May 8, 2017

Food Business Terms You Need To Know (Guest Post)

business listeningIf you’re brand new to the food business, you never want to let other people in the industry know just how inexperienced you are. But, if you don’t speak the food business language, it will be hard to hide your lack of experience in front of seasoned pros. Don’t worry—we rounded up the terms you need to know to act like a food business veteran:

Product Brokers

If you don’t have the resources to hire a sales team, you may want to look into working with a product broker. These industry insiders are well connected to just about everyone in the food business, so they can help you get in front of retailers you would have otherwise never had access to. However, brokers do take a fee for their services, which can either be charged as a flat monthly fee or a percentage of sales.

Payment Terms

When you do business with anyone in the food industry, the rules of how each party will be compensated are known as the payment terms. For example, Net 30 means the receiving party must make a full payment within 30 days. You can also offer the other party a discount for paying quickly. A 1%/15 deal means the receiving party could receive a 1% discount on what they owe if they pay within 15 days instead of taking the full 30 days.

Co-packer

Many food companies work with a co-packer, which is a company that handles the manufacturing and packaging of products. Although many companies would rather have control over how their products are made and packaged, this is not always financially possible.

Guaranteed Sale

If retailers are unsure of whether your product will sell, they may ask you if you are willing to work a guaranteed sale clause into your contract. This states the retailer will buy X amount of your product, but you agree to buy back whatever units do not sell at full cost. This is a very low-risk deal for the retailer, so it’s definitely more attractive for them than it is for you.

Slotting Fee

Many of the big grocery store chains will ask food companies to pay a slotting fee. What does this mean? Basically, if you want space on their shelves, you will have to pay for it. This fee is charged because of how valuable the limited shelf space has become in such a competitive market. Most retailers will allow you to pay the slotting fee either in cash or in free product. Unfortunately, slotting fees are a major obstacle for small businesses to get around because many simply do not have the resources to pay for product placement.

Facing

Once you make it on store shelves, you may hear the term “facing,” which refers to products that are literally displayed to face customers. If you have three different sizes in your product line, and three rows of each size on display, you would say you have nine facings.

Are any important food business terms missing from this list? Let us know in the comments below if we left any behind.

 

About the author: Joel Goldstein is the President of Mr. Checkout Distributors, a network of 1,000 distributors around the country seeking new and innovative products for their convenience stores, grocery stores and truck stops. Since 1989 Mr. Checkout has helped grow national brands like 5 Hour Energy and Pepperidge Farm using their DSD (Direct Store Delivery) network. If you have a product that they should see, you can submit your product for review here.

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