Who are the key players in foodservice?

Distributors :)

There are many distributors within the foodservice channels.?

Distributors will often supply products to all the foodservice octopus channels and work with GPOs.

95% of end-users will only source their food and drink products through a distributor, so it is essential to get a reputable distributor on board. On the flip side, many distributors will only list a product if the brand already has an end-user who has agreed to stock their range. It is therefore necessary to talk directly to both end-users and distributors in tandem. Often, both have to agree to want your product in order to move forward.

Other Considerations

Be aware that even once you have secured a distributor and end-user customer you are likely to need to offer price rebates to your bigger customers. In addition, over-riders are quite common place for large distributors, whereby you pay them a percentage of sales which increases the more they sell for you – think of it as a sales incentive / commission.

You will also need to factor in marketing costs to support your product launch e.g. digital advertising through distributor websites, product sales materials, sampling activity at key customer sites.

As you can see, it is ESSENTIAL that you don’t sell your product in too cheaply. You must account for all of the above costs before agreeing to a deal. Correct planning and detailed cost calculations are essential!

Although the above sounds complicated, many brands experience huge success through Food Service. When starting out it is always a good idea to talk to experienced people within the industry who can help advise you as to the best channels to market for your product range

What is the benefit for a company to move into Foodservice? ? Foodservice is where trends start.? Plus, in normal times, it is more than 50 percent of the total food industry, and it tends to be a more profitable channel.? So, the real question is, why would you not be in foodservice?

What does a company need to do to be ready to move into the foodservice industry? ? Foodservice is not hard, but it is complicated. So it should not be undertaken lightly or by a team that does not have the right experience.? Products, packaging, pricing, marketing collateral, messaging and distribution must all be tailored to the needs of the new business. Understanding how to navigate the push/pull demand generation of operators and distributors is critical to success.

What is the difference in selling into retail versus foodservice? Retail has approximately 250K doors spanning grocery, conventional and natural, drug, mass, club, dollar, specialty and others.? While each channel requires some specialization, generally the same products are used but put into different pack/size configurations.?

At least for now, there are specific windows for decision making and twice a year changes are made to the category planogram.? Promotions are driven by price and placement and scan data can be reviewed to understand the lift of the program in the moment and over time.? Additionally, there are several large distributors (UNFI, KeHe) and beyond that direct shipments or customer-owned supply chain (Walmart) handles getting your products to the stores.

Foodservice has 700K establishments today and we have every reason to believe it will climb back to its pre-COVID 1.1MM unit number in the next 18-24 months.? There are 19 segments in the Noncommercial side of foodservice.? Those segments may require a bid (K-12, Military, Prisons) or be highly seasonal (Colleges). Airlines, corporate cafeterias, and hospitals also have different requirements.? Moreover, most of the Top 100 restaurant chains will require proprietary products with an 18-24 month selling cycle.? There are approximately 2.5K distributors in the space that will require set up, training and management.

As you think about launching or scaling your foodservice business, if you do not understand the intricacies of the channel and have a well-defined strategy and budget for the first three years, you will likely fail. If you succeed, it could take you five years to gain any real traction.

Preparation is key

What are some things a brand should do to prepare before going into foodservice.

1.? Understand the role foodservice plays in your corporate strategy

2.? Create an Omnichannel, tiered pricing architecture ASAP even if not going into foodservice right away.

3.? Do not assume that your retail-focused head of sales can or should handle it (and for Pete’s sake, do not hire anyone upfront)

4.? Make sure you consider the channel when deciding on Co-manufacturing, co-packers and packaging partners