Things you [probably] didn't know about the grocery industry
Jaju Pierogi on shelf in Rhode Island.
We started Jaju Pierogi as a farmers market brand and had no idea about the goings-on of the grocery industry. We’ve learned a lot - by asking questions, networking…and making a whole bunch of mistakes. Here are a handful of facts about being on grocery shelves that we didn’t know before we started this pierogi thing.
Most companies don’t sell directly to individual stores.
We sell and deliver to a distributor, who then sells and delivers to the store. Selling directly to stores would be impossible with a frozen item.
What does this mean? A few things: There are more parties involved, which means more costs added. We sell to the distributor at a certain price, who then adds about 25-30% on top of it before it gets to the store, who also adds on another 30-40% (sometimes more, eek!). Because they don’t order directly from us, if something is out of stock, the best person to tell is pretty much the store. They have to order from the distributor - who we have supplied with inventory. We can call them, too! But we’ll have the same impact as you. Sometimes we’ve never even spoken to these stores, they just pick us up through the catalog.
The maker of the item (the supplier, like us!) is getting about half of the price you see on shelf, and we don’t control the price, either.
As we mentioned, after purchasing from us, the distributor and store are adding their chunk on. Every store has their calculus - they know their clientele and their own costs of doing business. Some stores operate on lower margin, higher volume, whereas others flip that equation and add more to their own margin. We have absolutely no control over how much a store sells our pierogi for. We offer a Suggested Retail Price (SRP), but they do their own thing.
Larger grocery chains only review their offerings in each section once a year.
A chain like Whole Foods or Harris Teeter will review each section of their grocery shelves once a year. For example, the review for “Frozen Pasta” for Whole Foods (the section we’re in) happens very year in November. They decide what products to add, but the actual changes get made in May! This means that, if we roll out a new flavor, we have to wait until a review cycle to present it. We might roll out a flavor in June, but we have to wait to submit it in November to Whole Foods, and you won’t see it on shelves until May of the following year — if they even take it!
…But smaller stores can add products whenever their hearts desire!
Small individual stores (like a co-op, butcher shop, or farmstand) can add flavors whenever they want by just scooching over existing product on the shelf! :) That’s why you see our new flavors hit these shelves very quickly.
Why don’t I see a certain flavor at all in my area?
In the Northeast, we work with a lot of small, regional distributors that service more specialty stores. Those smaller guys have a lot more flexibility, as we’ve mentioned. When we introduce a new flavor - like our recent Butternut Squash, Apple & Sage - they will take it immediately.
Further away from New England, we rely on the “big guys” - chains of 20 stores or more - to express interest in a flavor. Once we have an “anchor” (a store group that commits) in a certain area, our national distributor will bring it into the regional warehouse, and then it is available to everyone who orders out of that warehouse (small and large stores alike). But, we need to get the big guy to agree first, because that represents “guaranteed demand.” Freezer space is very coveted, so larger distributors won’t take on something new unless there is a demand for it.
Brands fund the sales you see on shelf.
Anytime you see a sale, the brand is funding it. That means, every time you scan a bag, that sale amount gets billed back to the brand. Stores do not usually contribute to the discount.
Slotting fees & free fills. Sigh.
Larger grocery chains almost unanimously require either a slotting fee (which can be tens of thousands of dollars per flavor) or the equivalent of 1-2 cases of free product (our cases are six pouches each) to get onto their shelves. The free product is called a “free fill.” In our opinion, this is one of the most predatory practices of the grocery industry and something that makes a lot of smaller brands go out of business - because, often, you don’t make that money back for a year. It is also one of the causes of inflation on grocery shelves. The combination of free fills or slotting, plus the requirements to fund sales and other marketing initiatives ($5,000 for a weekly flyer spot, for example), is one of the main reasons that brands have to raise outside money to grow (or survive) once they expand into larger chains.
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