Published October 2021 in European Baker & Biscuit
Your new bakery, pastry or biscuit brand is ready – now the challenge begins! The next step is to generate sales. There are quite a few numbers coming up, and some of them may leave you feeling a little deflated, so let’s start with an encouraging one: EUR91bn. That’s how much the bakery and pastry product sector is worth in Europe, the Middle East and Africa. So, there’s money to be made. But if a healthy chunk of that money is to make it into your pockets you’re going to have to work hard, and you will need a fair amount of money to start with.
Wholesalers and retailers
The main route to market for new brands is through wholesalers; they have established clients, they know who the buyers are and what they want, they have systems to help stores re-order when stock is low, and they can raise and collect invoices.
Selling direct to stores is almost impossible. Many won’t even deal directly as it’s just too much aggravation to contract with lots of small independent suppliers: there is no central system for re-ordering when stock is low and lots of small invoices to pay – all of which is inconvenient and time-consuming.
Naturally, when you began your product development, you researched your target consumer and where they shop. This should have given you a list of target retailers. From there you can contact the relevant wholesalers and persuade them to give you a listing. Or at least, that’s the theory.
A surprising number of new start-ups fail to do this very important initial research. Rather, they contact the most obvious large wholesaler without checking if the wholesaler supplies their target retailers. This challenge is compounded because, due to GDPR, many wholesalers cannot tell you who their clients are, so it becomes very ‘chicken & egg’. This is why you need professional insight to steer you to the right wholesalers for your brand.
Once you’ve sourced the wholesalers your targeted retailers buy from, you must now convince the wholesaler to give you a listing and, inevitably, pay their listing/marketing fees. So be very aware that stocking at wholesalers isn’t cheap. You will be asked to spend a minimum £2,000 listing fee per wholesaler, before your product is even advertised in their catalogs and that doesn’t include the additional marketing which involves YOU providing the banners, e-flyers, and any other materials for them. Some wholesalers demand the marketing budget be paid in full upfront before they even place an order. Even then, the order is sale-or-return, so you may end up paying thousands and still not selling anything.
Many start-ups dream of being stocked by the larger supermarkets, and although this might seem like a great idea, and a good alternative to the cost of stocking through wholesalers, it is generally not advisable, at least at first. Why? Because it is an almost sure-fire way to kill your brand quickly. Consumers shopping in supermarkets already know what they want before they’ve left the house and they do not have the time to learn about new products. And since the pandemic, they are even keener to be in and out as quickly as possible.
And, frankly, supermarkets are ruthless, as are some of the larger chains. Supermarkets will do very little to promote your brand. It is likely to be put at the end of an aisle with lots of other new products, with no association to one another and absolutely no talking up of those new brands.
So, it is best to approach the smaller wholesalers first and gain momentum in the premium stores. This gets a conversation going around your brand in a place where consumers have the time and interest to look for new products. In other words, start small and work your way up to the bigger wholesalers and eventually bigger retailers in months or years to come.
Despite all the cost considerations I have pointed out, it is still essential that you redirect as much business as you can to your chosen wholesalers and don’t try to circumvent them. If they are making money selling your product, they will maintain the listing – and that’s what you need. Yes, it’s hard work and expensive, but no one said it would be easy.
Costs: £2000 per wholesaler + wholesale marketing costs, which are likely to be around £5k for point of sale, banners, etc.
Initial production runs
Remember when you first launch your brand, try to keep the initial production run to a minimum, as wholesalers want maximum amount shelf life on new brands, and it can take a few months before you are in their next catalog. Meanwhile, your stock is using up shelf life just sitting around.
Sadly, buyers will only look at the finished product so don’t think you can take a few mock-ups and get an order, as that never happens. Try to get a small run of the finished product at a premium cost, then get some listings and go for a larger run.
For example, for a short beverage-product run, you might be looking to pay £1 per unit, which seems expensive but for that, you will produce around 1,000 liters and that would cost around £5k in total (per flavor). You may only pay a fraction per unit – something like 20p – if you do a large run but this is likely to cost around £30k. So, if you don’t shift any product after the initial run, better to lose £5k than £30k. Plus if you decide to tweak a formulation or flavor, you have an awful lot to sell through before you make that tweak.
Costs: minimum £5k per flavor for drinks. And likely to be much more for a food product.
Exhibitions are something to consider as they can be a good way to present your product to buyers, but finding the most suitable ones, once again, requires research and planning.
A stand at an exhibition starts from around £3,000 plus any additional costs such as travel, accommodation, stand dressing and promotional materials like banners, brochures, samples, etc.
The people selling the exhibition space will make it sound so easy, but it’s not. You need the right exhibition, with the right buyers, and a lot of hard work to generate worthwhile leads. Indeed, these days very few buyers take the time to visit the shows – they are simply too busy. Many of my buyer friends have told me that they go to exhibitions in their private time, as Head Office no longer sees them as relevant. Whatever exhibition you choose, be very careful what you spend and make sure it’s a well-targeted and well-marketed show.
Costs: around £5k per exhibition
Direct online sales
Another route to your target consumer is to go direct. This is known as ‘direct to consumer’ or D2C. It involves utilizing social media and third-party platforms which manage your sales for you—like Amazon, Shopify, and Woo Commerce—plus online advertising to bridge the conversation directly between your brand and the consumer.
Each platform will take a cut of the sales you make, and some may charge a monthly fee as well. However, they are worth considering as they have their own customers already who trust the items they sell. So, it’s a great way to reach people – but you still need to do your own marketing.
Costs: around 5% of each sale
Whether you are selling D2C or through retailers, you will need to engage in your own marketing. Retailers won’t market your product for you – they will expect you to do that. And the better, and more comprehensive, the marketing plan that you can show them, the more likely it is that a wholesaler will take you on, and the more likely that a retailer will stock you. Both want to see your product sell – but for that to happen, you need to tell consumers about it.
Your marketing should include Social Media, SEO, PR, and of course, your own website.
Although social media is free in principle, be prepared to pump money into advertising on Facebook or Instagram as that will help you gain traction and get your brand known: the more followers and conversations you have, the more attractive your product is to a buyer or investor. For example, one client we worked with sold all his stock on Facebook. It was a unique product that utilized the opportunity of COVID when their target consumers had the time to educate themselves on the point of difference.
The internet is your window to the world, so use it. If necessary, get professional help, and be prepared to invest in your website, your advertising, your e-commerce system, and your imagery – after all, everything sells better if the imagery is attractive.
When it comes to your website, it’s essential that it’s easy-to-use and has a robust e-commerce system that includes shopping baskets, accounts for returning customers, FAQs, and detailed information about the product and the brand story.
Also, think about the questions consumers and buyers are likely to ask and ensure the website answers them before they have to ask. Your website shows off who you are and what your product is, so make sure it looks enticing, professional and is something to be proud of.
If you are outsourcing your website, you should look to spend a couple of thousand pounds only to begin with, and that should incorporate both the build and the ongoing ecommerce system.
When it comes to SEO, I suggest perhaps spending a little in order to up your SEO on unique factors of your product, but it is not worth spending money to compete with the big boys on terms like ‘energy drink’ or ‘functional food’, for example. What you have to invest will be a drop in the ocean.
PR is also worth considering as getting your product featured in newspapers and magazines can boost sales. We’ve worked with small start-up brands that have engaged in a pro-active PR campaign that’s generated coverage for them in national media outlets, which in turn has led to a strong, sustained increase in sales. PR is also helpful when speaking to wholesalers and retailers who will want to see that you are actively building brand awareness and taking steps to help them sell your product.
Costs: Website, SEO, Social Media advertising, PR at least £4k per month
With all the money that will have to be spent, unless you have substantial funding or support, you will need investment, and you’ll need it quickly in order to survive and thrive.
If you have used up all your personal, family, and/or friends’ investment to get to the starting line, then you need to look at either start-up loans, or investment from Angels or Investment Houses, crowdfunding such as Crowd Cube, or campaigns such as Kickstarter. Otherwise, you will run out of money – and that is how most businesses fail. Make sure raising money or ensuring you have enough is a priority.
Being able to show early sales, and a good marketing campaign to build on the initial successes and grow the sales will be crucial to attracting investors. And, of course, pitching to investors isn’t free either. Many networks charge a set fee before you can access their members, and many also charge a percentage ‘success fee’ (generally in the 5-7% range). So, ensure you budget for this too.
Costs: around 10-15% of the money raised, much of which is required upfront.
Earning a living
As if that is all not enough, don’t forget that as with all new start-ups you will need personal money behind you, as you probably won’t make a salary for at least the first year. So, if you can, balance your business with your existing full-time job.
UK Bread and Bakery Goods Production industry operators are expecting continued pressure from falling bread sales and increasing health consciousness, but launching new innovative products is seen as a solid strategy to offset decreasing demand in other product segments. There are opportunities for bright ideas, but you must research and plan, including organising appropriate funding. Yes, it can be expensive, but it’s also a lot of fun. So, I wish you every success in your new venture.