Raw material suppliers in the organic business face a unique set of challenges as they
navigate the waters of USDA regulations, ingredient supply and demand challenges,
building and protecting intellectual property and the requirements of
larger customers. Here’s a quick look at the factors raw material suppliers need to consider as they equip themselves
for a future in the organics industry.
• The market is full of “me too” products—how
can you stand out? The answer is in the connections you can build to your ingredient and its origins, attributes or “story.” A company like
Sambazon, for example, not only built a great
story around an ingredient, acai, that no one
had ever heard of, it also worked with indigenous tribes in the Amazon to help make their
lives better. These stories resonate with consumers and if raw material suppliers can convince
their customers that their story is a good one for
consumers, then it’s much easier to make the sale.
• This leads to the second point, understanding your customer and your customer’s customer. Doing your due diligence
about the market and developing trends will make you a valuable partner to your customers. Many end product manufacturers are looking to ingredient suppliers to educate
them about the latest trends and know about emerging research in the field. There is no
excuse in today’s information age to go on a sales call without a plethora of information
to share with your customers about the market in which they are involved.
Additionally, it is time well spent to work on being perceived as an expert in the market in general. Publish non-commercial white papers, speak at industry conferences, be a
thought leader on the health condition or category you serve and others will be more receptive to your message.
• Because raw material suppliers have much tighter margins, it’s very important that you
know who your best customers are and how to sell to them. An 80/20 analysis can help
you understand your customer base (see details in Question 2 of main article), but equally
important is an understanding of the category you are selling to—do you deal mainly with
distributors? Branded marketers? Contract manufacturers? The answer to this question
gives you insight into how to spend limited resources on advertising, sales infrastructure
or that scientific study you are considering.
To combat tighter margins, you should also be looking at cost cutting measures that
allow the use of technology to streamline systems—Voice Over IP (VoIP), for example, or a
free online data collection service like Dropbox ( www.dropbox.com) to easily disseminate
information to your team. Many services are simple to implement but underused in most
organizations.
• Do you have the product back-up you need? It’s more than just the USDA paper trail.
You are a stronger supplier if you have the scientific support and intellectual property behind an ingredient that gives it staying power. Also, know your supply partners inside and
out. Have you visited your key suppliers and done an audit? Are they easily forthcoming
with the documentation you request? If the answer to either of these questions is no, you
need to really rethink your business model. When that inevitable production issue or a
food safety crisis arises, are you ready to defend your material?
• You also need to keep in mind that the claims your customers make on their products
are very much based on the risk tolerance of their company. A large food company will
not be willing to make the same structure-function claim on a nutritional beverage as a
Raw Material Supplier Perspective:
Factors for Future Success
small supplement company selling
through infomercials (although risky
claims are hopefully disappearing in this
arena too with the enhanced vigilance
by FDA and FTC). Offering examples of
potential claims—again another way to
provide value to customers and show-
case your knowledge of the market—
is one way to help customers think
outside the box on how to sell
your material.
• You’re a small organic sup-
plier selling to a big food
company; to make that rela-
tionship go smoothly, you
need to be perceived as able
to handle large customers
regardless of your size. As a
small organics ingredient com-
pany trying to sell to Kraft or
Nestle, for example, the goal
should be to rise to their expectations
rather than have them lower their stan-
dards. To do this, you’ll need established
processes and transparency. Make sure
you have standard operating procedures
(SOPs) for all your key processes. Allow
your customers to see test results or
track shipments online. Communicate
with them about what you’ve done to
make them comfortable with your sys-
tems and processes—the number of
Ph.D.’s in your QC department, how your
in-house testing process works, etc. The
more comfortable they are with how
you run your current business, the more
likely they are to consider you for future
opportunities.
• Along those same lines, what is your
“face” to the industry? It seems like a
no-brainer to make sure you have professional stationery and marketing collateral, but too often this takes a back
seat in small companies. Likewise, an informative website that shows your passion for what you’re doing is another
“must have” that many companies do
not have. As you design your messaging,
think about your story from your customers’ perspective rather than your
own— this “outside in” thinking helps
you focus your attention on what’s important to your customer rather than on
how great your product is.
