Food and drink sales channels
You’re an artisan producer. You’ve created a sublime new product and now you want to take it to market – but which channel is right for you and your product? In the main, you have four to choose from and each comes with its own pains, so it is worth deciding which ones you want to pursue early on and then set up your entire strategy around that. Here we look at the pros and cons for each:
Probably the highest margin option as you get to keep the money that would otherwise be paid to middle men and retailers, but everything is on you, so it is probably the highest cost option too. Also, you have to sell one product to multiple customers instead of multiple products to a single customer so return rates and hassle factor will obviously be higher. From a brand perspective, this option allows you to control everything, ensuring it is consistently and faithfully upheld from product to marketing to delivery and beyond. It takes longer to become established and the sales curve is longer and may not necessarily ever reach the peak you would have hoped but if you want to stay truly artisan and control sales and production volume this option is perfect.
Footfall across the UK high streets is falling and so starting retail premises is a big investment, unless you can be sure the location, the footfall and the demographic is right for your product. Before embarking on retail premises, trial the product at shows, events, markets or even pop ups in shopping areas, so you can get a feel for the likely success. Recent research by major universities on the health of the UK high street shows that towns/cities typically fall into one of 4 categories – shopping, community, holiday or cultural. It goes without saying that you want to be in a holiday or shopping centre if possible as the others rely on a very specific type of visitor or returning trade from residents/locals.
Some may say that to be truly artisan, you need to limit production and introduce a degree of exclusivity to your product. If you subscribe to that way of thinking then selling via the independent retailer market may be for you.
Getting in front of these guys requires a lot of shoe leather and effort which you can view as a cost of sale or not but don’t be fooled into thinking that the most obvious outlets will simply take the product regardless. We have seen a number of food clients profile their ideal outlets, only to find that these perfect targets reject the product out of hand. This approach is very much trial and error and will take far longer than any other option to get the same volume of stock movement.
From a price perspective, you are the producer, carrier and wholesaler here so you do get the benefit of higher margin as independents don’t tend to bend to the same price pressures as multiples. Yet as noted above you have to do all the running that the middle men you have replaced would otherwise do on your behalf.
However, this option allows you to work with the people that run the independents and small chains so you can have greater input to where and how your product is stocked, displayed and sold. Use this personal relationship and consider supporting the retailers by carrying out tastings and meet the maker events, developing bespoke point of sale units or even looking at limited edition versions of your product. You can also have greater say over RRP and the option to work with retailers to run offers and promotions – who will normally welcome any help and support you can offer in making this happen.
By far the least hassle option as you trade with a small handful of companies that take your product to hundreds or thousands of outlets on your behalf. You shift stock in bulk and so operationally it is relatively straight forward and many wholesalers will collect from you. But the major sticking point here is margin. These are middle men and they need to find the balance between cost price and RRP whilst preserving some historic industry multipliers, so someone’s margin will be squeezed – yours! Order volumes help offset the reduced margins for you and so if you can control your manufacturing costs, then wholesale is the best of both worlds – distribution and revenue.
If you think that this is a good route for you then do your research, speak to other suppliers and see who they recommend, or better still speak to the retailers you think ‘should’ stock your product and find out who they use. You can define where you want your product to be stocked and some wholesalers will specialise in (major) multiples whilst others will serve the independents and high street retailers only. Some will ask you to contribute to marketing funds or require you to provide stock imagery and content for their catalogues, with paid for prominent positions available too.
The holy grail – or are they? The risk with this sector is they become a vanity project which is also a drug, you become hooked and it begins to control your world. If you can survive on limited margins or you intend to offer a range of products and sell through the other channels noted here too, then listing with the supermarkets and big high street names can work, and it will certainly help with brand awareness. But if you chose this route, do so with eyes wide open from the start and ignore everything you know about these guys from a customer perspective because the suppliers experience is entirely different – almost 100% round the other way. The retailers you expect to be fair and easy to work with are typically not and it is some of the discount brands that have the best reputation where supply chain is concerned. Do be aware though that in recent years major multiples are all in a race to the bottom on price (and it is not their margins they are cutting to achieve it).
Listing with major multiples can take 6-9 months from initial approach to appearing on the shelves but it can take years to get noticed and cost thousands. Once you are in front of the multiples, be prepared for strict terms of trade – its one-way traffic only. You will use their carriers, deliver on their terms and be expected to contribute to central marketing funds which you can view as overhead costs or cost of sale, but one way or another it will affect your bottom-line. You will be stringently audited and inspected for provenance, quality and sourcing and may even be required to sign up to their own policies on ethical standards so be sure you can subscribe to this.
If it clicks and you can make it work for you then you can expect good size orders, regularly. There should also be a knock on effect brought about by a higher brand awareness and profile so you should set up your marketing to make the most of the availability of your product.