How To Sell Your Food Product to Grocery Stores (Part 1)
For many small business owners, seeing your product on the shelves of stores like Whole Foods or Target is the ultimate accomplishment. But getting into retailers isn’t a piece of cake.
Before you take the leap, you’ll need to put time into researching the industry and your preferred retailers to ensure as successful a presentation as possible.
Do your research
The very first step before pitching to retail buyers, is to research your products, competitors, and potential stores. Here are some things to consider.
Who is your target audience?
Does your product cater to a wide range of consumers or does it fit into a particular niche? Would your product do better on the shelves of a general retailer (like Target, standard grocery stores, etc.) or more of a specialty store (Whole Foods, etc)?
What sets your product apart?
(Differentiation is key when pitching your products) Is it similar to other products in retail? Does it contain new or different ingredients (vegan, dairy-free, etc.)? Does it fill a gap in the market?
Where in the store do you see your product?
Does it fit into a pre-described spot or is it in a new category? Is it shelf-stable or does it need to be frozen/chilled? Can it be displayed in high traffic areas like registers or delis?
Who are your major competitors?
Are they established household-name brands or relative newcomers? Do they command huge amounts of shelf space? How does your product stand out from the others? Does your packaging pop in comparison or get lost on the shelf?
Exhaustive research is the key to a successful pitch. Not only will you have the information necessary to build a winning presentation, you’ll be prepared for any questions the buyers send your way.
Find the right fit
To find your perfect retail partners, build off of your previous research. Each store has a different target audience with different requirements, including lifestyle, budget, and preferences.
For example, if your product has a higher price point, it might not be the perfect fit for stores known for their bargain deals. Or if your product appeals to the raw, vegan, keto crowd, it probably won’t do as well in a general mainstream grocery store.
Additionally, do your preferred retailers support smaller or local businesses? Whole Foods, for example, often stocks local products in their stores to support small local businesses. Larger stores, like Target or Wal-Mart, are more likely to stock items that can be rolled out nationally.
You’ll also need to look into the retailers’ vendor requirements. The larger the store, the more requirements they will have. These might include:
- UPC codes
- FDA compliant packaging & nutrition panel
- NAICS codes
- Transparent supplier list
- Full pricing disclosure
- Full sourcing and ingredient disclosure
- Sampling & demos
Plan for profits
Once you’ve done your initial research, it’s time to move onto researching logistics. To meet the retailer’s wholesale margins while still turning a profit, your production costs need to reflect the final price.
When you’re determining wholesale price, keep in mind that the cost of manufacturing is only a fraction of the overall number. You will also need to take into consideration packaging, marketing, and distribution, and factor these into the final cost.
For example. If the total cost to manufacture one product is $1, you might charge $4 for this product on the shelf. If the wholesale price per product is $2, the total revenue for each unit sold will be $1. Depending on the product, and the work that goes into making it, the potential revenue may not be sustainable for your business.
Additionally, if you decide to pitch to a big-box retailer that offers lower prices on name-brand goods, your margin will be even less:
If the total cost to manufacture one product is $1, the retail price is $4, and the wholesale price is $2, a big-box retailer may only offer $1.25 wholesale to keep prices low.
So how can you ensure your profits are high enough without compromising on wholesale pricing? Look at your overall costs. Are there any places where you can cut costs? Would purchasing ingredients or packaging in bulk make things cheaper? Can you switch brands without sacrificing quality?
Prepare for increased volume
Increased volume is another major consideration when pitching to retailers. If a buyer accepts your pitch, you will need to be able to fill the demand immediately.
Some important factors to consider when planning for increased production include:
- Storage space (for ingredients and finished products)
- Staff/manufacturing time commitments and availability
- Capital (for ingredients, packaging, transportation, etc.)
If you’re still relatively new to the world of retail, it might be a good idea to approach smaller stores, like local markets or co-ops first. Not only will you be able to validate your product, you will gather valuable data about production and marketing that you will be able to use when approaching the larger stores.
Part 2: How to present to buyers