Food Broker - Distributor Information Sheet - 2009

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.

For example:

• A pre-order broker or distributor may only deliver the product and typically allows retailers to display and promote the product as they choose.
• A full-service broker may deliver, display, stock and promote your product. They may also manage the inventory of your product and provide services to keep it looking fresh and appealing on store shelves (dusted and labels facing front and so on).
  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:

• define your target market segment
• develop a strategic marketing plan
• develop a promotional and distribution plan that establishes the services you must have and how much you are willing to spend
• shop around for a broker and/or a distributor that best meet your needs.

Talking to other people in the industry can yield valuable information and insight for your search. Some tips:

• Contact manufacturers (and their trade associations) who are already doing business with your target retailers. Ask their perspective on what the retailers need from a broker or distributor. They may be able to walk you through samples of typical paperwork, such as electronic purchase orders.
• Join trade associations for the retailers you want to reach - you can join as an associate member. Through these groups you gain access to networks of suppliers. Ask other suppliers about their views on specific brokerage or distribution firms - some may also be keen on sharing such services with you.
• Ask your target retailers which distributor they use. Explain that you want to make it easy for them to buy your product, if they are interested in it.
• Attend shows selling to the retailers you want to reach and walk the trade show floor to see which brokers and distributors are active and making sales.
• Review reports on this topic from governments, non-government organizations and industry trade associations and focus your efforts by integrating relevant resources into your market research and planning. See the list of resources below.

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:

• Ask brokers to provide you with a list of their clients, and which distributors, wholesalers and retail outlets they regularly work with. Ask distributors which retailers they sell to and ensure they fit your target market.
• Ask them to describe the volume they sell through each channel.
• Interview several brokers or distributors.
• Check for reliability, get quotes and don't assume anything!

Resources

For lists of brokers, distributors and self-distributing chains, see http://food_beverages.food.ca/canada_brokers_wholesalers_and_distributors_food.html.

Canadian Restaurant and Foodservice Association
See http://buyersguide.crfa.ca/Categories.aspx for distributor and broker listings.

Careers in Grocery

For a broker list of primarily U.S. and some Canadian companies, see http://www.careersingrocery.com/index.cfm/fuseaction/showResourcesLinks/CatID/34.

Directory of Restaurant and Fast Food Chains in Canada ($)
http://www.mondayreport.ca/mondayreport/drffc.cfm

Canadian Grocer magazine - "Who's Who in Grocery Retail" ($) http://www.bizlink.com/enewsletters/grocer/2008/grocer-whoswho2009-online.html.

Note: $ sign in resources section indicates a fee-based resource