Selling All Channels
May 1, 2004
Selling All Channels
If you’re selling only to supermarkets, you’re missing a big piece of the pie. Today, consumers shop for food at more channels than are available on cable TV. You’ve got to be everywhere the consumer is.
How big is the pie? Let’s look at one of the larger pieces, Wal-Mart. According to Just-food.com, Wal-Mart serves more than 100 million customers every week. In a single month, it serves 450 million consumers or 150 million more people than the entire U.S. population. But what are some other pieces of the pie? According to food marketing experts, John Stanton and Richard George of the Food Marketing Academy at St. Joseph’s University, “Everybody is selling food!” More specifically, they say, “Everybody is not only trying to sell food, but they’re trying to sell consumers their next meal.”
Take your blinders off, and you’ll see a whole new world of opportunity. For example, IKEA, the furniture and home-remodeling giant, is selling all sorts of meals to go. Blockbuster is selling more than popcorn and peanuts. Bed, Bath and Beyond now sells food items to go — like pasta sauce, spices, and tortilla mixes — in their kitchenware department. Walgreens and other national pharmacy chains sell food. So do K-Mart and Target. The Internet sells food, as does cable TV. QVC sold one million jars of pasta sauce in 30 minutes at $14 a bottle. That’s one million jars of pasta sauce that won’t be sold in food stores, and the food stores won’t even know they lost that business. Even Home Depot is selling food, in addition to candy and coffee. Home Depot gave away a free turkey with every purchase of a turkey fryer last Thanksgiving.
Don’t ignore these peripheral outlets for food marketing. Mass merchandisers in every form are now selling food, and they are always looking for a bigger piece of the food pie. Liquor stores and beer distributors are not only selling candy, salty snacks and nuts, but they’re also selling a wide assortment of foods. Some upscale liquor stores even have deli departments.
Hallmark stores have a “Let’s Do Dinner” program with a full line of soups, chilies, and salads along with grilled chicken breasts and stuffed shells. C-stores have expanded their fresh food offerings, and many offer bakeries that offer everything from sandwiches to pizza to Mexican food.
Many bakeries are not familiar with names like McLane, Coremark, H.T. Hackney, Imperial Trading and others. These are fast becoming one-stop suppliers for the C-store industry, and they’re all around the nation. Wawa is perhaps one of the most cutting-edge chains. Located on the East Coast, Wawa recently turned all the procurement of their grocery products over to the C-store wholesaler, McLane. Grocery products of any kind are delivered to a Wawa store from one of this C-Store wholesaler’s tractor-trailers. These huge, one-stop suppliers are contracting with the C-Store chains to offer them a single source for all their groceries.
What does this mean to you? It means that you should know that C-stores are now moving heavily into freeze/thaw bakery products. These products used to be exclusively direct-store delivery, but are now being supplied by the big C-store wholesalers who ship them along with their grocery deliveries.
Most of these large wholesalers supply their C-store customers from their own warehouse freezers. Distance is no longer a deal-buster. Bread, snack cakes, pies, and donuts manufactured on the West Coast are thus making their way to shelves in C-stores all over the East Coast. The C-store operator just thaws the product and merchandises it on the shelf.
Many bakers, however, do not know how to penetrate these alternate channels. With several years of experience, we’ve learned that it’s critical to find your point of entry into the loop, get through the point of entry of the loop, and, most importantly, stay within the loop.
For many bakers who are unfamiliar with these channels, a major obstacle is fear. They’re afraid these mass monsters are too big. They’re afraid they’ll take over their business. Bakers will do millions and millions of dollars of business with them, but won’t make any money. However, by planning and executing properly, all those fears are seen to be groundless.
What all the stagnant, doom-and-gloom thinkers need to understand is that the Wal-Mart’s of the world and their wannabes are not a fleeting phenomenon. They’re growing year by year and by leaps and bounds.
If you are a baker of any consequence, you’d better be in that loop and doing business with the “Mass Monsters,” as Stanton and George call mass merchandisers. Some of them may not consider food as their core competency, but if you look closely, you’ll see that they are selling a lot of it.
Specifically, if you’re not doing business with Wal-Mart, you’ve got a problem either now or certainly in the future. The No. 1 retailer in global food sales has to be on your list of customers. But don’t forget others, such as Target, which opened 80 stores in 2003, 25 of which were Super Centers. Don’t forget the clubstore channel with Sam’s, Costco and BJ’s growing faster than the retail industry. Then there are the stores that are big in their categories but not necessarily in baked goods.
Even if they don’t sell baked goods today, don’t ever ignore a large retailer or distributor of any kind for any food product. Stay alert because they can change without notice.
Here are a few helpful hints when dealing with mass merchandisers:
Here are a few helpful hints when dealing with mass merchandisers:
1. They are both professional and fair. They don’t need your business. They know that you have to make money and that they have to make money. If they can’t negotiate a win/win proposition, they will bow out.
2. You must do your homework. You have to know your product, your competition, your category and a lot about the retailer you’re calling on. This is not the usual sales call. You’ve heard the expression: location, location, location. Well, in this context, it is homework, homework, homework,
3. You’ll get enough time to present your proposition and not one second longer. When the buyer starts looking at the clock, you’re on the slippery slope.
4. Whoever makes the call on the buyer must be a very professional person, with plenty of rank so that he/she can make decisions on the spot. There will be no “getting an OK from headquarters.” You must be able to speak for your company and have the rank to commit it.
5. You will be talking to a buyer who can cut a deal right then and there, so don’t offer anything you can’t make happen.
6. They are very open and direct about their requirements. Also, they’ll be extremely frank about how they expect you to do business with them in terms of inventory requirements, transportation and logistics. For example, you may be required to ship through a third-party contractor as opposed to shipping direct. Be careful about hidden costs.
7. Most importantly, you have to go in with your rock-bottom price. They will expect you to make some money, but they will also expect that you’ve cut all the bells and whistles out of your product to honestly tell them that’s the lowest possible price. They will not negotiate on price. If they sense that it is not your best price, the meeting will be over immediately. If they are interested in your offer, they may negotiate to take over some portion of the logistics or they may suggest some synergies or less expensive packaging. If you accept any of their cost-saving recommendations, they will want you to take those savings off your price. Having done that, they will still expect you to make money. On this basis, you will either make the deal or you won’t.
8. You have to consider you have a viable customer when they ask to completely manage your product with all its attendant responsibilities. That means that the retailer will no longer place orders with your firm. You will do the ordering. You will monitor your entire inventory situation through their proprietary data system. In this way you will be kept current with what’s moving in and out of the retailer’s stores on a daily basis. You then decide, on a daily basis, what needs to be ordered and where it’s to go, and don’t be wrong. You will definitely need a full-time team on the business at that point. If your customer gets “out of stock” reports, you’re in trouble. And if it happens more often, the take-away will be that you’re not serious enough about their business to do business with them. If that’s the case, you will be dropped.
However, there are many upsides to dealing with customers. You will learn more about your business, your company and your category than you ever thought possible. This learning process can have an infectious, ripple effect that can run, beneficially, throughout your entire company. It’s like you’re working with the “smart money” now, and they have opened your eyes as to how things can be done by employing professionalism, contemporary technology and a serious commitment to your pre-determined company goals.
Gary Kyle presented parts of this column to the American Society of Baking earlier this year which has been updated for SF&WB magazine. Based in Philadelphia, Nagle-Kyle Associates specialize in delivering solutions for strategic growth for consumer packaged-goods companies throughout North America. For more information, call 267-238-3887. To view more technical papers from the American Society of Baking, visit www.asbe.org.