Business Basics for Alberta Food Processors - Distribution and Sales

 
 
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 Direct sales to the consumer | Direct sales to retailers | Direct sales to food service | Distributors | Brokers | Private label | Industry trade shows

Distribution is the means of getting your product into the hands of consumers. Although distribution methods and strategies vary depending on the individual company, its product, business plan and target market, there are six basic ways to get products distributed. These include:

  • direct sales to the consumer
  • direct sales to retailers
  • direct sales to food service
  • contracting with a distributor
  • contracting with a broker
  • co-packing for private labels
  • industry trade shows
A key factor in developing your distribution plan is the availability of your product. Because small producers often are not equipped for large scale production, they often begin by introducing their product into a small geographic area. Your five-year plan could call for you to introduce your product locally, then expand the market to include the whole region and ultimately make the product available nationally. When developing this plan, consider your potential customers, the shelf stability of your product and shipping costs. Also consider using brokers and distributors or filling orders by mail as alternate ways of penetrating distant markets. You probably will not be able to call on retailers and distributors nationwide. Of course, if your product is a regional specialty, you will have limited markets beyond your home territory and may not be able to expand to national distribution.

The growth of your production capability should not be rushed. Do not overextend yourself by selling to too many outlets, too soon. Grow the business gradually so that you can fulfil orders in a timely fashion, without straining your systems. Do not contract with distributors, brokers or retailers until you are confident you can fill your orders on time, both now and in the near future.

Many new companies sell product directly to the retailer. Competition for shelf space is fierce and until you can demonstrate that your product will sell, distributors and brokers may be skeptical about trying your product. You need to make the rounds, pitching your product to retailers at gift shops, specialty food stores and retail locations. That is another reason to introduce your product in a small area at first.

Direct Sales to the Consumer

There are several avenues available to companies wanting to sell their products directly to the consumer. Selling direct is suited to specialized products or a small number of customers. While it eliminates the middleman, the processor takes on most of the marketing and distribution functions. Companies can sell direct by using:
  • farmers’ markets
  • special events
  • craft shows
  • mail order
  • the internet
Direct Sales to Retailers

The available markets for food products are expanding. There are many more options and outlets than in the past. Primary markets include specialty food stores, independent and chain grocery stores, delicatessens, bed and breakfast establishments, kitchen and cookware stores, retail shops, gift shops, gift basket businesses and buyers’ clubs. The demand for shelf space is fierce, therefore marketing programs geared to retailers and consumers are critical.

Direct Sales to Food Service

The variety of food service establishments vary from snack bars to white tablecloth restaurants and the need for products and services are equally as diverse. Products are sold in bulk and therefore will usually reduce your labeling and packaging requirements.

Distributors

A distributor buys your product and resells it, at a profit, to his accounts. The benefit of using a distributor is that they do the job of selling your product. Distributors offer experience, contacts and market segments such as gift stores, grocery chains, delicatessens, food service or specialty food stores. They have existing accounts and work to increase their market share.

Brokers

While distributors buy product from you, brokers do not. They represent your product in return for a commission on sales. They sell directly to retailers and distributors. In some respects, brokers act in much the same way as a company salesperson by selling, maintaining accounts and representing your product directly to the buyer. A broker is useful when you are attempting to market a product into a new outlet or region.

Private Label

Private label products are made for retail buyers, wholesalers or brokers who exclusively own and utilize the label name. Superstore’s President’s Choice is an example. The manufacturer is under contract to produce the product according to the specifications of the label owner. The owner promotes and advertises the product.

Industry Trade Shows

Most industries hold trade shows or exhibitions to display the latest products and services offered by suppliers to the industry. Trade shows provide a forum to discuss new products, services and technological developments. They are also an opportunity to increase client contacts and sales. For information and a listing of some of the trade shows available check the Alberta Economic Development Authority website http://www.alberta-canada.com

For more information on the topics in this section see the resources section.
 
 
 
 

Other Documents in the Series

 
  Business Basics for Alberta Food Processors
Business Basics for Alberta Food Processors - Preface
Business Basics for Alberta Food Processors - Introduction
Business Basics for Alberta Food Processors - Starting Out
Business Basics for Alberta Food Processors - Business Planning
Business Basics for Alberta Food Processors - Business Considerations
Business Basics for Alberta Food Processors - Food Processing Regulations
Business Basics for Alberta Food Processors - Facilities
Business Basics for Alberta Food Processors - Product Development
Business Basics for Alberta Food Processors - Processing and Packaging Equipment
Business Basics for Alberta Food Processors - Packaging and Labeling
Business Basics for Alberta Food Processors - Distribution and Sales - Current Document
Business Basics for Alberta Food Processors - Promotion
Business Basics for Alberta Food Processors - Financing
Business Basics for Alberta Food Processors - Sources of Assistance
Business Basics for Alberta Food Processors - Additional Resources
 
 
 
 
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For more information about the content of this document, contact Ag Info Centre.
This information published to the web on June 1, 2005.
Last Reviewed/Revised on March 31, 2012.