Each week, we seek expert advice to help a small or medium-sized business overcome a key issue.
Dionne Laslo-Baker knew she had a winning product when her company's organic tea Popsicles disappeared from freezer shelves within days of their market launch.
"We launched in the month of October – the worst time of year to launch a frozen novelty product," recalls Ms. Laslo-Baker, who is chief executive officer of Victoria-based DeeBee's SpecialTea Foods Ltd., which sells non-GMO tea-blend iced treats under the brand name TeaPops. "It was our way of testing the market and we had a good response. People were excited to try it."
That rollout happened almost three years ago at a handful of grocery stores on Vancouver Island. Today, TeaPops are in more than 1,200 stores across Canada including Sobeys, Metro and Safeway.
DeeBee's has grown to about 15 full- and part-time employees, and its annual revenue has doubled each year, says Ms. Laslo-Baker, who has a doctorate in medical science, with research focused on the effects of exposure to drugs and chemicals during pregnancy.
"We've already surpassed 2015 revenue in 2016, and we continue to expand to more stores," she says.
She would like to see DeeBee's healthy treats in hospitals and schools, and in the cafeterias of progressive companies that want to serve healthy snacks to their employees. She has already been approached by a couple of big-name technology companies and universities.
But DeeBee's is in something of a Catch-22: The purchasing departments of these potential customers will buy only through a distributor, and the distributors Ms. Laslo-Baker has spoken with say they'll represent TeaPops only if DeeBee's can show signed contracts with guaranteed order volumes.
"The distributors need to know that we can meet their requirement and guarantee movement of a certain number of SKUs," she says, referring to product identification codes. The customers, on the other hand, "don't want to worry about how we're going to get our products to them – they just want to know which distributor we're dealing with."
The Challenge: How can DeeBee's get its products to companies that buy only through distributors if they can't line up a distribution agreement?
THE EXPERTS WEIGH IN
Chris Fry, vice-president for supply management, Sodexo Canada, Burlington, Ont.
They may want to consider approaching some of the larger contract caterers in the area. Often these companies serve a number of locations in health care, education, corporate clients and other sectors. Once the contract caterers are sold on the product's attributes and the ability to drive incremental transactions, the listing with the distributors is much easier due to the aggregated volume.
The other idea to consider here is to look at smaller regional specialty distribution networks. Local dairy, produce or ice cream distribution companies are often going to the same customer locations. In some cases and depending on the product, they may be able to handle temperature-sensitive products in a more consistent manner, ensuring optimal storage and delivery.
Peter Chapman, consultant and owner, GPS Business Solutions, and partner, SKUfood.com, near Peggy's Cove, N.S.
Moving into food service is a very different type of strategy. DeeBee's would have to have a sales group that would go into the institutions, get them interested in the product enough so that they in turn would push their distributor to list the product.
Addressing this market is a long-term approach. It takes time for institutions to change their menus, so it's important for DeeBee's to try to understand their target customers' menus and the products they would be competing against. If they're competing against ice cream or frozen yogurt, for example, how would their product be positioned to replace these? Food service is a different type of purchase because it's not the end consumer that's making the decision to buy the product from DeeBee's, so Ms. Laslo-Baker has to figure out what will make purchasers want to get her products on their menus.
When I look on DeeBee's website I only see a four-pack, which is not very user-friendly for food service when they're trying to get 150 meals together. DeeBee needs to have a product that's geared to food service's method of delivery.
Doug Park, president and chief executive officer, Cedar Bay Grilling Co. Ltd., Blandford, N.S.
Sometimes a distributor will do a detail order for a smaller volume, say 10 cases of a product. That's a special order where the distributor will bring in a product on a guarantee that all 10 cases will be sold.
My recommendation is that I would hire a broker who has relationships with the companies that DeeBee's is interested in. If you hire a broker who's doing multimillion dollars in business with a particular hospital or university, they can talk to the buyers and ask them to get their distributors to bring in your products. The companies trust the broker so they're more likely to act on his or her suggestions.
You have to pay your broker a percentage of sales, usually 3 to 5 per cent. Some business owners balk at that, but if you want to break into food service this is a strategy that can really work, and that fee you pay the broker just gets built into your price. Food service is a massive Canadian market – one that's very competitive and difficult to break into. But once you're in and your product is successful with their consumer, then the business is very, very repetitive.
THREE THINGS THE COMPANY COULD DO NOW
Partner with contract caterers
These companies often serve a number of food service sites across different sectors. DeeBee's can piggyback on their relationships with distributors.
Create a food service pack
DeeBee's needs to develop packaging that works for high-volume operations. Its four-pack product format isn't user-friendly for food service customers.
Hire a broker
These sales representatives charge a percentage of sales, but their relationships with purchasers and distributors can help DeeBee's break into the lucrative food service market.
Follow Report on Small Business on Twitter at @globesmallbiz.
Interviews have been edited and condensed.