As your food business grows, eventually you won’t be able to distribute your product yourself anymore. That’s a scary thing, but a good thing! Going into distributor conversations informed is the key to building a successful and productive relationship. We sat down with Chris Wren, Marketplace Business Development Director at Shelfmint, to pick his brain about the food brand-distributor relationship and how to maximize it. Chris has built distribution networks in multiple regions and worked with hundreds of brands, so don’t miss out on his valuable insights.
Foodboro: What should food brands find out before they approach a distributor?
Chris Wren: The first thing, assuming you don’t know the distributor already, is what type of stores they sell in. That goes back to the story of your brand. Are you positioned for specialty grocers, coffee shops, fast casual, or other markets? Most distributors only have one type of business that they sell into, so make sure you’re picking a channel that fits your brand. A beverage might sell well in coffee shops, but not a big box grocery store. Does the distributor fit into your strategy? If you’re selling into offices, maybe you can skip the distributor altogether and grow using only an online marketplace and a courier service.
FB: What are the most important things to find out about a particular distributor when meeting with them?
CW: You want to know how they’re going to price your product. They’ll most likely have a “Cost+” pricing model, and typically they’ll have pre-negotiated rates with bigger box retailers. For example, UNFI gives Whole Foods a Cost+7% margin, but a single store in their portfolio will only get Cost+20%. You’ll need to prepare the accounts you’re already in if you’re moving to a distributor, as your SRP might shoot up dramatically. Or you might need to still service the independent stores differently.
Also, you want to really push on exactly what type of in store services are offered. Are they merchandising, or are they actively selling items into the store? Are they just listing your products?
FB: What the biggest mistake you see small brands making in distribution?
CW: By far, it’s having the incorrect expectation of the services. Distributors are not designed to bring in new sales for your company. They typically only make it easy for buyers to order. As the CEO or sales person, you are still solely responsible for growing your sales. Distributors will typically not successfully add to your costumer base. In a nutshell, just to reiterate, you need to sell! The distributor will only get the product from location A to location B.
FB: How can a company start on the right path with a distributor?
CW: You need to make it worthwhile for a distributor to work with you. You will have to bring them the accounts they want to work with. That’s why a distributor like UNFI typically doesn’t work with you until you already have some decent traction. You also need to give them more accounts, which I know isn’t great, but you might have to give up the accounts you’ve already given to the smaller mom and pop distributors. The more accounts you give them, the better they’ll handle your product, both in warehouse and in sales.
FB: What should small brands not do?
CW: Never do exclusivity or equity – it will cut you out of every other channel. This has popped up a bit more recently, so push back if you see it. Typically, if a distributor want to work with you, you can convince them to remove this from any contracts.
FB: How does a brand get a meeting with a distributor in the first place?
CW: Wait until you’re in about 40-60 accounts. Before that point, it’s just too soon. Have one of your larger accounts broker the meeting and ask the distributor to start carrying you. Generally speaking, if you pursue distribution before you have at least 40 accounts, you might not have the margins built out for the distributors cut. You might as well self-distribute and pocket their margin to fuel your early growth.
FB: Are there distributors you can use to launch into a marketplace?
CW: Traditional distributors, generally speaking, are not positioned for a brand market launch. As mentioned before, they lack a concerted effort to bring a brand into new accounts. However, there are a few innovative, non-traditional distribution programs that have identified facilitating market launch as a viable business model. Shameless plug: ShelfMint has a low cost, low lift, platform that makes it incredibly easy for retailers nation-wide to discover and test out new brands on their shelves that cannot be found via traditional distributors.