Partnering With Distributors

Agenda

• Role of the distributor• Things to consider about distributors• What distributors look for• Pricing and margins• Distributor marketing programs• Promoting your brand• Costs of doing business• Deductions• Q&A

Role of the Distributor

• Distributors buy products from vendors and resell and deliver them to retailers

• Distributors usually provide marketing and sales services at a cost to the vendor

• Distributors can buy pallets and truckloads and break them into smaller shipments to retailers

• Distributors can cut cases and sell half-cases or even single units (depending on the category) at a cost to the vendor

• Distributors can provide a variety of services to the retailer ranging from writing orders, stocking orders, merchandising programs, sales & category analysis, new store support, and in store marketing programs

Things to Consider About Distributors

• Distributors consolidate shipping and receivables to fewer parties than selling direct to retailers

• Some retailers require the use of a principal distributor

• Can you efficiently grow your business by going direct?

• Does your pricing and margin structure have room for a distributor margin?

What Distributors Look For – Part 1

• Ingredients• Consumer and retailer demand• Uniqueness and appeal of the product• Pricing and promotional strategy• Sales effort – direct and use of brokers

What Distributors Look For – Part 2

• Shelf life – Are spoils likely to be a problem? Will the vendor stand behind and guarantee any losses?

• Payment terms – Are discounts offered for prompt payment?

• Extended Terms• Vendor capacity – service levels, order lead times,

minimum order quantities, pick-up points, ease of receiving

• Exclusivity – Is there an advantage to picking up a new item before the competition?

Pricing and Margins

• Selling price based on landed cost into distributor• FOB vs. Delivered pricing• List price• Volume discounts• Cost plus pricing• Menu based pricing

Margin vs. Markup

• What is the difference between margin and markup?– Margin = (selling price – cost) / selling price– Markup = (selling price – cost) / cost

• Example:– Margin: With a product costing $2.00 and selling

for $3.00– ($3.00 - $2.00) / $3.00 = 33.3% margin

– Markup: With a product costing $2.00 and selling for $3.00

– ($3.00 - $2.00) / $2.00 = 50% mark-up

Distributor Marketing Programs

• Catalog/Price Books: Product name, unit size, distributor code, wholesale and SRP are included in these listings. Catalogs are usually updated quarterly and are a good advertising vehicle for introducing your products to the retailer community.

• Newsletters/Monthly Specials Bulletins: A listing of new products and monthly specials. Usually printed monthly, insertion of product selling information during the same month that a product is on sale is a great way for your product to get retailer exposure and give an incentive to purchase.

Distributor Marketing Programs

• Consumer Flyers: Distributors will solicit high volume, well-distributed products for participation in these monthly programs. Distributors usually request larger-than-normal discounts for these programs.

• Case-Stack programs: A program available to manufacturers of shelf stable products. These deals are listed in distributor catalogs and monthly newsletter/specials bulletins.

• New 2 U programs: In store POP (shelf tags, flyers, signage) delivered to participating retailers to increase awareness of new items.

Promoting Your Brand

• Promotional programs• Incentive Programs• Exclusivity Programs• Distributor Books - Line & Ad• Shippers (in/out)• SPIFFS / Incentives

Promotional Offerings

• Off Invoice• Manufacturer Charge Back (MCB)• Bill-back• Case Stack Deals• Scan Down

Costs of Doing Business

• Set up fees• Payment Terms• Sample product• Intro deals• Ad programs• Forward buying• Participation in distributor shows

Deductions

• MCB (distributor wholesale)• Free fill• EDV / EDLP / TPR programs• Spoils / returns / damages / unsalable• Shorts / missing product• Demos• Cut case charges

Minimizing Surprise Deductions

• Make sure you clearly understand the distributor’s written policies.

• Have your own standard procedures policy.• Determine together what is negotiable, what the

retailer requires, and what may be systematic for the distributor.

• Do not leave the meeting without clarity of the terms of sale, particularly the pricing list, delivery requirements, and shipping policy.

• State in your policy what your broker is authorized to approve and that all promotional agreements and offers must be documented.

Next steps…

1. Build your brand locally2. Research the retail landscape3. Talk to your peers4. Grow slowly

Thank youQuestions