There was a time when supermarkets and retail giants were uninterested in small businesses because they could not supply on the mass scale needed to fill the shelves of the national chains. Not anymore. In the past few years, there has been a big shift amongst large retailers towards buying from small, trusted suppliers, in the belief that entrepreneurs bring innovation and diversity to their shelves.
Not only is it easier than ever for small producers to get into commercial retailers, small brands now receive far more guidance through the process. Tesco, Sainsbury’s, Asda and Morrisons now all both accept and encourage local suppliers, offering special local schemes.
More and more middle and regional managers have discretion over buying for their local outlets, meaning the dominant grocers are more localised than ever before. They can now take on even the tiniest of local producers, who may only supply to one or two stores – eliminating the fear of many artisans that they would suddenly have to stock all 3,961 Tesco stores from a home-owned kitchen.
This guide will take you through the following sections:
- Breaking into the big retailers
- The market
- Advantages of selling to retailers & supermarkets
- Disadvantages of selling to retailers & supermarkets
- Barriers to entry
- What do you want out of a retailer deal?
- How to approach a chain store
- Pitching a supermarket or large retailer
- Key things to consider
- Final thoughts & case study
Breaking into the big retailers
You can either supply the retailer or supermarket with products labelled with your own brand name or, you can supply them with unbranded products. The latter are known as “white label” products, which a retailer will then sell under their own brand or label, for example, Tesco’s Finest range, or Sainsbury’s Taste the Difference range.
Either option is possible, but unless your product is unique, the retailers are likely to prefer a white-label deal because your products will expand and boost their own brand range. Supplying white-label goods is likely to generate higher volumes and more sales, as shoppers have a lot of faith in trusted branding. On the flip side, however, own-brand products tend to come with lower prices, and for you, this means lower profit margins. As a commodity supplier, this may leave you vulnerable to aggressive margin squeezing tactics by the retailer.
The retail world has changed a lot since the global financial crisis, and it’s now easier than ever before for small producers to get into commercial retailers. For a small producer, the prospect of selling at a supermarket might seem both daunting and exciting. It is no surprise why: Tesco, Sainsbury’s, Asda and Morrisons, dubbed the ‘big four’, dominate 68.3% of the grocery market share in the UK in 2020. If you add Aldi, the Coop, Lidl and Waitrose in the mix, over 93% of the market is catered for, and that’s without even mentioning other big household names like Iceland. Such market-dominance means that supermarkets can offer staggering growth to small brands, but such exposure comes with considerable challenges.
Advantages of selling to retailers & supermarkets
- Higher sales volumes.
- You have the possibility of nationwide coverage for your product.
- Commercial banks may be more willing to lend your business money if you have a supplier contract with a big-name retailer.
- It’s simpler to deal with one or two large customers rather than hundreds of smaller ones.
Disadvantages of selling to retailers & supermarkets
- The price you get will be a fraction of what you would get selling directly to customers, and you will also have to take the hit for promotions, special offers and discounts offered on your product by the supermarket.
- Supplying most of your products to one large customer can leave you extremely vulnerable if they decide to put pressure on setting your prices and margins.
- It can be a demanding partnership – if your product sells well, the retailer or supermarket will want a constant stream of new products and ideas.
Barriers to entry
One of the main fears preventing small producers from approaching big chains is the fear of losing autonomy over their brand, or that they’ll have to hand over all their ideas. Other suppliers assume that trading with big brands becomes a highly corporate affair, involving lawyers and a lot of technical jargon. While there’s undoubtedly a difference in trading with international companies, it’s not as different as you may assume.
Most supermarkets and high street retailers now have a structured route to bring them into contact with new small suppliers. Tesco, for example, holds regional roadshows for small food producers, where they can meet the supermarket’s senior buyers face to face. Argos occasionally holds open days for inventors and small suppliers to meet the buying team.
Sainsbury’s has a programme called Supply Something New, to make it easier for small suppliers by providing free training days, technical support, and supplier certification. Waitrose’s Locally and Regionally Produced Initiative now includes around 1,200 product lines from small suppliers.
What do you want out of a retailer deal?
Before you get started, be clear about what YOU want. Selling to a supermarket or big retailer will undeniably bring your brand some growth, but just how much are you looking for? If you’re an established local supplier, maybe you’re looking to boost your local sales, only hoping to stock to a few stores in your area. If you’re just starting out, perhaps you’re looking to take your brand nationwide and appear on shelves throughout the UK.
Deciding between the two is essential for your marketing strategy. If you’re a local supplier, the chances are that the big retailers don’t really need your product. They already have plenty on their shelves, from several brands and suppliers. Chances are they won’t make that much money from selling your goods either. Here, the real value lies in your brand’s story. Leverage the backstory behind your brand as much as you can.
Take an artisan honey producer, for example. This isn’t a niche product – nobody is shopping around Tesco and asking why they can’t find any honey on the shelves. Supermarkets will be interested in you based on the value you can offer in terms of your story. Focus on a compelling pitch for your brand:
- If you are selling a food product, make it as regionally identifiable as possible. Provenance is the buzz word right now – customers love knowing where the ingredients come from.
- Don’t worry about how small you are – small food producers with Tesco and Waitrose supply their products to only between 10 and 20 stores on average, and both supermarkets have taken on small producers who make only enough to supply one store.
- Be local. Does your product use regional ingredients or materials?
- Find your artisan angle – what makes you unique? Do you use local techniques?
- Remain authentic – it’s a common misconception that small brands need to look sophisticated and corporate to approach the top grocers. Your consumer appeal is your authenticity. Aim to stand out against the glossy, airbrushed brands – your packaging should reflect the intimacy of your brand, looking and feeling authentic, hand-crafted and local.
If you’re a small brand looking for a way into the big retailers, consider Ocado. As Ocado is all online, supply is not so much about filling shelves but filling shopping carts. They have a far lower stock holding than their competitors, delivering from only three customer fulfilment centres. You can, therefore, get huge exposure, beginning with far less stock.
Why the shift from national to local?
Supermarkets are beginning to see increasing value in smaller, local brands. This value comes from a shift in consumer demand – customers are increasingly concerned with authenticity, seeking out ethical, sustainable products produced by local farmers and producers. This has created more scope for smaller producers to enter the market. By accommodating artisan products from local producers, the supermarkets retain these customers who might otherwise be tempted to shop elsewhere. And by stocking independent brands, local-minded shoppers can support local while still carrying out their weekly shop all in one place.
How to approach a chain store
Your absolute best bet for securing a deal is an in-person pitch. A great way to do this is to seek out the relevant person in charge of buying at the retailer and contact them directly. Do some research on Google, or scour Linked In to find someone in procurement. These are people you can learn from – find out what they look for in a new supplier before you approach them about a product. Establishing a rapport with somebody in the right department can go a long way to securing a pitch.
Get yourself out there. Start attending trade shows to find swarms of buyers, looking for the next viral product. If you’ve got a good product, people will be excited by it, so invest time and money into your stall to attract their attention. Before you go, do your research – bagging a spot at a trade show can be costly, so make sure it’s going to be worth your while. Pick a show that’s relevant to both industry and specific brand to build a valuable network.
If you can’t reach out directly to companies, you can start by applying online to any of the top supermarkets for a more traditional route to market. Asda gives the following advice for prospective suppliers:
- Include your contact details, including your company name and an overview of its size and location, a web address if you have one as well as any technical accreditations you have received
- Provide details of your product – what it is, an image of the product, what makes it unique and details of place of manufacture, what department you see it in
- Familiarise yourself with the retailer’s business priorities.
This last point is crucial. You need to tailor your research to each chain you target. How does your product fit within the retailer’s market? What is it about your brand that aligns with the principles and ethos of the supermarket in question?
Develop a marketing strategy
This thought process also needs to go into who you target. Once you’re selling to one high-street retailer, you’re more likely to attract deals with others, so it’s crucial to figure out which one is your best bet. Take Candy Kittens, for example – a luxury, gourmet, sweet brand, both vegan and gluten-free, broke into the high-street market via premium department stores that resonated with the product’s fashion- and design-focus. They first got in a foot in the door with Selfridges, which led on to Ocado. The deal with Ocado then gave them the traction to secure contracts with other big high-street retailers and expand their customer base beyond those with a gourmet reputation, and they now stock across the UK in Tesco, Sainsbury’s, Asda, Morrisons, Boots, and many more.
Make sure you include a sell sheet when you approach a retailer. If you can, it’s best to send this off with an application before you meet with the buyer in person, to give them time to consider your proposal. A sell-sheet should be a one- or two-page information brochure, detailing:
- The wholesale price and retail price of your product
- Discount tiers for 50, 100 or 500 units for example
- High-quality photographs
- Product information, benefits and USP
- Testimonials from other wholesale customers if you have them
- Rating and reviews from the end consumers
- Patents, certifications or intellectual property rights
- Your contact details and how they can order.
Bear in mind that you don’t have to get into the top four to reap the benefits of a deal with a major retailer. Getting a response from major retailers is challenging, and you’re likely to experience far more rejection than positive news. Make a list of the top 100 retailers you’d ideally supply to and approach as many as you can, and be persistent. Supermarkets receive hundreds of thousands of applications from brands looking to become a supplier. Chase up your applications by phone or email.
It’s always a good idea to start small. If you haven’t launched your product yet, consider starting at a local farmers market to test it out, or approach some smaller local, independent shops before you try the dominant market-holders. Testing the waters on a smaller scale will give you a chance to see how your target market reacts to your product, how well it sells and allows you to make any adjustments and refinements before your bigger pitches.
This kind of information and research also gives you a leg up in the pitch itself. Presenting your sales figures and market research based on real facts and figures gives you far more credibility when you meet the procurement team face to face.
Pitching a supermarket or large retailer
A sure-fire way to get your product into a supermarket is to deliver a flawless pitch. The essential for any pitch to a retailer is a marketing plan, in which you clearly explain how you intend to meet with demand, and particularly how you plan to manage a potential spike in demand once your product experiences supermarket-level exposure. You should also provide some financial information if you are already in business, such as sales figures and customer feedback.
Key things to consider
- Think about where would you like your product to be sold – what kind of image do you want it, and by extension your business, to have? Some entrepreneurs are desperate to be signed up by a supermarket chain; others go out of their way to avoid them.
- Before approaching any high street retailer with your product or prototype, make sure you have done your research. Go into their stores and have a look at their existing range of products. Think about where yours might fit in, both in terms of price and quality. Then think about how yours might offer something a bit special or different from what they already sell.
- Go into a meeting understanding what your options are – a retailer may provide one of several options to a small supplier: a supplier contract, manufacture of the product under licence, or even purchase of the intellectual property outright.
- The price – be prepared for a shock. Selling through a retailer of any kind is going to be a painful experience compared to selling directly to customers via your website because you have to factor in their profit margins too. If you sell through your site, you will get 100% of the retail price; if you sell via a retailer, you will get half that. If you are not still able to make a profit at this level, then you will need to rethink.
- If you decide to sell your products through a high street retailer, you will need to come to an agreement with them about whether you can still sell via your website too. Some larger retailers may insist on exclusivity and refuse to let you do this because it is competition for their firm. Others will be happy to let you continue selling via your website provided the product is offered at the same or a higher price.
Consider getting certified
Having a supplier certification is by no means a necessity but may significantly boost your credibility. Supermarkets look favourably on certifications that prove that your product is safe and legal and that your manufacturing practices meet the industry standard.
Two accreditation bodies to consider are the Safe and Local Supplier Approval (SALSA), who represent a high standard of food safety in the industry, and BRC Food Safety Standard. Both are globally recognised, developed by retailers, manufacturers and other foodservice organisations, promoting a culture of product safety and setting a global benchmark for quality in the industry.
Nobody wants to get caught off guard in a sales pitch. Make sure you fine-tune the details and practise your delivery before you go in. Above anything, make sure you have the following practical aspects figured out:
- Work out your cost price – in other words, the minimum price at which you would be prepared to sell to the supermarket. This is the cost of making your product, plus the cost of packaging and delivery, plus a profit for yourself. Do not forget to include your own profit in this figure, which is the money you will make after all costs have been accounted for. There is no hard and fast rule about how much profit you should be making on each item sold, but you do need to be comfortable with it and for it to be enough to feel it is worth the effort you are putting in.
- Think about how you are going to deliver your products to the retailer – and how you can make it cost-effective. Few supermarkets or retailers accept direct deliveries to a store, so you will have to take your goods to a central distribution depot which could be 50 miles away. One solution is to join forces with another producer in your area to share costs.
Be aware of the terms of a deal
It can be overwhelmingly exciting to clinch a deal with one of the top dogs in the supermarket domain. Once you’re selling in one, this can often lead to contracts with other big supermarket chains, building trust in your brand.
However, your first supermarket may want to sign an exclusivity deal, which would prevent you from selling in any other supermarket. Usually, this lasts for six months, which tends to be a useful period in which you can adapt to the supply pressures of a national chain. That said, be sure to check the terms and make sure you won’t have too many restrictions further down the line.
Prepare for massive growth in demand
One of the biggest problems small suppliers speak of when bagging their first supermarket deal is the challenge of keeping up with unprecedented demand. Many small producers are used to supplying several local shops with modest amounts of stock going to each. Wholesaling to the grocer giants means you have to meet tight deadlines and fulfil demand with a quick turnaround. If a product flies off the shelves in a supermarket, they’ll expect you to refill the gap with a quick turnaround. The chain will want to ensure that you can handle a vastly increased supply.
You’ll need to factor in more staff, increased storage, expanding production space and making sure you’ve got enough capital to invest into massively upping your output. Take the time to hone your shipping and logistics processes until they’re fool-proof.
Don’t be disheartened by rejection
Big retailers know what they’re talking about. They take on hundreds of new suppliers every year and know what it takes to be successful. If you get rejected, don’t be disheartened. Listen to their criticism, take it on board and come back better.
For example, supermarkets have been known to refuse packaging that they believe would get lost on the shelves. Such was the case for Lucinda Bruce-Gardyne, the brains behind the gluten-free bread Genius when she first pitched to Tesco. She took on board the criticism and returned with improved designs, and now supplies Tesco stores all around the UK.
Don’t get too comfortable
If your product is taken on, don’t get complacent. Presence in a supermarket can be fantastic exposure, but cannot replace your marketing strategies. Be on top of it from day one – some supermarkets will give your product just 12 weeks to shine on the supermarket shelves before pulling it if it is not performing well enough. Get involved in promoting it; make sure it is being displayed correctly and offer to do in-store tastings.
Be clear on jargon and how the game works
Make sure you’re totally clear on the industry jargon before meeting a high street buyer. If you are unsure of the difference between net profit, operating profit and gross profit, for example, you could end up in big trouble.
Secondly, understand how supermarkets and large retailers work. Never try to contact a buyer on a Monday because that is when they have sales meetings. Always contact them by email rather than by phone because you are unlikely to get through.
Finally, don’t rush into a deal – too many brands are so eager to clinch a major supermarket deal that they compromise on what’s most important to them. Take your time, and don’t be afraid to negotiate. Getting into a supermarket is a fantastic way to increase your visibility, build your brand and boost sales.
Case Study: Selling into a retailer
When Daniel Woolman approached Asda, the high street retailer, to see if it would be interested in his invention, a clip-on deodorising spray which keeps wheelie bins fresh, he didn’t even have a finished product to show them.
He only had a single prototype of his product, Binifresh, which had cost him £1,000 to make. “The prototype was like gold dust,” says Daniel, “Whenever anyone asked if they could keep it, I would say no.” Nevertheless, the buyer at Asda decided Daniel’s spray would sell well at a retail price of £14.99 – and promptly ordered more than 5,000 of them.
Meetings with John Lewis, Heart of England Fine Foods, Lakeland and Tesco were also fruitful, and they too agreed to stock Binifresh. Daniel has since launched the Minibini, a clip-on spray for kitchen bins, and his business is thriving.