There are two main avenues to sell your product into foodservice:

1. Direct sales to a foodservice operator
2. Sales to a foodservice distributor

DIRECT SALES TO A FOODSERVICE OPERATOR (END USER)

Small farmers and processors also begin to sell foodservices by talking to and selling directly to the owners or managers of independent restaurants and smaller hospitality businesses. This approach makes it easier to familiarize yourself with working with a foodservice provider and create demand for your product. Both you and the end consumer should approach a foodservice distributor with established sales once you have created demand for your product, raising the probability of your product being listed by the food distributor.

The steps involved with direct sales to foodservice operators include:

1. Visiting the location you’re looking to sell to and talk to the owner or managers about testing the product for free.

2. Once the product proves it’s a good fit, make the sale.

3. Delivering the product on time, every time.

4. Invoicing the operator and managing the account

a. Conduct  visits
b. Solicit orders
c. Collect accounts receivable

SALES TO A FOODSERVICE DISTRIBUTOR

A foodservice distributor or wholesaler buys and distributes your goods to foodservice operators or end-users. Hospitality firms, restaurants and organizations partner with distributors of food services because it saves them time as they are able to access multiple items from one company.

Tip: The best way to secure sales to a foodservice distributor is to generate demand from the end user. If a Chef likes your product he/she will request to be able to order it from their distributor.

The steps involved with selling to a foodservice distributor include:

1. Conduct market research

2. Ensure product fit

3. Meet foodservice distributor requirements

4. Make appointment with distributor

5. Present your product

a. Sales pitch

b. Product sell sheet

c. Product samples

6. Make the sale

7. Negotiate your Vendor Agreement

8. Manage the account

Whatever avenue is chosen, direct sales or sales to a foodservice distributor, market analysis and the specifications of the foodservice distributor are relevant. The remainder of this guide mainly focuses on sales to a distributor of foodservice. It can be difficult to contact a customer to get a new product listed with a foodservice distributor.

Most foodservice distributors have online general contact details. Other sources of buyer knowledge are restaurant managers, food industry representatives and networking at industry events. Members of the food industry are also able to share their experiences and provide the customers with whom they have interacted with contact information. Make sure that the correct customer for your product is found. Usually, foodservice customers have unique categories for which they are accountable. Buyers get a lot of inquiries and do not always get all their calls. Keep calling, be persistent.

HOW TO DETERMINE THE RIGHT RETAIL PRICE FOR YOUR PRODUCT

One of the big decisions you will have to make as a small business owner is setting the “right” price.

When you sell to a retailer, you would be forced to supply your goods with a suggested retail price. It should be competitive, cover your expenses and contribute to your company’s growth.

PRICING STRATEGIES

The right price for your product not only covers costs, but also generates a profit and funds to grow your business.

What is the right pricing strategy?

Usually, the best pricing approach is a combination of many techniques to achieve cost-value balance.

Just a part of the equation is to cover the expenses. Pricing should also take into account the value and advantages provided by the product, the willingness and capacity of your consumers to pay, as well as the value that the product offers relative to competitive goods.

What is value?

A skilled marketing strategy, guaranteed delivery dates, and in-store promotions can mean retail buyer value. Local, comfortable packaging, environmentally friendly or good nutritional content can be part of the final customer value.

The following table compares five common pricing strategies:

.

KNOWING YOUR COSTS

Business owners must keep track of fixed and variable costs:

Fixed costs: Costs that do not change regardless of the amount of product produced.

Variable costs: Costs that vary depending upon the amount of product produced.

“HIDDEN” COSTS

When selling to a retailer, you may be faced with a number of additional costs that must be factored into your pricing. Examples are listed below:

Listing Fee or Slotting Fee: a fee charged by the retailer to put your product on their shelf.

• Negotiable between seller and retailer

Cash Discount: the retailer takes a discount for early payment.

• Example: 2/10 net 30; retailer takes 2% off the invoice when they pay in 10 days, or pays the full amount in 30 days.

• Provides incentive to pay faster but costs you, the vendor, a lot more; a 2/10 discount equates to 37% of sales on an annual basis.

Product Liability Insurance:

• Required by most retailers

Promotional Allowance: reduced pricing to the retailer to promote product sales.

• Expect to offer reduced pricing three or four times per year

PRICING FOR RETAIL

The retail grocery business is all about margins. Buyers refer to margin percentages which are related to profitability.

CALCULATING YOUR SUGGESTED RETAIL PRICE

The example below uses cost-based pricing to illustrate the various layers of retail pricing. Although you may not have a broker or distributor right now, instead of facing price spikes later, you may want to factor these costs into your introductory pricing.

What happens if your suggested retail price is too high?

If your retail price is too high, retailers will not list your product. A product classified at a high price can not be sold, resulting in the delisting of the product.

If your price is higher than comparable goods, make sure your prices are analyzed and savings opportunities are established or ways to generate value are found to distinguish your product from the competition.

THINGS TO THINK ABOUT WHEN SETTING YOUR PRICE:

Having your product in retail is just a start. Bringing it into the carts of customers is also your job. In-store demos, campaigns for social media and exclusive events all need to be taken into account in the costs.

Retail and direct-to – consumer selling? If you sell the same product directly to the customer (e.g. e-commerce) at a lower rate, you risk putting your partnership with your retailer at risk.

Your direct-to-market price should be equal to the retail price or your product should be distinguished so that it is perceived by the consumer as a separate product. Create a 6-pack for retail and a 10-pack for online sales , for example.

PRICING FOR OTHER DISTRIBUTION CHANNELS

The pricing strategies and principles for retail can be applied to other channels as well.

MARKET RESEARCH

The foodservice industry is highly competitive, volume focused, and ever-changing. Consumer trends, restructuring of the sector and regulatory changes all have an effect on your business.

Currently, organic and safe goods are on the trend and local businesses are gradually sourcing these products from foodservice customers. As they evolve over time, stay on top of current trends. For information on how to stay on top of current trends, see the “How to Perform and Use Market Research“.

PRODUCT FIT

Ensure the product blends into the product offerings of the foodservice distributor. Some foodservice distributors offer an extensive catalogue of items; others concentrate on particular categories, such as alcoholic drinks, frozen foods or products.

FOOD SAFETY

For foodservice suppliers, food protection is paramount. Most foodservice distributors require the processing of goods in an approved facility. In general, the bigger the distributor of foodservice, the more strict the standards for food safety. Big, national and international businesses demand that federally recognized Hazard Analysis Critical Control Point ( HACCP) systems be in effect for their suppliers. Provincially recognized food safety systems may be embraced by smaller foodservice distributors.

UPC AND ECCnet

UPC, Standardized Product Codes, are used in the food industry and at point of sale at retail for inventory management. UPC codes are required for each package and for each case. Larger foodservice distributors need the ECCnet to be licensed with suppliers. ECCnet is an online source of accredited product details providing a centralized source of electronic data to trading partners. Product specifics, nutrition facts, ingredients, common allergens and product certifications are included in the information found in the ECCnet registry. In electronic ordering networks, foodservice distributors use ECCnet information to populate product catalogues and e-commerce sites.

UPC codes and ECCnet are managed by GS1, Global Standards One. You must be a member of GS1 in order to obtain UPC codes and be on the ECCnet registry. Fees depend on organization size and number of products.

PRICING YOUR PRODUCT

Foodservice distributors market large product quantities to end consumers at wholesale rates. Foodservice assigns a margin percentage to the goods it buys, like most food industry outlets.

MARGIN PERCENTAGE = PROFIT/PRICE = (PRICE-COST)/PRICE

Usually, a foodservice distributor applies a 5-20 percent margin to your commodity. Depending on product categories, margins differ. Foodservice distributors charge listing fees in addition to their margin, to cover administrative expenses, shrinkage or damaged goods fees and handling fees. Foodservice distributors often rely on sales representatives to sell the product, who charge commissions. In your Vendor Agreement, all costs associated with selling to a foodservice distributor will be outlined.

Your proposed price must all take into account margins, fees and commissions. Your proposed price should be sustainable, cover costs and contribute to the company ‘s growth. To assess the market value for your goods, work with the foodservice distributor.

SELLING FOODSERVICE DIRECT

When selling direct, without a foodservice distributor, it is recommended that you factor distribution costs into your pricing right from the start rather than risk raising prices later.

PRODUCT PRESENTATION

“Sales Pitch” is a crucial move towards a foodservice distributor listing. This is your chance to please the customer as they judge you, your business and your product with professionalism. Be sure to prove that you have done market research and that your item suits the needs of the foodservice distributor.

Carry your sales sheet, price list and product samples with you when you meet with the customer. “How to Create and Produce a Sales Pitch for Your Product” and “How to Develop and Use a Sell Sheet“.

MANAGE THE ACCOUNT

Make sure that you remain in daily touch with the customer of your foodservice. To assess how well your product is being sold and provide input to the customer, visit restaurants that use your product and speak to foodservice employees. The keys to success are building confidence and a positive collaborative working partnership with your foodservice delivery partner.

The food industry firm, Technomics, estimated that approximately 225 million meals are eaten away from home each day in the United States. This includes both restaurant and non-commercial eating places. Americans can be very busy and at the same time social. Many Americans prefer to have at least one meal outside every day. It could be the lunch during work, or the breakfast at a restaurant opposite the office, or a late dinner with a friend at a nice place; it is a dominant culture in the country.

However, we know the names of these restaurants, we may know the popular chefs but the people who deliver food products the restaurants prepare are hardly known by us because they are always behind the scenes. These people are known as foodservice distributors.

A foodservice distributor works as an intermediary between manufacturers of food products and the foodservice operator. This could be a chef, foodservice director, food and beverage manager, and independent food preparation businesses operator owners. The foodservice distributor procures, stores, sells, and makes deliveries of food products, providing foodservice operators with access to items from a wide variety of manufacturers. Foodservice distributors purchase pallets and bulk inventory quantities that are broken down to case and sometimes unit quantities for the foodservice operator. Most foodservice operators purchase from a range of local, specialty, and broadline foodservice distributors on a regular basis which could be daily or weekly basis.

It would have been very difficult for restaurants to meet the nutritional needs of about 65% – 70% of Americans who eat outside every day if not for the job of foodservice distributors in the line. There are a lot of things to be concerned with in the running of a restaurant and it would be an enormous burden if restaurants go to manufacturers of food products to keep getting supplies which could be as frequent as daily or weekly. Someone has to be in the line meeting demands and getting the products across to the restaurants.

It should be clarified at this point that foodservice distributors don’t only distribute to restaurants, they also get food products to cafeterias, industrial caterers, and hospital and nursing homes.

Estimates by the International Foodservice Distributors Association reveal that foodservice distributors in the Unites States, as a daily average, deliver approximately 27 million cases of food and other products.

There are several foodservice companies and they may very well range in size from a one-truck operation to larger corporations. There are broadline foodservice distributor offers a wide array of products, while a system distributor stocks a narrow array of products for specific customers, such as restaurant chains. A broadline distributor may carry up to 15,000 different items for purchase and operate topnotch warehouse and transportation operations.

The average American who eats out has the cause to be grateful to foodservice distributors. The industry sector is projected to grow as more eating places are looking at offering their customers more varieties.