The Retail Jump: Simplifying Labeling and Understanding Pricing
By: Lev Berlin Posted On: July 8, 2014
guest post by Lev Berlin, founder, ReciPal
We all know first hand that starting a business, let alone a food business, is a serious undertaking and a challenge. Cottage food laws, while differing by state, allow people to start on a smaller scale without some of the same intimidating regulatory and business requirements that larger food businesses have to deal with – permits, commercial kitchens, accounting for the cost of middlemen and retailers, and creating nutrition labels to name a few. They are also limiting, whether it’s a dollar sales limit, location restrictions, or types of food products.
If you have a food product that you want to sell retail or if you are thinking about doing a value-added product, you have to play by and understand the rules. These rules don’t have to be so intimidating, and become less so when you have passion and the right tools.
My food business, SlantShack Jerky, started at local farmers’ and specialty markets in New York. We started really small and were forced into growing up fast because of regulations around meat products and the interest we received for selling retail. One of the nightmares we avoided for a long time was nutrition labeling. It was intimidating – confusing, expensive, and uncertain. How would we pay for a lab test or consultant to analyze our dozens of flavors? What if our recipe changed? Which rules and label types do we have to stick to? Do we even need it?
All these questions required answers and a lot of research. If you’re thinking about doing any sort of retail sales, you’ll need nutrition labels. Not necessarily because your business is big enough, but because your retail buyers will require it. Plus, it makes your product look more professional and appealing, especially to a more savvy consumer.
So back to how to actually getting it done. What we initially did for SlantShack was create an Excel spreadsheet with all our flavors and used the USDA nutrition database to add up the numbers. It was a pain in the neck, but got us somewhere and was cheap if you don’t account for our time. I wasn’t happy with this process and thought I could make something better for other food businesses like ours. I had done all this research, learned the ins and outs of labeling, the formatting rules, the rounding rules, the requirements and options, and didn’t want to let it go to waste.
I ended up making a website, ReciPal, that let’s you do your own nutrition analysis and labels online. It keeps the process simple and straightforward without the unnecessary bells and whistles, so you can quickly create your nutrition label and get back to doing the important things for your business. If your recipe changes, you can just as easily update it and get a fresh label for the new recipe. Compared to sending your product to a lab or consultant, it’s faster and infinitely more affordable – we even have a free trial, so most of our customers don’t pay a dime.
We’ve helped several customers get into retail stores months before they were expecting to because our process saved them hundreds of dollars that they would have otherwise needed to save up for a lab analysis. I wish I had room to tell you all the success stories.
The other big piece of understanding how to sell retail is that that pricing changes dramatically compared to selling at farmers’ markets. At the market there is no middle man. Every sale goes directly to you. At a store though, you’re usually dealing with a 40% margin from the retailers (meaning you sell your product to them for $6 and they charge shoppers $10 – so they keep $4 of the $10, or 40%) and maybe another 20-30% if you’re working with a distributor, which a bigger retailer may require.
We have a really simple recipe cost calculator on ReciPal that will first help you figure out the cost of your product, and next help you determine pricing based on if you’re selling retail, and working with a distributor or not. You don’t want to learn the hard way that the product you’re selling for $6 at the market needs to retail for $12 at the store for you to make any money.
Our customers use our costing tool to pass along the best pricing to their customers and to better understand their business.
So, be prepared. If you want to sell retail, show up knowing your pricing, with nutrition labels on your packaging, and with a great attitude.
If you’re interested in learning more, we have a few other articles on getting your food product into retail, and I’m always happy to talk to food businesses about getting started with their business, nutrition labeling, getting into retail, and of course any questions about ReciPal. Don’t hesitate to reach out. I’m Lev and my email is firstname.lastname@example.org.