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By Chris Kajander
MANAGING DISTRIBUTORS Watchouts + Tips Chris Kajander has been working in CPG for nearly a decade. He is the cofounder and CEO of Candid and a founding member of Broadleaf Digital. He is passionate about sustainable sourcing, sustainable packaging, and food justice
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orking with a distributor can be confusing and sometimes frustrating. But good distribution can lead to new doors, new consumers, and increased revenue. While there’s not necessarily a “key” to working with distributors, knowing a few of the “watch-outs” and building good relationships with distributor reps and category managers can lead to fruitful business.
BROADLINE DISTRIBUTION If you have ambitions of working with Whole Foods and other big natural retail-
ers, you’ll likely need to work with UNFI and KeHE – two of the top natural and organic food distributors in the country. Both UNFI and KeHE are known to present a unique “chicken or egg” scenario; while you need to work with them to get into many online and in-person retailers, you often need to be in a few initial doors for them to consider distributing their product. UNFI’s UpNext program and KeHE’s elevate program are workarounds for emerging brands facing this dilemma. These programs are designed to ease upand-coming brands into the system with hands-on advising at a regional level. But even after securing one of the big guys as a distribution partner, there are still risks worth watching out for as you navigate business. In this article, I break down some of the major watchouts.
The Risk of Bridge Buying
Working with distributors can create lumpy sales patterns (high one month, low the next). You may have great sales in March when you’re offering a promotional discount, but then don’t get a reorder until June. Some sales lumpiness is unavoidable, but this is a common result of how promotional planning can be both a blessing or a curse depending on how the
promotion is executed. Bridge buying, which is when a distributor uses one of your promotional periods to over-buy your products at a discount, is one of the potential risks of OIs1. There are a few things you can do to mitigate this risk: 1 A high off-invoice discount (usually over 15%) can trigger a bridge buy. Keep your OIs between 10-15%. 2 Stack your promotional planning and leverage it with distributors and retailers so your discount really moves the sales needle. Say you’re offering a 15% OI to the distributor. They will (hopefully) pass some of that discount down to retailers to buy your product – but a 15% discount may not be enough for the retailers to pass on a deal to their customers. So, while you’ve incentivized the distributor and retailer to buy your product, there isn’t anything in place for the end consumer. This is where you might line up an MCB2 or a scan-back to move the needle with both retailers and consumers. 3 If you’re lining up an MCB with retailers to coincide with your OI, try to leverage that big promotional push to get a secondary or tertiary display in-store, promotional signage,
1 OI = Off-Invoice When a discount is deducted straight from a brand’s invoice from a distributor 2 MCB Manufacturer Charge Back: When a retailer buys a product, at a discount, from a distributor and the distributor deducts the amount from a brand’s invoice. Distributors usually charge a fee/upcharge for this
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