Tuesday, January 24, 2017

The Lancaster Food Company: 20,000 Loaves Donated

One of the biggest challenges of building a commercial bread company is handling unsold product, otherwise known as waste.

From the beginning we donated any unsold product, initially to the Council of Churches Food Bank because I had a previous relationship with them from my Lancaster Community Gardens days. Over time we added a variety of food banks, kitchens, and churches, including Crispus Attucks and Water Street.

One of our key indicators is our "return rate"; it's the measure of invoiced products vs. unsold product; we give full credit to stores for unsold bread. We lose money when there's a lot, and we make money when there's only a few. When there are no returns, we're leaving money on the table because we don't really know the strength of the demand.

The ideal scenario is that we keep increasing the amount we deliver, and it always sells out, but that doesn't happen ofter, so the next best thing is we find the bottom of the market, which is indicated by just one or two unsold units of each variety.

We don't currently disclose our unsold rate, so I'll just say we've helped feed thousands of families since 2014. While it's been a source of pride for us, it's also a painful reminder that not all customers at all stores want or know about our products, and we have to do a better job marketing them.

And donating bread doesn't align with our goals to get to profitability: we want to donate less--not because we don't care, but because we need to be self-sustaining before helping others (put your own mask on first).

So we've been testing selling previously unsold product at Grocery Outlet, which has 22 stores in PA and over 300 in California. It's going very well, so we'll continue to add more of the PA stores, to the point we expect to reduce our unsold product to a very low percentage. This strengthens the company, gives people with lower incomes access to tasty, locally made organic bread at a lower price, and keeps read out of the waste stream.

We'll continue to make donations, and we hope to get back up to our previous levels, but only as part of our overall growth plan. We much prefer treating root causes of poverty (with income through thriving-wage jobs), and keeping the company on the path to profitability.

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