May 30, 2017

Building Successful Food Service Relationships (PODCAST)

When I asked on the Small Food Business Facebook page, what types of topics podcast listeners would like to learn about, several people mentioned an interest in knowing more about selling to food service accounts.  With that in mind and armed with questions sourced from listeners about this topic, I reached out to Allison Ball, of Alli Ball Consulting, to find out more about what food producers should be doing if they’re interested in getting food service accounts.

Alli has offered listeners to today’s podcast a discount of $25 on her e-coures.  For more information, click here and use the promo code smallfoodbiz.

TRANSCRIPT:

Jennifer:Allison, thank you so much for being here today. I really appreciate it.

 

Allison:You’re welcome. I’m excited to chat with you.

 

Jennifer:So we’re going to start with a really basic question because we’re talking about food service today, but want to make sure that everybody listening is on the same page. So what exactly do we mean when we talk about just the word food service in general, because we’re going to be talking about how to get food service accounts, or some tips and ideas. But what does food service mean? What types of businesses does that comprise of?

 

Allison:Yeah, that’s a great question. So food service is essentially the opposite of retail. So it’s when a producer sells to a wholesale account, then uses their product either as an ingredient or as an item on the menu. So it’s establishments where food is served over the counter rather than off the shelf. So food service accounts could be restaurants, bars, schools with cafeterias, businesses where they provide meals for their employees, coffee shops, things like that.

 

As a producer you can sell to both retail stores and food service accounts. Say you make something like a Bloody Mary mix. You could sell it in a quart container on a retail shelf, or you could sell it in bulk to a bar. Does that make sense?

 

Jennifer:Yeah, that makes great sense. And I love the example, too. I mean some of the ones that you mentioned, things like school cafeterias and food that’s sold within a corporate setting, which certainly up here in Seattle a number of our tech firms do that. Yeah, those are ones that I hadn’t really thought of but, yeah, those are food service accounts. It’s great to think that it’s a pretty wide-ranging types of businesses.

 

Allison:It really is. I’ve had clients who have had really, really great success in nursing homes and hospitals and things like that, so it really is a broad category.

 

Jennifer:Oh, that’s excellent. So you know I know that over the course of our interview today we’re going probably dive into this next question in more detail, but again, kind of like at a high level. So what are some of the things that make selling to food service establishments different than selling to a retail store buyer?

 

Allison:Yep. So like I mentioned in that past example, number one is it’s usually sold in bulk or in bigger quantities. So again, using that Bloody Mary example, you might sell a 16 ounce Bloody Mary mix on a retail store shelf, on a grocery store shelf, but you might sell your Bloody Mary mix in one gallon jugs to your food service account. So usually bulk. So usually the packaging is a little bit different. And typically it’s higher volume as well. So if you make a really small batch product or something that’s really seasonal, that might not be a great fit for food service.

 

And then there’s two other things, too. The pricing is slightly different. And then lastly, when you sell food service, you don’t necessarily get the brand recognition that you would on a grocery shelf. So the end user might not know that the restaurant or the cafeteria or the golf course, whatever it is, is using a particular brand in their cafeteria, right? So if you make pickled onions, or you make, I don’t know, a type of cheese, a particular farmstead cheese, that end user might not know it’s your brand of pickled onions or your dairy’s cheese because it’s not highlighted on that food service’s menu.

 

Jennifer:Okay. So we’ll talk about the packaging and the pricing piece in a minute. But what you were just talking about with regards to brand, just in your experience, is that really important to some food entrepreneurs and so they might determine that going into food service is not the right avenue for them because they want to build that brand recognition?

 

Allison:Yeah. I do think that that’s really important. Especially if you are a brand that is higher end and your story helps sell your product or helps justify the higher price point on your product. For example, if you make really, really high end chocolates, and you are all about the story of foraging the inclusions that you put in your high end truffles, and they all come from within 20 miles of your home and you’re doing everything by hand and on and on and on, when that food service account buys your truffles and has to pay that really high price point for that, and then they just put a single truffle on a dessert plate, they’re not going to highlight your brand and maybe can’t justify paying the expensive price because of that.

 

So yeah, for some producers who really want to build the brand following, food service may not be the way to go. Alternatively, some food service accounts do highlight brands. Right? If you do have a great story to tell, they might want to partner with you because your brand following. It just depends on the account.

 

Jennifer:Again, that’s a good reminder for folks not just to be looking at the sales because somebody might be listening to this today and think, wow, this is a great potential channel to get into. I can really drive sales through this. That would be wonderful for the bottom line, but if it’s not in alignment for what you want for you brand awareness, then it might not be a good fit for you.

 

Allison:Exactly. Exactly. If it’s essential that you have the brand awareness to sell your product, then food service might not necessarily be the right channel for you.

 

Jennifer:So stepping back, you were talking about packaging and you mentioned about bulk sizes, bigger sizes. Is there other things that food entrepreneurs should take into account when it comes to selling to food service? I mean a lot of food entrepreneurs spend a lot of time and a lot of money on their packaging. Is that as important when you’re talking about food service accounts? [crosstalk 00:06:31]

 

Allison:No, it’s definitely not as important because that end user doesn’t see the packaging. Or rarely, rarely sees the packaging. So like we said, selling it in bulk to food service accounts is much more typical than selling your smaller retail packaging. But the most important thing is that that packaging for food service accounts is that it’s sturdy, that it’s stackable, that it’s going to protect your product from transport or in storage. So there’s no need for that really beautiful packaging that’s ready for the retail shelf, but it must be able to protect your product.

 

And then furthermore, you want to make sure that you still have all of your information on the outside of that packaging so that it has your brand name, that it has the product. You still want to put your ingredients on the packaging. That is really important, especially as consumers are more and more concerned with ingredients. So you want that, and then you always want to have your best by date on your food service package because food service establishments are buying lots and lots of ingredients and they want to be able to quickly look at the outside of your packaging and know how to properly rotate and use their products from their inventory.

 

Jennifer:Oh, that’s a great tip.

 

Allison:Yeah.

 

Jennifer:I was thinking back to the days when I was working as a pastry chef for a big hotel and just the quantity of ingredients that we would get in on orders, and then it’s just going into storage.

 

Allison:Exactly.

 

Jennifer:And you’re right, I mean we’re kind of throwing it back into the walk-in.

 

Allison:Yeah, exactly. Exactly. And you know if you’re ordering 200 pounds of sugar at a time, and they’re coming in 20 pound bags, you want to make sure that you’re keeping your back stock rotated. So in my mind, like the bigger the better for the size of the expiration date on your food service packaging.

 

Jennifer:Great. You know, I had mentioned to you Allison, that prior to this interview, I put it out on Facebook that you and I were going to be talking. We were going to be talking about food service and wanted to know what questions folks had. And without a doubt, and I know this is not … there’s no easy answer to this, but without a doubt the number one question that came up again and again was with regards to pricing. Is there a secret or is there anything to know about when it comes to pricing your products for food service versus when you’re pricing them for grocery stores and retail buyers?

 

Allison:Yeah. It’s a really good question, and it’s one that I do get all the time. And sadly, there is not a magic number that you can just punch into your spreadsheet. So it is similar to retail in the way that margins vary from category to category. They vary from type of establishment. A coffee shop that’s buying your pastries is going to pay a different price than a tech company who’s buying your pastries. So there aren’t rules that are set in stone.

 

The easiest way for you to approach the conversation of pricing is to be really honest and straightforward with your accounts. So I’ve seen margins that range from 30% all the way to 60%. Typically it’s about a 35% margin that they’re looking for in food service. But above all, producers need to figure out their own pricing, compare it with the competitors, and have an honest conversation with your accounts about pricing. And realize that pricing is negotiable from both sides. You can negotiate pricing on your terms as a vendor, and then also that food service account is going to want to negotiate pricing as well.

 

Jennifer:You mentioned comparing it with competitors, and that’s one thing to do let’s say, when you’re trying to get it onto a store shelf because you can just go to stores and do a little bit of competitive analysis from a price standpoint, but when selling food service, I mean that’s a little harder because you can’t just [crosstalk 00:10:47]

 

Allison:It’s a little harder.

 

Jennifer:Is there any-

 

Allison:One of the things that I talk about so often is realizing that as a vendor starting into the food industry, realizing that when you gain new accounts and whether you’re selling direct to an establishment through an in house buyer or you’re starting to have those conversations about picking up distribution, or maybe you’re adding a broker, it’s all about relationships.

 

So the more you can start those relationships from a place of mutual understanding and trust, the better. So once you establish those relationships, I mean they happen over time, and they grow slowly, but once you have those trusted relationships, and you have those key people in your network, you can ask them questions like that. You could say, “Hey, distributor. What target margins are catering companies looking for as they’re buying bulk ingredients?” “What do you think of my packaging for food service?” “How do you like my sell sheet?” All things like that.

 

Certainly like I said, those relationships happen over time, and I wouldn’t necessarily start asking all those questions in your first meeting as you’re interviewing a new broker, or in your first sales pitch to a new wholesale account. But over time, once you have that relationship established, you can lean on your accounts for feedback and advice.

 

Jennifer:That’s great advice. So it can be a two way street.

 

Allison:Yeah. Yeah, I guess that was a long-winded way of saying that you can ask about your competitors’ pricing. You can say, “Hey, are we the most expensive mustard on your list?” Or, “We want to be the value mustard in your deli. What would it take for us to get there in terms of pricing? What price do you want to see?”

 

So yeah. Just ask. I feel like over and over again, my clients are surprised with how much information they can get just by asking.

 

Jennifer:Yeah that’s great. I’m thinking about the fact that I feel so often that when I talk to food entrepreneurs, they’re always so nervous about the pricing discussion and afraid like they just say one wrong thing and the whole deal blows up. So I love what you’re sharing about, obviously it is you have to build the relationship. It’s not something you want to ask the first time you meet them, but ask them and see if you can get feedback from them.

 

Allison:Yeah, and I think that it is important to realize that you don’t want to be a high maintenance vendor. Right? So it is important to realize you don’t want to ask all those questions in the first meeting. That first meeting you do want to seem prepared and confident and like you know what you’re doing. You put some thought into your pricing. When you seem unprepared for those meetings, whether it is food service or a meeting with a broker or a meeting with a retail account, if you seem unprepared you seem unprofessional. But down the line, you can ask for feedback and get some suggestions on your product or your pricing or your packaging. Whatever you’re looking for.

 

Jennifer:So in terms of that first meeting, or actually we’ll kind of step even before that, you’ve talked a little bit about brokers, you’ve talked a little bit about distributors, and you also mentioned just potentially talking to like the buyer at the food service organization, how does one find food service accounts? And is it better to go with a broker? Maybe there is no better, maybe it depends, but that’s another question. It’s like okay, I’m interested in going into food service, but now how do I … do I literally just look up all the cafes in my neighborhood and start knocking on their door?

 

Allison:Yeah, it depends. And it depends what type of accounts you’re looking for. If you are looking for corporate accounts, and you’re really looking to get into all the little kiosks and little like … shoot, what are they called? I’m going to have to have you edit this out. Why can’t I think of the name of it? Like oh, the break rooms.

 

Okay. I’ll start over there. So let’s see. So it depends on which type of food service account you’re looking to get into. If you’re looking to get into big companies and you’re looking to get your product in all of the break rooms in all of their offices, you might need to go through a food service distributor. It might not work if you roll up to the office and try to figure out who does the purchasing at Google or Facebook. Right? That might be challenging. So larger accounts like that, use distribution.

 

That’s not to say that cold calling and knocking on doors doesn’t work, but that tends to work with smaller accounts. Certainly cafes in your neighborhood. Sometimes schools, too, if you know of a parent who is heavily involved in the school you can get an introduction through someone in the community. Sometimes the cold calling does work, but with food service, it tends to more often it works through distribution.

 

Jennifer:Okay. And I just want to tell one of my very favorite stories is actually speaking of a big company that begins with the letter G in the San Francisco area. There was a story about a food entrepreneur that I know who, she would always have samples with her and was just standing at the bus stop waiting to go into the city, happened to chat up the person next to her because they were always on the bus, and gave this person samples. The person loved it and was like, here, I’m going to put you in contact with the purchasing manager at said big company. And that’s actually how they got in, was just literally by hanging out and talking. And she had no idea this woman worked for this company, had no idea this woman had any connections, but that networking piece is sometimes also surprising how powerful it can be.

 

Allison:It really is, and if you have a great product and you happen to be in the right place at the right time, sometimes those really wonderful connections happen and you never know where they’re going to lead. I also think that it’s important to realize that trade shows are still really important in the food service space. People, like larger companies who are looking for food service or for bulk products often do the bigger shows, like Fancy Food, and pick up big accounts there. So trade shows are great.

 

Also I forgot to mention, when looking for a distributor for food service, oftentimes there are distributors who specialize in retail accounts and distributors who specialize in food service accounts. So if you specifically want to do food service, it could be worthwhile to find a distributor who specializes in that. It isn’t necessarily the same distributor who’s going to get you on the retail shelves.

 

Jennifer:Okay. Yeah, that’s another great tip to know.

 

So let’s say that you found this contact, whether it’s a distributor, whether it’s the purchasing manager, is the sales process any different than when you go in for a retail account? I mean I guess I’m just wondering because the brand isn’t necessarily as important in terms of end facing to the consumer. Does your story matter as much, or is it more nuts and bolts and numbers? Do you [crosstalk 00:19:07]-

 

Allison:Yeah, those are great questions. Ultimately it comes back to the why. Why would that food service buyer purchase your product instead of making it in house? So does your product save them time? Does it save them labor costs? Do you have equipment where you can make your product that they don’t own that equipment in their kitchen? Maybe your product guarantees consistency on their menu. So again going back to that Bloody Mary mix example, it takes a ton of work to make a really high quality Bloody Mary mix.

 

We’re talking about a Bloody Mary mix that is not just V8 out of a can with horseradish mixed in and some sriracha. Right? Like if you want to make a really high quality Bloody Mary mix, you are roasting those tomatoes. You are blending them, straining them. All of that. So it takes a ton of prep work. For my client who’s making this Bloody Mary mix, he goes in and his sales pitch is all about how it takes that labor off the bar staff, their pricing is then super controlled, with the portion size. That Bloody Mary mix costs the same every single time they order it. It tastes the same every single time they serve it. Year round, right? So it allows that bar to really, really control their numbers. And, like I said, gain efficiencies on the prep side of things.

 

So think about if your product can somehow benefit that food service establishment. Whether it is from a consistency point of view, or a labor point of view or a quality point of view. Something they can’t do in house.

 

Jennifer:Okay so it’s thinking about it through their eyes and coming up where their pain points are it sounds like.

 

Allison:Exactly. Exactly. What can you provide that they can’t do themselves?

 

Jennifer:Right. You know another thing-

 

Allison:So-

 

Jennifer:Oh, I’m sorry.

 

Allison:I was going to say, in addition to that, you and I talked a bit about sales sheets and if you would, in addition to having a different verbal pitch to that buyer, you would want to make sure that you have a different sell sheet as well. You don’t want to hand over your sell sheet that talks about the dimensions of your retail product when really you want them to buy it in those five gallon pails or in the five pound boxes or whatever it is.

 

Jennifer:Yeah. Again, like I keep saying, thank you that’s great. But like really, that’s another great point. You’re selling to a different audience so to speak, so all those other components have to line up.

 

Allison:Exactly. And at the end of the day, the food service buyer doesn’t care if your product looks really great on a Metro shelf because they want to know how does it perform in the kitchen? How does it play with the other items on their menu? How does it work for their business? They don’t care about the retail story of your product.

 

Jennifer:To that end, is it ever recommended that the producers come up with recipes or suggestions so that the buyer can start to see how the product can be used in different ingredients? Or is it pretty much like the food service folks know what they’re doing and you don’t-

 

Allison:No, I think it’s a great idea to do recipe suggestions. And certainly you would want to assess the individual account before you go in making suggestions, right? You might have a buyer who is really confident and knows exactly why they would want your product, and doesn’t really have the time or the interest in hearing your suggestions. But there are some buyers who are really open to that and would love to hear how to use your shrub in their cocktail recipes for brunch. It just depends on your product and if it makes sense with the account that you’re pitching to.

 

Jennifer:Yeah. I envisioned like, “Oh, Thomas [Koller 00:23:43] here’s how you could use my [crosstalk 00:23:47].

 

Allison:Yeah. Exactly. He doesn’t care. He doesn’t need suggestions on how to use your ketchup, right?

 

Jennifer:No.

 

Allison:Yeah. He’s like, “I got it.”

 

So it depends. If your product’s unique, it might make sense. It also I think it can help to brag on who else uses your product. If you do have a really great account, say you were selling your salt to the French Laundry, then you wanted to go pitch at a high end restaurant in Portland, you could say, “We are the number one used salt at the French Laundry. Like wouldn’t you love to use the same salt that they do?”

 

So it depends. If you already have a reputation and have some of those accounts that might help increase sales or help gain new accounts, you can certainly mention it.

 

Jennifer:That’s a great point.

 

Allison:Yeah. It could be highlighted on your sell sheet. I guess that’s where I would do it. Yeah.

 

Jennifer:One question that I got when I asked again the folks on the Small Food Business Facebook page, do food brands need to have a contract in place with food service buyers? And if so, what is that going to look like? Or is a purchase order all that’s really needed and used?

 

Allison:Yeah so it depends if you’re going direct or through a distributor. If you go through a distributor, then they already have contracts and terms and everything set up with that account. If you go direct, you’re going to want all that information that’s typically put on a purchase order. So your payment terms, your order and delivery days or process, you might have a return process outlined or guaranteed sales buy backs if you do anything like that. Just like you would on a retail purchase order.

 

But I think beyond that it’s hard to get buyers to commit to longer contracts, because again they’re placing a bet on your product. They are betting that it’s going to sell, that it’s going to work with their current menu. That you are going to be easy to work with.

 

So at the beginning, you’re testing the waters. You’re testing them out and they’re testing your product out. They’re testing you out. You’re entering into a relationship with with them. So it would be rare to expect them to sign a contract that would really lock them into that relationship.

 

Jennifer:Okay. And then my last question for you, because we’ve covered a bunch of different things today, is there anything else when we talk about food service sales that you think based on your experience is important to discuss or food producers to be thinking about?

 

Allison:Yes. I’ve definitely touched on this throughout the conversation today, but I can’t emphasize enough how important it is to realize that you as a producer, you’re the face of your business. You are your brand. And this is something that there is no direct cost associated with this. But the more warm and easy going and trustworthy and low maintenance that you are, the more likely you are to gain a following and to pick up these relationships with people in the food industry and to really grow your business.

 

No one wants to work with someone who is high maintenance, right? You can have the best product, and if you yourself are challenging to work with, it might not be worth it for that buyer to establish a relationship with you. So whether you are thinking about your product for food service or direct to consumer at a farmers market or through specialty retail accounts, whichever channel you’re going through, it’s important to realize that above all, you as a person need to be really lovely to work with.

 

Does that make sense?

 

Jennifer:Yeah. Absolutely. And that made me think too also about making sure that you don’t put the cart before the horse. You might have a great product and you might be great to work with, but if you don’t say have your production process in place, your operations in place, and you approach a big account and they go through all the red tape on their end and then want to place an order with you, if you can’t deliver on that order, they’re not going to want to take a risk on you. Why go through that hassle again? So they can tell if you’re ready.

 

Allison:Absolutely. And buyers are really busy. They’re doing a million things and so you have one chance to make an impression, and if you’re in that conversation and it’s going well and all of a sudden they say, “Yeah sure, we want you to deliver to all 18 of our stores up and down the west coast, and you’re not ready to do that? It puts both of you in a really challenging situation. You don’t want to say yes and then not be able to fulfill those orders. But at the same time, that’s the one chance you got. That buyer’s not going to wait for you to sort out your production and come back in a year and ask again to be put on the shelf.

 

Jennifer:Mm-hmm (affirmative).

 

Well, you’ve given us lots of great things to think about. I’m like okay, so be a good person to work with, have a great product and be ready, production wise.

 

Allison:Yeah. Exactly. Exactly. I guess we can sum it up by saying just be thoughtful and intentional in your business. I see a lot of people who just grasp at things. We call it the shiny object syndrome. Where you see an opportunity and drop what you’re doing and go after that opportunity. Maybe it’s a new food service account, or maybe it’s a fancy new trade show, or maybe you’re going to be put in the gift bags at the Emmy’s. There are all these shiny things going on in life and it’s really important to not get distracted by those as you’re building your food business, and really be intentional with your growth strategy.

 

Jennifer:I love that. Yeah, that sums it up perfectly.

 

Allison:Thank you.

 

Jennifer:Ally, thank you so much.

 

Allison:Oh, this was so fun.

 

Jennifer:Thank you. And obviously again to everybody listening, on the transcript of this page I will have links to Ally’s website. She also has a wonderful course as I mentioned in the introduction that might be interesting to many of you about getting both your company, your product, all those pieces ready to go after buyers and successfully get those buyers and get those accounts. So I’ll include a link to all of that on the transcript page for today’s podcast.

 

Allison:Wonderful. Thanks for having me Jennifer. This was wonderful.

 

Jennifer:Yeah, thank you again Ally. Really appreciate it.

 

For more information about Allison Ball check out her website at alliball.com.  Additionally, Alli has downloadable e-courses on her website that help you understand how to connect with Wholesale Buyers and maximize your sell sheets.  She has generously offered podcast listeners a $25 savings if you use the code smallfoodbiz when checking out.  For more information, click here.

Click here to listen to other podcasts in the Small Food Business podcast series.

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