Direct-to-Consumer (DTC), Retail, or Foodservice: How to Choose the Right Channel for Your CPG Brand
In a CPG landscape where choices feel infinite, making the right distribution choice is as critical as the product itself. Reaching consumers is only part of the equation—the real impact lies in creating experiences that connect with them at the right moment. For emerging brands, choosing between Direct-to-Consumer (DTC), retail, and foodservice shapes brand alignment, drives growth, and defines market presence.
With DTC, brands can control the consumer experience and access real-time insights that shape growth strategies. Retail offers scale and visibility, placing brands in front of a mass audience, while foodservice creates memorable experiences in curated environments that can foster long-term loyalty. Each channel has its advantages, but success lies in how well a brand aligns with its consumers, strengths, and growth goals.
Direct-to-Consumer (DTC): Building Relationships and Control
For many brands, DTC is where they first build direct consumer relationships. Poppi, the prebiotic soda brand, leveraged DTC to engage health-focused consumers and gather real-time feedback that shaped its product offerings. Every step was shaped by real-time insights, creating an engaged community that felt like part of the brand’s journey.
Advantages:
Direct Access to Data: Selling directly to consumers lets brands gather real insights into preferences, behaviors, and purchase patterns—priceless information for refining both products and marketing strategies.
Complete Control Over Brand Experience: DTC channels allow you to shape every interaction, from the look of the website to the unboxing experience, building a unique and personal relationship with consumers.
Fostering Loyalty: DTC creates a direct channel for loyalty-building with options like subscription models, exclusive product launches, and tailored messaging that keeps customers engaged.
Challenges:
Rising Customer Acquisition Costs (CAC): With the increasing costs of digital advertising on platforms like Instagram and Facebook, acquiring new customers through DTC can be expensive.
Scaling Constraints: While DTC is great for building initial loyalty, its reach can be limited. Expanding beyond a niche audience often requires tapping into other channels like retail or foodservice.
Best for: Brands that seek to build direct relationships with consumers, especially those with niche or highly engaged audiences.
Retail: Scaling Your Reach and Boosting Visibility
When a brand is ready to scale, retail is often the gateway to mass-market visibility. With the support of national stores like Whole Foods and Target, brands like Olipop have found retail to be the catalyst for reaching a wider, diverse audience and benefiting from the power of impulse buys. After building its base online, Olipop expanded into these stores, leveraging the credibility and consumer trust that come with being on the shelves of reputable chains.
Advantages:
Broad Audience Reach: Retail provides a brand the chance to scale quickly, reaching a significantly larger audience and gaining credibility from high-traffic stores.
Impulse Purchase Opportunities: Many CPG products, especially snacks and beverages, thrive on the impulse purchases that retail environments foster.
Built-In Foot Traffic: Unlike DTC, retail offers exposure without the need for high ad spend. Shoppers already in stores can discover your product organically.
Challenges:
Fierce Shelf Competition: Retail space is competitive, and brands need to stand out. Promotions, in-store displays, and sampling are often essential but can be costly.
Tighter Margins: With slotting fees and negotiated pricing, retail often involves thinner margins compared to DTC.
Best for: Brands that are ready to scale rapidly and have products that benefit from impulse buying. Retail is ideal for high-velocity items like snacks, beverages, and fast-moving consumer goods.
Foodservice: Real-time Trial and Experiential Marketing
For brands that rely on taste and experience, foodservice offers a unique path. Think of La Colombe Coffee Roasters, which partnered with JetBlue to serve premium coffee mid-flight. The decision wasn’t just about sales; it was about creating a memorable brand association. For consumers, experiencing La Colombe coffee in a curated, premium environment made them more likely to recognize—and purchase—the brand when they saw it in retail.
Advantages:
Immediate Product Trial: Foodservice lets consumers experience products directly, ideal for brands that depend on taste or experience to win over new customers.
Premium Brand Association: Collaborations with airlines, hotels, or restaurants position your brand as a premium choice, creating a level of quality and trust that is hard to achieve through other channels.
Creating Emotional Connections: Foodservice connects with consumers in memorable settings, building a deeper emotional bond that can foster loyalty.
Challenges:
Lower Margins: Foodservice often requires selling in bulk at lower prices, making it harder to maintain high margins.
Logistics and Consistency: Distributing to multiple foodservice locations, whether stadiums or cafes, can be complex and requires consistency in quality.
Best for: Brands that rely on taste-driven or experience-driven products. Foodservice is ideal for beverages, plant-based foods, or sauces that benefit from being tried in context.
The Power of Multi-Channel Strategy
Ultimately, most successful brands integrate a multi-channel approach over time, layering DTC, retail, and foodservice in a way that enhances each. The key isn’t just about having a presence in multiple channels, but about using each strategically to build brand loyalty and awareness.
Consider La Colombe: they used foodservice to create high-touch brand experiences in curated settings, then expanded into retail and DTC to keep the connection going. Each step reinforced the brand and made it easier for consumers to engage wherever they encountered La Colombe.
Key Takeaways:
Start where your strengths lie: If your product thrives on taste and experience, consider foodservice first. If your brand story is integral, DTC might be the better entry point. If quick scaling is your goal, retail may offer the fastest route.
Leverage each channel strategically: Each channel offers unique strengths—use foodservice to create trial opportunities, DTC for direct customer relationships and data, and retail for scaling visibility and distribution.
Flexibility is key: As your brand grows, adapt by layering channels. A multi-channel approach ensures your product is available where consumers are most likely to engage with it, whether in stores, online, or at their favorite restaurant.
Questions to Ask When Choosing a Channel:
Where does your audience engage most? Are they exploring new items online, in stores, or sampling products at cafes and restaurants?
What’s your stage of growth? Are you refining product-market fit or ready to scale?
Can your supply chain manage the demands of retail or foodservice, or is DTC a better starting point?
Finding the Right Balance
The decision between DTC, retail, and foodservice isn’t binary—it’s about knowing how each channel serves a different dimension of your brand. Brands that master this balance will find a lasting foothold in an ever-shifting market. For CPG brands focused on trust and growth, the right mix of DTC, retail, and foodservice not only drives sales but builds relationships that last.
About Joann Jen
Joann Jen is the Co-Founder and Partner at Topi Ventures, a boutique venture studio dedicated to incubating sustainable CPG brands. With a career marked by successful brand leadership, a commitment to social equity, and a deep-seated belief in the power of innovation, Joann is a driving force in the global CPG landscape.
