Part 6: Distributing Your Product
In Part 5, we went over how to develop your product packaging. It’s been a long road, and your bank account is likely a little low. Now it’s time to actually get your product on the shelves and hopefully recoup some of your startup costs!
To Self-Distribute Or Work With A Third Party?
First, the basics:
When you partner with a distributor, understand that they are buying your product from you at wholesale pricing, and will then sell it to grocery stores with their own markup. That does not necessarily mean that they will take an aggressive approach to marketing your product, and they may very well opt to discontinue carrying your product if it doesn’t move quickly.
With that out of the way, there are many factors to consider before you decide whether or not to partner with a distributor:
- How much volume do you expect to move from your fist run?
- Does your product require refrigerated or frozen transport?
- What is the shelf life of your product?
- Does your local distributor already carry a number of similar products, or will your product fill a niche in their catalog? Recall the section on your value proposition from Part 5.
- If you are going to self-distribute, can you afford a delivery vehicle and the man hours to drive it? Is there an opportunity to make more money by distributing other local products?
Marketing Your Products
There are a multitude of promotional mechanisms for you to consider, from the very simple in-store demo, to the more complicated and expensive free-fill or slotting fee scenarios. Review the marketing programs at the link, and talk with your local distributor to understand what mechanics they may be open to using for your product, and how that may impact your bottom line.
Should I Hire A Broker?
A food broker is a person who acts as a sales representative for your product. They do not distribute your product, but rather they work their established relationships with buyers at grocery stores to put your product on their radar. They take either a flat-rate or a commission on their sales, further eating into your margin.
I would suggest you only consider hiring a broker if you can meet all of the following criteria:
- You have a large volume of product that you are ready to sell
- You can afford the broker’s fee for a while, at least until your product gains traction
- There are a large number of stores in a given region at which the broker has established relationships
- Your product fills a relatively unique market segment, or your competitor’s product has a vulnerability you can exploit for increased market share
Product Review Windows
Virtually every grocery store has a very specific period during which they review new products. For example, they may only review new frozen dairy products in October every year, and new trail mixes in November. Contact your grocery stores as early as you can and request their product review schedule.
Selling On Amazon
Everyone wants to do it. Is it worth the time and effort for you to enter such a popular, but extremely crowded, marketplace? It really depends on your product, and what sort of promotions Amazon may be running for new food products.
Understand the differences between the Amazon Seller Central and Vendor Central. Reach out to both departments to learn more about what the parameters are for getting your product into the appropriate channel. Inquire about the Amazon margin or fee, the shipping and return arrangements, and anything else that may impact your decision to sell on Amazon. With Amazon’s recent acquisition of Whole Foods, many of these details are likely in a state of flux.
If you’ve made it this far, you should hopefully have a much better sense of exactly what your product is, how you’ll make it, and how you’ll sell it. Best of luck out there in the CPG world! It’s a competitive place, and know that most companies fail, while those that are successful usually take a long time, with a lot of hard work, before they can just break even…
But in my own experience launching and operating a (now-extinct) food startup for nearly four years, it is entirely worth it regardless of the outcome. Good luck out there!