Consider your options for the right channel - SKUFood
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Consider your options for the right channel

We have a challenge for you

As we roll into 2024, we want you to look at your customer mix. It is true just because we are into a new year everything will not change but it is a good time to take a look at your business. When was the last time you really thought about your customer mix?

We will take the first 10 weeks of the year to dive into our 2024 trends. We want to provide you with as much context to determine where to focus the efforts of your business. Everyone has a limited amount of resources and dollars so it is important to consider the best return for your investments.

20 24 Trends

2. Consider your options for the right channel

You have choices where to focus your sales efforts. It is easy to get busy and continue to service the same customers. Is this really the best solution for your business? A lot has changed which could translate into better opportunities in other channels.

Consider the following in our market:

We endured a global pandemic which put more emphasis on food and supply chains.

The pandemic had a dramatic impact on food service.

Millennials started to eat more at home which meant more dollars spent in grocery stores.

We have been on a roller coaster ride of food inflation with some better news in recent months but the reality is consumers believe they are paying too much and they are looking for less expensive alternatives.

Food prices have influenced consumers to shop more in discount food stores, dollar stores and club stores. They believe they get the most for their dollar and they are probably right.

Food service has rebounded to pre-pandemic levels, but we have lost independents, likely in the middle to higher end of the segment.

People continue to work at home more than they ever did before. Yes, offices are open, but we continue to see the trend of 1-2 days at home. People eat differently when they are not ‘in the office’.

There is more food in drug stores.

Consumer shows are more popular and you can sell product for full margin.

You have choices to consider

When you are considering different channels one major decision is retail vs. food service. For most products this will impact your final product, packaging, sales process, regulatory requirements and other factors. It is not and either or decision, some food businesses supply retail and food service.

This chart from FCC illustrates the trend of retail sales decline shifting to food service. Obviously the pandemic had an impact but as of 2022 we were back to pre-pandemic levels in the shift. We would always remind people that in the U.S. market this chart is closer to 50/50.

 If you decide to sell into the retail channel there are some considerations. Inflation is having a big impact on the segments of the market consumers choose to shop and also within each category. People are trying hard to stretch their food dollars as far as possible.

Discount stores, dollar stores and club stores have much lower operating costs which translate into lower margins at retail. Some of these stores will offer different brands that might invest less in sales and marketing, resulting in a lower cost of goods. Have you been to a Giant Tiger lately?

Giant Tiger Bedford, N.S.

Middle class consumers have already begun to shift their shopping habits, embracing discount banners and dollar stores as real alternatives for grocery purchases. If you want to sell into these segments of retail you could explore different sizes or even a different value focused brand.

Another option within retail is the drug channel. Food brings people into these stores and increases the frequency of trips. Most drug stores now have an offering of food, beyond pop and chips. Drug stores in dense urban markets have evolved into mini grocery stores. They will probably want only top selling SKUS and smaller sizes.

The food service segment represents approximately 1 of 3 food dollars in Canada. Chains will continue to dominate the food service landscape. While the restaurant segment remains an opportunity for many suppliers, it can be a challenge to get into the chains or listed by one of the large distributors. This is a different sales process than retail. If you are targeting independents, you need to employ a pull strategy where the restaurant will tell the distributor they need to carry your products.

Food service is much more than just restaurants. Institutional customers require a lot of food and beverage and have you considered airlines? Many provinces have ‘buy local’ programs and they are the customer so they have the leverage. Our conclusions are that often the products could be produced within the province but processors need to do more to leverage the opportunity.

Meal kits are another consideration if you are located close to their production facility. They gained momentum in 2021 when we were all eating at home but have lost some of their momentum. They are a small segment but they do require different sizes and perhaps different processing for fresh products. Here is a recent review of Canadian offerings from the Food Network.

We also see more direct selling at consumer shows. These are opportunities to sell at full margin and talk directly to consumers. They are work but for emerging brands they can be an important source of revenue and market research.

Fund raising programs are another smaller channel that can be lucrative for some food businesses. The buying decision is very different for these products and the focus shifts from price to the products and the cause. It is work but dealing with retailers is work too!

Benefits to different channels

There are a number of benefits to consider when you service different channels:

-Reduced risk with sales spread across different parts of our food industry

-Different channels can be looking for different sizes and packaging. This could improve efficiency or marketable yield for your business.

-Some smaller channels can be a good place to test new ideas before you go on a bigger scale.

-Trends will hit some channels before they become mainstream.

-Perhaps different channels will deliver better margins than you achieve today.

-New channels might have customers that are easier to work with.

-Different channels will have different food safety requirements.

Challenges to different channels

-There is no doubt additional channels will bring complexity to your business.

Different products

Different packaging

Different shipping

Different sales process

More invoicing

It might or might not be the right time for you to start selling in additional or different channels. You will never know if you don’t take the time to look at the market and see what is out there for your business!

Peter

Food inflation in the U.S. continues to fall

Many food processors buy ingredients from the U.S. and it is important to hold your suppliers accountable for the best possible price. We know your customers will hold you accountable!

Watch these numbers carefully. If you see decreases you should see it reflected in your cost. With a market falling it might be time to buy a bit less to see if the price will continue to drop. Every category is different and you should know yours. This might be a chance to get a little back before your customer challenges you about inflation slowing down.

Carrefour takes Pepsi products off the shelf

Does this sound familiar? Loblaw and the same parent company got into it about price increases last year. Interesting how the market perceives these battles between corporate giants.

Do you see Carrefour taking advantage of their place in the value chain to limit choice or get credit for trying to keep prices in line?

Is it right or wrong for Pepsi to go after double digit cost increases for seven straight quarters?

Really excited to have the opportunity to share the stage with Cathline James from Wise Bites and Lindsay O’Donnell from Piquant Marketing. Cathline will be sharing her real life experiences gained from developing and implementing strategies to get Wise Bites products off the shelf. Lindsay has a great process to help brand owners understand their ‘why’. I get to share insights on how to get your product on the shelf. A great day for food businesses in B.C. Thanks to FCC and BC Food & Beverage for hosting the event!

Where is Peter Speaking?

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