From sourcing ingredients to accelerating sales, the obstacles facing small-batch producers in the artisan food and drink market have become much larger during the pandemic.
A gluten-free snack producer recently told me that if her business doesn’t make money this year, then she’s done because she can earn more money working fewer hours back in corporate consulting.
The producer is stocked across 20 Harris Farm Markets stores and in a series of independent retailers. She’s also in discussion with the majors – getting ranged is not one of her challenges.
In the last 24 months, many consumers have discovered new small-batch food and drink products. And some artisans have found new consumers. Yet despite new push-and-pull opportunities, small-batch brand owners have not had an easy time making money and this has made it tough for many to stay in business.
Four of the biggest challenges that have affected small-batch brands, and in particular their bottom line, are: fluctuating ingredient costs; getting buyers to discuss their wholesale strategy; restrictions on sampling; and the need to rely on distributors to create demand.
Fluctuating ingredient costs
Since the start of the pandemic, some products or ingredients have been hard to find. We all experienced this first hand with the scarcity of toilet paper. For small-batch brand owners, the supply of raw ingredients has also been affected. At the beginning, it was difficult for them to buy ingredients, especially as many buy retail from supermarkets competing with everyday consumers, and then came the impact of massive fluctuations in cost.
“The challenges for small-batch producers certainly do not end with getting on the shelf.”
Most small-batch producers don’t buy in bulk, or buy wholesale. Buying in bulk requires storage, managing shelf life and a strong demand planning schedule. Many small-batch producers don’t have capacity to do all three well. And now, with the invasion of Ukraine, there’s more concern about how supply and pricing of ingredients may be affected.
For small-batch producers, managing ingredient costs is an unpredictable game right now, and making money is harder.
Engaging buyers to discuss wholesale strategy
Managing costs has been a moveable feast, but so too has pitching to get stocked on retail shelves. Grabbing the attention of wholesale buyers and getting them to respond to messages has been challenging. Pitching and selling to wholesale customers is the least favourite aspect of business for most food and drink brand owners. And in recent years, the setting for pitches has changed.
Online pitching has become the pathway to getting stocked, assuming a producer is fortunate enough to get the attention of a buyer in the first place.
The upside to online pitching is the time and travel saved. But a producer must make a shift in mindset to make a successful pitch online. Small-batch producers are generally relational and like to approach people – buyers or consumers – face-to-face. So with online pitching, or indeed when getting ranged in store, the challenge for brand owners has become how to build the kinds of relationships they’re used to having offline while selling and marketing online.
If a small-batch brand owner is pitching to specialty retailers, like high street butchers, delis or gift stores, these retailers typically still receive pitches face-to-face. But getting in front of those buyers, with all the health and safety considerations and travel restrictions everyone has had to endure over the last few years, has been challenging and disruptive to normal selling and pitching activities.
Whether it is the big or the small end of town, it is never easy for small-batch brand owners to win business in the retail channel and the pandemic has taken the challenges to a whole new level.
Small-batch brand owners are frustrated by the diminishing access to buyers. They are frustrated by the growing tendency of buyers to ‘ghost’ them – withdrawing from communication without explanation and leaving the brand owner’s emails and phone calls unanswered.
Even for small-batch brand owners fortunate enough to be on the retail shelf already, the lack of access causes problems. Their focus needs to be on improving the number of units sold each week – increasing velocity – for each store they are stocked in. And they are dependent on the store buyer to do this. So, when the buyer doesn’t respond, and the worry of being delisted escalates, the sense of frustration and fear increases.
So, the challenges for small-batch producers certainly do not end with getting on the shelf. The ultimate problem is how to get into more consumer baskets when there are more and more artisans vying for consumers’ attention and fewer and fewer buyers returning your calls.
One thing that used to work really well when selling products, and vying for consumer attention, was product sampling. Remember when it was commonplace to taste-test cheese cubes on a wedge of biscuit in a grocery store? Or sip on a thimble of the latest brew?
Well, that doesn’t happen anymore. Since the pandemic began, the ability to do sampling in store has greatly reduced.
When producers sampled, they’d sell out. The opportunity cost of not being able to sample is so great that it has many small-batch producers scratching their heads as to how to tap into that age-old marketing rule of reciprocity.
Relying on distributors to create demand
The final challenge for small-batch brand owners is the faith they must put in distributors. In a place like Australia, getting to new and far-off locations is difficult. If a product is refrigerated or frozen, distribution is even harder. Also, small-batch producers often make the mistake of thinking that once they’ve secured a distributor, their product will be distributed. Sounds logical but it doesn’t work that way.
Successful distribution is based on successful consumer marketing and pull-through campaigns, whereas distributors themselves are mostly, and simply, box movers. Remember, the ultimate challenge for small-batch brand owners is getting into more consumer baskets. Distributors do not help solve that problem unless the consumer is demanding the product and it is ‘pulled through’ by that demand. Distributors won’t just drop into places in the hope product will be bought.
Being a small-batch brand owner is hard work. It can be immensely rewarding, but current dynamics in the market make it hard to put money in your pocket in this profession. But with a strong sense of community and dogged determination to thrive, small-batch brand owners continue to lead the way in product innovation and category firsts.
This article first appeared in issue 36 of the Inside Small Business quarterly magazine