Choosing a Distribution Partner for Your CPG Brand

July 19, 2021

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If everything comes from somewhere, where do you start?

Finding the right distribution partners is an essential part of building any business. Ask any small business owner — from food and beverage brands to tech startups to D2C retail companies— the means by which you distribute your product can make or break you.

It’s one thing to have created the perfect product; it’s a whole other thing to see that product out in the world and readily available for your consumer. A high-quality distribution network ensures that all the time you spend perfecting your product or service is worthwhile. Reliable distribution partners ensure a business’ products reach their potential market successfully and efficiently.

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What exactly is a distribution partner?What is the role of a distribution partner for a CPG brand?

A distribution partner is any person or party that has been given the rights from an original party to market, distribute, resell, or do whatever they need to provide the original party’s products and services to a wider or more specific market.

TL;DR: They get your stuff out in the world. 

In the most basic sense, distribution partners bring your brand's products to the shelves. Imagine you’ve made a matcha drink. You would lean on a distribution partner to help to get your cans into coffee shops. Distribution partners specialize at varying scales and can be referred to by different names. You may have heard of wholesalers, for example. They tend to be large distributors who supply businesses with inventory to sell. Here are a few other players in the distribution network:

Manufacturers — They buy from other smaller manufacturers or artisans. 

Exclusive Distributors — They sell, often in an exclusive capacity, to local wholesalers. 

Regional Distributors — They sell large quantities of inventory to other wholesalers.

Jobbers — They make daily, one-off deliveries to local businesses. (Think: The classic milkman).

The challenges you may face when choosing a distribution partner for your CPG brand

The distribution game can be chaotic and draining on your cash flow. In some industries, distribution requires a massive network in which there always seems to be a new middle man trying to squeeze their way in. 

Distribution is primarily a challenge of logistics. All parties involved want to ensure there’s a steady flow of inventory and products so there’s no surplus at the storefront or in the warehouse. For many small businesses, it’s easier to outsource the entire process of distribution to another firm. The consequence, however, is a loss of control — you never quite know how many extra partners are needed to work alongside the one with whom you’re contracted.

Small businesses rely on distributors to make sophisticated decisions about product placement and inventory availability. They often look to distributors for strategic advice on how to break through oversaturated markets. A solid distribution partner can get a brand on the map by finding the right places to sell it.

Benefits of partnering with a high-quality distributor for your CPG brand

A high-quality partner is more than just a truck that runs on time. Distribution partners can greatly impact your business in a variety of ways. 

Increased sales

Distributors that get your product into the right stores can help to boost your sales and revenue. They know which stores are most effective at selling your product, where to place the product, and how to ensure your customers’ order goes through.

Tip: Instead of focusing solely on distribution capabilities, seek partners who can provide additional value-added services like marketing or product development.

Expanding the reach of your CPG brand

On your own, it’s difficult to reach every market. Perhaps your business is better fit in a different region of the country where you don’t live. A reliable, well-connected distributor can get your product in front of audiences you haven’t been able to reach before. 

Tip: Consider partnering with a distribution partner who also specializes in a different industry to leverage cross-promotion opportunities.

Infrastructural support

The logistics behind distribution can be so overwhelming that they cloud and fatigue other operations of a business. A good partner makes it so distribution is a streamlined undercurrent to the rest of your business. You can take your eyes off the ordering schedule and spend more time developing products, marketing efforts, and scaling your business.

Key factors to consider when selecting a distribution partner for your CPG brand

There are few different criteria that can help you to know whether a distribution partner is right for you:

Comparable Size

It may seem like choosing the biggest distributor in the country is the safest bet, but oftentimes the most successful partnerships run parallel in size. If your business is hyperlocal, you may want to look for a small distributor (jobber) to bring your product to market. If you run a broad, internationally-selling D2C business, however, you may want to look into a much larger distributor.

Distributors charge more for more inventory shipped. In basic terms, try to build within your bounds. 

Reliable and Easy to Work With

Your distributor will be someone or a firm with whom you work very closely. Since inventory and ordering can change on a dime, look for a distributor who is amenable to your business needs. This might mean you look for a distributor who always picks up the phone, or it might mean you look for one with reliable technology - choose a firm you can trust.

Tip: Explore distribution partners who have a strong presence in the online marketplace, leveraging their expertise in digital marketing and e-commerce strategies.

Deals in Your Target Market

Distribution partners differentiate themselves by industry for a reason — their expertise can help your product to outshine competitors’ on the shelves. Look for a distribution partner who has a strong track record of building brands within your industry. If they can offer suggestions on how to expand your target market, all the better.

Tip: Consider partnering with a smaller, local distribution partner to tap into niche markets and build a strong regional presence.

Ensuring timely payments to your CPG brand's distributors

Once you have chosen a distributor, you’ll reap the benefits of off-loaded work and smooth product distribution. The same can be true of your finances when you use Settle’s streamlined AP automation system.

Settle alleviates the burden of cash flow management for payers and vendors alike, meaning you have more time to focus on scaling your business. Settle Working Capital covers delayed payments on a payers’ behalf so brands and ecommerce businesses have more time and resources to grow. 

As you continue your search for distribution partners, take respite in knowing they’ll be paid on time and with flexibility when you use Settle.

  

Sources: 

Distribution Partner Definition | Lawinsider.com

10 Ways to Find a Wholesale Distributor | Thebalancesmb.com

What to look for in a Distribution Partner


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*The information in this article is for informational purposes only and should not be construed as legal, financial, or professional advice. Settle makes no representation or warranties, expressed or implied, and in no event shall Settle or its affiliates, agents, or employees be liable to you or anyone else for any decision made or action taken in reliance on the information contained herein.