The 2 Biggest Reasons Food Brands Fail in Foodservice

Nick: 00:00:02

There are a million ways to make money in the food service industry. You just have to find one. On the Titans of Food Service podcast.

I interview real life movers and shakers in the food game who cut through all the noise to get to the top. My name is Nick Portillo and welcome to the Titans of Food Service podcast. Let's jump right into it.

Most brands, they don't fail in food service because their product isn't good. They fail because they underestimate two things, demand and logistics.

Today I'm breaking down why so many brands, they just burn cash and disappear before they ever gain traction. Welcome back to the Titans of Food Service podcast. Nick Portillo here, I'm your host. I appreciate you joining me.

Please, if you enjoy the, the, the show, you enjoy the episodes, if you can leave me a five star review. Whether you're listening on Spotify, Apple Podcast, YouTube, you know, like share, subscribe, all those good things. It really means a lot.

I'm trying to get this, this show out there to as many people in our industry as possible or who want to be in this industry. You know, so funny.

When I was going to school, and I've mentioned this on this podcast before, like there's certain channels, right, that you, that you learn about growing up of. This is what success looks like.

Maybe it's like being a doctor or being a lawyer or being a teacher, you know, all of these types of professions, heck, you can do just fine. You can do very well in food service. It's a great industry. There's tons of people in this industry.

I mean it is every single state, every single county, every city, town, even every street. We're all, it's food services everywhere. It's a massive industry. Okay, okay, I'll get off my soapbox.

Let's get back here to the message of the overall episode. Okay.

As a food service broker, and again, a lot of my perspectives come from the viewpoint of my profession, which is a, a brokerage agency that I run. My dad and I, we started the company 10 years ago. We're in California, Nevada, Hawaii. We have so much fun.

We got about 30 people on our team, just amazing people. We represent some of the best brands in the industry.

We've also come across a lot of brands that think food service, well, candidly, it's easy, but it's not, it's far from easy.

One of the most common groups of brands or people that have that mentality that food service is easy, it's profitable for manufacturer, they come from retail. They think, hey, I'VE got success in retail.

The amount of times I've heard as a food service broker, we're selling in sprouts and Whole Foods and Costco. This stuff will work in food service. What, what are you talking about? Costco, Whole Foods, we're in food service.

That is those, those companies are not in food service. I don't know. Very little commonalities between the two. Are we both selling food? Yes. But the packaging and the consumer, completely different.

One is targeted towards people with home consumption. They're going to bring that product home, serve for themselves or their family, their friends, whoever.

That product and packaging, the packaging needs to be bright, colorful, clear, and it needs to be in a serving size that's, you know, sufficient for a single person or for a small, maybe a family of four. And food service, it comes in a nice ugly brown box. I mean there is nothing special to it.

Whether you're selling bread or your, whether you're selling seafood. It's coming in a brown box more likely than not. And you know what? It better be heavy.

I want, if I'm a, if I'm a chef, I want to buy that case because I need to, I need to serve many people in a night, not just one person or two people or a small family of four. I, I'm serving a lot of people and I, I can't be breaking up into little single serve packages all night when I've got 50 tickets.

I'm trying to, I'm trying to fill at one time. No, I need a big container. That's food service, baby. And that's that, that's my industry. And we, it's not easy. It's not easy. Can it be profitable?

Absolutely. Can you be successful? 100%. But having that mentality of what we do in retail will translate into food service. It doesn't work.

Those types of that mentality, you burn cash, your product collects dust on the warehouses of distributors like Cisco, US Foods because they're just not turning the product. And a lot of times those brands, they don't make it in food service or those teams like it just doesn't work. They don't gain traction.

They don't know why. It's super frustrating. So they stick with what they know. And that's retail.

It's a much different buying cycle and the turns are different, the merchandising is different. I mean it is a completely different ball game.

So I really see there, there's kind of two main reasons like that, with my fingers, two main reasons why brands fail in Food service. And if you don't get them right, your product, it may never stand a chance against the competitive set or may never get off the ground or may.

A lot of times I see a lot of stagnant brands too.

They get up to a certain level, maybe they're in a certain market, they're selling a million dollars worth of goods or $500,000 worth of goods or $200,000 worth of goods. What? I'm just throwing out numbers here. Whatever the number is kind of stuck there.

Might go up, it might go down, but really it's not moving in any one direction very quickly. Or you have the opposite. You build up a business and then it starts to free fall. But that's, that's a completely different conversation.

The conversation today is, you know brands, you know the mistakes that brands make in food service.

So some misconceptions when entering food service, especially this is from those of you who are listening, who have a retail background or retail viewpoint or your company does. So first is thinking that shelf appeal matters. It doesn't. It really doesn't. Again, our products, they're coming in an ugly brown box.

It's going to sit in the freezer. Nobody cares if it's beautiful and colorful and looks like my background here, full of, in bright of color. It doesn't matter. Okay?

Product functionality is what matters. Does this product going to work in my operation? Number two is, is assuming that's the success you have in retail will translate into food service.

Nope. Nope. Now I'll say this.

Sometimes your smaller mom and pop restaurants that might, that could shop maybe at a Costco, a Costco business center, they might buy your products from retail for food service. But it's, that's not. If you want to be in food service, you need to be in traditional distribution.

Cisco, Us Foods, your independent distributors, your regional distributors, whoever it may be, those are the channels you need to be in, not sell it into retail and hope a food service customer comes time, from time to time to buy your products off the shelves. So assuming retail success will carry over it most often. I actually don't think I've ever seen it where it does work in both.

Or at least I should say this.

Relying on the success of retail to build food service, you have to have a concentrated and specific focused strategy within food service to be successful. It's like, hey, if I'm really good at food service, I'm not going to assume that that's going to work in retail.

No, if you're a retail person, you me Looking at me like, nick, you're, you're nuts, dude. That's not going to work here. Same thing with food service.

Don't come over to food service thinking it's going to work because you're successful in retail. And the third thing is ignoring the differences in purchasing behavior in food service. For example, our data is so limited in retail.

You've got what, Nielsen and IRI data, like all these types of things to see how well a product is doing on the shelf. And all of these different metrics. We don't have that in food service.

We've got different things like circana data and whatnot that can give you trends, that can maybe point you towards the right segments or channels to be in. But overall, you're not going to have those data points.

Also, a buyer purchaser in food service, they're thinking about their business much different than a retailer would. They're thinking about velocity. How fast would this product do or how well would this product do? Will it taste right?

Well, can I incorporate it onto my menu into an ingredient? How available is it in distribution? Do I get any rebate money?

All of these types of things, there might be some similar vernacular that I just threw out that's similar to retail, but overall, they're pretty drastic differences. And you got to learn those types of things and you learn by doing right. You get out there, you got to, you got to, what we call drag the bag.

You got to get out there and get product, take your product, get it in the mouth of decision makers. They have to try it. We're not in an industry where someone can just buy it out of thin air.

They have to try it to make sure it works at least just one time. Reasons why most brands when they, why they fail in food service. So the first is lack of demand.

No one knows about your product or no one cares about your product or nobody wants to buy your product. That's a you problem. That's something for you to figure out to build that demand.

And once you kind of build that demand, you get up to a critical mass. Word of mouth. Friends start telling their friends, chef starts telling their chefs, and it starts to explode that way.

But you need to build that, that demand. Food service, it's not about branding. It's about function. Is this profit? Can I make profit on this item?

Is it, you know, can it hold up within a sauce? Or will it accompany well with my meats or my seafoods or whatever it is?

Or is, you know, is it to the quality level that my customers are going to return because they want to eat more of it. You know, so many types of questions to answer. That's product function. Like I mentioned earlier, shelf appeal, it means nothing.

I don't care how a can looks on a can rack. If you want to put a nice sticker on there, go for it. But it doesn't matter. The product in there inside that can has to be good. It has to work.

I have to make money on it. And a lot of times chefs and operators, they're risk averse.

They're not just going to pick your brand out of thin air, especially if they don't know your brand. The brands in food service are different than in retail.

And retail, I mean, I go up and down the aisles for, you know, home consumption and I recognize brands that I've never seen in food service.

It's funny, as a food service broker, I tell my friends I'm in the food service industry and I always ask, like, oh, I, I always get asked, what brands do you represent? Well, I represent this brand and this brand and this brand.

And I usually have to leave a stipulation that, okay, listen, these are big brands in food service, but they're not retail brands necessarily. You probably have no idea what this brand is. But I do because this is my industry and these are big brands. So I know brands.

A lot of times they don't get picked.

It may not be unknown to someone going into a, a grocery store themselves who's not in the food industry or yourself who just goes and shops the aisles. I'm talking about unknown brands to chefs.

You know, have they ever cooked with it growing up in culinary school or at least in their 10 years being a chef or whatever it may be. Those types of things lead, you know, themselves into having success. But if they don't know your brand, it's also not the end all, be all.

You have to just, you just have to educate them on it. And to do that, you have to, you have to invest in education.

You have to train your direct sales team, your broker sales team, the distributor, sales reps that are at the distributors that you're working with, all those types of things. They have to be able to go, they have to be able to go out and sell on your behalf. It's super, super important. Another way to do that is marketing.

I see too many times. And retail takes all the marketing muscle. They take all the dollars, everything from a manufacturer and they put it into retail.

What about food service? We need to be driving awareness of your brand, especially if you're about to launch into food service.

Precede the market or precede the, the industry that, hey, we're coming. Hit the, hit LinkedIn. Hit those channels. Chefs and buyers, decision makers and food Service. They're on LinkedIn.

Hit them, get on LinkedIn, email marketing, whatever it may be. You have to start getting marketing as a, as a engine for your business. You want to, you want to go full steam. You want to build that horsepower.

You got to have marketing, I got to have. You have to be involved in trade shows, make sure you have a nice display, all these types of things. These are more tactics.

I'm trying to give overlying strategies because these are some of the tactics on the marketing side. And the last one is. And it's going to sound kind of dumb a little bit, but it's not.

You got a sample, they have to put the product in the mouth of a decision maker and there's a cost to it. You have to ship that sample from, let's say, your production facilities in New Jersey and you have an opportunity in Phoenix, Arizona. Guess what?

You got to get that sample on a truck, on a flight, or maybe a carrier pigeon, I don't know.

But that product has to get from your warehouse on the, in the Northeast, all the way to Arizona or all the way to Texas or all the way to Washington or wherever it is in the country so that it can be sampled. Because people aren't just going to buy your product just because you're a nice person. They have to try it and see if it works.

Reason number two of why most brands fail, and that's logistics. They kill profitability. Kind of taking the same tangent of sampling, you have to be able. Your product has to be available.

It has to be as easy as possible for, for a distributor to bring it into their stock. So think of things like, is your minimum order quantity, Is it aligned? If I had to buy a truckload a minimum, I mean, hard to do.

Is your product stored overseas? If it is, I mean, again, how do I get it here to the US Is, you know, there's so many different variables when it comes to logistics.

Food service operators, they're running on the razor thin margins.

So if I have to, if I'm in California and, and you're producing your product, if, let's say I'm a, an operator in California and you're a producer in, on the east coast, is that freight getting from you to me, is that just going to crush my margins if it does? Maybe I'm not. Maybe you're not the supplier I want to buy from. So think about those types of things.

Maybe, maybe it's best to get a co packer here on the west coast or wherever you, you're located to help ease the cost of shipping all the way. Now I'm skipping up a lot of steps to just start with a co packer. Like there's so much more to it, but just some food for thought. Okay.

I'm just throwing out some ideas because your competitors, they're going to undercut you if you take their business, they're going to come for yours and they're going to come with, you know, lower cost or rebates or other ways to get their business back or to fight you off. So think about those things and if your product isn't moving fast enough, distributors, they're gonna drop you, they're gonna go for somebody else.

You'll slowly see your sales trickle down or those stop buying and then to get back into that distributor, it's very, very hard to do. So some solutions. First, invest in demand creation.

Build relationships with operators, large operators, operators that can really move the sales needle. Build relationships with them.

Educate your sales teams and your broker teams and your distributor teams on your company and why your products are important and why someone should buy them. Think profitability, product function and availability. And then have a pull through strategy, not just a distribution plan.

You should, if you have a direct team, have them make sure they're pointing towards national chains or regional chains, large casino groups, GPOs, K12 operators, you know, really segments and channels of operators that can move the needle. Not just your small mom and pop. I could do a couple cases a week. We love those operators. They do a fantastic job.

They're the, the backbone of the communities that they're in. But for us on a, on the sales side, they're not moving your sales needle and you need to move pounds.

So think about optimizing logistics early start with some regional wins, maybe beforehand. If I'm based in California as a manufacturer, maybe I'm going to focus on just Southern California or maybe just California, Nevada and Arizona.

Focus on the areas that you are.

Build success as you get success, then you can think about how can I expand outside of those areas because there's a lot of business to be had, I guarantee you, in just your local area or your local regional markets. Think about those types of places first.

And then also maybe down the line, consider a co packer or purchasing another manufacturer at some point down the line that can help you with logistics as you expand or maybe a dot Foods having a which is a national redistributor where they can warehouse your products and then ship it wherever it needs to go throughout the country. Also another strategy, probably for a whole nother conversation, but point is, in food service you have to play the long game.

Excuse me, the long game. Success doesn't happen overnight. It takes time.

You got to get out there, you got to press palms, you got to be face to face, you got to get product in people's mouths. You have to figure out logistics, you have to sell profitability and product function and availability and all these types of things.

It just takes time. But getting out there and practicing and building that muscle, it goes a long way.

If you don't create demand and get your logistics right, food service is going to eat you alive. That's right, I gave you a food pun. It's going to eat you alive.

But if you invest in education, you invest in your relationships and a long term strategy, I'm guaranteeing you, you can win. So if you're looking at food service, ask yourself, do I have a, do I have a plan for demand? Do I have a plan for logistics?

Or am I just hoping things will work out? Am I just hoping demand will be created for me?

If you're in the ladder, you may want to pivot, start thinking about it differently, Pull out the pen, pull out the paper, start writing down some ideas. So I've seen brands struggle with this before getting into food service. Love to hear your thoughts, leave some comments, some shoot me a note.

I'd love to love it, have a conversation with you again. Thank you for listening to Titans of Food Service podcast. I really appreciate it. If you can leave me a five star review.

It only helps the channel and it means so much to me. Until next week, See ya.