After 20+ years in foodservice distribution and consulting in foodservice, I see the same issues coming up for manufacturers who want to get into foodservice: logistics, packaging, go-to-market plan, pricing strategy and funding.
Here is a quick recap of the challenges:
- Logistics can be expensive. Do not expect every customer to pick up at your dock. While convenient for you, it may not be convenient for your customer. Tailor solutions to fit your customer’s needs. If a distributor picks up your product at your dock and hauls it to their DC, they want to know what you would charge for the delivery. If your freight numbers are less than their costs, they may ask you to deliver. If they pick up, they want to know their savings vs. your quoted rates and will reflect the cost to the operator or use it for enhanced margin. Understand every distributor’s approach to O, S & D.
- Packaging for foodservice is functional and durable. Typically, foodservice packaging is different from retail. Packaging should be ergonomic for the user and strong enough to withstand the rigors of being handled multiple times, with labeling that is easy to read. Consider bi-lingual labeling. Your product may have inner packaging. Products heading to the cooler or freezer are taken out of the box prior to squeezing in the cooled storage area. Having a lot code and other identifying marks is very helpful if there is ever an issue.
- Your market entry strategy needs to include who does the customer selling. Hint – IT IS YOU! Either you get out and hustle or you pay someone to do it for you. This is where deep pockets are needed. Selling your product to a distributor doesn’t guarantee a sale. Usually, it just gets your product into the warehouse. Now, you have about 90 days to get sales up to about 10 cases a week. Each distributor has their standards. You need to make sure customers are created from the foodservice operators in the market. Generally speaking, getting the steady sales to the operators takes time & is a cause of frustration for many manufacturers.
- Pricing for foodservice can cause much confusion. Distributors will talk about “buckets” where money goes. There are too many ways to “bucketize” money to put in one article. Make sure you have good guidance on how to price your products, so once you are doing good business, you actually have enough margin to call your efforts a business & not a hobby!
- So, it does cost money to sell products in foodservice distribution. If you are going to do the hustle and get out & sell your products yourself, then make sure you have strong advisors to protect yourself from common profit traps. If you are going to have someone else do the hustle, then recognize costs will be higher in the beginning.
Post a comment, send a DM or reach out through our website: growfoodservices.com if you would like to discuss your situation!
