Food processors – Preparing for selling in stores, part 2
What you need to know ahead of time to be prepared and ramp up success as a food processor.
Expanding your food business’s product from a farmers market table to the shelves of your local store requires some preparation, as well as possible design and safety regulation changes. Here are some initial steps to prepare your product for this shift in venue.
This document needs to be developed for each product or set of products before approaching wholesale buyers. A sell sheet should have an attractive 4-color glossy picture of your product(s) in its package, the company story, the shelf form (shelf stable, refrigerated, frozen) shelf life, the list of ingredients and, if used, Nutrition Facts.
The pricing sheet, which is a separate document, should provide the case quantity, pricing per case, UPC, suggested retail price per unit and contact information for ordering the product.
Pricing your product
It is critical that your product price provides a 30-35% margin of return to make the business profitable for long-term growth. Price cases of product to encourage distributors or store buyers to increase purchases and reduce delivery frequency. Whether it is a distributor, store, or restaurant, you will need to set a minimum order request quantity to make the wholesale outlet worth a manufacturer’s distribution cost, merchandising and in-store marketing efforts.
Once a buyer approves the product for their store and you agree to the sale, you can expect a 30–90-day payment policy for the order. For companies with a product that has many competitors or a product which may be unfamiliar to a buyer, a consignment agreement could be an option to get into the store.
Picking stores to approach
Since some retailers only select new products to include in their stores once a year, you will need do some research to determine when retailers select those products. Make sure a store is a good match for your target market and product price by looking at demographic sites such as Michigan MarketMaker, Claritas, Taste the Local Difference, and others, as well as comparing it to similar products already on the market.
Also, consider delivery distance, the distributors the store accepts, who merchandises the product to get it on the shelf, etc. This careful selection process can result in higher sales than merely targeting larger retailers. Building a relationship with the store managers and store personnel is essential. You should anticipate spending a large amount of time on this critical part of your business plan.
Approaching a store
Make an appointment with the store buyer to pitch the product in less than 5 minutes – where you will provide samples, as well as give them the company sell sheet and pricing sheet. To prepare for your product pitch, know the product ingredients, allergens, special features such as gluten-free, nutritional value, UPC, and how the packaging or secondary packaging fits the store’s needs.
Information to collect from the store
During the product pitch, you are also interviewing the store to decide if the store is right for you. Being in a store has cost implications, such as the level of liability insurance coverage they require, replenishment timelines, and demonstration practices. Find out how many cases or units are sold a month of similar products to determine sales potential and related production needs. Again, a consignment arrangement with a retailer is an option to consider if the retailer is hesitant to have your product in the store for any reason.
It is beneficial to provide demonstrations in stores to make sure your product is in front of the consumer and moving off the shelf. Demonstrations will need to be coordinated with the retailer or category manager during high consumer traffic time. Some retailers require you to use the store demonstrator, while others will allow you or the company you hire to do the demonstrations. Budget for this expense well in advance. You will need capital for these initial demonstrations and the ability to reinvest sales profits for 4-5 years into store demonstrations and marketing in additional stores.
Check out the previous article, “How to Ensure You Are Ready and Successful Part 1” for additional information.
The Michigan State University Extension Product Center has business counselors ready to assist you as you prepare for stores sales. Register today at the MSU Product Center website to become a client.