07: Distributors
KeHE
KeHE is one of the most prominent natural and organic food distributors in the U.S., serving over 31,000 retail stores. If you’re ready to expand your CPG brand, working with KeHE can unlock significant growth opportunities, but like anything in the CPG world, it comes with its own set of challenges and complexities.
Why Work with KeHE?
KeHE connects suppliers with thousands of retail stores, ranging from independents to chains like Sprouts, Albertsons, and Target. They specialize in distributing natural, organic, and specialty products, making them a key player in the growth of many small to medium-sized CPG brands. KeHE offers national distribution and access to markets that would be difficult for a brand to reach on its own.
KeHE also has strategic programs that facilitate small-parcel orders to independent retailers and initiatives to help launch new products quickly across their distribution centers (DCs).
When Should You Start with KeHE?
Timing is crucial when it comes to working with a distributor like KeHE. You should be prepared to scale your business and meet demand. Before considering a partnership, ensure your product has consistent retail velocity, market demand, and proven consumer interest. KeHE’s model requires you to keep up with supply, manage fill rates, and meet the expectations of retailers across various channels. So, jumping into KeHE too early—before your business is ready—can lead to operational strain or even damaged relationships with key retail partners.
Key milestones for starting with KeHE:
- You have secured retail placements or distribution agreements.
- Your brand has demonstrated steady sales velocity in existing stores.
- You can manage the increased logistical complexity of working with a major distributor.
Getting Started with KeHE
- Preparation: Before reaching out to KeHE, make sure you have your supply chain, inventory management, and product certifications in order. This includes managing item maintenance, pack changes, pricing submissions, and ensuring you’re set up for Electronic Data Interchange (EDI), as this is how KeHE processes orders from suppliers.
- KeHE New Item Launch Process: If you’re introducing a new product, KeHE offers programs that give your product visibility among independent retailers through their distribution centers. You’ll need to work closely with KeHE’s category management team to submit your product, create a robust launch plan, and support the new product with promotional efforts.
- Handling Logistics: KeHE has 18 distribution centers across the U.S., and you’ll need to coordinate shipping and inventory management across these facilities. Make sure your products meet their delivery requirements and that you can maintain a consistent supply.
Challenges of Working with KeHE
While the opportunities are immense, working with KeHE can present some challenges, particularly for early-stage brands:
- Managing Fill Rates: KeHE expects a high inbound fill rate (IBFR), meaning you need to consistently deliver your full order quantities on time. Falling short can strain your relationship with both KeHE and the retailers they supply.
- Spoils Management: Spoils—expired or damaged goods—are a reality of working with any distributor. KeHE offers programs to manage spoilage, but you’ll need to have a plan in place to minimize this risk.
- Complex Sales and Payment Terms: Navigating pricing, promotions, and deductions with KeHE can be complex. They require timely submissions for price changes and promotional allowances, and you’ll need to manage invoice deductions carefully.
Best Practices for Working with KeHE
- Prove Your Retail Velocity First:
- Before approaching KeHE, it’s essential to demonstrate strong retail velocity. Retailers are more likely to take on your product if you’ve already proven demand in smaller, independent stores or other regional chains. KeHE wants to know that your product will sell, so build your retail story before jumping in.
- Prepare Your Product for Scale:
- Once KeHE picks up your product, you’ll need to be ready to fulfill larger orders quickly. This means having your production, packaging, and logistics in order to avoid any delays or stock issues.
- Engage with KeHE’s Marketing Programs:
- KeHE offers several marketing and promotional programs to help brands stand out in stores. Consider participating in their programs that offer additional promotional support for high-growth brands. This can help you gain more visibility and increase sales.
- Attend KeHE Trade Shows:
- KeHE hosts regular trade shows and events that allow brands to showcase their products to retailers and buyers. Participating in these events is a great way to build relationships and make connections within KeHE’s network of retailers.
Key Considerations Before Partnering with KeHE
- Timing Matters:
- Like with any distributor, the best time to approach KeHE is when you have proven demand, solid retail velocity, and are ready to scale. If you are still figuring out product-market fit, it may be premature to approach them.
- Margins and Pricing:
- Be sure to understand your pricing and margins thoroughly before entering into a distribution agreement with KeHE. Their fees can significantly impact your bottom line, so you need to be certain that your product can sustain these costs.
- Long Sales Cycles:
- Prepare for long sales cycles and delays in onboarding. It’s common for new products to take 6-12 months to get picked up by retailers through KeHE.
KeHE can be a powerful partner in scaling your CPG brand, but it requires careful planning and operational readiness. It’s best suited for brands that have already proven product-market fit and can meet the demands of national distribution. By utilizing KeHE’s programs, tools, and distribution network, you can significantly expand your brand’s reach—but don’t rush into it before you’re ready.