The 5 costs you need to know when starting a food & beverage biz

By Richard Horwell, Brand Relations

Underestimating budgets for sales and marketing is a common mistake for entrepreneurs with a fledgling Food & Beverage (F&B) brand. Here are five costs you need to be aware of to avoid your F&B business faltering in the early stages.   

1. 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. Once you’ve sourced the wholesalers your targeted retailers buy from, you must 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.

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).

2. Initial production runs

Costs: minimum £5k per flavour for drinks. And likely to be much more for a food product.

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, so initial production runs need to be kept to a minimum. 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.

3. 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.

4. 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.

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.

5. 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.

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.

www.brandrelations.co.uk

https://www.linkedin.com/company/brand-relations-ltd/

https://www.instagram.com/brandrelations/

https://www.facebook.com/brandrelationsltd

Photo by Clem Onojeghuo from Pexels

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