Vermont Specialty Food Site »
  Distribution
Introduction
Planning For a Business
Food Safety
Scaling Up
Pricing
Labels & Labeling
Marketing
Distribution
Technology in Business
Real Business Mistakes
Financial Resources
Quick Links
Acknowledgements

Distribution

Claire Fitts from Butterfly Bakery of Vermont

Having a great product is all well and good, but you won't make any money if you can't figure out how to get it to your customers. If you aren't interested in opening up your own store to sell your product, there are many models available.

Direct markets
For those of us in Vermont, "direct markets" usually means farmer's markets or craft shows. The big advantage to distributing your product this way is that you entirely cut out the middlemen and get to keep all the profits for yourself. The big disadvantage is that you have to spend a lot of time physically at the place of sale, rather than in your kitchen making more product, as well as usually pay an upfront fee, regardless of how much you end up selling. These markets are great venues for trying out new products and getting customer feedback as well as getting your business name out to customers to help speed sales at other venues. While some food producers can support themselves entirely from direct market events, most small businesses use them as a supplement to other distribution methods. Whenever you sell at the retail level, make sure to sell your products for the same price as your MSRP (manufactures suggested retail price). If you undercut your stores or distributors, you'll create a bad relationship and may lose a valuable account.

Website
A website is a must for businesses these days. It's a great way to reach the customer directly and reap all the profits, without having to stand at a booth at a craft show for hours at a time. Most customers these days expect to be able to buy your products online, so even if you don't do a lot of sales online, it will present a good image for your company if you have a selection of products available for perusal and purchase. Tourists that fall in love with your product on their visit to Vermont will often look to get more when they get home. If you expect to sell a considerable quantity of product on your website, you will need to advertise and make sure that customers can find your products easily on search engines. If you're just starting up, it can be a lot more work to generate consistent sales on a webpage than to get things moving in a local co-op, but a website can allow you to reach farther flung customers and build your brand. Find out more about starting up a website in our technology section.

Self-delivery
This is the option that most small businesses start with in Vermont. You do your own footwork, establish a relationship with each buyer, and deliver to each store yourself. If you are selling your product in local stores, this method might work best for you. It's a good way to stay involved with how your sales are doing in each store and allows you to keep a larger percentage of the profits than if you're paying someone else to deliver the product for you. But there are some major downsides to self delivery. You are restricted to selling to a confined delivery route area. Some larger stores don't accept small vendors and will only order through a distributor. Self-delivery is a good method to get started, but you may find that as your business grows, you may want to hand your accounts over to a distributor.

Delivery services
Delivery services are a good middle ground between delivering yourself and selling through a distributor, and can also be a good supplement to self-delivery. Companies like UPS, Fed Ex and USPS charge a per-pound/per-box fee and can be economical for lightweight items. USPS flat-rate boxes can be a great way to budget shipping costs into your price. Vermont also has many great currier services that can do same-day deliveries, stock your shelves and even take credits back from stores, all for a flat per-box rate. Also, consider piggy-backing your deliveries with another company. Using one vehicle to deliver two companies products will save time and reduce greenhouse emissions. Some Vermont businesses use locals to do their deliveries. They find people who are already going to a given area and have them bring a box along for the ride. It can take a lot of coordination, but not adding any new cars to the road is the greenest choice of all and will look good to your environmentally conscious customers.

Broker
Brokers don't actually deliver your product for you, but they will help make sure that stores want to carry your product. A broker is a consultant salesperson who gets paid on percentage and can save a start-up business a lot of money compared to having a full-time staff salesperson. A broker will represent a variety of products and have a relationship with the stores in a given area. Generally they won't represent more than one or two of a certain type of product, so they can give each product more attention.

Private Distributor
Small distributors will sometimes work with a new company to help them get started and make sure they are fully compliant with regional regulations, but larger distributors generally don't want to meet you until you have worked out the kinks and have a handful of (or more) accounts to hand them.  Distributors are a bonus to the business owner that wants to spend more time focusing on making their product than driving their product to each and every store. Even if you opt for a distributor, you still need to do the advertising and most of the sales yourself (or hire someone to do those things). While a distributor will often do some product brokering, they are representing many different products. You (or your salesperson or broker) are representing your businesses interests. Distributors will take a percentage of your sales price (usually 20%-30% depending on the distributor and the store department), but many large stores will not buy directly from a small business and require their vendors to sell through a distributor.

Since different methods work well in different situations, chances are you will use multiple methods to get your new product into your customers hands. Those methods will likely develop as your business grows and changes.






Randy George from Red Hen Baking Company


We started baking bread in Central Vermont in 1999.  From the beginning, we have been dedicated to selling only bread that is delivered and sold the same day that it is baked.  We began by making all of our deliveries with our own vehicles.  We were flattered when any store or restaurant within 75 miles requested our bread and within 5 years we found ourselves putting a daily total of 400 miles on our three vehicles.  But we discovered that we were spending nearly a quarter of every dollar we earned on paying our drivers and fueling and maintaining our vehicles.   Our business could not support this labor and energy intensive delivery method if we hoped to reach profitability.  Thus began a reevaluation of the best way to get fresh bread around the state on a daily basis.  

The first step in this process involved making the difficult decision to discontinue delivering to many of the small stores that are off the beaten path.  (I believe that such establishments are one of Vermont's greatest assets and it was tough to call these stores and tell them that we could no longer deliver to them.  Fortunately, in many cases one of the state's other great assets-- small bread bakeries-- have sprung up to fill the gap.)  The next step for us was to develop a relationship with a couple of same-day, local delivery services that transport goods throughout the state.  To our surprise and delight, we found that this actually allowed us to affordably reach further throughout the state.  The result has been that our business has continued to grow at an annual rate of 10-15% while we now run just 2 vehicles daily, covering a total of just 275 miles.  Over the years, the routes that our own vehicles cover have grown to the point where we carry more than twice as much in each vehicle than we did 5  years ago, making our loaves (or dollars) per mile average much more favorable and our delivery efficiency much greater.
The Vermont Specialty Foods Manual
148 State Street, Montpelier, VT 05602
Phone: 802.839.1930 Email: info@vermontspecialtyfoods.org
©2010 Vermont Specialty Food Association. All rights reserved.

Designed & CMS by Cambium Group, LLC