If you are a leader with a CPG company and considering broadening your customer base to include foodservice, there are several factors to consider. Here is a short list:
1. Customer base:
• CPG- you can reach consumers directly through Amazon, Faire, etc. today. The traditional distribution stream is through brick & mortar stores, like traditional grocery stores, Costco, etc.
• FOODSERVICE – your target is the “operator” in a foodservice channel, like a restaurant, hospital, school, a business’s employee cafeteria, a caterer, etc. To reach the target, you inevitably will need to go through a distributor to reach any scale.
2. Packaging
• CPG – in retail, your packaging has less time to catch the consumer’s eye than an NFL quarterback has to get rid of the ball. Also, sizing is intended for personal use, so packaging is typically smaller for retail.
• FOODSERVICE – Typically, packaging is more about function than esthetics. Think ease-of-use, how your product will be used in the back of the house, storage, case price (not too high or low).
3. Pricing Structure
• CPG – You must price your product to include promotional funds, slotting fees, distributor costs, spoils and more. Promotions help keep your product in front of the consumer and keep it flying off the shelf.
• FOODSERVICE – in some situations, you’ll be selling directly to the customer and the distributor has a prearranged cost for delivery. With smaller operators, the price discussion is first done with the distributor.
4. Product Specifications
• CPG – products are built for mass appeal, focusing on taste, price point, shelf life.
• FOODSERVICE – products may be customized for a specific channel of business, such as lower sodium for healthcare, high fiber for secondary schools.
5. Sales Approach
• CPG – The first sale is getting your products on the shelf. The next is to the consumer. People still like product demonstrations, respond to social media and discounts!
• While we can reach chefs and operator management with social media, a lot of business today is done because of relationships & understanding the needs of each operation.
Understanding the differences between retail CPG and foodservice distribution can help you make great decisions in how you approach your business. Please reach out if you would like a free consultation session!
