5 marketing costs that food and drink entrepreneurs underestimate
Here’s how to stop your new F&B business ending before it’s even begun.
By Richard Horwell, Brand Relations
There are many costs involved in creating a new Food and Beverage (F&B) product, with budgets for sales and marketing being among those commonly underestimated.
Here are five costs you need to be aware of to avoid your F&B business becoming an early fail.
1. Wholesalers and retailers
Costs: £2,000 per wholesaler + wholesale marketing costs, which are likely to be around £5,000 for point of sale, banners, etc.
The main route to market for new F&B brands is through wholesalers; selling directly to stores is almost impossible.
Once you’ve sourced the wholesalers your targeted retailers buy from, you must now convince the wholesaler to give you a listing and, inevitably, pay their listing and/or marketing fees. So be aware that stocking at wholesalers isn’t cheap. You’ll be asked to spend a minimum £2,000 listing fee – per wholesaler – before your product is even advertised in their catalogues, and that doesn’t include the additional marketing which involves you providing the banners, e-flyers and any other materials for them. Some wholesalers demand the marketing budget to be paid in full, upfront, before they even place an order. Even then, the order is sale-or-return, so you may end up paying thousands and still not selling anything.
However, despite all the cost considerations, it’s still essential that you redirect as much business as you can to your chosen wholesalers and don’t try to circumvent them, (remember, supermarkets are ruthless). If wholesalers are making money selling your product, they will maintain the listing – and that’s what you need.
2. Initial production runs
Costs: minimum £5,000 per flavour for drinks. And likely to be much more for a food product.
When first launching a F&B brand, initial production runs need to be kept to a minimum, as wholesalers want a maximum amount of shelf life on new brands and it can take a few months before you are in their next catalogue. Meanwhile, your stock is using up shelf life just sitting around. So, try to get a small run of finished product at a premium cost, then get some listings and go for a larger run.
For example, for a short beverage product run, you might be looking to pay £1 per unit – which seems expensive, but for that you will produce around 1,000 litres and that would cost around £5,000 in total (per flavour). You may only pay a fraction per unit (something like 20p), if you do a large run, but this is likely to cost around £30,000. So, if you don’t shift any product after the initial run, better to lose £5k than £30k. Plus, if you decide to tweak a formulation or flavour, you have an awful lot to sell through before you make that tweak.
Costs: around £5,000 per exhibition
A well-targeted and well-marketed exhibition can be a good way to present your product to buyers. A stand starts from around £3,000, plus any additional costs such as travel, accommodation, stand dressing and promotional materials like banners, brochures, samples, etc.
Costs: Website, SEO, Social Media advertising, PR at least £4,000 per month
Retailers won’t market your product for you – they will expect you to do that. Your marketing should include Social Media, SEO, PR and, of course, your own website.
When it comes to your website, it’s essential that it’s easy-to-use and has a robust ecommerce system – that includes shopping baskets, accounts for returning customers, FAQs and detailed information about the product and the brand story.
If you’re outsourcing your website, you should look to spend a couple of thousand pounds only to begin with, and that should incorporate both the build and the ongoing ecommerce system.
PR is also worth considering, as getting your product featured in newspapers and magazines can boost sales. We’ve worked with small start-up brands who have engaged in pro-active PR campaigns that have generated coverage for them in national media outlets – which, in turn, has led to a strong, sustained increase in sales. PR is also helpful when speaking to wholesalers and retailers who will want to see that you’re actively building brand awareness and taking steps to help them sell your product.
5. Direct online sales
Costs: around 5% of each sale
‘Direct to Consumer’ – or D2C – involves utilising social media and third-party platforms which manage your sales for you, like Amazon, Shopify and Woo Commerce, plus online advertising to bridge the conversation directly between your brand and the consumer.
Each platform will take a cut of the sales you make, and some may charge a monthly fee as well. However, they’re worth considering as they have their own customers already who trust the items they sell.
It’s a great way to reach people, but you still need to do your own marketing.
ABOUT THE AUTHOR
Richard Horwell is the owner of Brand Relations, a specialist food and drink marketing and branding company based in London. Over the last 13 years, Brand Relations has been behind the launch and development of over 100 brands in the UK. Richard has also built up and sold companies of his own in the F&B sector. He has over 30 years’ experience in marketing FMCG brands around the world, having lived and worked in the UK, USA, Australia and the Middle East.