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Getting into food distribution companies

Getting into food distribution companies
Heidi Green
Start-up advice, Mentor, Marketing, Business development
Find out more about Heidi Green

In this article you’ll learn

  • About different types of food distribution companies
  • What to consider about your contracts
  • How to research food distribution companies

We know there is no greater thrill and feeling of pride than walking into a shop seeing your own products on the shelf of your own shop! At last all those years of hard work getting it right have paid off. So how to go about getting your product into food distribution companies?

Waitrose, Tescos, M&S, Sainsbury, Morrisons are all big distributors of product, or are you maybe a little more discerning and looking at smaller, more independent or exclusive outlets? It’s a quicker process dealing with smaller retailers 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, if you can offer any special promotions, any seasonality 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?

Young man looks at fruit in the supermarket supplied by food distribution companies

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 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, understand that promotional offers will be at your cost, and that you are vulnerable if your retailer changes supplier, so don't put all your eggs in one basket! Also, make sure that you’ll be able to keep up with the increased demand.

If you have decided 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 website.

Young woman chooses food from food distribution companies

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 as well as those who are environmentally aware and consider things like air miles.

You will have worked out how much your product costs you to produce and what your profit margin will be – don't 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, ensure you are at liberty to sell to other outlets or via your own shop/website. Some food distribution companies may want exclusivity and maybe 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? All important things to find out.

Young woman looks at a product supplied by food distribution companies in a supermarket

What are the terms of trade? Some large retailers may not pay you for 90 days, 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:

Have great samples, including 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 into 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 onto the shelves in the high street, be it supermarkets or delis.

Summary

Find out what you need to know about getting your product into food distribution companies.