When you are ready to scale-up the growth your business, the fastest way to achieve this is through distributors and major retailers.
Who better to learn from than those who have been through it all before?
We held a round-table zoom call with plant-based business owners and invited three panellists to share their experience with us.
Nicole Mahler (Delicious Foods Australia) - Shared her experience with independent retailers & distributors
Sarju Shah (SSS Foods) - Shared his experience with Woolworths and the Majors.
Chris Molloy (The Plant Pantry) - shared his experience from a plant-based niche distributor.
All the speakers shared generously and openly for the audience.
The following transcript is from the conversations on Bob Ratnarajah and Nicole Mahler.
Bob: Welcome Nicole to the round-table discussion about distributors. Before we dive into the topic, could you please share your food journey? And your inspiration for starting your business?
Nicole: About five years ago, I was trying to re-enter the workforce after a surprise third child, oops-a-daisy, and couldn’t get a job. And then my two eldest daughters who were in their teens turned vegan, and we decided to take that journey together. The business grew from home delivery, thanks to Facebook, family and friends.
I was cooking in my kitchen and sending food to 22 suburbs, and all got a bit out of hand.
Then we started the markets, and we all know how hard that journey can be. I thought there needed to be another way. So, I outsourced my manufacturing and learned to let go of my control.
You know your fears? The business is your baby. Anyone creating your food will stuff it up. And how could they possibly make it as good as you do, right?
Outsourcing really taught me about knowing my recipes and making sure that they could upscale effectively.
And from there it was an obvious next step looking at distribution.
I realized that I was the one holding my business back by working in it so intensely. And it made more sense for me to hand that over and distribution so that I could work on growing the business and growing my range as well.
Bob: Thank you for sharing so openly. There was a giant leap of faith. After all, your background wasn’t in the food business industry.
Nicole: No, I’m a marketing person by trade. I am a passionate foodie, and my kids were the impetus. But I understood five years ago that there was a gap in the market and that there was a real growth opportunity in the plant-based space.
So it made sense for me.
My goal was to make eating plant-based easy for everyone to try.
There was a whole bunch of vegans eating cereal, without a whole lot of options on the shelf. So I just wanted to make something that tasted fantastic and made it super easy for people to give it a go.
Bob: Fantastic! When businesses are ready to consider a distributor, what would you say to them?
Nicole: First, assess whether or not it’s the right model for you. A market/event model is perfectly viable if that gives you a good lifestyle good profitability, and you can keep it up, right?
To determine whether distribution is the right model for you is to really understand your pricing and whether or not there’s room to allow a 30% margin, to hand over to a distributor as well as the retailer margin as well. So it’s about knowing the cost of the product and scalability. And whether or not there’s room in there for a distributor. The benefits of distributors are that you’re getting enormous impact in volume.
Bob: How much did your volume increase compared to a market business, when you evolved into this?
Nicole: I started at home, markets and then, began distributing to stores. The volume increase was crazy! You know, its chalk and cheese.
I’m only supplying to 350-400 stores nationally now, but that’s a big difference to me driving around doing it all myself, right?
It’s a leap, and it also involves investment because, of course, you have to create store-ready packaging. We all know packaging is probably the most annoying part of the food business, at least in my experience.
All my products are in stand up pouches. It’s a refrigerated product, and the printing was done in China, then India and back to China now. I tried printing in Australia. It’s a costly exercise because you’ve got to do volumes for it to make any sense financially.
Bob: I can say that majority of the businesses on this call are no longer in the market model. They’re moving to the next growth phase. Most of you would have seen the life-cycle of business video. Well established businesses are on the call as well.
Everyone on this call is looking to grow their business.
So how would you choose a distributor? What are your requirements?
How to Choose a Distributor
Nicole: Yeah, that’s the next step. Boy, I have been through a few. I’m sure some of you’ve had some similar horror stories. I was fortunate to be approached by a national distributor who was specializing in plant-based products, so it seemed like a good match at the time and volume was high, but he promised the world and severely underdelivered and then went bankrupt owing me money– so not the best experience!
A state versus a national base distributor is something I’ve come to understand the importance of. I’ve learned that there are no advantages in my sector of the market to having a national distributor because it’s the state-based distributors who have relationships with the stores. This is particularly true if you are in the independent space with IGA’s, health food stores and vegan specialist stores.
I found that having an excellent distributor who works hard, who knows the stores has been more successful for me.
Distributors promise you the world, and you get all excited about the volume and roll out, but, if they don’t have relationships in the States, then your sell-through rate falls through the floor, and you don’t get restocked. When stores drop away like flies, it’s tough to get re-ranged - especially if stores have had a negative experience with your product.
So I’ve learned that slow and steady wins the race in that regard.
I’m now up to distributor number five in Melbourne – which has been my hardest state to crack.
The most important thing is to look at the range of products that they represent. And make sure they distribute products predominantly in your category.
These distributors might have their stockists right, and good reps on the ground. But if their primary sales come from products that are not in your category, then you won’t get the attention, and you won’t get the traction.
So, it’s essential when you’re looking at a distributor to have a look at what brands they represent. Check out their website. Make sure you call some of the brands listed there and ask them how the distributor is performing for them. People are usually super happy to share with you if you’re polite, respectful of their time and friendly.
Whilst the brands they distribute should not be directly competitive, it’s good if they’re in a similar space.
Like for me, for example, the distributors brands need to be strong in the chilled vegan space, not in the ambient area. This has made a significant difference to me. You also need to make sure the distributors have reps on the ground making regular calls with the stores.
Bob: Did you check this at the beginning, or did you find out the hard way?
Nicole: What do you think, Bob? I went it alone because you got no one else to tell you how to do it right? So I figured it out the hard way!
There is a slight issue here for all of us. With vegan products - the retailers are still struggling to know where to place them in store.
There’s a lot of discussion going on in the independents and Coles/Woolies space, which I know, the other guys will have a chat about but even the Independents, are having a bit of a struggle.
Harris Farms, who have 23 stores here in New South Wales, are my biggest customer. They have created a specific plant-based product space. They are doing well for me. Product placement and shelf placement has an enormous impact on sales.
Nicole: There are a couple of questions on the chat, let me pick this up. For those who are now moving to consumer packaged goods, we use acronyms like CPG. And to define a category, well it’s your lane effectively – your type of product range.
Category management is a scientific process whereby businesses segment their product spend for more significant opportunities and efficiency.
As Nicole was saying, if you look at what Woolworths has done as an example, they’ve moved all the plant-based meats from the tofu section into the meat area.
Back to you, Nicole.
Nicole: How do I choose a distributor? Make sure they are a good match for YOU. National, or strong in that state you are targeting.
Bob: A point to note, with selecting a national distributor - you need to be able to have a back-end production system and budget, to be able to serve them. Do consider whether to start small or go national at the outset.
How to Increase Sell-Through at Stores
Nicole: Then what happens next is really your responsibility to make sure your products moving off the shelf. It’s not your distributor’s responsibility. Whilst you clap your hands and pop the champagne, you have a good distribution network in place - then that’s where the fun begins.
That’s where the hard work starts.
To ensure that your products are moving off the shelf, that’s where the investment comes in. Ultimately, as a brand owner, it’s, it’s up to you to make sure that there’s sell-through.
Bob: Just on that point, what do you do to make that sell-through? I know some of your supportive campaigns, so I’d love for you to share that.
Nicole: So it all depends on the network of stores. I do a lot of work with IGA stores, Harris Farm, SuperBarns and Foodworks. So you might schedule maybe three or four specials periods per year. So that’s when you’re offering a discounted rate per carton. You know, if you buy five cartons, you get one at 20% etc. You work out whatever the deals are that still make sense for you.
All these strategies get more traction and more volume. You’re just aiming for people to try your product.
Whether we like it or not, a lot of that is price-driven. Particularly, when it’s sitting out there on a retail shelf. You’re not there to represent it, you know, and price tends to be the primary motivator to trying.
When I run specials periods, my volumes almost double during those periods. My profitability goes down, but I figured if they love it, they’ll keep buying it beyond the specials period or not.
When you look at the figures, in the three weeks post-special period, there are higher volumes, so that’s an advantage.
Bob: The major brands use this approach. Brilliant!
Nicole: Thank you. I do price specials, and in-store taste testing, which are so laborious, but they bloody work! Only if your products are good - which I assume all of your products are great!
Bob: I would not have invited them on the call otherwise. :)
Nicole: I find that it only takes one or two and then you get a following - that’s all you need to set up a following in that store. So you don’t have to do a lot of them. I do some of them myself. I also have another two ladies that do them for me. It’s expensive - but it works!
On in stores taste testings - I have an 84% try to buy ratio. So, if I can get them to try it – its likely they are going to buy it.
On the other side is social media; whether we like it or not, it is really the most cost-effective way to reach the largest audience.
Now it’s about creating relevant and authentic content - that’s not just product orientated - tell a story.
I think it’s essential to know your customer, know your audience, and to be delivering content that is meaningful for them—not just shouting out about your product. It goes beyond that. It becomes your brand, what it represents, it’s about lifestyle and things like that as well.
Join ALL the social media groups that are in your space – eg. Vegan Gals Australia etc – there are literally hundreds of groups. Often people are posting questions about finding products – its appropriate and not too ‘salesy’ for you to post re your products here.
I’ve run several influencer campaigns that have had some success – the main thing I have learned there is make sure they share a similar audience and that their audience is engaged. You can ask them for demographics on their audience and engagement levels. Give them a personalised discount code so you can track their effectiveness. Most of them will work for free product. Also give them a list of hashtags to use.
Also look at public relations opportunities - PR can be free, so make the most of these opportunities.
I mean, I should be writing PR every day if I had the time. That’s a resource that I’ve underutilized, so I need to move that way up the priority list – or pay someone else to do it for me! It’s an effective way to get traction.
And then the last thing is trade shows representation. Pick an event that is attracting your target audience. I’ve done everything from Mind Body Spirit, Fairs, Vegan Festivals because it’s a similar kind of audience - who are open to plant-based foods.
I’ve had mixed success doing them. Really, it’s just about driving people to store, you know, to drive that sell-through.
Bob: So, just the one question, when you have a 30% distribution fee, are you factoring in the extra promotion marketing spend? In other words, do you have extra margin?
Nicole: You have to factor in specials periods otherwise it’s not realistic. Your product won’t sell through otherwise. You’ve just got to have those opportunities to get retail or continue to get customers. I think there are innovative products that perhaps can sell without the discounts - and that’s fantastic for them.
In my space, it’s quite competitive so I find it works.
So I’m sticking with it for now until I manage to drive up brand awareness to the extent that I don’t have to rely on them as much – which will take some time and a heap of money!
Bob: Thank you for openly and candidly sharing your experience with us all Nicole. Over to the audience to ask some questions from you.
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