Order up: Selling to Canada’s food service industry
Wednesday, December 14, 2022
Reference: FCC
With an estimated $34 billion in annual food purchases, Canada’s foodservice industry is a sizable market for food producers and processors.How is this opportunity accessed?
Foodservice is multifaceted, ranging from commercial restaurants (businesses whose sole purpose is to serve food) to non-commercial institutions such as healthcare and universities (operations that must serve food but whose primary purpose is something else).
Several operating models exist. Commercial foodservice may be an independent concept or a chain operated by one company or franchisees. Non-commercial foodservice may be self-operated (run by the institution) or contracted to a caterer.
Producers and processors typically sell to operators through third-party distribution channels, each with unique needs and shared challenges.
Know who to sell to
Sell to the person who makes purchasing or menu development decisions.The contact at an independent restaurant might be the owner or chef. At a chain restaurant, the right contact is usually a corporate/executive chef, purchaser or in the marketing department at the head office. Franchisees and unit-level management rarely contribute to chain menu development.
In non-commercial foodservice, a purchaser, executive chef, director of food services, corporate services or ancillary services may make purchase decisions.
Contract caterers may make menu decisions at the individual location or a regional office. Asking for the executive chef or director of food services at the location is a good place to start.
The exact title may vary by operation but seeking these roles first will direct you to the correct contact.
Know who to sell through
Food service operators purchase through third-party channels, rarely direct from producers/processors.The most common distribution channel is broadline distributors, but some products may be sourced through alternate channels such as cash-and-carry, specialty suppliers, group purchasing organizations or brokers.
Operators prefer to purchase through their current suppliers. Often, this is a requirement if the operator has an exclusive contract with a distributor, which is common in institutions or chain restaurants.
Broadline distributors purchase, sell and deliver products to the operator and typically mark up the price by 20% to 30%. Producers and processors should not expect the distributor to promote their products for them.
Broadline distributors have mandatory requirements such as minimum sales volumes, HACCP plans and traceability, liability waivers, nutrition data, specific labelling formats and proof of market demand for the product, among other needs.
Operators may also purchase through a group purchasing organization. GPOs leverage purchasing power by combining the purchase volumes of their membership. GPOs negotiate manufacturer rebates for their memberships, often in the range of 4% to 8%.
Brokers help producers and processors navigate the distribution chain and market the product to the industry. Brokers have industry experience, connections and data that benefit their clients. Brokers often work on a commission that varies with the level of service required. Commissions may range from 3% to 10% of sales.