Pros and Cons Of Selling Your Craft Bean-To-Bar Chocolate To Retailers
While crafting the first chocolate bars in their home kitchen, small bean-to-bar makers dream of scaling up, owning a chocolate factory, and seeing their products on the shelves of renowned retailers, specialty food stores and specialized chocolate resellers.
A real dream come true!
Or is it?
Retailers take off the burden of dealing one-on-one with every single potential customer. A network of trustworthy retailers can help a brand reach international eyes and wallets, and it is a precious ally in sales, marketing and branding efforts. But like in any business partnership, there are advantages and disadvantages when choosing to sell to retailers, whether they have an online platform or a physical multi-brand store.
The right retailer can kickstart the success of your chocolate brand and become a precious addition to your distribution strategy. But the wrong one can give you more headaches than satisfaction.
Let’s see all the PROS and CONS of selling your craft bean-to-bar chocolate to retailers, and some final tips if you decide to go the retailing route.
PROFIT
PROS
The large orders placed by retailers bring in significant sums of cash all at once. This is a sweet advantage compared to the tiny and tedious purchases placed by regular consumers either on a website or in store. These substantial payments help immensely with cash flow, especially in a bean-to-bar model where daily expenses are running high. Selling to retailers is also more efficient and cost-effective compared to packaging small orders for end consumers, resulting in lower costs and higher profits per unit.
CONS
Retailers (in any industry) look to make anywhere from a minimum of 40% all the way up to 60% profit margin on the products they resell. This means that they will ask you to sell them your products at pretty much half of your retail price. Therefore, you are losing a good chunk of profits every time you sell through retailers instead of direct sales. You are selling bigger quantities, but at half of the price. Also, if final consumers pay immediately for your products, retailers can take their sweet time with the payment of your invoices.
PRODUCTION
PROS
The more you produce, the cheaper your cost x unit. Selling to retailers means that you can expand your production capacity, and consequently your chocolate ends up costing less to produce, because all the fixed costs are spread over larger quantities. With an increased production, you can also purchase larger quantities of manufacturing material, from cacao beans to packaging components, at discounted prices.
CONS
Opening your brand to retailing opportunities will inevitably require an increase in production capacity. This translates to new investments and debts (bigger machines, new employees, more space) without the guarantee that they will be worth it in the end. In the absence of a bonding contract, retailers don’t have to purchase regular quantities at specific times. They can demand large quantities at the beginning, only to drop you from their assortment abruptly if they need to, leaving you with an increased production capacity that is eating up your profits daily until you find another retailer.
BRANDING & MARKETING
PROS
An expert retailer that cares about your brand can be considered an extended branch of your marketing department. Thanks to daily and direct interactions with final consumers, the retailer is able to explain your products in details, communicate your company’s values, give out samples, include you in unique marketing material, blog posts, social media posts and websites. All these extra actions help to reinforce your brand identity and reach a larger audience that you couldn’t have possibly reached on your own.
CONS
Retailers don’t want to deal with brands that don’t have a solid marketing & branding strategy already in place. If you aren’t doing your part in promoting your brand, the retailer doesn’t want to do the job for you. Retailers tend to choose brands that have already an established and good-looking online presence, brand identity and a loyal customer base. Moreover, in the worst case scenario, a retailer can also ruin your branding by taking marketing actions that are not aligned with your vision: putting your products on strong discounts, bad handling and shipping practices that result in damaged chocolate, wrong pricing that doesn’t align with the prices on your website, and more.
SHIPPING
PROS
Shipping is becoming more expensive, less reliable and more complicated every day. Once you ship your hundreds of products to a retailer, you don’t have to worry about each of them reaching the houses of customers: all the burdens of shipping are passed on to the retailer. Moreover, retailers abroad can reach an international audience that you wouldn’t have been able to reach on your own (international shipping costs have become almost prohibitive nowadays). Sending large orders to retailers is way more convenient and headache free than shipping directly to consumer’s houses, one tedious tracking number at a time.
CONS
When choosing a retailer as an intermediary between your brand and your potential customers, you are not in control of how the chocolate is going to show up at their houses. From the presentation in the box, to the conditions of the chocolate, until the dispute in case of lost or damaged packages, everything will depend on the attention to details, the professionalism and the expertise of the retailer. Any shipping that goes “wrong” for a reason or another can have an indirect negative impact also on your brand identity, despite shipping being totally out of your control.
COMPETITION
PROS
Being included in the assortment of a reputable retailer gives you a great advantage on the competition. Especially when it comes to the assortment of specialized craft chocolate retailers, the prestige of the retailer is also projected onto your chocolate brand. Consumers have trust in the brands that a specialty food retailer chooses to present to the public. So being chosen as one of the few brands displayed already gives you a big competitive advantage.
CONS
Reputable and well-know retailers are highly courted by specialty food brands. It won’t be easy to convince them to give your chocolate a try and stock your products, especially with so many new and cool craft chocolate brands popping up on the market. Moreover, you are not the only brand that the retailer has in the assortment. The retailer has no solid reason to treat your brand any better or any differently than the others (unless you have a strong branding), and can replace you with another, more popular brand in a minute.
In case you want to try the route of selling your craft bean-to-bar chocolate to retailers, here are some important tips to keep in mind:
A strong brand means more contractual power. Before you start knocking on the doors of retailers, it’s worth taking the time to build a strong brand that will guarantee you better contracting conditions.
Retailers love to pick and choose from a large assortment. It’s unlikely that a retailer will decide to stock your entire assortment. They want to pick and choose the kind of products that will best fit in their own assortment. So don’t introduce your brand to a retailer yet unless you have a wide and varied range of products.
Specialized craft chocolate retailers are the best choice, but also the most competitive. Craft chocolate retailers don’t need any explanation on the value of bean-to-bar chocolate. They already know the drill and understand your products perfectly. But for this same reason, they are highly courted by all craft chocolate brands left and right. You will need to come in with a strong product and a strong branding to be noticed.
Choose retailers that make sense for your brand. Don’t say YES to all retailers that want to stock your chocolate. Your chocolate products should have a specific feel to them that won’t suit all retailers and all audiences. You should choose only retailers that align with the image of your brand that you want to portrait.
