Underestimating marketing costs can sink Food & Beverage startups

by Startacus Admin

Startup in the Food & Beverage sector? Richard Horwell from specialist food & drink marketing and branding company, Brand Relations shares insights on the Sales & Marketing costs you'll need to consider.

Many entrepreneurs in the Food & Beverage (F&B) industry make the mistake of thinking they can handle sales and marketing themselves. They simply don’t foresee the costs that are involved in marketing their own product. Here is what you need to know to avoid your F&B business becoming an early fail.

Wholesalers and retailers

Costs: £2000 per wholesaler + wholesale marketing costs, which are likely to be around £5k for point of sale, banners, etc.

The main route to market for new F&B brands is through wholesalers; selling direct 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 / marketing fees. So be very aware that stocking at wholesalers isn’t cheap. You will 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 is 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.

Initial production runs

Costs: minimum £5k 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 maximum amount 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. 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 £5k 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 £30k. 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.

Exhibitions

Costs: around £5k 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.

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 are 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.

Marketing

Costs: Website, SEO, Social Media advertising, PR at least £4k 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 are 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 that have engaged in a pro-active PR campaign that’s 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 are actively building brand awareness and taking steps to help them sell your product.

Earning a living

Don’t forget that, as with all new start-ups, you will need personal money behind you, as you probably won’t make a salary for at least the first year. So, if you can, balance your new business with your existing full-time job.

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 Food and Beverage 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.   

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Published on: 29th October 2021