Getting your food and beverage products on the shelf requires good relationships with retailers if that is the channel you choose to sell your products. You have the choice of working to develop these relationships yourself or employ a broker to do the work for you. This year we are helping you define different industry terms. We share insights into the terms and also how they are important to suppliers in the industry.
Brokers are companies or individuals that represent your business to the retailers. You engage them to build relationships and your volume with retailers. Often, they represent a number of ‘principals’ that do not compete. They do not take possession of your product, you ship and bill retailers directly.
Brokers will not develop your sales and marketing programs for you but they can be an asset in getting them implemented. They have established relationships with retailers that can shorten the time it takes to get your product on the shelf. They should also have better insights into the opportunities for your products.
Advantages of brokers
The biggest advantages brokers have is the established relationships with retailers and the frequency they are in your customer’s office or on virtual calls. Category managers and others within the retailer’s organization trust the good brokers. Not all brokers are good. Some category managers let the broker act as a gate keeper. Some retailers trust brokers to ensure they do not bring products/companies forward they do not believe have a chance. Because they are paid on volume they are not interested in investing time/resources into companies that are not ready or able to supply the retailer.
The volume incentive can be good for both the supplier and the broker. Usually you pay 3-5% of sales into the retailer. For example, if your sales to Loblaw are $200,000, they would get $6,000-$10,000. The more work they anticipate they will have to do, the more they charge. Like any business trying to generate a profit they will focus on the items with the best return. If they are only going to make a few thousand dollars from your products they will not spend much time. They look for established products where there is a base volume that will deliver a reliable return. The more they sell the more the broker makes from the product. Some brokers will charge a retainer in early days until the product is established. This is to cover their costs of building the volume.
Brokers execute the marketing and sales programs you develop. They do not develop them for you. Finding a broker does not remove you from the work to figure out how to sell your products to retailers and consumers. They should provide advice and guidance, but in the end they execute what you put in place. Most do not do consumer marketing so you will have to figure that out internally or with other resources.
Some brokers have retail coverage. They have employees who visit all of the stores. This is a valuable asset, because it allows them to help you understand what is happening in the stores. These ‘reps’ can get extra merchandising displays, deal with close to code product and be your eyes and ears in retail. This will be an extra fee and make sure you agree on the reporting for store visits.
Some brokers specialize in certain categories or areas such as private label. It is important to find the brokers who have the relationships in the departments where you will be most successful. Some will tell you they can develop the relationships required but this is not the best option as it takes time and there is no guarantee they can get in the right doors.
If you plan to sell into retailers in the U.S. most will expect you to go through a broker. They have even closer relationships than Canada. Brokers really are the gate keeper in the U.S. market and once they agree to take your product you have a very good chance of getting listed.
Finding a broker
To find a broker search for companies that want to grow the volume the same way you do. You need to find people who have the relationships where you need them in the office and the stores.
Ask merchants at retailers about brokers. They will often share who the best brokers are to work with. Ultimately, they will determine if your product makes it, so the best chance is with a broker they want to work with. Similar to checking references before you hire a person, check references for brokers and distributors.
Once you narrow the list be very clear about fees. You need to make sure you can budget for everything because it will never be less than you plan. There is the broker fee but then there will be the investments required with retailers. Brokers need autonomy to make decisions but there should be no surprises for you.
Be very clear about the reporting you will receive. You need to know what is selling when and where. This is the only way you can determine if it is working. Plan to go to some of the calls with the broker. Retailers want to know who you are so do not put all your faith with the broker.
Brokers can be valuable in your business, but they need to be the right ones, or they will cause you more work. They are the face of your brand to your customers, so you need to be confident they are representing you properly. They can be important components of a successful business, but they do not replace all of the work you must do in sales and marketing.
If you have any questions or require help finding or working with brokers, you can always send me an email peter@skufood.com or call me at (902) 489-2900.
Peter
Loyalty program update!
Never a dull moment in the grocery industry! Last week we talked about loyalty programs and the different options. Yesterday Sobeys announced they will be switching from Air Miles to Scene+. In one article it was reported both programs have about the same number of subscribers: 10,000,000. It was interesting to see the same article state that PC Optimum has 18,000,000 subscribers.
The new program does offer a more contemporary suite of rewards but my perception would be Air Miles is a better fit with the Sobeys shopper. Scene+ is tied to Bank of Nova Scotia who have had a very long relationship with Sobeys. The switch will happen over the next 8 months. Expect Sobeys to be pushing suppliers to participate with the launch.
Sri Lanka’s conversion to organic farming causes food shortages
During the pandemic we have experienced so many challenges in the food and beverage industry. Despite all of the negatives one positive has been the increased awareness around food and the importance of a viable sustainable food industry. We cannot take feeding the population for granted.
Sri Lanka embarked on an ambitious plan to convert all primary agriculture in the country to organic. This massive shift has not been managed well and is resulting in major food shortages and upheaval to agriculture producers. This is an example of how important it is to consider the impacts and execution of major changes to food policy.
When is Peter speaking?
Association of Municipal Administrators of NS- Jun 16
With the Kilted Chef
United States Department of Agriculture- June 28
Ecommerce in the Canadian Food Industry
