A few years ago, I started making jams, chutneys and salsas at home and selling them in local markets and a few farm shops. Recently, I got a call from someone who manages a group of 26 shops. They asked me to meet them and discuss supplying them with my products. This is not something I’ve ever even considered and I really don’t know if it is right for me. I make the products when it suits me, in my kitchen, and it fits around my life and farm work. What should I consider when making my decision?

Answer: Firstly, it is a great compliment to have been contacted by a retailer group, and it is a testament to the quality of your products.

There is a lot to consider in terms of moving from quite an informal business structure to a formal one, should you decide to begin supplying larger quantities of products.

The financials

I would begin by costing the product fully. If you currently grow your own produce to make the products, you’ll need to assess how much that is costing you. Alternatively, if you are buying fruit and vegetables, factor in these direct costs.

Consideration then needs to be given to the time involved as well as the cost of gas, electricity, jars, labelling and so on. Don’t forget the extra costs that you may encounter also – you will require business insurance and may be required to ship the products to the retailer. In addition you may need to employ someone to assist you, depending on the production levels. This process needs to be carried out before you can begin any discussions.

Generally, there is an expectation from retailers that they will achieve at least a 30-40% margin. Perhaps, given the artisan nature of your products, they will alter expectations in this regard.

Having your costings established and knowing the required margin that the retailer expects will inform you of the potential margin you can achieve. Here is a quick example:

1. Raspberry jam: established cost to produce one jar is €1. This includes ingredients, labour, insurance, electricity, packaging, shipping.

2. The average estimated retail price in stores is €2.95.

3. The retailer margin is 30% (meaning they pay you €2.06 per jar).

4. Your expected profit per jar: €0.99.

So from a financial point of view, this business move may require investment in kitchen space and equipment. I would highly recommend consulting your accountant for advice on creating cashflow projections and understanding the level of investment you need to make.

Other considerations

There are many other considerations when scaling a food business and they can vary from food safety standards to labelling and allergen testing. Given that you are already producing and selling products, you are likely already HACCP compliant.

However, for direct-to-consumer sales in a farmers market setting, you likely only require the simplified HACCP plan and it allows for a home kitchen to be utilised. If you decide to supply to retailers, you will require a full HACCP plan as well as a dedicated kitchen space for the business. All products produced should be traceable to specific batches also.

In terms of labelling, you could be required to provide ingredients, nutritional information, allergens, best before date and so on. There are exceptions to this rule where you are selling to local retailers only, so it is advisable to discuss this with them.

There is no doubt that this would be a big step for your business. Consideration would need to be given to investment in space and equipment, sourcing additional fruit and vegetables, potentially hiring an employee, assessing the true cost of each product and determining the profitability of the business.

The starting point is to establish the cost of the products and then discuss potential margins and order levels.

There will be some additional HACCP and labelling requirements that need to be determined, and consideration should be given to potential grants available to you.

Whilst margins, profitability and food safety standards can all be measured, only you will know if this is the right move for you personally.

In Short

Alongside the additional requirements to entering retail, there are funding opportunities. There are bodies such as the Local Enterprise Offices and Bord Bia who may assist with funding for the kitchen expansion, training, marketing and branding.

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Andrew Brolly

Andrew Brolly is fractional cfo with ifac, which is the professional services firm for farming, food and agribusiness.