Navigating Distribution Channels for CPG Brands

Once you’ve finally found buyers who want to bring your products into their assortment, you next need to understand how their business works. Mastering the complexities of major distribution channels is essential for CPG brands aiming to scale and succeed. This guide explores how to navigate major distributors like UNFI and KeHE, build strong relationships with them, and optimize your supply chain. By understanding the best practices for managing distribution agreements and expanding your product's reach, you can drive successful distribution and sales growth.

Understanding Major Distributors: UNFI and KeHE

Navigating the landscape of major distributors such as UNFI and KeHE requires a strategic approach. These distributors play a crucial role in getting your product onto store shelves and into consumers' hands. Understanding how they operate, their requirements, and how to align your brand with their expectations is essential.

UNFI (United Natural Foods, Inc.) and KeHE are extensive operations that handle a large volume of products, involving numerous physical touches. This complexity contributes to significant operational costs, which many perceive as excessive. However, it's important to recognize that these distributors operate on relatively thin margins. In fact, UNFI has faced challenges in recent quarters due to shrinking margins and operational inefficiencies. By understanding these dynamics, you can better navigate your relationships with them.

UNFI is a leading distributor of natural, organic, and specialty foods, serving a wide range of retail channels including supermarkets, independent retailers, and food service providers. KeHE focuses on natural and organic products, specialty items, and fresh food. Both distributors have extensive networks that can significantly boost your brand’s market presence, but they also face operational challenges that can impact your profitability.

Building Strong Relationships with Distributors

Strong relationships with distributors are the backbone of effective distribution strategies. Start by understanding their business models, priorities, and challenges. Demonstrate how your product fits into their portfolio and meets the needs of their customers. Building trust is essential.

Regular communication is key. Keep your distributors informed about new products, promotional activities, and any changes in your business. Building a rapport with your account manager can help you gain insights into how to better support their efforts. Additionally, be responsive and reliable—meeting deadlines and maintaining product quality can build trust and strengthen your partnership. Reliable partners are valuable.

Optimizing Your Supply Chain

An optimized supply chain is essential for efficient distribution. Many businesses run fairly unspecialized supply chains, but optimization can make a significant difference. One effective strategy is to adopt a proactive approach with your supply chain partners. Just ask. If you don’t ask your supply chain partners to do something the way you want, they may never offer it. Clear communication about your needs and expectations can lead to more tailored and efficient services.

Tracking supply chain costs is as crucial as monitoring the costs to manufacture your products. Often, supply chain costs can exceed your cost of goods, making them critical to understanding your competitive pricing. Knowing where your money goes helps you make informed decisions about pricing, cost-saving opportunities, and overall efficiency. This knowledge can give you a significant competitive edge in the market.

Managing Distribution Agreements

Distribution agreements are the foundation of your relationship with distributors. It's vital to negotiate terms that are beneficial for both parties. Understand the key elements of these agreements, including pricing, payment terms, delivery schedules, and performance metrics. Clear agreements prevent disputes.

It is crucial to read your distribution agreement thoroughly. While legal review is important, do not rely solely on a lawyer to understand the nuances of your business. Legal professionals may not fully grasp the operational intricacies and specific needs of your industry. Therefore, it is essential to review the agreement with someone who has hands-on experience in the business. This dual approach ensures that all aspects of the agreement are comprehensively understood and that you are protected from potential pitfalls. Regular reviews keep agreements relevant.

Increasing Your Product’s Reach

Expanding your product’s reach involves strategic planning and execution. Start by identifying which regions and retail channels are most aligned with your target market. Work with your distributors to create targeted promotions and marketing campaigns that drive product awareness and sales in these areas. Strategic planning is essential.

Promotional programs offered by distributors can carry different costs and risks. Understanding these programs ahead of time is critical. Some may require upfront payments or commitments that can impact your cash flow, while others might offer a higher return on investment but come with their own set of challenges. Knowing these details can prevent costly mistakes and help you choose the right programs to maximize your reach and profitability.

Leverage data and insights provided by your distributors to refine your strategies. Understand which products are performing well and why. Use this information to tailor your offerings and marketing efforts to meet the preferences of consumers in different regions. Data-driven decisions improve results.

Critical Factors for Successful Distribution

Several critical factors impact successful distribution and sales growth:

  1. Product Quality and Consistency: Ensure your products consistently meet high standards of quality. Distributors and retailers rely on your brand to deliver products that satisfy consumer expectations. Quality builds trust.

  2. Marketing Support: Provide robust marketing support to help your distributors and retailers promote your products. This can include point-of-sale materials, digital marketing campaigns, and promotional offers. Marketing support boosts sales.

  3. Flexibility and Adaptability: Be prepared to adapt to changing market conditions and distributor needs. Flexibility in your operations can help you stay competitive and responsive to new opportunities. Adaptability is key.

  4. Data-Driven Decisions: Utilize data analytics to make informed decisions about inventory management, market expansion, and promotional strategies. Data-driven insights can significantly enhance your distribution effectiveness. Data guides strategy.

Conclusion

Navigating distribution channels like UNFI and KeHE requires a strategic and informed approach. By building strong relationships with distributors, optimizing your supply chain, and effectively managing distribution agreements, you can expand your product’s reach and drive sales growth. Mangrove Management Consulting can make this process smoother and more effective. With our expertise in distribution strategies and supply chain management, we provide the insights and customized solutions needed to elevate your brand and secure your spot as a market leader. Get in touch with us today to see how we can help take your brand to the next level.