07: Distributors
Getting Started with Distributors
Building a distribution strategy goes hand in and with selling your product to retailers.
This is where choosing the right distribution method comes in.
Just as you carefully source your ingredients to ensure quality and consistency, you need to be equally careful when picking the right distributor and the right distribution method to get your products in front of your customers.
Let’s explore the different types of distributors and the factors to consider when choosing a distribution method that aligns with your overall business strategy and goals.
We’ll also give you some tips on how to find the perfect distributor for your business, so you can get your tasty treats into the hands of eager customers.
Choosing a Distribution Method
Choosing the right distribution method can be a tricky decision.
You have to consider things like how much you can produce, who your target market is, and how you’ll get your goods from point A to point B.
To make things easier for you, here’s an overview of different distribution methods available and who they’re suitable for:
Self Distributing
Self-distribution is when a company distributes its own products rather than relying on a third-party distributor.
But it’s mostly suitable for companies starting out or when selling in one geographic area.
In that case, this method can offer more control over the distribution process and potentially higher profit margins. However, it can also require more resources and logistics, as the company handles all aspects of the distribution process itself, including storage, shipping, and sales.
An example of a company that uses self-distribution is the coffee roaster and retailer Intelligentsia Coffee. The company has several retail locations and distributes its coffee to wholesale customers, such as cafes and restaurants, using its own trucks and drivers.
Regional Distributors
Regional distributors are third-party companies that operate within a specific geographic region, such as a state or group of states. They can offer a more personalized approach to distribution and may have established relationships with retailers in their area.
This can be a good option for companies with a smaller production capacity or those looking to target a specific market. Regional distributors can also allow a company to sell to regional grocery chains, which can be a valuable partnership.
An example of a regional distributor is Chex Finer FoodsTony’s Fine Foods, which distributes specialty foods to its core market in New England and the East Coast.
DSD Regional Distributors
There’s a subset of regional distributors that offer Direct-Store-Delivery (DSD) services to stores. Most distributors will simply drop the product off at the back door of the retailer. DSD Distributors will actually take your product and stock it on the shelf, set up out-of-aisle displays, and more. Some retailers require DSD, otherwise, your product won’t make it onto the shelf. For these additional services, they do charge a higher distribution fee.
National Distributors
National distributors are third-party companies that operate on a larger scale, covering multiple regions or even the entire country. They have established relationships with retailers and can offer broader market reach but may require larger production volumes and have stricter requirements for product placement and pricing.
For companies in the natural and organic food space, KeHE and UNFI are two of the largest national distributors. Most major retailers work with these distributors, but it’s important to be cautious, as they have high fees, deductions, and chargebacks. In addition, you can also try Pod Foods – a national distributor designed for emerging food and beverage brands.
In most cases, you’ll need to secure a large retailer first to start working with a national distributor.
Factors to consider when choosing a distribution method
Distribution is a critical part of any marketing campaign, and there are many different ways to get your product out there. The main thing to remember is that distributors are warehouses and trucks. Their main role is to store and transport your products to retail stores. They aren’t there to sell your products into new retail accounts.
Your budget, the nature of your business, and the specific needs of your target audience will dictate the type of distribution you choose.
Here are some more factors to consider when choosing a distribution method:
First up, think about your product type. Is it perishable and requires special handling, or does it have a long shelf life, and you can store it in ambient conditions? This can impact the type of distribution method that’s feasible for your product. For example, if you are selling frozen food products, you are unable to use the same distribution method as if you were selling dry goods such as clothing or household appliances.
Next up, consider your target market. Are you looking to sell in a specific geographic area, or do you want to reach customers across the country? This will help determine whether self-distribution or a regional or national distributor is the way to go. Most brands work with multiple distributors, so think of the best combination depending on the retailers you serve.
Production capacity is another important factor to consider. Can you produce enough products to meet demand and satisfy the minimum order quantities required by distributors? If not, self-distribution may be the best option until you increase the production capacity.
Finally, logistics play a key role in determining the most cost-effective distribution method. Shipping and handling costs can vary widely depending on the distance traveled and the type of product you plan to ship. Choosing a distribution partner close to your production facility can help keep costs down.
Let’s say you’re a small-batch craft bakery producing limited-edition granola with a short shelf life. In that case, you may find self-distribution the best way to maintain quality and freshness while reaching customers in their local area.
On the other hand, if you produce shelf-stable snack foods and are looking to expand nationally, a national distributor like KeHE or UNFI is the best way to reach a broad audience at scale.
Ultimately, the choice of distribution method should align with your company’s goals, resources, and product characteristics.
How to Find Distributors
Finding distributors can be a difficult process. However, if you are able to get the right distributor, it can make all the difference in the world and help your business grow.
Here are some tips on how to find potential distributors:
Use The Foodbevy distributor directory:
Foodbevy has a directory of over 175 distributors, making it easy to find the right partner by region, product category, and temperature state. Search the Directory
Ask your retail partner:
Each retail partner has a preferred set of distributors they work with, and the buyer can tell you. Sometimes they’ll ask, “Which distributors are you in?” And you can respond with, “Who are your preferred distributor partners, I’ll work with them.” Even if you’re not working with that distributor yet, you can use the retailer’s approval to accelerate setup.
Attend trade shows and conferences:
Trade shows and conferences are great places to start talking to potential distributors face-to-face about your product line or service offerings. Many companies attend these events intending to make new connections that could lead to new business opportunities down the road – so don’t be shy about reaching out and getting started!
For example, if you’re in the natural food industry, you might attend the Natural Products Expo or the Fancy Food Show to network with potential distributors and discover industry trends.
Search online directories and databases:
Another approach is to search online directories and databases, like ThomasNet or Food Export USA, to find distributors that match your criteria. These directories usually provide detailed information on distributors’ capabilities, service areas, and contact information, making it easier to reach out and start a conversation.
A simple Google search will also do:
You can also use the internet to find potential distributors by searching for “distributor,” “wholesale distributor,” or “retailer” in your area. This can lead you to lists of local companies that sell products similar to yours, which may be interested in carrying your product line as well if it’s profitable for them.
Negotiating a Distribution Agreement
After your hunt for the right distributor is over, you need to negotiate a distribution agreement.
A distribution agreement is a legal contract that defines the rights and obligations of both parties in the distribution relationship.
It covers aspects like:
- The scope of the distribution: What products, regions, channels, and customers are included or excluded in the distribution?
- The duration of the distribution: How long will the distribution last? Is it exclusive or non-exclusive? Can it be renewed or terminated?
- The pricing and payment terms: How much will the distributor pay you for your products? How often will they pay you? What discounts or fees are applicable?
- The delivery and inventory terms: How will the distributor order, receive, store, and ship your products? How much inventory will they keep? Who is responsible for any damages or losses?
- The marketing and sales terms: How will the distributor market and sell your products? What support or incentives will you provide them? What goals or targets will they have to meet?
- The reporting and communication terms: How will the distributor report their sales and inventory data to you? How often will you communicate with them? What information will you share with them?
- The dispute resolution terms: How will you handle any conflicts or complaints that may arise in the distribution relationship? What remedies or penalties are available?
When it comes to negotiating a distribution agreement, it’s important to be prepared with a draft agreement that outlines what you want. Take the time to research the market conditions and legal regulations that might impact your distribution, too.
Once you’ve got your draft together, have a discussion with the distributor and work together to find common ground. There may be some give and take, but don’t forget to protect your interests and consult a lawyer before signing the dotted line. National distributors will have preset agreements with little room for negotiation. Regional distributors often won’t have distribution contracts, but it’s still important to create an outline of your agreement.
Coordinating with Distributors
Once you secure a distributor and sign the agreement, the next step is coordinating with them to get your products to retailers.
Remember that distributors are essentially warehouses and trucks to get products from the manufacturer to the retail shelf. As the brand owner, it’s your responsibility to get your products approved by retailers and coordinate with the distributor to get your products there.
Most distributors act as your customer – buying the product directly from you to re-sell to retailers. That said, you’ll need to work with the retailer directly on store placements, expansion, pricing, promotions, merchandising, and more.
Here are some things to keep in mind when coordinating with distributors:
- Clear communication: Communication is essential when working with distributors (or anyone who acts as a mediator between you and the customers). To do that, be sure to establish regular check-ins and set clear expectations for how and when you will communicate with each other. Most relationships fail because of misaligned expectations and poor communication.
- Inventory management: Work with your distributor to manage inventory levels and ensure they have enough stock to meet demand. You don’t want to miss out on sales because your product isn’t available. Keep in mind the travel time to get the product from your production facility to the distributor.
- Timely delivery: Deliver your products to retailers on time if you want to maintain good relationships with your distributors and customers. Make sure to communicate any delays or issues that may affect delivery.
- Pricing and discounts: You’ll need to work with your distributor to establish pricing and discounts for your products. Be aware of the costs involved in production and distribution and negotiate accordingly.
- Marketing support: Coordinate with your distributor on any marketing or promotional activities they may be doing to support your product. This could include in-store displays, advertising, or demos.
- Sales reporting: Ask your distributor for regular sales reports so you can track your product’s performance in the market. This will help you identify areas for improvement or adjust your strategy if needed.