Does anyone have experience selling a "chip" type product to grocery stores

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by a searcher from INSEAD
in Calgary, AB, Canada

2yrs ago

Does anyone have experience selling a "chip" type product to grocery stores

What does the process look like when dealing with grocery stores?
What is the cash flow timeline, order frequency, and liabilities/risks involved?

Context: I am looking at an opportunity that is already a supplier to national grocery stores in Canada but only supplying a handful of locations. I want to understand what it should be like to scale to more locations and also additional stores.
Thanks

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reply by a searcher 2yrs ago
from University of Denver in Denver, CO, USA

^redacted‌ I’m very familiar with the process and specifically the chip category. Shoot me a DM if you’d like to chat further!

reply by a searcher 2yrs ago
from Harvard University in Boston, MA, USA

Sorry for a late reply! Not sure if will be helpful at all, but let me try to provide as many points as I can. Context: I worked for snack companies, but not for chips specifically.
Cash: on average 90 day payments terms to suppliers if you’re a large company, even 120 days is possible (will be less than 60 days I’d guess for a small company). Customer payments I’d expect to clear in 12 days or so, but perhaps terms are less favorable for a smaller manufacturer. Inventory - this one is product specific so can’t comment with useful info.
I’ve never been in a sales role but grocery stores just want your product to turn over at a speed and generate a profit to the stores at a better rate than a competing product which they’re not stocking to give you shelf-space. And large competitors can exert all kinds of leverage onto the retailer to get more shelf space and more premium shelf space than you, so it’s hard to compete.
In terms of scaling, would be helpful to better understand dynamics of stores where this product isn’t present yet. Look at their shelves and try to understand if you see only large brands or also smaller brands. For example, in US, Whole Foods is know as notoriously “easy” to get into for smaller startup-like CPG brands. However, other chains are a lot more difficult. Costco is extremely difficult, but if you get in, it can easily become your by far largest customer because there is so little competition within Costco stores. So if your target company is only in the “easiest to get into” segment in Canada, growth may be more difficult.

Risks: if your product doesn’t sell well, reorders won’t happen and you likely won’t get a second chance.

If your product sells very well, but you can’t keep up with demand, you will lose shelf-space and will be under pressure to expand demand quickly.

If an aggressive competitor decides to do price & shelf-wars with you, will be painful. But this is unlikely if you are “small enough” to stay under the radar.

Overall it’s a risky business, and the product needs to look great to the mass consumer (packaging), needs to taste great, and ideally have some sort of differentiation aspect and/or better price than competition. However, if the product-market-fit has been established and the product sells well, and supply is the main constraint, it’s a much better problem to have!