Do your homework to find the right wholesaler and distribution partners
Getting your food and beverage products on the right shelf can be the difference between success and failure. And for many food and beverage companies, wholesalers and distributors are your best options to reach that shelf, especially in specialty channels and foodservice.
Wholesalers and distributors are your best options to reach that shelf, especially in specialty channels and foodservice.
Most wholesalers and distributors have a specific segment of the market where they specialize. When searching for the right partner, research the markets they service, determine where they’re strong and find the perfect fit. People in the right stores or restaurants are a great source of information when doing this research. They can tell you which distributors do the best job.
Wholesalers and distributor’s primary function is to move your product from their warehouse to the shelf. You still must build demand and generate sales for your products with the end consumer - they will not do this for you. They’re paid based on volume, so there’s an incentive to sell more. However, they have many products, and will focus their efforts on the items that sell best.
There are many costs associated with getting your product on the shelf or in the restaurant. Regardless of whether they mark up your product or charge you a distribution fee, there will be other charges. A standard cost to consider is ‘free fill.’ Most specialty retailers will expect the first order to fill the shelf to be free. This is their equivalent to listing fees in bigger stores.
For example, if you have three SKUs and they’re packed 12 in a case, you can budget for 36 free units per store they service. There are also other fees for returns, broken product and advertising programs. Take the time upfront to understand and budget these costs as they can add up quickly.
If your product has 40 points of gross margin available for distribution and trade spend, you must find a partner that can generate the sales for this investment. Often the cost of moving the product from the warehouse to the shelf will be 20-25%, which would leave you with 15-20% to invest with customers to drive sales. Work with your distributors to develop the most effective programs. Make sure you understand them all and review them with your wholesalers and distributors quarterly.
The best business relationships are built on a shared understanding of success. Discuss volumes and costs with wholesalers and distributors. You should agree on the targets for sales and investments required to meet these numbers. Once these are established, you’ll have the same measurement of success. Communicate often to ensure your products are top of mind and keep conversations focused on what is being done to sell products by your business and theirs.
Spend time with their salespeople, visiting retailers and restaurants. Understand the conversations about your products and what customers are saying. Often called a ‘ride-along,’ this is a great practice to schedule in your calendar. Your wholesalers and distributors need to know you’ll be interested and watching what they do to sell the product, and it keeps you engaged in what the customers are saying.
Remember, you’re the customer in this relationship. Processors need to work with distribution partners and hold them accountable to have the best chance of getting the product on the right shelf and generating sales.
Article by: Peter Chapman