Local 102-103 Combo - Whole Foods Market, Fine Foods Group, Food Centricity Food Maker Workshop

Local 102-103
… So, you want to grow your company

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Why We Are Unique for the Food Maker
Community
• Shared, yet individual- a model for future shared kitchens
• Kitchens Bays –Equipment
• Specialty Equipment
• Gluten-Free Kitchens
• Confectioner Kitchen
• Health Department Involvement

Packaging & Storage
Basement Storage
Packaging Room

Michel Algazi
Robert Gonsalves
Greg Yudin
R
Food Centricity powers the Fine
Foods Group, LA Prep and East
End Kitchens at 4th Street Market.!
!
We offer 1 on 1 coaching as well as
group acceleration programs to
plan, build and grow food
businesses.!

Agenda
•Why become a food entrepreneur
•Creating a food business
•Ideation
•Validation
•Incubation
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M

Dwight Detter
Local Forager / Buyer
D

Why Are You Here?
Motivations for a Food Entrepreneur
D

WHY?
• To make money, (LOTS of money)?
• Full time or part time?
• Hobby or serious income?
D

WHY?
• Make it and sell it?
• Is this a start up for investments?
• Is this for you or your children?
D

WHY?
• Social mission or cause?
• Does social responsibility enter?
D

WHY?
• For a lifestyle change?
• To make money, (LOTS of money)?
• Make it and sell it?
• Social mission or cause?
KNOW WHY!
D

New Way to
Ideate Your
Product and
Business
OLD WAY - Starting with
the recipe
!
NEW WAY - Starting with
the pain / challenges in
the marketplace
R

Define A Target
Audience
•Defining your
consumer
• Demographically
• Gender
• Age
• eScoocnioo mic level
• Psychographically
• Needs
R

Understanding your consumer and
her pain / needs will allow you to fine
tune your product concept and
maximizing your opportunity for
success in the marketplace.
R

Market Pain
Your Product Concept
R

Matching
Benefit with
Needs
M

FABs
(Features, Attributes, Benefits)
•Product / brand attributes reside in the product
•Product / brand benefits reside in the customer
!
Example 1: Sports Car
•Red and has a powerful engine (concrete attributes)
•Providing the customer with an exhilerating driving experience (benefit).
!
Example 2: Basketball shoes
!
•Can have extra support around the ankle (attribute)
•Reducing the wearer's chance of injury (benefit)
M

Market Pain
Your Product’s Price Positioning
R

Competitive Assessment
• Competition
PRICE /
FEATURES
Product 1 Product 2 Product 3 Product 4
Store A
Store B
Store C
Store D
R

Price Positioning Map
$$$
Commodity Speciality
$
Your Brand
Positioning
R

Price Positioning
Your skill at pricing your product
correctly will have a great impact
on volume and profitability, as
well as on your ability to compete
in the marketplace.
R

Focus on Cost
Given prevailing gross margins, how
much does the product need to cost
to by viable?
R

Takeaways
• Bring something different to the market (fill a market
gap)
• Start and end with the consumer and her needs in
mind
• Don’t over engineer your product (start from a viable
product cost)
R

Test Your
Product
• Farmer's Market?
• Grocery Store?
• Internet?
• Food Service?
• Direct to Consumer?
• Events
• Personal Storefront?
• Pop-up Venues?
• Fairs?
D

Market Pain
Company Formation
M

Company Formation / Brand
Registration •Legal Entity
•LLC
•S Corp
•C Corp
•Partnerships / DBA
•Brand Registration
•Trademarks
•Patents
•Copyright
•Facility permits
•County Health
•FDA / USDA
•S Letters
•Facility Audits
!
• Business licenses
• City Business License
• Insurance
• General liability
• Product recall
• Freight / Transportation
• Other (worker’s comp, etc)
• Contracts
• Operating agreement
• Partnership agreement
• Co-packer,
• Broker
• Distributor
M

Financial Planning
•Assumptions
•Based on real life scenarios and test market
•Include
•Distribution growth
•Sales velocity
•Seasonality
•Product costs
•Product price
•Product mix
•Costing
•Price
•Operating Expenses
M

Financial Controls
•Good record keeping
•Financial Planning
•Inventory Management
•Quickbooks
•Support
•Accountant
•Bookkeeper
M

Product Development
•Developing the formula
• Flavor considerations
• Quality Considerations
• Cost Considerations
•Production environment
•Artisanal / small batch production
•Scaling up a recipe / industrial formulation
Discussion:
Own facilities versus Contract Manufacturing
D

Sourcing
• Know your product sources
• Focus on ingredient integrity / sustainability
• Make sure you can track the ingredients through
entire supply chain
• Focus on quality, costs and transparency
D

Brand positioning is important
because it spells out the “what?”, the
“For Whom?” and the “Why?” of a
brand, among other things.
M

Introduction to concepts and terms
Brand Image Brand Identity Brand Position
How the brand is
now perceived
How we would like
to brand to be
perceived (ideal)
The part of the
brand identity and
value proposition to
be actively
communicated to
a target audience
M

Brand Identity
A unique set of brand associations that
the brand owner aspires to create or
maintain. These associations represent
what the brand stands for and imply a
promise to customers.
Relationship
Created by
the value
proposition of
the brand
Benefits
Brand Customer
M

Brand Identity: Core and Extended
Extended Identity The core identity
Core
Identity
represents the timeless
essence of the brand (it
contains the associations
that are most likely to
remain constant as the
brand expands)
The extended identity
includes elements that
provide texture and
completeness.
M

Brand Associations
• A brand association
• Is anything that is linked in memory to a brand
• Should be strong and positive to lead to a purchasing impulse and long-term
brand loyalty
• Becomes stronger when a customer is exposed to it multiple times
• Can create value by
• Helping to process info (facts and specs)
• Creating differentiation
• Generating a reason to buy
• Creating positive attitudes and feelings
• Creating a basis for extensions
Brand Image
a set of associations, usually organized
in a meaningful way (clusters)
M

Brand Associations
Product Attributes
Brand
Name and
Symbol
Intangibles
(“Healthy”)
Customer
Benefits
Relative
Price /
Competitors
Personality /
Lifestyle / Celebrity
Country of Origin
/ Geography
User / Customer
Product Class
M

Positioning Statement - Elements
• What are you making?
• For Whom?
• Functional Benefit
• Emotional Benefit
• Self-expressive Benefit
Value Proposition
M

Market Pain
Retail Environment
D

Packaging
Attributes
• Form Factor / Integrity
• Size
• Units / pack
• Merchandizability
• Label size /
placement
• Shelf size
• Orientation
• Stackabilty
• Resistance to crushing
• Resistance to
environmental elements
• Smell
• Humidity
D

Packaging
• Cost
• Components
• Materials
• Production /
printing
considerations
• Minimum order
quantities (MOQs)
• Assembly
considerations
• Storage
• Inventory cost
D

Packaging
• Environmental
Considerations
• Materials
• Recyclable vs.
Made from Recycled
materials
• Compostable
• Printing (inks and
varnishes)
D

Market Pain
Creative Brief
R

Creative Brief
• Spells out brand
strategy
• Positioning
• Target audience
• Communication
Objectives
• Stipulates
• Expectations
• Deliverables
• Budget
• Timeline
R

Labeling
•FDA Requirements
•Our Requirements
•Your Requirements
D

FDA Requirements
•Principal Display Panel
•Information Panel
•Claims
D

Principal Display Panel
•Brand Name
•Product Name
•Weight/Volume
D

Information Panel
•Ingredient Statement
•Allergen Statement
•Nutrition Facts
•Responsible Party
D

Claims
• FDA Regulated
• “low” “less” “zero” “free”
• Whole Foods
• All Natural
• Verification
• Non GMO
• Organic
• Gluten Free
• Green
• Eco Friendly
D

Claims
D

Brand Positioning
And its importance in pricing a product
Brand positioning is important because,
among other things, it substantiates the
relative pricing level of a product or
product line - it serves as a basis for
comparison.
M

The 4 Cs of Pricing
•Cost
•Understand your cost, then set pricing to achieve
gross margin in the 40-50% range
M

The 4 Cs of Pricing
Consumer
•Strengthen marketing and sales capabilities to find consumers
that will pay the price you need to make it, as a small scale food
producer
•Maximize profit, based on your understanding of consumer
price elasticity of demand
•Leverage direct-to-consumer options (eCommerce,
farmers’markets)
M

Raise Prices
(if PEoD permits)
Increase
Capacity
(optimize
Pockets of
Profitability)
Reduce
Overhead
Generate Good Will /
Increase Perceived
Value
Improve
Customer or Product
Mix
Profit “Levers”
M

The 4 Cs of Pricing
Competition
•Don’t compete with larger scale producers on price
•Understand the pricing environment and motivation
of retailers who carry your product
M

The 4 Cs of Pricing
Capacity
•Capacity constraints and additions will create
“pockets of profitability”for you at various stages of
growth”–understand them and adjust your pricing
accordingly
R

Pricing - Capacity
Traditional Break-Even Chart
$
Revenue
Cost
Units
Breakeven Volume
Loss
Profit
R

Pricing - Capacity
Pockets of Profitability
$
Cost
Revenue
Pocket of Profitability
•Businesses run more profitably at 80 –90%
utilization of plant capacity
•Adding new capacity can push a profitable
business back into the red
•Try to find the “pocket of profitability”for the
stage you are at right now
Units
©
2013,
Michel
Algazi.
All
rights
reserved. R

The 4 Cs of Pricing
Conclusions
• Appropriate Pricing Strategy will be a function of:
• Cost you need to cover
• Consumer Demand
• Competitive Products
• Capacity that you want to profitably utilize
• If your product has some unique and valued characteristics, it may give you more pricing
latitude than you realize
• Set a price that gives you the best chance to be profitable at your current stage of development
• Look for the channels that allow you to keep more of your pricing, and avoid those where you
will get squeezed due to retailers’need to compete on price
R

Yield Management
Yield Management is the discipline of
learning to maximize the value of your
resources and of your customer
relationships.
“The challenge is to sell the right
resources to the right customer at
the right time and for the right
price.”
Wikipedia
R

A Couple of Additional Ideas
The Fifth C: Client
Acquisition
Retention
PROFIT
Customer Lifecycle
Profit-centric Model
(Ideal)
Lifetime Value (LTV)
(loyalty)
©
2013,
Michel
Algazi.
All
rights
reserved. R

Sales, Distribution,
Marketing
D

How much start-up capital?
How much HOW am MUCH?
I going to sell?
How much do I need to sell?
How much can I sell it for?
How much can I make?
How much do I need to make?
D

Determining Your Costs of Goods
D

Determining Your Costs & Totals (1 0f 3)
D

D

Sales & Distribution Plan
• Understand distribution channels
•Understand distribution universe per channel
•Structure sales and distribution relationships
•Understand financial impact of chosen channel
•Plan 24-48 months ahead
•Support with a financial plan and sufficient funds
M

Launch Process
Distribution Channels
Channel Intermediaries Margins Other
Considerations
Farmers Markets None 50%-70% Concession Fees +
labor cost
Retailers (WFM) / Other
specialty / natural
Direct or
Distributor
50%+ direct
<30%
High cost of sale
Foodservice (Hotels
Restaurants
Others)
Distributor 35%-50% Brand is lost
Direct-to-consumer None 50% to 70% Awareness
building
Own retail None 50% to 70% Fixed Overhead
Pop-up stores None 50% to 70% Concession
*** Costco and Trader Joe’s
M

The Distributor
•Takes your product to retailers
•Will sometimes drop off your product at the dock and sometimes
will provide full service, including merchandising (DSD).
•Typically works on a margin of 25% to 30%
•Typically distributes hundreds or thousands of different brands /
product lines
•Has a sales force, but is usually not an effective sales organization
for small brands
•Holds inventory and title to your goods
•Will be the party responsible for paying you for your goods.
M

The Broker
•Fulfills the function of an outsourced sales force (in other
industries, they are called “Reps”!
•Works on a retainer, on commission (typically 5% of
gross sales) or on a combination of both.!
•Typically represents up to 30 different brands / product
lines!
•Role is to open accounts and doors!
•Does not hold inventory or title to your goods
M

Margin Expectations
•Brand Owner: Minimum of 40%
•Distributor: Between 25% and 35%
•Retailer (not including Trader Joes or
Warehouse / Clubs): Between 35% and
50%
M

Setting Your Pricing
Structure
M

Rules of Pricing
• Never underestimate your cost of goods (the fallacy of economies of scale)
• Allocate costs appropriately
• Always define your pricing based on the maximum number of possible
intermediary relationships
• Make a realistic assessment of the “Cost of Sale”
• Clearly understand discount / promotional mechanics
• Run pricing scenarios for every major account you open.
M

Price Lists
Dos
•Have product specifications and pallet configuration
•Have lead time
•Have payment terms
•Have pickup point
•Have your distributor’s contact and PO details
•Have manuf customer service contact details
•Have customer signature
•List expiration date or validity
•Show customer’s profit per unit, case or pallet
Don’ts
•Confuse distributor and wholesale price lists
•Demand to control wholesale and retail price
•Allow for partial case purchases
•Circumvent your distributor
•Forget to specify UPC code for shipper if you have one.
M

Launch Process
Selling Tools - Sell Sheet
•Front (4 color)
•Brand
•Tag Line / breadth of range description
•Product glory shot (in use and in packaging, preferably)
•Selling points (focus on the right audience)
•Back (B&W OK)
•Table with:
•Vendor item number
•Description / name
•Ingredient statement
•Case pack
•Item dimensions
•Item weight
•Case Dimensions
•Case cube
M

Selling Tool Development - Other Tools
•Sales force training manuals
•Store personnel training
•Web site
M

An Effective Support Plan
• It must incorporate all elements of the “marketing mix”
• Product
• Price
• Promotion
• Distribution (place)
• It must consider broker, distributor and retailer Expectations
• Annual plan
• Seasonal support (3-4 times / year)
• Back-pocket deals
• Mix of performance and non-performance based promotions
• Whole Foods programs
• Product Exclusivity
• Team training / appreciation
• Demos
D

Promotions
Performance based (based on units sold)
•Scan-downs (discount on SRP)
•Coupons (discount on SRP)
!
Non-performance based (fixed or time delimited)
•Slotting (fixed price - evaluate customer profitability)
•Free-fills (on cost of goods - evaluate customer profitability)
•Off-invoice distributor (eg Intro or seasonal) (on distributor price)
•Off-invoice retailer (eg Intro or seasonal) (on wholesale price)
•Chargebacks (eg marketing) - variable
•TPR (on SRP)
D

Next Steps
R

Whole Foods 101 - 104
“The gold standard for
building a retail ready
Product”
East End Kitchens
OC’s epicenter of food
innovation
Food Centricity
10 Minute compass call!
“Placing You on the Right
Step of the Food Centricity
Idea to Shelf Process”!
!
CLASSES STARTING IN
SEPTEMBER!
R
fmhub.us/4compasscall
Contact us by clicking HERE

Compass Call Scheduling
Food Centricity powers the Fine Foods Group, LA
Prep and East End Kitchens at 4th Street Market.!
!
We offer 1 on 1 coaching as well as group
acceleration programs to plan, build and grow food
businesses.!
!
Schedule a free information call with us at
fmhub.us/4compasscall to find out how we can be
of help.

Local 102-103 Combo - Whole Foods Market, Fine Foods Group, Food Centricity Food Maker Workshop

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