WWW.STARTUPCPG.COM
by Jenna Movsowitz
DISTRIBUTION 101, PART 1 An Overview of Foodservice
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f you were a CPG brand just a few decades ago, your distribution flow was a lot simpler; you could stock a truck with full pallets, which went from a distribution center, to the retailer’s distribution center, to the retailer. Nowadays, the flow of distribution looks more like a complex web. CPG brands are now selling and fulfilling direct-to-consumer, sitting on fractional shelf space for delivery apps or ecommerce platforms, wholesaling to foodservice, and navigating a new world of brick-and-mortar retailers Before you fall into a thought spiral on how to be (everything) everywhere all at once, we want to help you gain a better understanding of the landscape, starting with one of the most overlooked channels within it: foodservice. I spoke to Matt Cotton, Founder and CEO of Rooted Food Sales, and Kyle Peters, founder of former protein ice cream brand Carver & Oak and current Growth Hacker at Nestle, to gain a better understanding of this channel. This article will be the first article in the Distribution 101 series, published in upcoming editions of The Spotlight and Startup CPG’s blog.
WHAT IS FOODSERVICE? Though not often considered a primary distribution channel, there are more than 15 categories considered foodservice operators, including full-service restaurants (sit-down), quick-service restaurants (your local smoothie shop or salad
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joint), hospitals, universities, cafes, sports stadiums, airlines and more – providing endless ways to consistently reach new consumers. Some major broadline foodservice distributors (the foodservice equivalents of KeHE and UNFI) include U.S. Foods, Sysco and Sodexo. There are also smaller distributors and convenience/specialty-specific distributors.
WHY FOODSERVICE? Foodservice is often overlooked by emerging food and beverage founders. Matt believes this may have to do with input from investors, who are looking for quick wins – and traditional retail is undoubtedly a faster process than getting into foodservice. But foodservice accounts are generally much “cleaner” than their retail counterparts. “With markups – foodservice speaks in terms of markup, not margin – averaging around 25%, and no slotting fees, merchandising, or promotions necessary, you make money off the very first case sold,” says Matt. “In Foodservice, the opportunities to enter are wide open. Unlike grocery, you can pitch your product at any given time and are not bound to a rigid, yearly schedule,” he adds. Matt also notes that entering foodservice may help you reach an entirely new market: “You can capture sports fans watching a game in a stadium, or students in their university cafeteria. Diversifying your retail strategy with foodservice accounts may be the factor that sets you apart from competitors.”
CRAFTING YOUR FOODSERVICE STRATEGY Your point of contact for pitching foodservice is the key decision-maker at your target operator, not the distributor; in other words, foodservice initially requires a “pull” distribution. Determining where to pitch for foodservice is similar to determining where to pitch for retail – it all comes back to product-market fit. For Carver & Oak, for instance, Kyle wanted to reach end users who needed an extra dose of protein and a nutritionally-dense treat. He focused on three target operators: healthcare, sports teams, and universities. He crafted his pitch around these target demographics, and got scrappy with discovering the point of contact for each account. Kyle mostly used LinkedIn to connect with key decision-makers in his dream accounts (Foodservice Director or the dining program’s Executive Chef for healthcare and universities; Nutrition Coach or Strength and Conditioning Coach for professional sports teams). Rather than approaching them immediately with a pitch, he spent time engaging with their content and building up a natural relationship. Eventually, he would find a natural reason to approach with a pitch. To build trust with these accounts, Matt suggests that you take the time to understand the segment you are pitching to and demonstrate your fit: “Become familiar with what these operators are looking for by attending national trade
