Focus on distribution
Our plan was to start 2025 with a focus on each of our 10 trends each week. We are continuing this week with an important one; distribution.
The cost and complexity of moving food and beverage products from the point of production to the point of sale are more challenging than ever. The options are do it yourself, find a capable, invested distributor or get into the retailer’s network. Each one of these strategies is different and requires a different skill set and resources.
The solution you have for distribution will have an impact on your cost of goods. Distribution will probably be 20-30% of the price you sell your products. This is significant and it is very difficult to make it a reasonable point of differentiation. Conversely, it is one of the factors that can have the biggest impact on your relationship with your customers. You need to be very good at getting the product they want, when they want it where they want it.
Distribution is a three step process
We see distribution as three critical steps:
- Get your product from your facility to the distributor or warehouse
- Get your product to the store
- Get your product to the shelf
You need to ensure you have the most efficient and effective process in place at each stage. There is a good chance you might not be too involved in some of these steps, but you need to own it to make sure your product is in stock. You will be judged for the sales you deliver. Your product can only sell if it is in stock on the shelf.
Get your product to the distributor or warehouse
Find the most efficient way for your products to get out of your facility. Maximize the cases per pallet and check your freight rates regularly. Negotiate the right minimum order quantity to give you efficiencies in production and shipping.
If you are shipping into a retailer’s warehouse, make sure you understand the compliance fines and how to avoid them. This is everything from how the pallet is assembled to on time deliveries. They are frustrating if you do not get your team engaged. If you are using an LTL (Less Than Load) carrier they need to be experienced shipping into one of these warehouses.
Get your product to the store
If you are doing your own distribution, you will need a regular call cycle to check on store inventory. They will not call you. You can set this up by using your store by store sales forecast and the holding power on the shelf. If there is space for 12 units per sku on the shelf and you forecast sales of 6 units per week you will need to be in the store every 2 weeks.
One of the advantages of doing your own distribution is you will know what you are selling. Sales per store is very valuable information. Track this in your business and focus on growing sales per store.
If you are using a distributor, make sure your product is getting attention. You might have to spend time with sales reps and educate them about the benefits of your product to stores and consumers. Distributors get paid on volume. If your product is a top seller they will focus on it.
Products in the retailer’s warehouse will be ordered by the system if there is computer assisted ordering (cao) or by the store. If CAO is in play you need to check on data integrity if you start to see out of stocks. If the system thinks there is inventory your product will not be re-ordered.
Get your product to the shelf
This is the shortest physical distance but might be the biggest challenge. Retailers say sales is their number one priority but they are not the best at keeping the shelf full.
For suppliers doing their own distribution you will need to develop relationships with the stores to get cooperation and the space for your product. If you are in the plan o gram (pog) this is your space to keep full. If you are in the local program you will have to secure space for your products.
Getting on the shelf is one task you need to be very clear with your distributor about who is doing this. Some distributors see their role as only getting the product to the store. Others will merchandise your product on the shelf. This is a major difference and you should not pay as much if they are only taking it to the store.
Store employees should be good putting product on the shelf that comes from the warehouse. The product will come in on pallets for the correct aisle. There should be enough holding power for the sales.
Regardless of whether you, your distributor or store employees are putting the product on the shelf you need to check to ensure it is happening. Store audits need to be on your to do list. You can share some of this work with other suppliers. The challenge is getting to the stores. Checking 6 more items does not take too long.
When you find out of stocks it is worth the time to figure out the reason. There are many things that can impact in-stock position. Don’t just ‘hope’ it gets better. Find the root cause and get it fixed. You can only sell if you make it all the way to the shelf.
If you are in Vancouver or the Lower Mainland join us for the FCC event next week on distribution. We have a great line up for the day.
Peter
SKUFood Recipes for Success Podcast
In this episode, we’re excited to feature Carzan Local Meats, a family-owned business from Southey, Saskatchewan, dedicated to producing premium grass-fed beef and jerky products. Founded on the principles of sustainability and regenerative ranching, Carzan has become known for its locally raised meats and innovative flavour offerings in their growing jerky business.
Join us as we delve into their journey with Carter and Carmen, from their family roots to their commitment to providing top-tier products that reflect their passion for sustainability and community.
Get ready to hear the inspiring story behind Carzan Local Meats.
Canadians looking for Canadian products in store
Retailers are responding to consumer’s demands for more Canadian products. Specialty stores can respond quicker but the big players are too. I just saw a Sobeys ad on during the hockey game to reinforce their Canadian routes.
Now is the opportunity for Canadian brands. Consumers want them and retailers want to protect against higher prices if tariffs are implemented. If you did not get on the shelf last time, try again.
If you are on the shelf make sure you are looking at sales forecasts to have enough inventory.
FCC Distributor event in B.C.
Join Coby Palidwar National Sales Manager, Left Coast Naturals, and me as we discuss the ins and outs of working with a distributor.
From knowing when your business is ready to make a move and what to look for when choosing a distributor to communicate and work with in a way that generates the most value, you’ll learn actionable insights you can bring back to your business.
I do have travel coming up to Toronto, Calgary, Lethbridge and Niagara Falls so if you want to connect or have an event in any of these locations give me a call or send me an email.