Behind almost every restaurant and manufacturer are specialty food distributors. What exactly do they do? These unsung restaurant industry heroes are the reason you get the freshest farm-to-table salad at your go-to local cafe or the juiciest apples in your favorite diner pie. They’re the companies that stock your corner store with your favorite type of chips and make sure the local pub never runs out of hamburgers. In the most basic terms, they purchase products from a manufacturer and sell them to retailers and restaurants, and the industry is worth $424.7 billion a year.
If you’re looking to grab a piece of the multibillion dollar pie, you might want to start your own food distribution business, but the model has completely changed over the last decade. Food industry vets including Jon Taffer, host of the Paramount Network’s "Bar Rescue" and the podcast "No Excuses with Jon Taffer," share their secrets for navigating food distribution in the digital age.
It should be a given that what you're offering has to be really, really awesome. There’s a lot of competition, so how do you stand out in all the noise? According to Taffer, it comes down to two things: You either dump a lot of money into marketing or have an amazing idea.
“You either have to have a very thick checkbook, which means you have to have frequency,” he said. “You have to be seen all the time to really build a brand. That was Mike Lindell’s [of My Pillow] approach, as you know, because you can’t watch television without seeing him every half an hour. He went with the frequency approach. There’s other people who go with, as my grandfather used to say, ‘if you don’t have a thick checkbook you better have a thick idea book.’ Others go with ideas.”
How do you know if what you’re selling is actually a good idea and not a lofty pipe dream? Do some research. If there's a hole in the market, fill it. For example, if there are no international food shops in your area, you may want to focus on important international foods. If you have a lot of bars and restaurants where you live, you might want to focus on distributing beer and alcohol. According to Jon Caiola, the 35-year food industry vet behind New Jersey’s Gelato Dolceria, offering rare products helps food distribution companies stand out.
“I look for the hard to get items that some food distributors have that no one else carries,” he said. “I like being one of the few with food items that leave other food establishments scurrying to find and put that item front and center.”
How do you know those products – no matter how rare – are actually good? Follow your gut. “Develop a product that you would want for yourself,” said Thomas Assea, who’s helped deliver 4 million meals with his ready-to-eat meal delivery service Fresh n’ Lean. “If you’re your own customer, you’re in a much better position to gauge how to keep your product/service/company moving forward.”
Food distribution companies are nothing without their customers. For this reason, you need to define your customers and cater to their unique needs. According to Taffer, most specialty food distributors choose between two types of customers: businesses or individuals.
“In specialty food, or getting into that business, there are two approaches. There’s the B2B approach, which is selling to restaurants and food service operators. That isn’t so hard to do. If you bake the best cakes, and you bring samples over to some of the restaurants, and you propose a dessert program to them, and you start to sell to a few restaurants, what do you know? You’re in business.”
Taffer believes that starting a B2C business (or direct-to-consumer business) is a little more difficult because it relies heavily on marketing. Many food distribution companies start out B2B and use it as a springboard to gain consumer sales. Which model is right for you? It comes down to personality.
“I always think that the company should choose which of those two approaches works best for them based upon the personality of their owner,” said Taffer. “If they’re not sales oriented, don’t take the B2B approach. If they’re not marketing oriented, they’re more knock on door types, then do take that approach.”
Once you decide to whom you’re selling, you need to figure out exactly what they need. Caiola recommends focusing on either high-end personalization or bulk.
“Many of the bigger food distributors lack the personalized service and items that a lot of high-end restaurants require, but the same larger distributors may be the perfect fit for the average family-style places that do much more volume,” he said. “These places are looking for larger quantities at a lower price, while the smaller specialty food establishments are focused on quality over quantity and expect to pay a little more for a much higher-quality product.”
Since food distribution companies deal with products people actually consume, the regulations are ultra-stringent. You’ll need permits, licenses and insurance. The exact requirements differ from state to state, but there are a few exemptions. Retail food establishments (grocery stores, cafeterias and your website) and farmers' markets are not regulated by the Food and Drug Administration. You may also be exempt if you don’t plan to sell across state lines. For all the other food distribution companies, you must register as a food facility with the FDA and get ready for regular inspections.
“Understand that in the food business, you’re dealing with something that people are going to eat, and we’ve all seen all of those Salmonella and other issues that come up,” said Taffer. “And there’s a reason we don’t get sick all the time, and that’s because of the health department, and they are very, very big on licensing and inspections.”
As far as insurance goes, all businesses should have general liability insurance. Many food distribution businesses also choose to buy property insurance (if they have a warehouse or brick-and-mortar location) and business income insurance. If you’re making the deliveries yourself rather than outsourcing to a company like FedEx, you’ll need auto insurance. If you’re hiring employees, workers' compensation insurance is mandated by law.
Do you make an awesome pasta sauce or unbeatable cupcakes? You don’t need to find a food distributor to get your products into stores. Many of today’s food retail business models completely circumvent distributors and sell directly to customers. In other words, you’re the distributor and the retailer.
“In today’s world, distribution and products don’t always go hand in hand,” said Taffer. “... I have a friend who creates humorous fortune cookies, so you open your fortune cookie and it will say something like ‘your better days are behind you,’ and he doesn’t have a distributor. He’s created an internet model.”
According to Taffer, the internet has helped ease some of the financial burden that causes food companies to crash and burn. You don’t need to invest in a brick-and-mortar store, you don’t have to produce a back stock until you get orders in and you don’t have to walk into it full time. You can scale your business while working a day job.
Aside from word of mouth, the internet is one of the main ways specialty food distributors gain new business. For this reason, building a brand online is crucial. All that money you saved on not having a brick-and-mortar store or distribution network should be spent on a solid marketing plan and killer website. Taffer recommends focusing on advertising, Facebook advertising, Google placements and integration with other social media channels.
“In today’s world, I like the fact that I don’t have to put my money into bricks and mortar and all those traditional things,” he said. “I can put my money directly into brand building.”