From the August 1997 issue of Entrepreneur

Take a peek into the average American's grocery cart, and you're likely to find such a wide variety of food products that you may wonder how they could possibly all be linked to the food chain. According to the consumer foods trade magazine New Product News, 13,266 new food products were introduced to supermarkets in 1996. And that's not counting the number of new comestibles lining the shelves of specialty, gourmet and health-food stores; gift basket shops; farmers' markets; delicatessens; restaurants; county fairs; caterers; and even department stores. Nor does the figure include specialty products sold via mail order catalogs, from airline dinner menus, or from an increasing number of sites on the Internet.

When it comes to food, it seems, Americans can't get enough on their plates. But that doesn't mean they will eat--or buy--just anything. "The consumer is fickle," says Stephen Hall, author of From Kitchen to Market: Selling Your Gourmet Food Specialty (Upstart Publishing) and president of Food Marketing International, a food consulting firm in Tucson, Arizona. "Successfully positioning your product so it appeals to the consumer is very complex--it has to do with price, packaging, where it is on the shelf, how it looks and its content."

Simply getting your product on the shelf isn't good enough--especially when you're contending with thousands of competitors and consumers' shopping whims. "[The specialty food business] has historically been an easy-entry business," says Justin Rashid, co-founder of Petoskey, Michigan-based American Spoon Foods Inc., a fruit preserves and condiments manufacturing company he started with partner Larry Forgione in 1982. "It's at the next level--when you try to expand your distribution--that it becomes a very tough business."

In other words, getting your product off the shelf and into consumers' hands is more important than getting it on the shelf in the first place. Among other things, it requires filling a need, leveraging trends and marketing aggressively. Though all this may sound like a tough nut to crack, the entrepreneurs on the following pages prove that with all the right ingredients--plus a little persistence--they've got all the fixin's they need for success.

For Health''s Sake

One of the biggest consumer trends affecting food products in recent years has been a hankering for all things healthful. "With better labeling [required by food labeling laws], consumers can make more educated choices as to whether to buy a product," explains John Scroggins, former editor of The Food Channel, a monthly food-trend newsletter. People want to eat better, and healthy foods fill that need, which Scroggins sees as leading to more growth for this market.

Suzanne Locklear tapped into the healthy trend when she started marketing Suzanne's Sensational Dressings in 1993. With a Tupperware container filled with her "heart healthy" salad dressing and marinade (made with red-wine vinegar and canola oil) in hand, the entrepreneur approached small wineries and specialty food stores to drum up her first accounts. She also set up taste-test tables at local farmers' markets. There, people not only marveled at the unique taste of her spicy, tangy dressing but were also intrigued by her commitment to health education and awareness.

Specifically, Locklear donates a portion of the profits from the sale of her dressings to breast cancer research. As a two-time breast cancer survivor, the entrepreneur also speaks nationwide on breast cancer issues and even went to Capitol Hill in 1995 to lobby for federal funds to help fight the disease.

A commitment to marketing--not to mention promoting healthful living--has paid off for Boise, Idaho-based Suzanne's Sensationals. Several months after she started selling her product to a dozen small accounts in her area, customers began demanding more: "They even filled out request forms for my product in local Albertson's stores," says Locklear, 42. In response to customers' requests--and a sales appointment where Locklear won over the store's buyer--the nationwide grocery chain took Locklear's product on a six-month trial basis in five local stores. Within two weeks, sales were so promising, Albertson's expanded the dressing to 15 stores statewide and has since placed the product in California stores as well. Today, Suzanne's Sensational Dressings--including her new honey-mustard flavor--can be found on supermarket chain Hughes and upscale grocery chain Wild Oats shelves across California, as well as in specialty stores in six other states, contributing to projected sales of $1 million by year-end.

"We've been [increasing] our accounts ever since we started," says Locklear, who attributes much of her success to networking via groups such as the Small Business Administration-sponsored Women's Network for Entrepreneurial Training (WNET) and through meetings with people who share her concerns about breast cancer.

In fact, it was while attending a breast cancer function in Sacramento, California, that Locklear made one of her most important industry contacts: the owner of the upscale Raley's/Belair supermarket chain. "The next thing I knew," says Locklear, "my product was in more than 200 stores across Northern California."

Distribution Do's And Don'ts

Getting the Raley's account helped Locklear land another prize: a distributor to fulfill the increased number of orders. "Raley's/Belair simply asked their existing distributor to handle the product," explains Locklear.

Typically, distributors (also called jobbers or wholesalers) aren't interested in carrying a new product unless there has been proven demand. "The best way to do this is to first get a bunch of retail orders yourself, then present them to a distributor," explains Stephen Hall, who is also a contributing editor of Food Entrepreneur, an industry trade journal. Without these orders, he says, distributors feel they will have to undertake the "pioneering" of the product, which they may not be willing to do.

About five dozen distributors sell specialty foods to U.S. retailers, says Hall; each typically carries a number of different product lines and sells them within a region. A listing of distributors can be obtained from trade groups such as the National Association for the Specialty Food Trade.

Just because you get a distributor to carry your line, however, doesn't mean you've got it made. "You make a grave mistake if you assume the distributor will sell your product," warns Rashid, who, with partner Forgione, learned the hard way that their fruit preserves required a different marketing approach to reach customers. "Distributors warehouse, deliver, receive orders and do invoices--but they don't sell."

After a year of working with a distributor, the duo, both 45, turned to other methods to get their products to market. They found, for example, that their preserves sell best when first offered to consumers on a taste-test basis in the local resort region near Lake Michigan. "We do our best sales here since our customers are on vacation, relaxed, and willing to taste a wide variety of things," explains Rashid, who sells the preserves and other specialty foods in four company-owned and three licensed retail stores.

"Everything revolves around the tasting table," Rashid adds. "Customers also enjoy watching our products being made." Having storefronts has other benefits, too: Every customer who visits the stores is asked to join the company's mailing list. The result: a Christmas mail order catalog with a very high response rate.

In addition to storefront and mail order sales, Rashid and Forgione wholesale their goods to gourmet shops, department stores with specialty food departments, and upscale grocery chains (including Wild Oats, Alfalfa's and Whole Foods) nationwide. Specialty stores such as these are typically more open to dealing directly with entrepreneurs rather than with distributors. The pair has even landed an account with the first-class food services department of American Airlines, thanks to a contact Forgione had in that industry "We've become a multichannel marketer, and we do everything ourselves," says Rashid, who estimates wholesaling brought in about half the company's $5.2 million in sales last year. "This way, we're able to keep the price down."

Like distributors, brokers can also help entrepreneurs get a product to market. "Brokers are the salespeople you use when you can't afford to hire your own," explains Hall. Also known as food representatives, these professionals sell your product on commission (unlike distributors, who buy it outright, then resell it) to distributors and retailers. Because brokers typically represent a number of products, however, entrepreneurs should make sure they don't carry a competing product line. To find a broker, contact the National Association of Specialty Food and Confection Brokers for a listing; better yet, ask other food manufacturers for referrals. Advises Hall: "Look for a broker who understands how you want the product marketed."

To Fee Or Not To Fee?

Whether you sell your product via distributors or brokers or do it yourself, you can ring up some formidable costs in the process. Many supermarkets, for example, require a onetime "slotting fee" to pay for pioneering a product. Others may ask for free samples and merchandise to help ensure the product sells.

Nikki Taylor and Bill Danner, co-founders of Milwaukee-based Nikki's Cookies Inc., frequently provide free cases of their cookies to supermarkets. "Most stores will pass the savings to the customer to help introduce the product," explains Taylor, 39, who with Danner, 40, started the company in 1986. "It's only a onetime deal, and it helps us get ongoing orders."

This method seems to work for the duo, who has expanded their line to include 15 varieties of cookies, sold through upscale grocery and department stores nationwide--as well as in Japan, England and the Caribbean--to the tune of more than $1.5 million annually.

When it comes to slotting fees, many supermarkets are flexible. "A supermarket may force major manufacturers to pay a slotting fee of $25,000, but quite often they will be more lenient on individual entrepreneurs, provided they have a good product," says Nelson Knapp, director of new product development at Springfield, Missouri, food marketing firm Noble & Associates.

In Locklear's case, a high-quality product plus a commitment to doing advertising and in-store demonstrations helped her bypass slotting fees. Locklear did food demonstrations and passed out samples at supermarkets herself until her business expanded and she was able to hire others for the task.

Likewise, Lesley Giordano, founder of Walnut Creek, California-based Giordano Foods, says she promised supermarkets she would help advertise her Flavor Starters specialty cooking oils when she began marketing them through wholesaler/distributors in 1994. Tactics such as doing radio advertising and coupon ads and contributing to the cost of supermarkets' newspaper ads helped the 48-year-old entrepreneur avoid slotting fees and get her product on the shelves of independent grocery stores across Northern California within three months.

To ensure her product stays on those shelves, Giordano also employs creative strategies such as placing "neckhangers" on bottles, with recipes, special offers and coupons. "You have to keep being creative," she says. "Just being on the shelf is not going to solidify your sales."

Next time around, however, Giordano hopes to avoid the financial pressures of the regular grocery distribution channel altogether. "[Natural-foods stores] don't ask for free goods as much as the regular grocery channels," says Giordano, who annually attends the California Natural Foods Expo to promote her product.

Tricks Of The Trade

Attending trade shows is one of the best places to get a taste for the food product market--and for your product's viability. Locklear regularly attends the Seattle Gift Show, Natural Foods Show and International Fancy Food and Confection Show, for example. (For listings of regional or national food trade shows, check out Tradeshow Week's Tradeshow Week Data Book at your library.)

Trade shows are also great places to find new marketing strategies. "We always get new ideas from shows such as the one put on by the Direct Marketing Association," explains Pud Kearns, who runs Mary of Puddin Hill, the Greenville, Texas, fruitcake company her parents, Mary and Sam Lauderdale, started in 1948. One new idea for Kearns was to diversify the family business to include off-season mailings for Valentine's Day and Easter. This helped the 43-year-old entrepreneur boost sales to $2.5 million last year.

Attendees at Jubilee! The Creative Gifting Convention and Trade Show are often looking for new products to include in their gift baskets. Taylor and Danner got their start this way by taking packages of the cookies to local gift basket and department stores.

"I sold our cookies myself the first few years, until one day at a department store I met a specialty food rep who put me in touch with [reps] in other states," says Taylor. Today, she and Danner sell their cookies via 47 independent sales reps and 10 distributors.

Another place to get a feel for the food products market--and possibly even solicit new orders--is on the Internet. "Food is definitely a very popular topic on the Internet," says Ken McCarthy, president of the San Francisco Internet consulting and production firm E-Media. "You can buy advertising on some sites, or you may get [recognition] if you provide an interesting site with recipes, for example." Specifically, McCarthy recommends checking out sites at http://www.epicurious.comhttp://www.starchefs.com and http://www.veg.org/veg

Other venues for marketing a food product include mail order and wholesale clubs. "Rather than go head to head with competitors, look for different ways of bringing your product to market," suggests Knapp. "Find a less traditional way of reaching your target audience." That could mean a unique kind of packaging--or looking for a different market altogether.

Wholesale and membership clubs, for example, provide plenty of opportunity. "Club stores--with their numerous food sampling tables--are turning into a proving ground for new products," says Knapp. "These stores have become more consumer-friendly, and because they're always looking for ways to differentiate themselves from grocery stores, they're often more willing to work with entrepreneurs."

Mail order, too, can work for a food product--but beware: Increasingly high postage, materials and fulfillment costs have made this industry more difficult to get into than before. Experts say mail order success requires offering three things: 1) an unusual product or service not found in regular stores, 2) a price advantage over your competition, and 3) a personal flair that sets your catalog apart.

"Unless you have a product that is extremely unique or delivers a very high value, developing a mail order food business is a lot tougher than people think," cautions Rashid, who attributes his company's success with mail order to an article on it in The New York Times in 1983. "After the article, we got over 3,500 calls asking for our mail order catalog--which did not exist," he recalls. "An `echo' effect followed, with smaller magazines and newspapers picking up our story." The media was attracted by the unusual nature of their business: "We're not just a jam maker; we do things with products like wild hickory nuts and thimbleberry jam that no one else in America is doing."

Another key ingredient for mail order success is a good mailing list. Though lists can be leased from various list brokers, finding one that fits your target customers can be difficult. "It's better to put a sign-up list in your store, if you have one, and encourage everyone to sign up," says Kearns, whose family used this method to build their 24-page catalog. "A lot of people also have good luck advertising in magazines--just make sure they are magazines your customers read."

Selling through another company's mail order catalog is also an option. Because companies such as Williams-Sonoma are overwhelmed with samples shipped to them from small vendors, you might have better luck making contacts with such catalog companies in other ways, such as at trade shows. (For more tips on selling your food product through mail order, see our special report, "It's In The Mail," in the February 1997 issue.)

Menu Plan

Final food for thought: Whatever method you choose to get your product to market, make sure it's spelled out clearly in a business plan. "Be prepared to pay someone who's familiar with the industry to go over your plan with you," advises Giordano.

Also be prepared to give your potential market more than just a quick taste test. "If you've really got a hot product, people will come to your door, but the reality is that you should expect [to wait] five to seven years before you generate revenue," says Hall. "Articulating a vision of where you want to be in those five to seven years is what will pull you through."

Having a realistic plan for her products' future is what keeps Locklear going--and keeps her dressings flying off store shelves. "All it takes to be successful is one bottle of dressing sold per store, per day," says Locklear. Though one bottle a day may not sound like a lofty goal, Locklear views it differently: "If, by the year 2000, Albertson's makes good on their plan to have 1,000 stores nationwide, that could mean a lot of bottles."