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Best in Class Distributor Standards

By: Greg Seminara, Export Solutions
Topics: Food Distributors 1

Is your distributor (or importer) network “Best in Class”? Alignment with a strong partner will deliver superior results for your brand. Export Solutions evaluates and analyzes hundreds of distributors per year. Frequently, our point of view is requested to establish criteria for selecting the best distributor candidate for a brand owner. Recapped below are points for consideration for evaluation of your existing distributors or potential new partners.

Size Counts !
Critical mass translates to the ability to offer broader services and deeper sales coverage at a competitive rate. Retailers are dependent on large distributors, creating a “two way” street on tough negotiations. Larger distributors leverage their scale to obtain benefits for the niche brands in their portfolio. In times of financial turbulence, larger distributors get paid first. Bigger is not always better ( see Big Distributors vs. Small Distributors article), particularly if you are a small brand. An important metric is distributor rank in terms of sales revenue to key retail customers within your category.

Countrywide Coverage
All distributors normally feature good presence and contacts with major retailers and stores within the capital city. Best in class distributors offer superior coverage countrywide. Look for distributors that maintain sales offices and warehouses outside the capital city. Request a map pinpointing where the distributor’s field sales people are based. Typically, the major cities represent only 50 % of a countries volume. An opportunity exists for best in class teams to obtain higher brand development outside the major cities where second tier brands do not have coverage.

Information Technology-Reporting
The sophistication of a distributor’s information technology platform creates a statement regarding the distributors commitment to future growth. Best in Class distributors offer online portals where their suppliers can log in to view sales trends, inventory levels, invoice status, and results versus key sales initiatives in “real time”. Leading distributors supply their field sales teams with handheld computers to transmit time sensitive information on orders, pricing, in store conditions, and competitive activity. Other key areas for evaluation include a distributor’s supply chain management software, ability to handle multiple EDI transaction sets, as well as data security and back-up plans.

People- Multinational Expertise
Many distributors trace their origins to family run operations. The most successful entrepreneurs recognize the necessity to bring in professionally trained talent to bring their organization to the next level. Best in class distributors hire executives with experience with strong companies such as Procter & Gamble, Nestle, & Unilever to manage key departments. Progressive distributors incent these senior executives with a route to gain ownership shares in return for their services.

Multi-Channel Focus
Global brands source sales from multiple trade channels: convenience, foodservice, discount, pharmacy, cash and carry, natural, gourmet, and wholesale in addition to traditional supermarkets and hypermarkets. Best in Class sales teams offer coverage of all trade channels and deploy dedicated specialists with channel specific expertise. Similarly, small shops still represent 50 % or more of food sales volume in Latin America, Asia, and the Middle East. Leading teams feature focused programs for reaching “down the trade” retail outlets.

Marketing Department-Creative Ideas
Is the Distributors owner the “marketing” department as well? Your primary point of contact at the distributor has the greatest ability to impact brand results and influence the distributor’s organization to achieve your priorities. Strong distributors establish full- fledged marketing departments with experienced university graduates filling key roles. Successful marketing managers bring new ideas to your business and adapt your brands marketing message to the local market. Look for an energetic marketing team that adds value and creativity and avoids the mistake of simply passing through your standard presentation and plan.

Brand Presence at Point of Sale
The retail store is a showcase for our brands. Best in class field sales teams “own the store” and can obtain more than “fair share” of shelf space for the brands they represent. Are your brands at eye level, with share of space in excess of their market share? Or are your brands buried on the bottom shelf, with only one facing per item? Strong distributors maintain excellent store level coverage to insure fundamental focus on correcting out of stocks, price tag placement, correct pricing, off shelf display, point of sale placement etc. Speed to shelf timing on new products is another key metric to evaluate distributors. Always request the retailer’s official schematic (layout) to measure the authorized shelf space and positioning for your brand.

Financial: Cost to Serve
The last crisis reinforced the priority to be aligned with a financially solid partner. Savvy manufacturers are requesting new credit information and running Dunn & Bradstreet reports on all distributors in all markets to preempt the difficult situations that transpired in other countries. Best in Class Distributors offer competitive margins and provide ideas to generate cost savings in your mutual business. The best distributors pay on time, promptly submit promotional reimbursement requests, maintain good financial tracking systems, and secure reasonable payment terms from retailers.

Logistics: Service Level 98 % +
Logistics represents a core component of a distributors service offering. Advanced distributors promise 24- 48 hour delivery countrywide and maintain sophisticated inventory replenishment systems. In large countries, look for distributor warehouses outside the capital city. In some instances, distributors may outsource logistics operation to another third party specializing in logistics only. This strategy normally works well as long as the logistics company delivers excellent service without incremental costs. Remember, most distributors were founded as sales and marketing specialists that provide logistics services to satisfy the needs of their brand owners. My opinion is that the distributor dedicates more focus to brand building if the distributor can find another company to effectively manage logistics. The key metric is 98% + service level and minimum out of stocks at store level.

Results
Best in Class distributors ( large or small) deliver results in excess of total market and category growth year after year. The best way to measure topline distributor performance is to compare total retailer growth and total category growth (excluding your brand) with your brands performance in a country or at a retailer. Are you getting your fair share of growth? Best in Class suppliers recognize that there are substantial costs in investing and developing a best in class team. Suppliers must recognize that distributors are also in the business to make a reasonable profit. The “Best in Class” relationship allows both parties to grow and prosper from a sales and profitability standpoint.