You may think that distributors will carry your consumer package goods (CPG) brand because your price is so low or your quality is so high. You may think that they will provide it to stores in their territory because the packaging is so cool or the product is so disruptive.
They won’t! In fact, most distributers don’t care about your product at all!
What they care about is how fast the inventory they do carry will turn in their warehouse. They know from experience that a great idea without the merchandising support behind it just won’t fly. It takes a lot more than product, package, or price. It takes customer service, quick returns on spoils, representation, and even sales made for them!
You may say, “Aren’t they supposed to make the sales?” But one glance at the huge range of products and brands they carry will convince you they have little time for your brand. Further, with consolidation and compression forces at work in the marketplace, there are fewer distributers to choose from. Some territories may have only one or two. If you are not with one of them you can forget about distribution in that territory.
You may say, “Well, I don’t need distributers because I will sell directly to the chains.” But selling direct has its own pitfalls including being held hostage on price, having all your eggs in one basket, and becoming a house brand. But the biggest roadblock to selling direct is that the retailers want to write one check to one entity for many brands. They will also pay their distributers who supply them with the majority of their products first, and you may have to wait for your payment.
Here’s 3 reasons that helped us get the attention of a prospective distributor:
- Presell. We would sell our product into the top chain in the prospective distributer’s territory. Then we asked the buyer who he wanted to distribute our products to his stores. We then would go to that distributer and tell them we were presold to their top retailer and the buyer wanted them to deliver our brand. Also known as “backdooring,” few distributers will turn down “free money” and a chance to become more important to their largest buyer.
- Represented. We would hire our own commission-based representative dedicated to their territory. This assured the distributer that even if his own salespeople didn’t introduce and sell our new brand to their retailers, our rep would. This guaranteed sales and quick turn over. It meant our product would be replaced on the shelf, the distributor’s inventory would be watched like a hawk, and spoils would be quickly handled. Our rep’s livelihood was based on their sales. We had to grow slowly to afford to do this properly.
- History. By establishing the reputation of being a “hot mover” from the start, other distributors were encouraged to take our brand. It was critical for us to create this history even if it meant that we broke even or lost money with our first few distributers. We were careful not to spread ourselves too thin by growing too quickly. We gained a reputation of delivering excellent service and customer support. This is why it’s so critical to start slowly, in a limited area, to discover what is expected of you to properly service what you sell.
Distributers don’t build brands. They are afraid they could lose them. They want their salespeople to focus on the brands that bring them the greatest profits. We like to say, “Everybody wants to milk the cow, but nobody wants to raise the calf!”
Who Are We.
Having built and sold a bestselling national brand, we appreciate the value of brands and everything it takes to make them successful. Companies are valued by their brand equity. Achieving and maximizing brand equity requires tremendous respect for all your customers, from your wholesaler to your end user.
Starting in our laundry room with no money and no knowledge of the industry, we built the famous Barefoot Wine brand. We learned a lot they don’t teach in school and much of it the hard way. Although our success was in consumer products, our real world experience will be helpful to anyone looking for information and advice about brands.
We have written the New York Times Bestselling Business Book, The Barefoot Spirit: How Hardship, Hustle and Heart Built America’s #1 Wine Brand, which chronicles the history of the famous brand from its inception through its acquisition. Our book is now required reading in schools of entrepreneurship across the country. We hope this book will provide inspiration and encouragement for all those contemplating starting a brand or wanting to improve their existing brand.
Michael Houlihan and Bonnie Harvey
-Barefoot Wine Founders