Foodservice for CPG Brands in 2024

Jordan Buckner: [00:00:00] Food service is one of my favorite channels for CPG brands. When I was running TeaSquares, we quickly realized that grocery was not a great channel for us to educate consumers because it's very expensive. And we found our way into corporate offices and it was an ideal placement for our energy bars. And what I love about is that we could identify One or a couple of buyers per location and reach thousands of consumers.

And then those could then become retail consumers as well, or online consumers also, but food service is a really big channel. It's had its wild ups and downs. We ended up shutting down Teasquares because of COVID and the entire kind of channel shutting down at that time as well. And so definitely know firsthand the difficulties that can come with it also.

But what I wanted to do with it being the beginning of 2024 is look at how the food service channel is performing and predicted to perform this year. So for this conversation, I've [00:01:00] invited on Kristi McGill, who's the VP of sales at Rooted Food Sales, and they work with almost all food service channels to help.

CPG brands, both in package products and then also back of house, like cafeteria items to really understand how the market's looking. So Kristi, welcome. 

Kristi McGill: Thank you for having me. I'm excited to be here. 

Jordan Buckner: So you see, and are actually like pitching and selling a lot of brands into food service. I love to get a sense from what you're seeing, how the market's performing, which segments are doing better than others and what your general sense is.

Kristi McGill: Yeah, absolutely. So, you know, it's interesting. I feel like last year in 2023, we felt really good about where the channel had channels within food service had grown, right? Coming out of COVID, it took longer than I think people wanted to accept for it to really start to come back. And I even remember saying last year, it feels that we're back.

I think it really took most of last year to kind of start to see a lot of the channels come back towards where we would have expected them to be, or at least. Trending more similarly to [00:02:00] numbers that people were seeing in 2020, or, you know, kind of late 2019, as a whole, there's still a lot of changes, right?

Like, you spoke about the corporate or BNI sector, and there's still been a lot of ups and downs there, right? We've seen pushback from staff, not wanting to come back to offices. And then with that offices and companies really starting to even heavily incentivize us. People to come back. And with that, what do they like to dangle in front of people?

Delicious snacks, foods, beverages. So, yeah, I mean, as a whole, like, what we're really seeing, I think, B& I is the sector in the, when you think about package product, the sector I'm the most, like, excited about within food service, simply because of really a huge uptick in repeat buying. We're seeing, you know, large groups like a Google or a Meta or something like that, really looking heavily at are they offering sustainable offerings?

Are they offering allergen friendly offerings? And Not the kind of typical office snacks of the past. I mean, if you look at like a LinkedIn and you see the snack stores they have over there, right, they're filled with the brands that you and I saw [00:03:00] at an expo West or have never seen actually. So even sectors right within the management groups or canteens or places like that have developed special teams that are sourcing more of these very unique, hyper local regenerative types of products.

Jordan Buckner: I think that's amazing to hear, you know, I'm curious to see how the tech industry is performing because I know the tech industry is the one that's kind of like pioneered bringing in a lot of the newer sustainable snack options. But at the same time, a lot of those companies have been and are still undergoing tons of layoffs.

And so have you seen a change in their buying behavior with like laying off employees, but then also buying more food items or how's that correlated? 

Kristi McGill: Yeah, I don't know if I've seen enough data to fully like correlate what that looks like. It's definitely I mean, I actually just In the last month did two trips like right into the heart of Silicon Valley, going into these types of spaces, it seems that you're not, we're not seeing it yet in terms of like a hit on numbers, more so I think place [00:04:00] everybody's getting even more anxious of like, how do you secure happiness for the team that you have in place to because I mean, there are a lot of layoffs in the tech industry.

I think as a whole, those who still have their jobs probably aren't feeling as secure about them as they did a year ago. But I don't have clear data. Okay. If that's going to impact our sales yet, so far, what we're seeing is this quarter is trending higher in the corporate side than it did last quarter.

And that quarter was up over the previous. So still continue pretty steady growth.

Jordan Buckner: Gotcha. Okay. That's really great to hear. Yeah. Cause I know those conversations can always be a little mixed in terms of how those companies are operating. I know what Teasquares even like I would. Sometimes get the hold of like someone on the team and at a office, like a, like LinkedIn, for instance, I had a friend out of grad school who worked there.

She was able to introduce me to their they're like community team brought us in through a management company. Is that still possible to kind of get in that way? Have you seen more of the companies [00:05:00] moving to like management groups or away from managing groups? What's that look like? 

Kristi McGill: Yeah, mostly still really operating heavily within the management group.

And I think in general an overall fatigue. I would say this across all food service management groups. There's become a heavy fatigue from the groups themselves of being approached from every direction. And I'm a scrappy seller. I certainly started. Selling that way you know, and definitely applaud people who go after that.

And then it's not to say I wouldn't do that today, but the more and more, when you speak with the management groups, they're so frustrated, they're getting hit up on LinkedIn, they're getting sent emails and people are going around them too, right? When they tell you, Hey, don't approach my blah, blah, blah set of businesses, but that's kind of.

You know, I mean, we've probably all heard the advice, right? Well, if you get enough interest from X, Y, and Z outlets, then they'll bring you in, but I'm kind of seeing like almost a, like a sense of patience. People are done with that from the management group side where it's hurting the brands that are doing it.

That being said, I still think that approach can work. [00:06:00] Right. And I know a ton of people and we still do it ourselves, right? If we know someone that we can ping to kind of. Say, Hey, who do we talk to? Or I've seen people have success finding a friendly person that works. Let's just keep you linked in as an example, a friendly person that works there, right.

And saying, Hey, I'm going to send you like a package of my snacks. And those people are excited about it. And then they end up revealing who the contact is. But management groups very much are not in favor. 

Jordan Buckner: I mean, it's so interesting, right? Because I've worked with a lot of these management groups and.

A lot of them come from very like traditional minded business practices where they're like, Hey, we're operating on relatively thin margins here. We want like a very streamlined, predictable business and having lots of like new products and in and outs just adds to the chaos on their end. And products also tend to be more expensive sometimes.

And so I know that can be kind of difficult to manage. So I can totally understand the fatigue. Yeah. 

Kristi McGill: I mean, they're definitely cracking down [00:07:00] on like even dinging operation managers, right. For bringing product in off their sets because it had become such a problem. And it was really, I think, I mean, it causes a huge distribution problem.

And so many of them are focused on having a seamless operation where everything looks the same wherever it is. And so a lot of them really cracked down on it, which it's like penalizing, you know, managers of different ones in terms of like their bonuses. So I think that's. It's definitely made me more hesitant.

to go out of the outside the box way than I would have been previously. 

Jordan Buckner: Have you seen any of the management groups create processes for identifying new products into the market or what are great ways like to get their attention in ways that they might appreciate? 

Kristi McGill: Yeah, I think it's looking at, I mean, it's kind of understanding your product and going, okay, we're on maybe someone's initiatives.

Does my product fit? So, you know, we'll use women in minority owned businesses, understanding that that type of product has a very different path than a product that doesn't have that certification. And so. Very easily, you can [00:08:00] usually take your management group and go, okay, I fit this. I fit sustainability or I fit, you know, upcycled and start to look for, do they have someone leading those initiatives?

Because then that person, while I will say they're probably going to smack me for saying this, that person is at least maybe a starter to get you in front of who you want to get to. Sustainability is definitely right. Probably a top initiative right now across. Almost all of food service, I would say, but really in those management groups, they're trying to figure out that cost because that's the push and pull here is they want to do these things, but the cost of those products is still prohibitive in a lot of spaces.

Love looking for people who are over sustainability, looking up, just even understanding, okay, I want to get into this sector. I want to work with this manager group. Are they Pushing X percentage of their brands to be women and minority owned or to be sustainable by X date, because then you kind of know it's on their radar.

Jordan Buckner: Yeah. One of my favorite things too, is to look at the blogs [00:09:00] and the social media pages for some of these management groups to see like what they're talking about and what they're posting about, because then that's usually the things that are priority for them. And if you can leverage that same language saying like, Hey, I saw that you're posting and sharing about the women in minority brands who are part of your portfolio.

You know, here's a really great offering to add to it, since this is something that you care about, right? Or if like you're posting about sustainability and waste reduction, here's how our product can fit within that. 

Kristi McGill: Yeah, it's having that lens, right? What problem are you solving for them? Because they've all seen it all by now.

I mean, I think if you use plant based as a really great example of that, everybody has seen every option, whether it's from a mushroom or a bean or You know, engineered, they've seen it all. So having like taking the time to research and know how you maybe fit into their initiatives is going to yield the best result and ideally not as much fatigue.

A lot of the groups, I mean, I can think of about three right now that are doing some really creative things, especially in the package space because they don't, aren't hindered by cold chain [00:10:00] where they are doing. Group buys of what they would, what I would call, they're typically going to fall under like initiatives like local or sustainable, or what we're talking about women and minority owned businesses, they're group buying it and almost creating these shippers, not the right term, but for most people in retail, that would make sense.

Some sort of shipper type of option where it's like they get the, the unit gets sent this box and it has. A case of this, a case of that, et cetera. And that's how they're playing around a lot with testing some of these more hyperlocal or brands that don't have distribution and are able to track it better than say all their units pulling from UNFI, which becomes its own problem.

So I think it's neat that they're doing more of that. I mean, lots of brands that you and I know are in some of those. Boxes or they get like a month or two, which is kind of a cool trial initiative. I don't think for the brands necessarily doesn't yield that distribution as quickly. It's definitely more of like driving trial in the sector.

Jordan Buckner: You know, we were talking about sustainability. I know pre COVID, there was a big push by [00:11:00] these groups to move more towards bulk options to reduce packaging waste from individual served items that obviously like flipped with COVID when like everything was individually packed. How has that Change the last year.

Kristi McGill: it's almost they're almost at odds with each other because the individually packaged or the small pack sizes, right? I mean, like, going below even a single serve almost these many to get the cost on these items to what they want it to be is still really popular in the package side. So I feel like that's almost grown that they wanting it to be fully wrapping.

thrown in a drawer differently. As far as your back of house side, a heavy push to reduce packaging. And a big consideration, not only from the cost of the packaging, but like how much space it's taking up in their back of house spaces. So you're seeing some good innovation in that space. You know, things that maybe were in cans are now in pouches, but that presents its own problem because for a lot of types of products, the pouches are actually not recyclable or So there's kind of a push pull where They definitely want to see more of that, but some of it's the technology for packaging has a [00:12:00] hundred percent caught up with actually being sustainable.

Jordan Buckner: I like that. So I know we were talking a lot about BNI or kind of corporate offices as well. There are also tons of other channels, right? There's quick serve restaurants. There are airports and airlines working with education K through 12, its own thing, but then also like universities and within there, have you seen anything else?

Kristi McGill: I mean, as a whole, like, I don't think plant based is new. I think it's shifting and changing this year into like a really more concise. product offering, but it continues to grow. So it's not new, but it's had steady growth now from year over year, continued steady growth with now, I think I want to say it's probably like almost 50 percent of restaurants are featuring a plant based item and calling it that, right.

Really calling that out. So that seems to be becoming less of a trial and more of actually like a restaurant staple. You've probably heard people talk about the veto vote, you know, that still is a [00:13:00] big. Piece of if, okay, three people are going out to eat and Sarah is gluten free. They're going to go to the restaurant that she wants to go to, and it's not, you know, restaurants.

I need to think about it in that standpoint, right? Is that more and more people have some veto vote in their group? Whatever that may be. So if you can capture that person to not take the group, the restaurant across the street, your overall sales rise, and it can be hard to track that because. If you're looking at a ring total, right?

The plant based products or the gluten free items may still be a lower ton product or a non alcoholic. But what you missed was that you would have lost an entire bill if that group hadn't decided to come to your location. Otherwise, I mean, it's actually more of the technology sector within food service, right?

That's where I feel like there's a ton of innovation. You're seeing that in terms of like prep assembly. You're seeing that in how orders are being taken, you know, COVID really pushed a lot of technology there. So it almost feels that it's more on the technology side of what [00:14:00] we're seeing change and what people are having to do with to kind of solve labor and cost. As their 2 biggest priorities 

Jordan Buckner: got it. That brings up a question. But before I get to that, I'll make sure I remember it. I want to talk through, like, if there's been a rise in, like, micro markets and other kind of distribution tech like that. But then before that, I want to ask about nonalcoholic beverages.

Have you seen a lot of venues and food service options on the restaurant site looking for those nonalcoholic beverage options? 

Kristi McGill: Yes, so it, that is becoming more and more of a staple now, like the ring data is still probably lower than what, like, I want to like the positive side of me wants to be like any options are just like climb, climb, climbing.

It's more of there's again, go back to that veto vote. You need that option for more people to choose your restaurant. I mean, I was even at a bar the other day that's like outside of a concert venue, that's what you'd consider like a grimy concert bar, right? And they have six NA options on their menu.

Because we're seeing, I mean, you can already tell, right? Generationally, I'm a millennial you know, generationally below me, [00:15:00] drinking is a lot lower. It's a lot less of like everybody's getting blitzed or everybody's drinking every night. So places are needing to be more creative to still get that added dollar ring.

And it has to come then from a fancy And a type of beverage. I think you've seen brands rise like an athletic brewing to almost be more like you're going to see them in a bar of a certain tier always. As a whole, I believe a ton in that because I think that that solves, or if you don't have the alcohol sales, that's a huge hit.

So you, they need to keep kind of innovating there , to pull people in. Like my husband doesn't drink very rarely, so if you don't have kombucha on the menu, you're, he's going to order water. He's not also going to order Coke, right? He's going to order water. But if you put a popular kombucha brand on tap or on the menu, you're getting us to pay probably 7.

99 for it, which is absurd. 

Jordan Buckner: Nope, I totally agree. I mean, my wife and I, we severely like drastically reduce our alcohol intake, but we'll drink like , like mocktails and non alcoholic drinks. We have two kids and it's like, [00:16:00] we're driving everywhere. We don't want to like be drinking every night. So it's just easier to that doing that, but then having something flavorful as well.

So jumping into some of those tech changes, I know even in the last 10 years, there's been a evolution from like the standalone. Oh, traditional vending machine model to these open micro markets, both a lot of times, like sometimes within offices or certain environments or universities. Have you seen those increasing now post COVID or has there been any stall with that?

Kristi McGill: So it's interesting because there's a rise of those, right? Those are growing. I think you could use like a part of your familiar farmer's fridge. They're great example of someone who has continued to increase their number of machines. You know, every quarter they're placing more.

And I think there's a comfort level with vending machine food when we have to really speak about the US here, right? Because we are uncomfortable with, like, some of these fresher prepared vending food options. It still is like, ooh. That went out of a vending machine? Like, what is that? If you go into, you know, more, like, I really, I think if you think about, like, Japan or China or [00:17:00] places like that, that is not uncommon.

You can get a bowl of ramen right out of one. Or, you know, I go to the vending shows, you can get, like, it's wild, but you can get out of these. So there's definitely here, I think you still fight on that fresh food side, the vending machine themselves. You still fight a little bit of a stigma of like, is it fresh?

But the numbers are showing that people like, people are more comfortable with it now. Like, farmers fridges, I think they're up to almost 400 plus units throughout the U. S. now, and that's a pretty fast growth. On the flip side to that. Consumers are craving more connection. So if you look at most like restaurant reports that came out last month, most of them are showing that there's like a push between this technology, keeping people feeling separated and people actually wanting to like engage with a human.

So it's almost like there's like growth, there's continued growth there, but there's definitely, where do they fit? You know, I think people are more put off and I won't name it. The chain, but there is a pretty big, like salad bowl kind of chain that when you order, you order on a screen with like a virtual server, [00:18:00] but there's actually people right there.

And they literally won't answer your questions about the menu. You talk to this virtual person, even though they're there. And so that I think people are finding a little off putting, but at the same point, I love that when I'm sailing through an airport, I can put it into my app and grab it from one of these microspaces.

With no interaction needed,

Jordan Buckner: right? Yeah, that's really interesting because I think , the reality is like, both exist, right? Like, sometimes you don't want to talk to anyone, you just like, want an easy way to grab your food, and other times you're like, don't mind, like, talking to someone, and you have some time to spare.

And so I think it's created this duality of A lot of companies where they want to do all or nothing in one direction, and then they're like, Oh, we're going to invest millions of dollars in this technology. You want that to be the primary thing that people use to make it worthwhile. Cause we're solving our labor issue, but then it doesn't always work.

So I think that's really interesting. But I think that's really, really great. Any other things that we haven't talked about that you've experienced coming up, any trends or any [00:19:00] opportunities for our listeners. Into getting into or expanding into food service.

Kristi McGill: Yeah, I mean, trends as a whole are still trying to, I mean, I guess we want to look at trends real quick, like trends as a whole are still really heavy global cuisine. So, and that, that's trending into beverages too. I mean, you can kind of see that like more, no longer, you know, do people just want like a simple beverage that's supposedly representative of country.

They really want it to kind of have more of like global flavoring. There's some great beverage brands that are really growing in the space. Global because we like is on every. Like that just continues to be, and we're not talking now as much of like, you know, Mexican food, Chinese food, right? And we're like the Americanized version of it.

We're really talking about some more interesting, like Venezuelans really hot right now in the food service world. So spices, ingredients, things that kind of play on those flavors. Vietnamese food is incredible. It means fusion food, right? It's really, really hot right now and just keeps growing. I mean, I see.

From beverages to food to actual venues popping up around , that, you know, that drive. And I think global food across all food service channels right now is up. [00:20:00] So colleges are being forced to like implement more interesting global food. And so food service as a whole global inspired products, I think are one that's really hot.

Jordan Buckner: I love that, you know, I've been following that as closely as well, and there's definitely this rise of now like second, third, sometimes fourth generation families here in America were like, hey, I, I like longing for this. Cuisine that like my parents or my grandparents made, but like no longer available on a day to day basis.

And so there's this like new availability of this, like a globally inspired food for people who like are harking back to like , their culture and their heritage and then sharing that with each other as well and their friends. And so I love that and continue to see that rising as well.

Kristi McGill: Yeah, it kind of trends with like, because there's a similar trend for like nostalgia right now in food and beverage and and that's hitting food service as well. And I think it's like, they're almost like they do, they kind of are in duality with each other because it's all like, you're tapping into that emotional side for someone of like that connection with food or [00:21:00] their memory of it.

And that's like, yeah. I think driving a ton of consumer behavior in really across all food channels, but within food service. Yeah, it's definitely like, I mean, I forget what's the name of that one concept that's come out, but it's like from McDonald's, you know, it's like all nostalgic foods and beverages and that is happening.

I think both globally and even like your standard American kind of. Food from the 80s. It's really hot 

Jordan Buckner: again. Yes. I love that. Well, I'm excited to see everything that comes out over the next year. For anyone who's interested in food service, we have a ton of resources on Foodbevy.Com in our website. And if you need help getting into that channel and have some traction, I'm definitely happy to connect you with the Rooted Food Sales team because they are living this day in and day out.

Kristi, thanks so much for being on today. 

Kristi McGill: Thanks for having me.