7 Specialty Food Success Factors Selling With Regional Distributors
Guest Author Mary Calo has spent her entire career in specialty food from retail to distribution to brokering to manufacturing. She works for Mike Hudson Distributing, a privately owned, regional distributor that serves the San Francisco Bay Area and parts of Northern California. Mary is working to expand the specialty food and cheese portfolio, helping expand selections into existing accounts, growing new business and focusing on items not carried by competing distributors.
Artisan food crafters often get started by selling and making deliveries to stores from their own car. There's a point when you realize that's not the best use of your time when you have the chance to (or need to) expand to more specialty grocers and supermarkets.
It's time to look into a regional food distributor.
What Specialty Food Distributors Do (and Why You Should Care)
Food distributors have warehouses that stock many types and brands of food. They take orders from wholesale food buyers than "pick and pack" the food into cartons or pallets to deliver to stores. This is a much more efficient way to deliver and receive products.
Regional food distributors focus on independent and small chain grocery stores in a state's region, or in areas chock full of small states like the Northeast, a several state area.
New food entrepreneurs must anticipate the time you will sell through a distributor — even if today you think you will only sell at local farmers' markets — in case an irresistible opportunity comes your way. Read on to build your knowledge. Look into Good Food, Great Business: How to Take Your Artisan Food From Concept to Marketplace for a whole lot more.
What's It like to Sell Through a Small, Regional Food Distributor?
Distributors may have different specialties in terms of the foods they sell and the wholesale accounts they service. Mike Hudson works largely with caterers and delicatessens as well as with small independent Northern California markets and chains such as Nugget Market, Andronico’s and Mollie Stones.
The West Coast and East Coast regions still have a lot of small and independent grocery stores, which are the type of accounts regional distributors tend to serve. This is partly because volume these stores buy may be too small for larger, national distributors to service.
On the flipside, small distributors might not serve large accounts (such as Whole Foods, where you might want to sell), as such retailers want to minimize the number of distributors they work with and can get the variety they need from the nationwide distributors such as UNFI and KeHe.
How Can a Small Food Manufacturer Find the Right Distributor?
1) Ask yourself who you want to play with.
I always advise manufacturers to know where they want to see their products:
- In foodservice such as high-end restaurants?
- In retail with cheese and deli counters and cheesemongers?
- A little bit of both?
2) Know your ultimate distribution goal and find distributors who can deliver.
If you only want to go to restaurants or another food service, look for distributors who have a good reputation and sell to accounts that interest you.
Talk to other food and beverage producers who sell to the accounts where you would like to sell. At the same time, hit the Internet to start searching.
Things Fresh Food Makers Should Look For In a Distributor
If you're making fresh food or refrigerated drinks, like pressed juices, you’ll want to work with a distributor that already has experience and facilities to handle foods such as produce or with cheese. (This is a key consideration when making any preservative-free foods with short shelf life.)
For example, Mike Hudson has systems and protocols in place to make sure the poultry, produce, cheese etc. is picked up and shipped out immediately to caterers and delis.
We specifically located our operations near popular fresh food producers so quality and freshness surpass most of our competitors.
Our operations are set up to allow for daily or weekly pick ups from food and beverage producers, including farms.
What Are the Benefits of Working with a Regional Food Distributor?
In the case of Mike Hudson Distributing, because we are regional and concentrated, we have a high-touch approach that balances our needs with the manufacturers’ and retailers’ needs.
Generally, with a smaller food distributor, you will enjoy several benefits that are especially important when taking the leap from delivering to stores yourself to trusting a distributor:
- Smaller food manufacturers usually benefit from a closer, more personal relationship with a smaller distributor and the chance to get input on important decisions such as product placement, promotions, and pricing. Plus, when we bring in a new product line, we make target lists of accounts where we think the product will sell.
- Regional distributors tend to focus on customer service. We have customer service reps in the field so we can better expand and grow a small food brand as well as convey the story better than a large distributor.
- Smaller distributors may help you project food sales — which lets the manufacturer understand how much to produce.
Do I Need a Food Broker and a Food Distributor?
In the case of Mike Hudson Distributing, essentially we are filling the role of a broker as well, getting your food products and presenting them to buyers along with merchandising and promotional suggestions.
We can help a manufacturer figure out how to do promotions. If they can’t do a discount (which stores frequently ask for), we come up with creative ideas on how to get the consumer to get a taste of the product.
On the other hand, if a manufacturer goes to a large nationwide distributor they will more than likely tell you to start making the sales/product placements (which you might do with a broker) before they’ll consider stocking the products.
Some small-batch food producers, fresh juice makers, and family farms want to stay small and local, delivering personally to stores or selling at farmers' markets. In that case, a food broker or sales rep can help you make sales if you prefer not to handle sales yourself.
Does a Distributor Give Me Visibility into Where My Products Are Being Sold?
You will have a greater chance of finding out where your foods and beverages are being sold when working with a smaller distributor.
Often once a food manufacturer sells to a massive, nationwide distributor larger distributor, they do not get reports on where their products are sold into. If, of course, makes it difficult to hand-hold the accounts and ensure they re-order product.
At Mike Hudson Distributing, we make a point to know our customers/accounts we’re selling to and can pass that information along to the manufacturer.
Specifically, when it comes to fresh foods, we believe it is especially important to honor the manufacturer’s requests if you don’t want to sell at a certain account — it just doesn't make sense to take a high-end blue cheese to a store where it won’t sell. That doesn’t benefit anyone.
What Is the Biggest Mistake Food Companies Make When Selling with a Distributor?
Not anticipating pricing...and pricing incorrectly.
Build expansion into selling through distributors into your business plan from the get-go.
For example, if you need to make $15 per pound, you should consider adding a distributor margin to your cost so when you are ready to expand into distribution, you have the ability to sell at a manufacturer price into a distributor vs. the direct price you are selling into the retailer.
Also, think about how your food will get to the distributor.
- Will the distributor pick up your cheese (which adds freight cost)?
- Or are going to bring it to them? It affects the freight costs a distributor typically adds to the price of the product.
[Note from Susie: In Good Food, Great Business you will find examples of how retailers price to help you calculate margin as well.]
When Should a Food Company to Approach a Food Distributor?
Once a startup food producer doubles their capacity, whether moving from a shared kitchen to a dedicated kitchen, or to a co-packer, it’s a good time to start thinking about a distributor. Two key considerations:
- Most importantly, you need the capacity to produce enough to fulfill orders.
- You need to be sure your pricing will allow you to be profitable.
When it comes to cheese makers and meat producers, once you expand your herd, start talking to distributors who can help you move your products while they’re fresh.
There is also a right time of year to expand distribution: Winter and Spring. Come late Summer and Fall, stores are busy getting ready for the holidays, and the last thing they want to do is hear about new products, for the most part.
There's also a right time to work with a large distributor. If a large distributor approaches a manufacturer, they may propose getting you into certain stores, such as large supermarket chains.
Their work will likely stop there, and the food company is on the hook for building demand for the product. In this case, the manufacturer might need to hire demo and sales help as well as invest in marketing.
So you need to be ready in terms of your production, sales, and marketing — no matter how flattering the offer to distribute with a large distributor may be.
Well before you launch your company, plan your pricing, packaging and production to anticipate distribution. The distributors and retailers you pitch to will be delighted at your knowledge, and you will be delighted to make a profit from the get go rather than scrambling to stay in business.