Updated: May 21, 2020
When David Pritchet came home from college his childhood classmate, Ethan Holmes, had moved back into his old neighborhood. This brought the opportunity for the two to reconnect during the new stage in their lives. Today, David is the COO of Ethan’s company, Holmes Mouthwatering Applesauce. This Cleveland-based tasty treat can now be found in grocery stores all over Ohio. This did not happen overnight! When David joined the company they were still looking for seed-funding. Him and Ethan learned by doing and embraced a few funding strategies that got the business to where it is today. So, what does it take to get your food product in a grocery store?
The first step is making the product. This comes with a lot of costs (research and design, manufacturing, packaging etc.). David noted that the biggest burden are those recurring bills. These can be minute costs you may not think about such as fees to the FDA and your state’s department of agriculture. However, the largest recurring expense is often times payroll. There are a lot of hands involved in getting the product on shelves, and those hands need to be paid. During our interview, David shared strategies used to finance these costs.
Pitch competitions are a common strategy. Holmes Mouthwatering Applesauce has had their success with this. However, David cautions that this money can come at a price.
“When you get $50K [...] you are trying to figure out how to make 100k. So, you are going to spend a lot of money upfront but if those things don’t pan out you are going to still have to spend money.“
Working with all-natural food products can be time sensitive. So, you should prepare for incidents that may have financial implications. For example, if you buy the ingredients for your product and you aren’t able to get in the kitchen or you don’t store it properly, your product may go bad as a result. One way to pay for your ingredients is purchase order financing. For a fee, companies will buy purchase orders already placed by grocers before your product is made. David explains that once you have a paid purchase order you can use it to negotiate terms on other things - like kitchen space or early access to ingredients.
With a food company there are 2 ways you can get into a store: direct and working with a distributor. The former involves a direct sale to a grocer. While the latter buys your product in bulk and then sells it to retailers like grocery stores. David’s finesse with B2B came from the best teacher, experience. During his first year at the company, he was a sponge that took in all the knowledge the food industry had to offer. As his role at the company developed, he began watching Ethan cold call grocers throughout Ohio and in some parts of Pennsylvania. He did not spend much time observing. Instead, he picked up the phone and joined in on the hard-work that is needed to build relationships in the industry.
When Holmes Mouthwatering Applesauce was looking to expand their market, they set their eyes on getting deals with distributors. Distributors often make bigger purchase orders than grocery stores because they have a larger net of consumers. In order to connect with more distributors, Ethan and David decided they needed to start doing food shows. At these flea-market-styled shows, buyers from across the country would come to shop for products. This gave the two young entrepreneurs the opportunity they needed to get their product into some of the top grocery store chains in Ohio.
To maximize the sale of any product, you must know and understand your target audience. When selling to grocery stores this can be hard because you are only seeing numbers and not the faces of your customers. To overcome this, Holmes Mouthwatering Applesauce began doing live demos in the grocery stores where their products were located. Now members of the team, including Ethan and David, could interact with their customers first hand and learn what they valued in the product. This also presented them an authentic opportunity to share the story of their brand to consumers.
In addition to food, David also emphasizes the importance of branding in the music industry. Not only is he COO of a food company, but he is also lead keyboardist for Uptowne Budhha, a popular Cleveland neo-jazz band. In addition to playing multiple club and corporate shows, they bring in revenue through an emerging e-commerce presence. To learn more about funding ventures in the food and music industry, listen to the full interview on the Founders Get Funds podcast!