All gelato businesses have a common dream: to be successful and make the world’s best gelato. Most independent businesses start with a small gelato shop pouring their passion and knowledge into it. Once they accomplish opening a brick and mortar store, then comes the decision on how to extend their businesses beyond the walls of the store. Depending on the market, entrepreneurs can choose between three different business models: retail only, half retail/half wholesale and full wholesale. In the gelato business, more and more shops are finding the addition of wholesale to be a fruitful endeavor, selling full pans of gelato and stretching their brand beyond their neighborhood. On the other hand, the buyers are thankful that don’t have to make the lofty investment in gelato equipment, yet can still provide top notch, fresh gelato.
Wholesaling, in Short
According to Investopedia Online Dictionary, wholesaling is “The sale and distribution of goods to users other than end consumers. Wholesaling involves selling merchandise to retailers, wholesalers and merchants, or to industrial, commercial and institutional users. A wholesaler can act as a middleman, brokering deals between businesses. Wholesaling often occurs when large quantities of merchandise are reassembled, sorted, then repackaged and distributed in smaller lots.”
For many gelato businesses, wholesaling involves dealing with other foodservice establishments such as restaurants and cafés, retail stores, groceries, private labels is also co-packaging.
Wholesale versus Retail: A Business Choice
Businesses selling wholesale provide other companies with the option to manufacture to order so that expenses can be minimized. Wholesaling can result in lower profits, individual portions can sell with higher margins because there is less of a chance to stock large inventories like retailers and a risk that pre-purchased stock won’t sell. However, going full wholesale with a business is often less risky because it means lower overhead than retail stores. A shop on the street has to cover costs such as rates, rent, utilities, insurance, and staff before its stock.
The main advantage of going wholesale is that it is an easy way to grow the business as long as there is a demand for it. With existing know-how, equipment and clientele, selling wholesale on the side of a business is just an extra step that does not involve too much risk. Another perk of selling wholesale is that it’s free advertising for your products in multiple locations and allows for cross-promotions with other businesses. The extra revenue stream of wholesaling gelato allows for a steady income, especially when the store itself is having slow days.
Selling wholesale entails increased production of larger quantities of products. Being able to fulfill orders on time requires increased productivity. Planning accordingly will make the difference from day one. Expectations might also be slightly different. Selling to business professionals requires consistent top notch quality, presentation and freshness. Selling direct to retail does as well, but the stakes are even higher when other businesses are presenting your gelato as their own. Wholesaling can also be challenging because you are always on-call for your customers, especially if their needs grow and you haven ‘t been able to plan for it accordingly.
In her article “Running a wholesale bakery versus running a retail bakery,” Monica Parpal discusses the day-to-day operations of a typical bakery that sells bread, cupcakes or pies, for instance. Such a typical wholesale bakery sells its products to restaurants or grocery stores, and rarely to individual customers. The setting for production is different; all the work takes place behind the scenes since customers never visit the site. With a full wholesale business, there are no cake stands and display cases, the kitchen looks more industrial and is reserved for production only. Some of the differences and advantages listed by Parpal for these bakery businesses – and that are also true for frozen dessert businesses – are consistent and predictable orders, no storefront and minimal customer service labor. The challenges are that these bakeries heavily depend on consistent clients, the opportunities to find new business opportunities are nominal and delivery trucks and service are required.
1. Check out the competition: When starting any type of business, getting information about the market and existing wholesalers in the area is important to figure out the viability of your business ambitions. Collecting information, tasting products, comparing pricing and offerings, and looking up competitors’ websites will give a good idea of what you are up against.
2. Talk to others in the wholesale dessert business: Ask for advice and talk to business professionals about their experience with the market and how it has been evolving over the past few years. Is there a growing demand for some specific offering? Don’t be shy to ask for suggestions and tips that will most likely give you valuable insights on how to answer the current demand and keep up with the trend.
3. Inquire about the demand in your area: Find out if there are some restaurants and other foodservices establishments in the area that would be interested in purchasing your desserts. Understand which ones could be potential competitors versus customers and what their expectations would be regarding your offering.
4. Offer popular and original products and flavors: Plan on standing out by staying on top of trends and offering popular flavors and products that are longtime favorites. Prepare short surveys and read industry magazines to get inspired.
5. Emphasize the presentation of your desserts: Image is everything and you want to make sure you give your customers a good first impression. Optimize your onsite and online presentation of desserts, as both will bring traffic to your store. Displays need to be appealing, and professional pictures on your website are crucial. Market both your retail and wholesale business if you do both.
Owner of G.S. Gelato Simona Faroni knows this concept all too well and has built one of the most successful wholesale gelato businesses in the U.S.
Camille Bedu (CB): What is GS Gelato’s story?
GS Gelato (GS): GS Gelato was born with the dream and goal to produce and distribute Italian Gelato throughout the United States. We started in 1996 with less than 1,000 square feet, and no market for gelato. Since then, we have worked very, very hard to make our dreams come to life. Our growth has been progressive and 2014 will be our 18th consecutive year of increase. We started with our gelateria and little wholesale to the local restaurants, then grew consistently until 2008 when we also began packaging gelato for grocery chains and expanded our facility to 26,000 square feet. Today, we work with many wholesale distributors and we manufacture private label product for the major grocery chains in the country.
(CB): Why did you decide to sell wholesale?
(GS): Since the inception of our company in the U.S. in 1996, we have always believed that gelato was going to be the evolution within the ice cream segment. We have invested time, energy and resources to distribute gelato wholesale, at first at a local, then regional, and today at the national level. This decision has been a predominant element in our growth strategy.
(CB): What are some challenges you have encountered?
(GS): It has been very difficult to establish a structure that would infuse education on “what gelato is,” its applications, uses and versatility within the different segments of the wholesale market. Customer support and distribution support are necessary and critical to the success of gelato within the wholesale segment.
(CB): Is it hard to enter the wholesale business?
(GS): It is certainly not easy but it is also not extremely difficult to enter the wholesale business. The difficulty is to grow within such as it is necessary to create a structure that will offer support within the areas of wholesale distribution, along with marketing assistance to the end user and to the distributor.
(CB): Could you share one of your success stories with us?
(GS): We have many success stories … But I think that the sum of it all is a very simple principle, yet very difficult to maintain. This principle, which is the very essence of our organization, is based on passion. Passion is the driving force for anything we set ourselves to do in life. When you believe, all things are possible, and never give up. In business, you will find it’s made of both successes and challenges.
GS Gelato succeeds in manufacturing authentic artisan gelato and sorbet in the U.S. Today, the owners operate a state-of-the-art facility and distribute their products throughout the country. There is no doubt that they are a true success story of wholesaling gelato!
If wholesaling is mostly a business model decision, it can surely be done as a side business as well to increase one’s market share. Today, many gelaterias sell mainly retail and do wholesale on the side. Opportunities are everywhere and established businesses have the advantage of existing connections and equipment. Selling more for limited additional costs sounds appealing, doesn’t it? A word of advice: it is never too late to get started on a new adventure as long as your passion is driving your ambitions.