With the rapid changes in flavors, ingredients and consumer preferences, food and beverage manufacturers are constantly challenged with developing new or improved products to keep pace with consumer demands and compete for market share. Successfully developing and manufacturing a new food product can be challenging in and of itself; however, once a manufacturer creates its next great product, getting it on a retailer’s shelf can pose another significant obstacle.
The following guidance can help food manufacturers prepare to present new food items to potential wholesalers or retailers. Food manufacturers constantly evaluate new products, and it’s important to remember there’s only so much shelf space available in warehouses and retail stores. As such, success is never guaranteed. However, by understanding what retailers and wholesalers look for and value in a new food item, manufacturers can potentially increase their chances of success by developing a rock-solid presentation and being fully prepared to answer the requisite questions related to the new item’s evaluation process.
Review the retailer’s roles, strategies and tactics.
Manufacturers must understand the retailer’s store format to determine if their product is a good fit and aligns well with the retailer’s overall strategy. For instance, is the retailer categorized as an upscale, traditional or discount store? Perhaps your product can align with any type of store format—however, knowing which formats your product will sell best in is a critical first step in gauging success in terms of potential sales. Is your product a branded item, or is it a private-label brand? If it’s a private-label brand, be prepared to answer questions regarding who the “targeted” national brand is and how closely it compares to the taste, texture, etc., of the target brand.
Define and support the primary strategy you recommend the retailer to implement to sell and promote your product.
Manufacturers should determine if their product aligns with a turf protector, traffic generator, transaction builder, profit generator or image enhancer strategy and tailor their presentation so it aligns with the selected strategy. Each strategy has its own distinct characteristics that help drive consumer traffic, increase the transaction size, distinguish the retailer as the go-to destination, generate profits or enhance the retailer’s image. Knowing which strategy works best for your product and implementing the requisite marketing tactics for each are critical steps to help ensure success.
Determine where the new product fits into the consumer decision tree (CDT).
A CDT is the consumer’s thought process when buying a certain item. Manufacturers should fully understand the key attributes shoppers consider when deciding to buy a product. For example, many shoppers have a certain taste for products; therefore, the brand may be higher on the CDT. A good example is ketchup. By contrast, some products, such as bleach, are fairly standard and generally equal in terms of performance. In this case, the brand may be lower on the CDT, while the type, such as powder or liquid, and size/package generally are higher on the CDT. In short, the CDT will vary by product, and knowing how consumers buy a particular product can help determine which strategies work best for driving product sales.
Determine if the new item will grow sales in the segment, increase retailer profitability and grow the category.
Manufacturers should be able to determine (and support) whether the new product could affect sales of other “like” products in the segment and category. Prepare to be asked if your new flavor, type or improved product will have a positive effect on the overall sales of the segment/category as a result of the added assortment available to consumers.
Prepare recommendations for which items the retailer should discontinue to create slot and shelf space.
Selling space on retailers’ shelves is limited and highly competitive. Manufacturers should be prepared to recommend which products the retailer should discontinue and replace with the new product. Manufacturers should review Nielsen data to understand what is and isn’t selling in a retailer’s store or market. However, it should be noted that retailers should be cautious when making decisions on whether to discontinue a product and first understand the value it has within the category and store for the customer. It’s possible this particular item is the deciding factor for choosing to shop at a store. As such, it’s critical to know how consumers view and value certain products in a category, as the decision to discontinue could potentially cost the retailer the entire shopping cart if the product is no longer offered. Manufacturers also should understand this dilemma and consider alternative suggestions and options.
Be prepared to offer or disclose special terms for early or seasonal shipment.
Some manufacturers may be able to offer early shipment and incentives to the retailer for taking early receipt of products, such as delayed payment terms. In some cases, manufacturers can use this tactic to smooth production of the product and achieve efficiencies within their manufacturing operations.
Establish the shelf presentation and merchandising tactics for the new product.
Understanding where the new product’s shelf location will be, e.g., top, bottom or middle, along with where it will be merchandised in the store is important when deciding how to advertise and market a product. Also, the manufacturer and retailer should determine which party will be responsible for making these decisions during the negotiation process, and this responsibility should be clearly communicated and monitored once the product arrives in stores.
Determine the seasonal lift patterns for the new item.
Manufacturers should be prepared to present “when” their product sells and whether it’s subject to seasonal sales fluctuations (lift patterns) of consumers. Manufacturers also should take lift patterns into consideration when timing their new item presentations to retailers. In some cases, untimely presentations could result in the manufacturer missing out on the retailer’s ability to carry and/or sell an item.
Define the cost, promotional deal rates, slotting, advertising support and any other cost-related metrics.
Manufacturers should be ready to define the “base” case cost, which is the true cost of raw materials, manufacturing and transportation to the wholesaler or retailer. In addition, manufacturers should be able to explain the promotional deal rates related to achieving certain sales volume thresholds and whether they’ll be required to offer slotting dollars in exchange for stocking the new product in their warehouse. Manufacturers also should discuss issues regarding funds paid to help the retailer support advertising costs for ads, displays, etc.
Define all reclaim, recall or damage policies and procedures.
If issues related to reclaims or recalls arise, manufacturers should understand what the retailer’s terms are on pulling the item(s) from shelves, who’s responsible for the labor and who’s responsible for discarding the product. In addition, when a product is found to be damaged, e.g., during delivery, a clear policy that identifies the party responsible for recovering the product and absorbing the related costs should be agreed upon.
Be able to outline food safety program(s).
Food safety should be the top priority, and manufacturers should be able to outline and discuss their efforts in connection with a hazard analysis and critical control points (HACCP) plan. A HACCP plan is a systematic, preventive approach to food safety from biological, chemical and physical hazards in production processes that can cause the finished product to be unsafe. Manufacturers should consider conducting a yearly food safety audit performed by an outside firm that’s recognized by the food industry, providing in-house training programs for plant employees with mandatory attendance and conducting thorough quality checks at frequent intervals during the production cycle. These efforts and certifications can provide the retailer with assurances that your product is safe and preventive measures are being taken into account during the production process.
In recent years, the food industry has experienced an unprecedented amount of change and disruption, creating a complex business environment for manufacturers to operate within. As a result, this landscape requires them to be more receptive to changing customer tastes, preferences and demands while quickly adapting and delivering quality products to meet consumer needs. The food industry is truly a balancing act, and manufacturers that are nimble and can pair strong manufacturing operations with a solid working knowledge of getting new products on retailers’ shelves will have the best chances for success. For more information, reach out to your BKD trusted advisor or complete the Contact Us form below.