Food Broker - Distributor Information Sheet
Is a broker or distributor right for your business?
If you are a food product manufacturer, establishing a partnership with a broker or distributor can be key to your success. Brokers and distributors link manufacturers to retailers. They can help you sell your product - for a fee. The cost of making a broker or distributor part of your team can be compared to the costs of maintaining your own sales staff and consumer outlets, including salaries, travel expenses, office operations and running a fleet of trucks.
Hiring a broker or distributor is not always necessary, especially for larger companies with an established consumer base. However, their services and contacts can give new or existing products an extra push and can be a key component of your strategic marketing plan.
What is a broker?
A broker (or agent) sells your product without taking ownership of it. Brokers provide varying levels of sales and marketing services. These services may include preparing a marketing plan, selling to retail or foodservice outlets and head offices, promoting your product to consumers, managing product categories, and invoicing.
Brokers can operate on salary, but usually operate on commission, often representing a "stable" of small and medium-sized businesses. Depending on the services provided, the average brokerage commission in Canada can range from 5 to 20 per cent of sales.
What is a distributor?
A distributor (also known as a wholesaler) buys your product at a discount from the retail price and resells it to other firms (such as restaurants, specialty food retailers and gift stores) or to their own internal chain stores.
George Weston Ltd. wholesales to its own Loblaw Companies Ltd., Ontario's largest food retailer. Wal-Mart is famous for its internal distribution. Sysco is one of North America's largest foodservice distributors.
Distributors move large volumes of product, often with nation-wide economies of scale, and they can be reluctant to carry slow-selling or regional items. For these larger firms, small orders and partial cases can slow down their automated order assembly times, adding labour costs.
Companies using a distributor have three customers to satisfy - the consumer who buys the individual item, the store and the distributor. If you choose to hire a distribution partner, you must still persuade retailers to stock your item and consumers to buy it.
Finding the right partner
It's essential to find a partner that fits with your business objectives, as bigger is not always better, especially for smaller food firms. Selecting this partner requires careful consideration and homework. Here's how to get started:
Talking to other people in the industry can yield valuable information and insight for your search. Some tips:
As you narrow your choices, consider taking the same steps to find a broker or distributor that you would to find a reliable employee or contractor. For example:
Global Agricultural Information Network has prepared a report which describes the broker structure in Canada including a listing of brokers with offices in Ontario and/or Quebec.
Careers in Grocery
Canadian Grocer magazine - "Who's Who in Grocery Retail" ($)
Note: $ sign indicates a fee-based resource
For more information:
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