Craft Baking: The Road to Market

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. 

By Richard Horwell, Brand Relations

Having been behind over 100 brands, I have seen far too many entrepreneurs think they can handle the sales and marketing themselves, without any help or funding. They set out without any real understanding of what’s involved or the budgets they will need. They simply don’t foresee the costs that are involved in marketing their own product and that is a precarious starting point. Most businesses, when they start their journey, fail due to lack of planning and lack of cash. 

Consider that in the Food & Beverage (F&B) industry, you have to pay upfront for everything and then wait up to 90 days for the payments on anything you might sell. This can create a huge black hole in your cashflow; the more product you sell, the more you need to make and ship, the more money it costs – all of which you need to fund for at least 90 days. So you need to be prepared.

The bottom line is that you will probably need a minimum GBP35,000 to produce your product before you even start to think about marketing. Overall, you are probably looking at spending around GBP100,000. However, by planning carefully and avoiding some of the common pitfalls, you can make that money work hard for you.

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 direct as it’s just too much aggravation to contract with lots of small independent suppliers: there’s 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. 

When you began your product development, you should have 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 much thought for whether or not 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 GBP2000 listing fee per wholesaler, before your product is even advertised in their catalogues and that doesn’t include the additional marketing that involves YOU providing the banners, e-flyers and any other materials for them. Some wholesalers demand the marketing budget to 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 (at least at first) not advisable. 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; 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. Intense price-based competition among supermarkets has led to them demanding lower prices from producers. And 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.

You can read the rest of this article in the September / October Issue of European Baker & Biscuit magazine, which you can access by clicking here.