A Guide to Brokers

By Erin Fasano A Guide

TO BROKERS

Brokers are one of the most common topics on the Startup CPG e-commerce Slack channel. Founders looking for advice about who to hire, how Brokers help, and how to get the most out of the partnership. Look no further – our Startup CPG Spotlight Guide is here to get you started on your search for a Broker.

THE BASICS

Before starting a search for a broker, it first helps to know what a broker is and what they do. A broker is effectively an arm of your sales organization, who will support your retail growth initiatives, both by supporting sell-in and sell-through. Avi Kahn, Director of Business Development at B&A Food Brokers located in NJ, thinks about his brokerage as a fractional VP of Sales for his clients, with the added benefit that he and his team are going back to the same accounts and calling on a variety of categories at the retailer. This is one of the key benefits of partnering with a broker: they really know the retailer well.

But not only does a broker know the retailer well, they should also be able to guide you on your readiness for market. A broker maintains strong relationships with retailers by bringing them brands with real potential and the cash to support the demands of entering brick-andmortar retail. If you’re not ready, a good broker will maintain a relationship with you and help guide you to striking when the time is right.

When you’re looking for a broker, know your own geographical needs. Are you looking for a retailer who specializes in a particular region of the country? Are you looking for a retailer who is strong in a particular channel? Or are you ready for big, national accounts? Once you know what you are looking for, it’s time to issue an RFP or start interviewing brokers.

Finding a broker can feel daunting – try googling it and you’ll see why. Of course, you can visit the Startup CPG Slack community for advice and tradeshows are a great opportunity to see what options are available and how they work. To start, see if you can find out who similar brands use (ie. are all the natural and gluten free brands using the same handful of brokers?). If you’re lucky enough to already have retailer relationships, you can also solicit their advice – they might be cagey about it, but sometimes you’ll get lucky and they can point you in a good direction.

Some brands wonder if a distributor rep can service their selling needs as well as a broker can. Jake Huber, a retail sales consultant, says that they probably cannot fulfill this role. Distributor reps are really focused on moving cases out of their warehouses. There will be times, like if you’re running a SPIF, that you can get a lot of attention from the distributor reps, but generally, they are really focused on the super-fast moving brands, and if you’re just starting out, that isn’t going to be you.

INTERVIEWING A BROKER

When you’re interviewing brokers, you’ll want to try to get an understanding of just how well they know categories, too. Phil Gelinas of JOH Brokers has spent 35 years in the business and encourages founders to start by asking a lot of questions during the interview process to confirm that the brokerage knows which items sell, which don’t, what is the range of MSRPs, and what frequency of promotion is required. You want to feel really confident that they know the category you’re looking to enter and can guide you to success.

You also want to make sure you understand the services the broker offers. Brokers offer so much more than the retailer relationship – do you need access to category data? Do they offer category management services? Do they have a merchandising team?

And of course, how much of the broker will you actually get. How much time do they have to service your business? A typical account manager will have a ton of brands on their desk. Find out how many brands the AMs manage so you can assess how attentive they’ll have time to be. When you ask every broker this question, you can make it an input into your decision for how much time they will actually have for you. How do they communicate? How do they manage tasks? Try to get a sense of their response time; 24 hours should be the standard.

Finding out broker team structure is important too. More common in larger brokerages, sometimes there is a person who is brand facing, a different person who is retailer facing, and potentially even more in between. You don’t want to be too far removed from the retailer. Ideally, it would look like: You – Broker Rep – Buyer.

Helping execute your promotions and strategy is a critical part of managing your brand once you’re on the shelf. How does the broker conduct strategic planning for brands? How do they plan promos, verify that they’ve actually run properly, and then report on their impact to your business (and the category)?

A broker should also be able tell you the cost of doing business in their area of specialty. Do the retailers (or a specific retailer) charge slotting? Do you have to be on EDI? What are the promotional expectations in the category you’re looking to enter? What marketing programs are you expected to participate in? What is the cost to exit should your brand be discontinued? It’s absolutely critical to understand the cost and fees for the worst case scenario.

Pierre Jamet, Head of Sales at Petit Pot, also shares key advice: Ask about brand conflicts. Does the broker service your competitors too? In some categories, there are so many brands that this is hard to avoid, but knowing who your broker is also working with is a key input to your decision. Do they work with the category leader or other brands just starting out? Is the category big enough that it helps to have a broker who is seeing the buyer for more than just your brand?

COST STRUCTURE

Nearly all brokers make money when you make money; they charge you a % of net sales. Most don’t charge more than 5%, but the larger and more reliable your revenue is, the better position you’ll be in to negotiate that number. If you’re pre-revenue or just getting started with a new broker who will help you expand your business, you may be asked for a monthly retainer until you hit a certain revenue threshold. This retainer investment varies widely depending on the size of the broker and the number of services you’re buying from them. The faster you scale, the faster you can move to a % of sales model.

Brokers don’t want to hand you all of their relationships, data, and expertise, only to have you walk away once your foot is in the door at a retailer. So expect a contract, and come to an agreement you are comfortable with for at least the medium term (don’t run after 3 months!). You should consider an out clause so you aren’t locked in if the relationship isn’t working though, so do your best to commit to a partner without limiting your options.

BEST ADVICE

You only get one shot with a retailer, so Gelinas wants founders to remember to prepare, plan, and leverage your broker to make your launch a success! Getting to the shelf is the easy part, turning off of it is the hardest – be prepared to spend money to deliver velocity.

Jamet wants founders to remember that brokers are people, not machines. They’re busy too, and the stronger the relationship you can build with them, the more they’ll actually want to answer your call or reply to your email – don’t be the brand they dread dealing with. Be clear about your objectives, and then ensure they have everything they need from you to win. Your broker is only as good as the information you give them, so be clear and simple – give them 3 things you need them to accomplish and let them stay focused on doing those things. Have your materials ready to go: sell sheets, specs, samples, everything they’ll need to go sell!

Ultimately, a broker should be a strategic partner in your brand’s journey. Ensure that you are asking the right questions upfront, take time to build out a contract you feel comfortable with, and be the brand they love to work with. Your success is their success — so long as you set yourself up for a successful partnership.