5 things a food startup needs to know about selling your products wholesale
Last updated: Jan 1, 2017
By Aly Johnson
There is so much to think about when starting a food business. Starting any business is hugely daunting and not for the faint hearted, but I reckon you have to be properly barking to be a food startup. So how do you go from zero to hero? How do you get your food products in front of thousands of customers? Fundamentally you have two choices: wholesale or retail. This article is going to look at 5 things a food startup needs to know about selling your products wholesale. Apart from going for one of our catering kitchens for license in London at a very competitive rate, of course!
When you are starting a food business you are going to approach selling from one of two ways: go big early, or start small and grow. We are the latter. We wanted to sell our products through small, independent stores and so we would go door to door, persuading the owner/manager that they wanted to retail our products. When they agreed, we would do the drops across London ourselves, but as we grew it started getting silly and was not the best use of our time. We knew we would have to take the hit and use a wholesaler. We did our homework and this is what we discovered.
Food Wholesale Selling Tip #1
You will have worked out the ideal RRP for your food product: one which the customer will pay and that you can still make a profit from. If you are selling direct to retailers you will have taken into account the retailer margin, but if you are going to sell through wholesalers, here comes the sad part, you are going to have to build in their margin too – bye-bye glorious profit!
Food Wholesale Selling Tip #2
Know your margins. Broadly speaking, you are going to want a margin of 40-60%. A wholesaler will want 20-30%. A retailer will want 30-60% (depending on the type of retailer they are). The wholesale price will be the absolute minimum that you can charge. Whilst that seems like a lot of money when you’re small, as your volume grows it should bring the manufacturing costs down, which in turn will make using a wholesaler worthwhile.
Food Wholesale Selling Tip #3
In order to grow, you need volume. One way to find that volume is to sell your products wholesale.
Food Wholesale Selling Tip #4
How to find a wholesaler. It’s actually quite simple when you know how. Work backwards: build a profile of your customers, know who they are and where they are likely to shop. Approach those target shops and establish first if they are keen to stock your products, and when they are, find out who their wholesaler/distributors are.
Food Wholesale Selling Tip #5
Not all wholesalers are created equal. You have no control over where your food product ends up, so choose your wholesaler wisely. Just because on paper they sound like they would work for you, they might not actually suit your product. Consider whether you want to use a fine food wholesaler or someone who sells nationally. If it’s the former you will probably have to find one in all the various regions you want to be sold in. If it’s the latter, you run the risk of being lost in the crowd.
One final thing we learned: a small wholesaler will likely take you on if your product is amazing and has a point of difference, even if you have no actual stockists confirmed. The more mainstream wholesalers won’t touch you unless you have guaranteed customers.