“Foodservice isn’t hard, but it’s complicated. Winning in the channel is difficult, but very rewarding if you plan ahead,” said Stephanie Lind, founder of Elohi Strategic Advisors, during last week’s SFA webinar titled Entering the Foodservice Channel. She shared the following 7 tips for breaking into the channel.
1. Foodservice is not like retail. When entering foodservice, you automatically have 4 to 5 times the touchpoints you do with retail, noted Lind. Unlike retail, you need to first convince the distributor and operator, rather than the consumer, that your product is worthy. There are over 2,500 distributors in foodservice, and they won’t be sharing consumer behaviors with you, she said.
2. Early decisions matter. Since foodservice is about what is on the menu, it is important to always be thinking of implications down the road, including which influencers are involved in getting decisions made. People in the foodservice world have been around forever, and they will remember if you make mistakes early on, according to Lind.
3. Distributors are an important piece of the puzzle. Since warehouse, transportation, and labor costs are the responsibility of distributors, it is important to understand and respect what they do, said Lind. She explained distribution segmentation as:
Redistributor (ex: Dot Foods) - sells to distributors; job is to build a full truckload to help distributors manage their inventory; usually require a minimum of 200-300,000 pounds to do business; with current backlog, not as easy to enter as in past
Tier 1 (ex: Sysco) – national
Tier 2 (ex: Gordon) – super regional; they work together to bid on national chain business
Tier 3 (ex: Baldor) – anything specialty
Cash and carry (ex: Restaurant Depot) – many reasons not to go into as a new brand, according to Lind; specific decision set like going into Walmart early on
Online (ex: Foodservicedirect.com) – struggle with frozen and fresh; still need to support with sales and marketing
4. Help Drive Traffic, Check Size. Foodservice operators need to consider traffic, check size, and waste/cost before working with you. Lind shared that the way to their heart is a product that allows them to charge more and helps drive traffic. Because their top three costs are labor, rent, and food costs, anything you can do to extend shelf life, and thus minimize waste, is appreciated.
5. Know the difference between commercial and noncommercial operator segmentation.
Commercial – buying, selling, and preparing food as the main source of business. Composed of quick-service (McDonald’s), limited-service (Panera), and full-service (Chili’s) operators.
Noncommercial – food is a service, not the main source of business (ex: hospitals, airlines, college/university, theme parks, etc.)
6. Consider the following for selling into foodservice.
Know your audience. Study where they come from and what kind of menu they have, said Lind.
Restaurant density. Just because New York City has a lot of restaurants, doesn’t mean there’s more opportunity, Lind noted.
Speak their language. An operator wants to provide what consumers want, so they won’t necessarily be focused on you or your brand. If you check your ego at the door, you will be in better shape, according to Lind.
Decision drivers. Discover how restaurateurs will find out about you. Before the pandemic, trade shows, seeking a replacement, and customer requests were the top reasons, said Lin
Role of the DSR (distributor sales rep) has changed. Be aware that there are fewer reps managing more customers, she suggested.
7. Learn from others’ mistakes. Lind noted that the top 3 mistakes include having a one tier, one pallet minimum order quantity (MOQ) pricing structure, approaching operators without understanding their distribution and buying path, and selling across geographies.
Lind also emphasized that when speaking to any operator, you should discover how they buy, who they buy from, and how they think about product and price. To learn more about the entering the foodservice channel, and to access the slide deck complete with foodservice data and examples, register to watch the recording here.
Related: Foodservice Bundle: Prep for the Winter Fancy Food Show; Shawarma Press Opens Second Walmart Location.