Growth is a central aspect of maintaining a specialty food business, and there are different paths to consider that can affect every food business differently.
During SFA’s In the Know webinar, “Is Your Food Brand Ready to Scale?”, Georgiana Dearing, principal and brand strategist at Water Street, a marketing company for manufacturers, shared the different ways to deliver product to the consumer, how to set goals and choose channels that can boost sales, and organically grow a business to serve high-volume customers.
Dearing explained that if a specialty food business plans to get stocked by national retailers, they need to do it safely, as a brand needs to be equipped to deal with larger volumes, shorter lead times, bigger budgets, marketing costs, and various related issues.
“I have seen brands that make that leap and they get into Whole Foods or perform pretty quickly in their early years. But leaping into that national platform can often kill your small brand or put you in a deficit and not in a profitable place,” she said.
Often, inappropriate pricing and promotional costs put brands at a deficit and they eventually end up with insufficient positive cash flow to run their business. The solution is to price appropriately, said Dearing who noted that it is wise to consult a financial advisor.
“You shouldn’t be afraid of raising your price because buyers are more concerned about a brand that can sell at a higher price, especially in specialty food,” she said. “Your key to success at a higher price is right in that name, it’s “specialty,” you’re special.”
She also recommended spreading sales channels through multiple retailers of varying sizes so that chargebacks are not hitting a business all at the same time, which can negatively impact the growth potential of a brand. A chargeback is an industry standard in which a grocer will discount your product, and then charge the manufacturer to cover associated fees. These chargebacks can hit a business even after the invoice is closed.
In preparation for scaling, Dearing suggested starting small and regional before working with national companies. She focused on the importance of distinguishing between growing and scaling. Growth must occur before scaling and involves increasing capacity and staff. Scaling, on the other hand, is about maximizing a business’ efficiency.
In this video clip, Dearing explains growing and scaling.
To learn more about how to appropriately expand a specialty food business, watch the webinar on demand in the SFA Learning Center.
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