Wholesaling increases sales, but proceed with caution
Regardless of the region of the country you operate in, business slows down at times. Sometimes these lulls happen randomly, and sometimes they occur regularly at the same time of the year every year. Either way, every retail bakery goes through times when some extra business would, at least, be welcome, and sometimes necessary. We all get into positions in the retail bakery business where we need to increase our sales and wholesaling is one way to do it, says Jim Murphy, owner of Sweetish Hill Bakery in Austin, TX.
Murphy took over Sweetish Hill in 1988 and has always done wholesale. Over time though, the wholesale side of Austin bakery has changed. “We were doing very little and it’s grown, Murphy says. “It’s kind of turned into its own little entity or monster now.” What started out as a few accounts with restaurants and hotels for bread has turned into more accounts of the same nature, plus cookies and pastries to all the Whole Foods supermarkets in the Southwest region, roughly 20 stores. “Whole Foods is a big part of what we do now,” Murphy says.
However, Murphy is quick to point out that wholesaling means more than just taking large orders and collecting all the new revenue.
“It’s a completely different business,” Murphy says. “Wholesale is so up and down, particularly in the cookie business. We have huge swings in sales from month to month which are really hard to manage.” The wholesale bread business fluctuates as well. After some steady years of growth in Sweetish Hill’s wholesale bread business, the no-carb phase hit a few years ago. Sweetish Hill’s restaurant accounts started cutting back on the amount of bread they used, Murphy says. Enough so that Murphy removed the large deck oven out of the production area because the bread production didn’t justify the usage of space.
“Of course now hearth breads and artisan breads have come back into favor and everybody wants them,” he adds. Wholesaling will get you more sales and more opportunities for increasing the amount of business you do, but be ready for all the things that come with it.
The swings in monthly numbers and ups and downs consumer preferences only convey the beginning of getting into wholesale. Delving into the business presents a different area of management, not only the accounts, but your own people as well.
Wholesale account management means working with others to make sure the product works for both parties involved. “We’re working on a bread right now for a new deli that’s moved here from out of state. They want a very specific bread,” Murphy says. “I’ve spent two weeks trying to get exactly what they want. When people come to you and want something you don’t already make, it’s really complicated to get it right. I think it’s going to be a big account, but things like that are a lot of work.”
Wholesaling also involves a new set of management responsibilities in terms of your staff. The new accounts and orders mean both more work and hours on the clock for your existing staff, or new staff members and training for additional employees. Either way, you have more and new management requirements.
“Do you want to start managing more people all night to produce stuff that has to be delivered at 6:00 and 7:00 a.m.?” asks Murphy. “With your retail operation you may only be managing two or three people then suddenly you’re managing 12. It’s going to take more of your time, and more of your time in the middle of the night. I think that’s an important thing to think about.”
The best way to begin wholesaling starts with products you already make. If you’re known for something specific in the city where you operate, focus on that product and get behind it with a little extra promotion. Be receptive to businesses that come to you before going out and trying to get accounts. “Most of us who already have an existing retail business, usually they (potential wholesale customers) come to you,” Murphy says. “Oftentimes the customers will seek you out.”
If you want to start wholesaling and find that it’s taking too long, salesmanship does work if you’re good at it. “If you want to expand, you can just go out and cold call and you’ll be surprised how many people are interested and will say they didn’t know,” Murphy says.
It’s important to take all things into consideration when starting a wholesaling arm of your bakery. Remember to plan out what you want to do and who you want to be before leap into it. “Don’t just start wholesaling everything,” Murphy says. “It makes it more difficult to figure out which items you’re making money on and which one’s you’re not.” With the tighter margins in wholesaling, it’s imperative to negotiate well at the front end of a deal.
When potential wholesalers come to you they will understandably try and get the best and lowest price they can, Murphy says. If you find you’re not going to make enough money on the deal, it’s best just to let it go and move on instead of trying to manipulate it. “Why make something to lose money on it,” Murphy adds. “It’s a position you find yourself in a lot in wholesale business.”