Monday, October 8, 2012

Research Your Niche

Interview with Robbie Frank
“Not Everything Will Go As You Think It Will”

By Kathryn Gordon

Kathryn:  Hi Robbie!  I’m very glad to meet you – I know you and Jeff (Yoskowitz) go back a long way, working together.  Can you tell us a bit about what you do?

Robbie:  I am mostly a middleman, and sell to distributors but I help work with the people producing the products I sell, to find them co-packers to do the production. I also have my own line of products that I use a co-packer for and sell through distribution channels. 

Kathryn:  Wow.  That sounds like a lot of hats to juggle, and it sounds like you know a lot about how the food business works. What’s the best advice you would give to someone setting up a new business? 

Robbie:  It depends a bit on which market you want to go after.  Retail is definitely more expensive to establish.  Someone can always decide to open their own retail operation after they have more capital.  It might be best to start selling first to the wholesale market through distributors to start establishing your business and to build your brand.  Ideally, someone starting off would have enough capital to be able to set up for wholesale and retail.

Kathryn:  If someone is a start up, what does it take, to be able to go through a co-packer?

Robbie:  You have to have some extra capital because not everything is going to go exactly how you think it will.  You need your name, packaging, branding, corporation, insurance, recipe costs and nutritional analysis to start working with a co-packer.  Most co-packers have high minimum production runs but co-packer price points do drop for volume production.   

Kathryn:  What’s the biggest challenge to a startup going the distributor route, after they've figured out how to produce?

Robbie:  You have to allow for the percentage off wholesale price, because everyone along the way charges a markup:  the distributor, the wholesaler, and the retail outlet.   Generally, the person producing the product needs to take 30% off the wholesale price to figure out what price they’ll be able to sell for to a distributor. 

Kathryn:  What’s the biggest advantage a start-up company would have in deciding to work with you as a middleman / distributor?

Robbie:  I work with about 3,000 retail outlets. I work with 40 different co-producers to sell product to those 3,000 accounts.   Ask yourself, how long will it take for you to get 50 solid contacts? 

My customers buy solid products from me, because they trust me if I’ve made a decision to represent the product.

We also have refrigerated trucks, and enormous freezer storage warehouses.  We can inventory your products .  Co-packers often can’t, or will charge to store your product.

Kathryn:  What do you look for in a product before it can be sold to a real high volume retailer?

Robbie:  3 things have to be met:  Niche, price point and quality.  

Kathryn:  If you get someone into a retail outlet, how do payment terms work?

Robbie:  The retail outlet generally sets the terms.  Usually it’s 15 day or 30 day payable.  You may be able to negotiate a slightly better price for a longer payment term.

Kathryn:  What mistakes do you see if someone decides to strike out on their own and approach retail outlets?

Robbie:  Research your niche – know who your competitors are and what their price points are.  Figure out how you are going to deliver your product and don’t forget to factor in your time, and travel and parking costs.

Kathryn:  Any other words of advice you have for a start-up company?

Robbie:  Hold down your food costs.  Know exactly what your recipe costs you to produce.   Maybe you can “tag onto” the purchases of a friend in the business, otherwise the smaller you are – the more likely you going to pay top price.  You might even be charged delivery fees for your ingredients, and that’s not going to make you profitable.

I’ve seen a lot of good products that for one reason or another just don’t make it.  Maybe the company had a good idea, the product tested well and was even covered in the local press but sometimes it could not be manufactured efficiently.  Sometimes you are not selling enough volume to get your price points down enough to really do business.  Also, ask for help because if you’re too proud to ask for help, you may always remain stuck in between achieving success or just scraping by.   

Kathryn: Thanks Robbie!

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