Getting in to Food Distribution Companies
You will learn
- About different types of food distribution companies
- What to consider about your contracts
- How to research food distribution companies
So, how do you go about getting your product in to food distribution companies? Are you looking to get your product in to a big food distribution company such as Waitrose, Tesco, M&S, Sainsbury or Morrisons? Or are you maybe a little more discerning, and looking at smaller, more independent or exclusive outlets? Large food distribution companies may grant you with a bigger potential customer base. However, dealing with smaller retailers is a faster process, and generally it will be the owner/manager in the shop who is the decision maker.
Whichever size of retailer you decide you are going to approach, you need to have some facts and figures ready to discuss with the buyer. Market research will be vital; you need to consider the price people will be willing to pay, whether you can offer any special promotions, whether any seasonality is involved, and ensure you are confident you will be able to meet demand when it really takes off. Also, give consideration to pricing depending upon level of demand, e.g. can you offer a "bulk buy" discount?
How it works
Many food distribution companies are happy to supply retailers with unbranded products (white label) which they can then sell under their own brand. This can generate higher volume of sales over a large geographical area. Funding via banks may also be easier to obtain if you have a contract in place, and are dealing with one or two large outlets.
However, you must be prepared to take a lower price per unit than if you were selling direct to customers. Furthermore, there are other implications: any promotional offers will be at your cost, and you are also vulnerable if your retailer changes supplier, so do not put all your eggs in one basket! Also, make sure that you will be able to keep up with the increased demand.
If you decide to approach supermarkets, many have an application process. Sainsbury Supply Something New offers a lot of support, and Tesco and Waitrose have details on their websites.
Things to consider
Decide on which of the food distribution companies are best for your business by conducting thorough research. Importantly, find out what their current range of products are, and how yours will compare i.e. price/quality. What differentiates your products? Local produce is very much in favour at the moment; customers really do like to know where the produce is from. Further, those who are environmentally aware and consider things like air miles (how far produce has travelled).
When working out how much your product costs you to produce and what your profit margin will be, do not forget things like shipping, packaging and building in special offers. However, by selling through food distribution companies, you will need to factor in their margins too. This will obviously reduce your price to the retailer considerably, so be careful not to get caught up in the excitement of it all.
There will be contracts to agree upon, so ensure you are at liberty to sell to other outlets or via your own shop/website. Some food distribution companies may want exclusivity and may be willing to pay a premium for this, however, you must decide if this is right for your business. Are you allowed to make deliveries direct to store, or do you need to get your products to a distribution depot? These are all important things to find out.
What are the terms of trade? Some large retailers may not pay you for 90 days, so work out the impact this will have on your cash flow. Remember, turnover is vanity, profit is sanity and cash is reality!
Why not offer to do some in-store tastings? Get involved in the promotional activities, and if you are accepted as a supplier make sure your items are displayed correctly, it is too easy to have put all this hard work in and then lose the contract through no fault of your own.
So, to summarise:
When it comes to meeting with your potential food distribution company, have great samples, including both the product itself and branding to take with you. Get the buyers interest by telling them why your product will sell more than your competitors, and therefore increase their profits.
Make sure you can meet the demands, think of the "best case scenario" which could turn in to your "worst case scenario" - how will you meet demand as it increases? Do not allow yourself to over-trade, which could lead to a breach of contract.
Good luck with getting your products on to the shelves in the high street, be it supermarkets or delis.