Creator to Consumer – Distributors – The wheels to move your product.
Season 2 – Episode 8 –
30 years and still learning - Having spent most of my career post leaving the Royal Navy working in consumer goods, primarily in the perishable food sector. I find it fascinating that I still learn every day, sometimes it’s a reminder of what I have forgot but for the most part, I learn something new every day… Today’s episode is about Distributors – The wheels to move your product.
Why do I need to work with Distributors?
There are many reasons why you need to work with distributors, the following point takes care of most of your questions, with the size of the country, the US needs distributors and they need to be factored in when considering your pricing strategy, because unless you want a little niche brand that sells in your own town only, at some point you will need to have a distributor to move you products to other customers and states.
Point to consider and worth mentioning.
I mention this point a few times over the various episodes because it is important for both our US and International readers to be reminded.
The continental US is the geographical equivalent of starting at the West Coast of Ireland all the way to the Eastern border of Turkey, it has 48 states in that space (not including Alaska and Hawaii, but they are not to be forgotten) All with their own local governments, legislation, state tax structures and more importantly cultures. The US is not one country one size fits all… you wouldn’t go to Europe and expect to do business in every country right out of the gate or without local support or knowledge so why does it not makes sense here to have local teams.
What does a distributor do for me?
Distributors are generally considered as the wheels to get your product from you to your desired retailer or foodservice operator, they generally have sales teams who have connections with the end customer as Brokers do, as mentioned in our ‘Broker or No Broker’ episode, like Brokers they have many SKU’s to sell, bigger distributors carry up to 25,000.00 SKU’s. So remember you need to help drive the sales through a broker, with the sales team or directly yourself.
Which distributor should I partner with?
This is very often driven by the customer you want to reach, for example for retail, Whole Foods predominately use UNFI as their distributor of choice, Sprouts use KeHE, Ralphs (Kroger) in Southern California use DPI in addition to their own DC networks. For Foodservice, you have Sysco, US Foods, Chef’s Warehouse and many regional distributors who sell to chain and local Foodservice operators, all if you work operator back will have their chosen Distributor. More details covered about Foodservice in our ‘Market Channels – Foodservice’ episode.
What does it cost to go through a distributor?
In theory nothing, they buy your product at X and Mark it up to cover their costs plus profit and sell it on to their customers at Y, however, the larger distributors have marketing programs, administration costs and inventory management charges. Each distributor has its own structure, get to know these up front, as this can and will damage your profit margins if not factored in to the price you sell to the Distributor, Margins are covered under the ‘Margin’s & Why’ episode.
Should I participate in their marketing programs?
That is completely up to you and your level of marketing monies you have to invest, the key here is you need to gain share of voice from a customer exposure perspective, so the more activity you participate in the more exposure you get it is all a balance.
Can my Brokers work with the Distributors?
Yes, and they should, remember you hire a Broker to work as your representative in the local markets, they should have access to and be involved with the distributors, this will help gain distribution, listings and sales.
Do distributors take on lines without any sales or customers?
Generally, no, and if they do, they will have you sign for the write-off of the product if it does not sell through. Usually Distributors have a minimum volume or pull through requirement which can vary anything from 5 cases per week to 10 customers minimum, larger distributors will require a large anchor customer, for Retail it could be a multi-unit regional Retailer with 10 or more stores, for Foodservice it is usually driven by volume rather than operator #’s however, invariably the volume comes from more units pulling the product through.
Should I offer up or pass over customers to the Distributor?
Scary question to ask or answer and even more scary to do or not do. If you have managed your pricing correctly and factored in using Distributors then that makes it easier to decide, but still not simple.
The long-term advantages of working with a Distributor far out way the direct to customer approach. For most smaller companies, start-ups or new market entries you may have taken years to cultivate your direct customer base, which will have taken you hours to get each one and even more hours to make the deliveries and handle all their orders.
Working with a Distributor does not take away your relationship with your end customer, it consolidates the orders and reduces the delivery and billing headaches, so in reality, if there is no increase in cost to the end customer and as long as you continue to engage with them they will be happy and you will have more time free to cultivate more sales.
Now it’s all clear as mud, need more, please ask.
In our next episode, we will be talking about Distribution & Logistics, thanks for reading and continuing your journey from Creator to Consumer.
Interested in reading or finding out more about selling your passion or our Creator to Consumer series please visit our Chatter page at www.beachcitysales.com/blog and click on Creator to Consumer 1 & 2 or our general site at www.beachcitysales.com, for more direct interaction please e mail us at info@beachcitysales.com
Remember, whatever you know “good luck keeping up”