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 locally
2. Research the retail landscape
3. Talk to your peers
4. Grow slowly
Thank you
Questions