February 22, 2016
Getting started and gaining traction in your local marketplace is the first hurdle small food businesses face, but the next step can be equally as challenging. In today’s podcast, we talk with Genie Gilliam of Wagon Trail Foods that produces a nut butter spread called NutFusion about everything from working with brokers, distributors, and co-packers as they look to grow the product’s reach beyond southern Oregon.
Jennifer: Before we get to your specific company issue, can you tell us a little bit about your business?
Genie: Absolutely. Thank you, Jennifer, for having me on this podcast today. I’m really excited to be able to talk with you about this.
Our business, Wagon Trail Foods, is now two years old. Actually, make it a little bit longer in concept, but as far as starting production, we started production in 2014. We create a peanut spread, actually, four different peanut spreads, that we started with at growers’ markets. Then, we moved into some grocery stores, and now, we wish to expand beyond our local area.
The product itself has great reception. We create a spicy peanut spread. One of them is the most popular, and can be used with coconut milk or soya sauce or rice wine vinegar. You can almost pair it with anything. We love it on Jalapeno peppers with cream cheese. It’s just a fabulous product and it surprises people because there’s not, to my knowledge, a spicy version of what we do. It’s called “Thai Wan Ahn.” We did a little twist of the words. It’s spelled T-H-A-I, so Thai Wan Ahn, and people just … they just really enjoy it. If people like peanut butter, they really like this particular product.
Jennifer: As a lover of spicy food, that sounds phenomenal. You mentioned, though, that it’s a peanut spread. Can you tell us how that’s different than a peanut butter?
Genie: Yes. In the whole process of us deciding what kind of business we wanted to do, and settling on a food business, and then, creating peanut butters, we found that working with the Oregon Department of Agriculture that to be a peanut butter, and actually this is a federal regulation, it has to have 90% of peanuts in it. Only 10% can be other things. When something’s called a peanut butter with, let’s say it’s got raisins in it or cinnamon or whatever, only 10% of that product can be those things. The rest has to be peanuts.
Ours has a different formula , which makes it different, but you also have to call it a “peanut spread”, because regulation doesn’t allow it to be called a peanut butter.
Jennifer: Oh, okay. Okay, thanks for clarifying that. You mentioned that you sell through a couple channels. Are you still selling through growers’ markets now, in addition to the supermarkets?
Genie: Absolutely. We find that we pick up supermarket traffic by doing the growers’ markets, because we make it more convenient for the people who cannot always come to the market to get it some place else. We do have to wholesale to do that, but our intent is that … You know, unless people taste it, they really don’t know the difference. You don’t walk into grocery stores saying, “Oh, I’m going to buy a new peanut spread or a new peanut butter.” You actually have to taste it. People aren’t in so much of a rush at a growers’ market. They’re more in a “stroll” mentality. At a grocery store, it’s a little bit harder to grab their attention.
Jennifer: Have you found that you have better sales in one channel over the other?
Genie: I would say, “Yes,” in part because … I would say the growers’ markets, we have better sales than, necessarily, the grocery stores at this point, because we’re still building recognition, branding and things like that. The growers’ markets, we just get a lot more tastings done. People aren’t necessarily on a budget, per se. Our price at the grower’s market is $8.75, and then, when we’re in grocery stores … and actually, we’re in a couple of specialty stores, it goes from about $7.77 to $9.99. On our website, we sell it $9.99 just so we don’t undercut any of our stores.
The growers’ markets, we do get a lot more tastings done, and eventually, that drives traffic to the grocery stores.
Jennifer: When you wrote in about being part of this podcast, you mentioned one specific issue your company was facing when it comes to sales. Do you mind sharing that again for all of our listeners?
Genie: Yes, so we … Growers’ markets, we started out small with one little market on a Saturday, and now, we’re doing two markets a week. We’re looking at doing three, here locally. Originally, we were in Jackson County in Oregon, Southern Oregon. We want to create a business that will create wealth, not just for us but for our community. I have a passion, as an example, for the Medford Seniors’ Center here, and I would like to be able to create them a nice income stream.
To do that, that means we’ve got to get our sales up. We can’t do that physically with just us. We have to use the grocery store market, and also, try to produce more online, especially the grocery store. Stepping outside, it’s like, “How?” We deliver ourselves now, but trying to … There’s a couple issues. One is, how do we ship and get people to desire our product when they have to pay extra shipping and those types of things to get it? Looking for a distributor, then, how much do we have to cut our price in order to support that distributor?” Then, if we’re really successful, how do we create enough of the product … and getting a co-packer has also been part of that … It’s kind of a chicken and egg thing, trying to get a co-packer in place.
First though, if we do need to ramp up because we have huge orders, we can do so, but also having the capital in place at that time. Also, knowing that we don’t put all of this capital out there to create the product, and then not help buyers at the end. Maybe, there’s just a little blip where the distributors buy, but then, nobody’s buying at the grocery stores. The real difficulties is getting … once I put it up in Portland, Oregon, which is 6 hour-drive from here for me, is getting those people at those stores to know that our product’s there and to taste it. How do I expand rapidly, but also, support that through tastings at the grocery stores or the specialty markets or whatever? How do I do that? It’s just kind of a … it’s a big nut to crack. No pun intended. It’s going to be a challenge to stretch our minds to go that far and to create that network of stores, and to be able to supply them.
It’s an invigorating challenge. I’m looking forward to it, but it’s also scary at the same time.
Jennifer: As you talked, there were a couple things that I was thinking of. First and foremost … and this isn’t to say that in the local area that you don’t have really robust sales, but first and foremost, is to make sure that you’re getting the traction that you want in the stores that you’re currently in, from a sales standpoint and from an inventory turn standpoint. A lot of entrepreneurs look as the quickest way to growth is to open new stores, but actually, the quickest way to growth is to increase your inventory turns in your existing stores. You’re already in there. The majority of the legwork to get into the store has already been done. Within your local market, it is a little bit more feasible to be going and doing tastings and doing samplings and what not.
In terms of growing beyond the local area, though, you mentioned distributors, but one question I have for you is, “Have you thought about working with food brokers?”
Genie: I read about food brokers and I haven’t really thought about using a food broker instead. There’s this hierarchy, and I’m still trying to understand exactly how all that works.
Jennifer: In a nutshell, and of course, in the food industry nothing is 100% set in stone, but in … Essentially a food broker would be a third party sales consultant for you, if you will. This is actually somebody who has relationships with stores. Potentially, you would look for somebody who has relationships with stores in the Portland area already. They actually bring samples of your product and your sales material along with all of the other products that they’re representing. They show those to the stores that they have relationships with.
A food broker doesn’t actually take any inventory risks, so he or she, is not ordering in a pallet of product from you and then shipping it to the store. Essentially what happens is that, when they have a store who’s interested in your product, they let you know and you would ship the product directly to the store. You’re handling kind of the distribution side of it, but you typically are going to pay kind of a lower rate, if you will. Usually with food brokers, you’re paying a commission based off of sales, typically. There are some food brokers who will also ask for a monthly or quarterly retainer, but typically, you’re going to pay a commission based off of the sales that they make for your company.
It’s also less of a financial risk, versus a distributor. You’re going to have to provide them with a distributor, basically, a distributor price point which is below your wholesale price point. The right broker … Again, not to say that the right distributor cannot do this, but the right broker is going to be able … because they have this relationship with these stores, is going to be able to work with you. You could ask them questions, like, “Okay, I want to know what I can do to support the product in these stores, even if it means I can’t physically be up there every week doing tastings in the store. What other things can we do to support the product in the store?” It may be things, they might say, “Well, let’s provide a free jar for every 12 that they order so that they can open up the 13th jar, and let people taste.” They would be able to to give you ideas based off of what they’ve seen work well in those stores, and how they know that that buyer or that store operates.
As I’m sure you’re aware, every store operates a little bit differently in terms of what they allow or don’t allow.
Genie: Yeah, definitely. They all have their own little peculiarities that we’ve had to learn about. That’s a good idea with food brokers. Is a distributor … I guess, the question I would have would be, could you have maybe a distributor and a food broker covering different areas?
Jennifer: Absolutely. That’s a good point. Not always, but usually food brokers are going to cover certain territory. It’s not uncommon for them to ask for, let’s say, exclusivity within that territory. I’ll use the word “territory” kind of loosely, because sometimes and often times, it’s a geographic territory. Sometimes, it might also be, “Okay, it’s Portland area of specialty retailer stores,” so, they might not necessarily be covering the grocery stores that are in the Portland area. It might be, “Okay, I want the entire Pacific North-West,” as an example, “But I only want, again, the specialty stores.” You absolutely can work with distributors and work with brokers. In fact, a lot of times, brokers might help … again, the brokers who have these relationships, will actually help make introductions to distributors for you.
There are certain stores, especially with grocery stores, that you can’t get into unless you work with a distributor. That is in part because they don’t just want you showing up at the door with your case of product to hand over to them. When they work with a distributor, they know they can order, let’s say, 200 SKUs, and they can get that all in on one truck. They can plan for delivery of that, they can plan to have the staff to put it on shelves as needed. There are a lot of stores, certainly, your bigger stores, that only work with distributors. Even if they like your product, they’ll actually tell you, “You need to be working with X Y Z distributor.”
Genie: As far as scaling up, it’s sometimes, especially with larger stores, it’s harder to get them to be honest about what do they consider a proper turn for the product in the store. One store here, locally, has been really kind and showing us their reports on peanut butters, and things like that, compared to ours, but a lot of stores are not. Giving of information so I can determine, “Are we doing well? Are we not doing well?”, that’s been hard to determine. What is considered a good flow or traction in a store? I’m sure specialty stores are going to have a a smaller amount of turns than a grocery store, but I’m kind of struggling with what is norm. What’s my benchmarks? Should I just be benchmarking against myself?
Jennifer: You know, I wish that there were norms. It’s questions I get all the time from people, like, “Okay, what can I expect in the industry?” Honestly, it totally differs depending on both your product category, depending on where you’re selling both within the, let’s say the US, because we’re talking about the US here, and then where you’re selling specialty versus grocery. There isn’t actually a norm. I would say that you want to benchmark against yourself. As much as you can, keep track of your sales, not just in general, like, “Okay, this month we did more sales than last month,” but until your accounts get too huge and unwieldy, try and track it by store too. Say, “Okay, how am I doing this month compared to last month within these stores individually?” Then, certainly, as your company grows, you might want to group those stores into categories, and then start to look for, “Okay, you know, again, on average, how am I doing in specialty stores in the State of Oregon? How am I doing in grocery stores in the Sate of Oregon?”
The fact that one store had shared that data with you is huge. That’s not something you’re typically going to be able to find. Sometimes, actually, food brokers can help get that information for you because their whole goal is to keep you in the stores and to get more sales. The more sales they get, the more money they make. They’re highly incentivized for that, so sometimes they can … because they have relationships with the buyers,, they can get that information for you, or they can at least get some rough figures for you.
It’s uncommon to find a buyer who’s willing to share that with you, unfortunately.
Genie: What’s the best way to, I guess, screen food brokers? You know, at first … I mean, I’m coming from … because we are still small, just the sense of gratitude that someone even wants my product in their store. I’m just kind of bending over backwards just to make sure that I keep them happy in all of that. Now, I need to grow up and be, you know, “This is our business,” and have it professional. Be on the same level as them, rather than grateful. How do I go about finding the best food broker that could be match, that would be a mentor, but also respectful … or doing and not just look at us as another product that’s kind of unusual and so they’ll give it a shot?
Jennifer: You know, part of that is there’s a little bit of gut feeling. You know, just when you meet somebody and intuitively you feel like, “Okay, this is actually somebody who’s going to be helpful to my company, or is this somebody who’s just kind of randomly interested?” In terms of some questions or some things that you want to be talking to them about, you know, first and foremost … and this does go back to the “little bit of gut feeling”, is trustworthiness. Do you feel you can trust them? Never forget, also, that when you hire a food broker, you’re hiring someone else to represent your brand. You have to feel you are comfortable with them being a physical representation of your brand to buyers, especially as you grow even outside of the Oregon area, there may be some buyers that you actually never meet in person. The only connection that they have to your brand is through your broker. First and foremost, trustworthiness.
Second, is you want to be looking at communication. Somebody who can represent your products and your messaging well to buyers, but then also, be able to provide to you information about trends within the specialty food world, be able to provide you with industry information, numbers, like we said, either that they’ve gotten directly from buyers, or just numbers that they’re seeing from the industry as a whole. You’re looking for somebody who isn’t just going to sell your product, but is truly going to feel they are going to do everything they can do to help you succeed. On the flip side, you are going to do everything you can to help them succeed in their role.
You want to … Kind of beyond that communication and the trustworthiness standpoint, is finding out what accounts they serve. Contacts in this industry are important, as you know. Just trying to get in the door to meet a buyer is hard, so you want to have a food broker who has contacts and has relationships with the stores, and the types of stores that you’re looking to get into. Ask perspective food brokers what their top accounts are, see if they fit with your business goals. You want to make sure that what you have planned for where your company is going to grow in the next year to three years, that you have a broker who is aligned with that. If not looking to get into, let’s say, a big box retailer like a Costco, if that’s not your goal, them I wouldn’t be swayed by somebody, a food broker, who all they do is serve big box accounts, because that’s not a right fit of your company now. Down the road, maybe, but currently, not now.
Also, checking out, do they have geographic regions? Do they have specific channels such as selling into gift stores or only into specialty stores or only into drug stores? Again, you might meet somebody who seems wonderful, but if they sell into drugstores, and that’s not where you see your product right now, then, that’s not going to be a good fit for you overall. Again, it’s not going to a good fit for either of you because your food broker won’t succeed either.
Lastly, I would look for a food broker who would be … This is stuff that you have in conversation with them before you sign a contract and start working with them, but somebody who’s going to be help you implement promotions and provide you with suggestions on promotions that would help get your product sold in stores, especially in stores where you cannot be there every week doing tastings. Somebody who has some ideas and would be able to provide you with ideas on the outside, but then also, provide you with feedback on how those went, and, “Did the stores see an uptick in sales? Should this be something we’re considering again? Should this be something that we re-evaluate and we decide to do something different?”
I know if there are food brokers listening right now, they’re probably shaking their heads because it is a lot to ask of food brokers, because remember that they do have multiple products in their portfolio, but ultimately, the food brokers who succeed the most are ones who are really working partnership with brands. It doesn’t mean that you call them up every other day with a question about your business strategy, but when it comes to the accounts that they serve, you know that they are willing to provide you with feedback, and they are willing to provide you with ideas. On the flip side, you are willing to listen to those ideas, because sometimes that can be a detriment to us entrepreneurs. That’s what I would be looking for with regards to food brokers.
Genie: Okay. With distributors, what is … You know, I’ve been reading about distributors in your price point and how you [inaudible 00:21:06] that kind of backs into your costs and things like that, but looking at the distributor, what are kind of the dos and don’ts as far as you signing contracts with them? What are the things to watch out for?
Jennifer: The number one thing, not just from my experience, but this was actually at the specialty food … at the Fancy Food Show put on by the Specialty Food Association. They have a bunch of education seminars, and I was sitting in on one. They were talking about distributors and the number one thing that everybody said was, “Make sure you have a lawyer review the contract.” That is the number one thing because distributors can be a huge benefit to your business and move your business forward, but that contract is not always going to be written necessarily with equality in mind, so have a lawyer review the contract. That’s the number one takeaway when it comes to working with distributors.
Genie: Well, that’s interesting. I assume it would be probably best to work with an attorney that would be used to working with food companies and things like that.
Jennifer: That’s great … I mean, yes, if you can find that, who covers the State of Oregon, absolutely. Otherwise, just somebody who understand retail would be good, because in this contract, they’re going to be talking about margins, they’re going to be talking about purchase orders, they’re going to be talking about all of that. Somebody who understands the retail world and understands those terms, and understands both from a legal standpoint those terms, but also from a logistical standpoint, those terms, is somebody you would want to look for. Somebody who understands the retail world.
Genie: All right, that’s good to know. Wonderful, well we’ve got these challenges as far as finding co-packers. Maybe in your experience, this is part of the whole distribution thing, is being able to produce enough product to get it out. I’ve contacted a co-packer who can produce what we want. We’ve gone down. We’ve done a walk though their plants, and all of that. Then, they just didn’t return my phone calls. We signed the agreement that … the non-disclosure and all of that, and after the third message, I finally left a message just saying, “Hey, if you don’t want to produce our product, that’s not a problem. Just let me know.” What’s your experience been with food co-packers?
Jennifer: Co-packers … I’ll say, fortunately, that has not been my experience with co-packers. What I do know of co-packers is that ultimately, they are looking to fill time on their product runs. If somebody else came in after you signed the non-disclosure, and all of a sudden, is … either it was an existing client of theirs, or it was a new client who is now, you know, has their machinery at capacity, that’s potentially what’s happening there. They’re just like, “Well, our lines are full so we don’t necessarily need another client.”
I haven’t seen that, necessarily, happen too often. I do know that it’s … In my own experiences, and I’m working with others whoa re looking to work with co-packers, it’s a challenge to find the right co-packer, just to find somebody who meets the state and federal requirements that might be necessary for your specific product line, that can work with your type of packaging, and then again, that kind of trustworthiness and gut feeling, it’s for me, the price point feeling. It’s not uncommon to spend … I mean, I’ve known entrepreneurs who’ve spent up to 18 months looking to find the right co-packer.
Ultimately, my recommendation would be, certainly, see if those people re-surface. Per se, I don’t know if I would trust them after that-
Genie: I know.
Jennifer: I would continue to spend energy to try and find the right co-packer. To your point, though, it’s this balancing act of “You don’t want to necessarily spend a lot of money to have inventory produced, and yet, at the same time, you don’t want to sign on with a co-packer and then never use them.” Chances are … not to say it doesn’t happen, but rarely does it happen where your product goes from 0 to 100 overnight. In a perfect world, I would have, let’s say, three to five co-packers identified, that you feel you would like to work with, but you might not have gone through the testing process with them yet to really nail down, “This is the co-packer I want to be working with.” Have some preliminary conversations with them, potentially have seen their facilities, so that when you start to notice that your business is really ramping up, then you can kind of speed things along with regards to the co-packer issue.
Genie: Well, I know that one thing that I’ve realized after a couple years is that it’s just like raising a baby. They can’t run until they crawl. I have learn a little bit more patience to move things forward. Things happen the way they need to happen. I can’t do much beyond just continuing on and putting on step, you know, foot in front of the other.
Do you have any recommendations about how to move with this business forward faster? In fast way, but also, in a way that it doesn’t crash and burn?
Jennifer: Unfortunately, the answer is, “It takes money to do that.” To move the business forward, it’s increasing those inventory turns at stores, and part of that may be by running promotions that discount the price to consumers, or discount the price to the retailer. That’s usually the way to really move it forward. In fact, even beyond … I was talking to someone the other day about getting press for the company, and short of Oprah’s holiday list, which I don’t even think exists anymore, rarely is there a media outlet that will absolutely turn your business on overnight.
The quickest way to grow your business is through those relationships with those retailers, which is why that initial point that I said was, you know, really make sure that your relationship with your local retailers is solidified, and that you’re doing as much business as you can through them. The very first thing I would do is, I’d get on the phone back to those retailers and say, “Okay, what else can we be doing?” If you haven’t asked them that question recently, say, “What can we be doing to really move this product in your stores?” They might each have different ideas, but also, those are ideas that as you do grow outside your region, you can say, “Oh, let’s try this because this worked in this store back home before. Let’s try this because this worked in a different store another time.” It will give you a wider range of promotional ideas, that you can then take with you to other retailers.
Jennifer: I do think that if you can find the right broker, I do think that based off of everything we’ve talked about today, that that might be the next big step in helping you grow. Yet, again, it’s not something like all of a sudden, you’ll be shipping 800 pallets, and that you need to have the co-packer on board right this minute. I think that the right food broker would be able to help you grow in a smart manner, and prepare you for that next step.
Genie: Cool. That’s what we want to do, is to grow in a smart manner. We want this business to be around for a long time. We want to make an impact in our community, by making sure we’re lively and kicking, still ten years from now, is one of our goals.
Jennifer: That’s fantastic. I always love when I talk to entrepreneurs who are looking to grow sustainable businesses. I mean “sustainable” from a time period, but also, as you mentioned, sustainable within your community, and helping or giving back to your community as well. It’s one of the things I love about food entrepreneurs.
Genie: Well, besides that’s very tasty.
Genie: It’s fun to do.
Jennifer: The spicy, I’m going to have to try that out.
Genie: I’ll have to make sure you get some [inaudible 00:30:15].
Jennifer: Well, again, thank you so much. We were talking with Genie Gilliam of Wagon Trail Foods. The website is wagontrailfoods.com. A link to their website will be up on the Small Food Biz site, so you’ll be able to find them.
I really appreciate talking to us and taking the time. Best of luck to you. Please keep in touch and let us know what happens.
Genie: All right, thank you so much, Jennifer. Appreciated.
Jennifer: Thank you.
I hope you enjoyed today’s podcast and that it gave you some food for thought as you work on growing your business. If you’d be interested in sharing a bit about your company’s story and the hurdles you’re facing in a future podcast, please reach out to me at email@example.com.
In the next podcast, we’ll be talking with a small business marketing expert who is going to share some insights and tips on how to make email marketing work for you.
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