trust of customers. At this point, I’d also consider rebranding the business: same name, but a new logo and ‘design identity’, as the marketing folks say.

From that point, inks can be gradually brought back to market in a way that ensures a reliable supply. An eye should be kept on the profitability of each ink, ensuring that the production facilities are being used to maximise the business’ revenue, and that no new ink is simply cannibalising sales of other inks.

A turnaround like this is a slow process; I expect it would take at least two years to get to the point where the old inks could be brought back. The company would be very different: it would be selling a lot more bottles of ink but offer fewer colours, it would almost certainly be a quite profitable venture and therefore a sustainable business, and it would undoubtedly be more innovative once Tardif was liberated from having his energy drained by business management. Prices for consumers might be higher, but the business would still focus on a high-volume/low-cost strategy so the products would still be quite cheap.

So the real question is whether this competitive scenario is preferable to the current business model. For Tardif, the overall answer seems likely to be yes: he gives up operational management but retains overall control, and has more time and resources available for creation and innovation. He also gives up political expression through his products, but instead receives profits that he can channel into other forms of political expression – ones that may be more effective. Importantly, his quality of life and wellbeing improves as the business becomes more profitable and the stress starts to fall on others.

For the distributors and retailers, the competitive scenario is undoubtedly better in the long run: improved relationships, improved supply, and a product that’s easier to shift. For consumers, there is some pain: the loss of many product lines for a year or two (or longer), then a reduced range. On the flipside, however, there is greater availability and a secure, long-term supply, but also the potential benefits of Tardif’s innovation. Imagine the Neponset if it had arrived after a year or two, instead of five: what else could have been produced? Finally, there are the staff whose jobs are created when the business grows. These people are undoubtedly better off in the competitive scenario.

So, it is obvious that a competitive business is my preference. Of course, it would not be easy to build and transform a business: it would require substantial investment, and there would be many challenges and setbacks along the way. But I think that there are substantial long-term benefits to everyone in the community and while the costs are real, they are comparatively minor. And so I hope that this – or some version of it – comes to fruition.