We’ve been busy tying up all the loose ends here at Peapod so that we can start the new year with a bang.
Since every fresh start needs a sharp knife, I finally took the blade on the slicer to get sharpened. Look how sharp it is now!
The dullness really snuck up on me (as dullness does). Even the guy who sharpened the blade commented on its poor state. I can’t wait to test it out.
The last few months have been a study of product pricing. The big question was: how much are customers willing to pay for our product? I was eager to collect lots of data since I didn’t have a good feel for market prices. What I didn’t realize is that we were also gathering valuable information on retail markups.
The jerky is on the shelves of various different retailers: butcher shops, sporting facilities, different types of specialty shops. Surprisingly, the retail markups vary wildly, even within similar categories of retailers, and even within the same geographical region. Some shops want to keep 20% of the sale price. Others want to keep 60%!
Even though I define my own product unit price and my own suggested retail price, the numbers have to fit within retailer expectations in order to get on the shelves at all. At the same time, our product prices across all store shelves have to be pretty consistent. This means that if the retail markups vary wildly, our income per package also varies wildly.
For a 15g bag of jerky selling for 3 Euros (including sales tax), some retailers might expect to pay Peapod just a little over 1 Euro. And this value is assuming that we do our own distribution instead of outsourcing to a distributor. We currently do distribution the old-fashioned way.
There are obviously lots of other factors in play here, such as volume of sales at each retailer or marketing strategies.
In reading about pricing within the food industry, I came across this rule of thumb: take the cost of your materials+packaging+labeling and multiply it by 4 in order to estimate the sale price of the product. If customers will pay at least this price for your product, you might have a working business model.
We’re in the process of developing a working business model.
I’m learning a lot by talking to customers. I get all sorts of feedback: some positive, some negative, and a whole range in between. Here are a couple of gems.
“Ugh, I don’t like this. This is very bad. Nobody should make this. Why are you making this? It’s just not good. Please. I don’t think this is necessary. It just doesn’t taste good. In any case, it’s not for me. It’s not my thing. Do you have to make this?…[pause]…But don’t let me discourage you!”
“Hmm. I guess it’s ok. It’s kind of weird. We don’t really have this in Germany. Are you familiar with Landjäger (typical German sausage available in all grocery stores)? Why don’t you sell Landjäger? People buy that.”
This kind of feedback is hard to take seriously. I usually thank them for their feedback, and then I make a mental note to tell James about it later so we can share a good laugh.
People share their opinions on the packaging too. One store declined to sell the jerky entirely because our packaging was deemed inadequate. Someone else told us that the packaging is too neutral and not catchy enough. I like our packaging. I think it looks high quality but also homemade. I won’t go into detail here about packaging and labeling though because that story is a blog post for another day.
A big thanks to Metzgerei Widmayer, our local butcher, for hosting a jerky tasting! We got a lot of great feedback directly from customers.
Kiddo and I have spent the last few months indulging in playgrounds. At least that’s what Kiddo would tell you. We rode all the different U-bahn lines and all the best buses. At every destination, we played hard.
Really, we were on a mission to find a production kitchen. And it wasn’t easy. Kiddo and I ventured far and wide.
You can’t open a food business in Germany without a proper kitchen which complies with a whole bunch of rules. However, there are zero production kitchens available for rent in Stuttgart. How, then, do people start food businesses? I had absolutely no idea.
Kiddo and I took matters into our own hands. Thankfully, two of Kiddo’s favorite things are public transportation and playgrounds. We settled into an afternoon routine. I would pick a destination from my list of possible food-establishments-with-kitchen, and the two of us would venture over. When we got there, the conversation would usually last about 10 seconds.
Me: Hi, I’m Alissa, and I’m starting a food business…blah blah…would you be willing to let me rent your kitchen during the hours you’re not using it?
Them: Nope.
Me: Do you have any other leads or information that could help a new company find a kitchen [or similar followup question]?
Them: Nope.
And then Kiddo and I would go find the nearest playground and play hard to recover from the rejection.
The rejection was seriously tough. Luckily, we didn’t give up, and our perseverance paid off. After many, many rejections, we finally got a yes. It’s all thanks to a generous person who is willing to give this far-fetched idea a chance. This can’t really be how people normally start food businesses, right?
Peapod’s proof of concept phase has officially begun! We are now in full production mode with our first product, Classic Country Road Beef Jerky. For the next three months, September through November, we will be figuring out distribution and trying to test the market in Stuttgart.
Stay tuned for updates on our progress.
