Distributors and retailers' profit margin

[Garrigues]

Hello everyone
I am an extra virgin olive oil producer located in Spain and I would be interested in distributing it in the UK. Taking into account that the quality of our olive oil is quite above average, I do not want to sell it via discount supermarkets that put price before quality but via retailers that sell food products with an added value.
I would like to know what is the average profit margin charged by distributors and also by these kinds of retailers (or supermarkets), so I can make my figures and I can accomodate their profit margins into my cost scale.
Thanks in advance for your help and advice

 

[Garrigues]

I would really appreciate if someone could help me with this issue. In order to know if my product is competitive in the UK, I need to know how much mark up usually charge distributors and retailers in the UK specialty food business. I have been told that importers-distributors usually get 30%, and retailers usually get between 40 to 50%, but the figures are approximate. If someone could give me a more exact number, I would really appreciate it.

 

[Cee46]

Hi, Typical wholesale margins on non-perishable food in the UK are around 20-25% with retailers typically expecting a 33-40% margin.

However I don't envy you trying to sell olive oil into the UK as it is already a very crowded market with lots of very high quality oils available to retailers but a limited consumer customer base. We get inundated with marketing material from producers across Europe all the time.

Although there are very discerning consumers out there, unfortunately the vast majority still don't appreciate really good oil and they tend to think that Italian (sadly all too often Filippo Berio) is best. Too often consumer purchasing decisions seem to be driven by how attractive the bottle, particularly the label is - something stylish to sit on view in their kitchen perhaps.

To stand out from the crowd in the UK you will need a very good story about the oil: olive variety, heritage, "terroir", picking and production method etc as well as an exceptional taste. Also we tend to find that whether the oil is organic or not doesn't seem to make much difference.

Hope that helps and good luck!

 

[Garrigues]

Thank you Cee46
I imagine that entering the UK market s extremely difficult, because there is a lot of everything everywhere. About my product, it comes from my own lands, and many of the trees were planted by my ancestors in 1599. The taste is definitely different than that of other olive oils, and it has nothing to do with Filippo Berio. That quality has made us successful in a country so competitive such as the US, where top chefs and consumers really feel the difference.
Anyway, I know it won't be easy, but I want to try.
Your help and advice is really appreciated.

 

[Talay]

Personally, I don't think you can sell high volumes, even if you have the supply, as your price point will likely be too high. Getting traction on a niche product is hard but I would perhaps trade off some profit for sales.

If you could get some product positioning on a tv food programme or get some editorial written in the press by a critic or perhaps even a celebrity chef, then you could potentially achieve sales on the back of their recommendation. However, you would still need to have an established distribution network.

Unless you want to try and sell your soul to the supermarkets, you might be better off looking at some organic / high quality / fine foods wholesalers, possibly with online ordering. That would give you the distribution channel which you currently lack. Getting your product into independent stores would also help I think.

Perhaps there are case studies you could follow - I am not in this field unfortunately.

 

[Garrigues]

Thank you Talay and Natalie for your advice.
I assume that I will not sell high volumes in the UK (I wish), because my product is more intended not for discount supermarkets but for high end supermarkets. It is a matter of finding the right distributor who believes in the product and knows the UK market like the back of his hand. I know one thing based on my own experience: there are many olive oil brands, but when consumers taste mine, they notice the difference inmediately. Also, as most of my US customers are restaurants, I would like to offer my olive oil to those UK restaurants that want to use top quality products in their kitchens.
Natalie, I will carefully review the guide that you are suggesting me. Since I am already selling my product to non Euro countries, I am used to pay extreme attention to currency rates, but you can never know enough about that. I truly appreciate your advice.

 

[Root 66 Woodshop]

With all due respect, don't bother lowering your prices to get it into this country... All supermarkets will do is lower the price to beat each other on their "special brands". they'll sell as loss leaders - then expect you to provide more at a cheaper rate.

This country is a beggers belief - unless of course you've got some lovely Olive & Horse Oil in your stash... then we'll just buy the oil and claim that it's 100% olive Oil and reap the benefits...

Everyone's a winner!

 

[Garrigues]

With all due respect, don't bother lowering your prices to get it into this country... All supermarkets will do is lower the price to beat each other on their "special brands". they'll sell as loss leaders - then expect you to provide more at a cheaper rate.

This country is a beggers belief - unless of course you've got some lovely Olive & Horse Oil in your stash... then we'll just buy the oil and claim that it's 100% olive Oil and reap the benefits...

Everyone's a winner!

Thank you for your advice. I do not plan to enter into a "mine is cheaper" game because I am too small for that. I have always believed that if price is your only competitive advantage, there will be always someone who can produce the same for less. And also, pricing too cheap destroys the reputation of a good product, and I have always wanted to offer the best possible quality at a reasonable price. Some of my customers are high end restaurants, very demanding with quality but do not want to pay more than they have to. They like my olive oil because it is 20% more expensive than others, but it is 100% better. I am sure that there are chefs and consumers in the UK who are looking for the same, and I hope to find someone who can help me reach them.