Contract to supply a supermarket
There are a number of things you should be clear about before signing a contract with a supermarket:
- Price – workout what margins will keep your business viable and make sure the price meets this. Look out for clauses on re-negotiation of price where a supermarket may try to reduce your profit margin at a later date. Also consider how supermarket promotions will affect your price, eg if a supermarket sells something at half price your profit margin will also decrease.
- Shelf space – map out exactly the shelf space you will receive including how many stores will stock your product, where they are, and how many products in each store and for how long.
- Exclusivity – a supermarket may demand to be the only seller of your product therefore restricting sales elsewhere. If you do sign an exclusive contract make sure there is a clause with a realistic expiry date.
- Supply – get a clear understanding of exactly how many units you must supply and how often. This will also help you forward plan production and delivery logistics. Don’t promise something you can’t realistically deliver on just to get the contract as this will damage your business reputation.
- Payment terms – set out when and how you are paid. This is critical to forecasting your cashflow.
You may want to consult a solicitor before signing any supplier contract with a supermarket. See choose and work with a solicitor.
Fulfilling orders and selling in supermarkets
You will need work out how you will deliver your food or drink products to the supermarket. Few supermarkets or retailers accept direct deliveries to a store, so you will have to supply your products to a central distribution centre. To reduce delivery costs you could look at sharing deliveries with another local supplier.
You should make the effort to promote your product in-store. For example, you could focus on selling points such as making your product as regionally identifiable as possible. This is something that customers are currently keenly aware of. Make sure your product is displayed properly and look at doing in-store tastings. It is only the start to have your product on the supermarket shelf - you must work to keep it there and hopefully sell more or other product ranges.