How CPGs Source Ingredients
For CPG brands, ingredients are the foundations of your product. Unfortunately, it’s not as simple as them tasting good. It’s important to think about their source, quality, pricing, consumer perceptions and more.
With more and more consumers paying attention to that tiny writing on the back of food and beverage packaging, it’s vital that you get it right.
Why is ingredient sourcing so important for CPGs?
As we mentioned before, your ingredients are your foundations. Whatever you’re putting in at the start will have an effect on your business later down the line. Whether it’s a good effect or a bad effect is down to how you source them.
You have to consider: what do your customers want out of their food and beverages?
It’s no longer enough to get them to buy what you’re selling. You need to sell what they’re buying.
Pricing, ethics, health and sustainability all come into play when you’re marketing and scaling your CPG products. If just one ingredient is misaligned with your brand, it could throw off the whole mix.
That’s why it’s crucial to create brilliant supply chains as soon as possible.
How should you source suppliers for your ingredients?
Word of mouth
Got any friends in the industry? Ask them if they know of any suppliers suited to your brand. If not, ask if they might know anyone who might know of any.
It may surprise you to know that CPG brands will often be more than happy to share their suppliers with you. In fact, there might be something in it for them. There’s always the incentive of gaining brownie points with their suppliers, helping them whittle their own costs down or get a scrumptious discount code.
But beware, others aren’t quite as giving. They might not want to give their precious secrets away and give a leg up to a potential competitor - even if you’re making completely different food or beverage products!
Speak to wholesalers
They might not deal with suppliers directly, but they’re all within the same supply chain. Chances are, wholesalers know the best tips and tricks of the trade - or the best suppliers.
Why not pop down to some wholesalers who you think could potentially stock your product?
Even if they’re not immediately helpful, you’ll be planting the seed for your brand’s relationship with them. So when you do eventually reach out to them to stock you, they’ll already be somewhat familiar with your brand.
Do some digging
These days, brand transparency is everything. Even if they don’t go looking for themselves, consumers want to know that they can find out everything and anything about a brand with minimum effort.
Bigger brands especially share plenty of information about their supply chain. It might not be on the front page of their website, but within just a few clicks you’ll be looking at their suppliers and how they’re working towards ethical and sustainable sourcing.
Which of their products share ingredients with yours? Make a list, get your detective hat on, and go and investigate!
Have you raised capital for your brand? It’s the investors’ job to make sure that you’re successful.
More often than not, investors are experts in one industry, so it’s worth asking them for a list of potential suppliers for you to check out. If they don’t know of any themselves, ask them to join the hunt. Never be afraid to ask for help!
What Should CPGs Consider when Looking for new Suppliers?
Will your potential supplier carry out thorough and regular quality checks? You don’t want to end up with a large order of unusable ingredients.
Any delays early in the supply chain will have a knock-on effect further down the line and you don’t want to let down retailers.
Your cost of sales will affect your profit margins and it’s vital to keep an eye on those. The average profit margin for a food manufacturer is a healthy 30-35%.
Make sure to shop around. You might think that if a supplier is charging premium prices that their products must be premium - this may not always be the case.
See what nearby suppliers are charging and chat with their competitors. If you can beat their prices elsewhere, they might be willing to give you a special deal.
Remember, you’ll likely have to pay a bit extra for that all-important sustainability aspect. It’s worth it. Plus, it’s common knowledge that consumers are willing to pay extra for sustainably and ethically sourced ingredients.
Are some of your ingredients seasonal? If so, one supplier per ingredient may not be enough. You may need to source several suppliers in different locations to ensure that you’re stocked up all year round.
Are you prepared for the worst? What if a crop doesn’t yield one year? What if a natural disaster occurs and damages the crops? It’s worth knowing exactly where you’ll turn to in these scenarios. Acting quickly will be key to keeping your supply chain on track.
Where is your supplier based? If you’re stuck between 2 suppliers who look equally promising, but one is 2,000 miles further, which are you going to pick?
We’d suggest going with the closer one. Food miles are one of the first things that conscious consumers will look for in a product. Mainly because it’s quick and easy to spot. Keep your emissions down and you’ll be a hot contender amongst eco-shoppers.
Ethical consumption has crept up behind sustainability in recent years, becoming a hot topic amongst consumers. In fact, many say that you can’t be sustainable if you are not being ethical.
What are the conditions for workers in your supply chain? Are your suppliers paying their workers a fair wage? Conscious consumers are ‘voting with their wallets’.
If you ensure that your ingredients are sourced ethically, they’ll be way more likely to ‘vote’ for you.
Challenges for SME/Indie CPG brands
What are the main challengers for small CPG brands? It can be tougher for smaller CPG brands to find the right suppliers for their products. You might have found a dream supplier, but then realize that their pricing is out of your budget or the minimum order is way more than expected.
It’s worth doing the research in these early days. If you settle for subpar ingredients, or compromise on the sustainability or ethics of your food or beverage products now, you might pay the price later on.
Establishing relationships with the right suppliers as soon as possible might be the key to your brand’s success.
Switching up on suppliers when you’re more established could disrupt your supply chain and cause you problems in the years to come.
Benefits for SME/Indie CPG brands
As a growing brand, you’ll have way more flexibility than larger, established brands with big teams. It probably takes them months to find new suppliers, agree on them, get them checked out and signed off.
Not only can you move quicker, but you can also be more innovative.
Some CPG brands form unique partnerships with suppliers to get the best possible deals. For instance, have you considered entering joint ventures with suppliers? It’s something that would require a lot of research and time but could pay off.
Once you’ve conducted thorough research, you can begin to shortlist your potential suppliers. Weigh out the pros and cons of each and opt for the best partnership for your CPG brand. Don’t be afraid to reach out to them and start a conversation. You may be able to negotiate your way to the ultimate deal.
Never stop researching. You never know what new ingredients, sources or suppliers you could be missing out on!
Once you’ve got the early stages of your supply chain sorted, it’s time to look at the next steps.
Distributors are an important partnership. They’ll help you get your carefully crafted products out onto those supermarket shelves.
Buffalo Market is the leading distributor for sustainably and ethically driven products. If you’ve got a food or beverage product that’s good for people and good for the planet, we want to hear from you!