How to Find a CPG Distribution Partner

LearnFebruary 3, 20245 min read
Caroline Lu, Product Marketing Manager

Step One: Determine whether distributors are necessary.

Yes, yes. You must start with the “why.” Consider the following as you map out whether or not you even need a distribution partner at all:

  • Are you ready for a new middle man? More hands between your brand and your customer could mean a lower profit margin. A distributor will take a significant cut from the profits earned by the company.
  • Is your product a better fit online — or worse? For example, the food and beverages industry is a trillion-dollar market offline, but makes a small portion of ecommerce sales. Gearing up with an online distributor might not be worth it, but going with a local brick-and-mortar one could be beneficial.
  • Do your buyers exist in specific stores? If you sell to a market that doesn’t typically shop at retail stores, there is no real reason to partner with a distributor. However, if the target market is concentrated somewhere, shelving in a store might be a good idea.
  • Could you make enough products? Before signing on with a distributor, think about your manufacturing cycles. They need to be up to the task of creating high volumes of supply for your retailers’ demands. If it might be prudent to stick to the pre-established channels initially.

Step Two: Identify target stores

The first step is to conduct market research and source opinions from your current customer base to better firm up a distribution strategy. It is important to consider how they and your target customer prefer to shop to get an idea of the types of retailers your company should target. Leverage real data as much as possible rather than just going off a whim.

Then make a list of ideal stores — your distributor will need to know what you’re envisioning.

Step Three: Understand what the competition is using

Distribution is an industry-by-industry game. After getting an idea of where to stock the products, the next piece of research is finding out which distribution partners the competition is using. Understanding the competition will give insight into best practices, established distribution channels, and proven players in the industry.

Bonus Tip: If you are struggling to get this information, search for keywords such as “[Product Category] distributors” or “[Product Category] distributors in [local market].”

Step Four: Consider joining trade associations

Manufacturers, retailers, and distributors from most industries come together via local trade associations. There is a list of local and regional chapters of different trade associations offered by the National Association of Wholesalers (NAW) for the U.S. It is important to find an association that serves the relevant industry in your region.

Step Five: Consult wholesale directories

A wholesaler is the retail-facing side of a distributor. If you’re looking for a wholesaler, consider visiting Wholesale Central. It has a pretty thorough list of wholesalers across different verticals. Wholesalers are typically positioned towards retailers; however, they like to hear from manufacturers who want to work with them.

How to Evaluate Potential Distributors

Spend time researching and evaluating your potential distributors before signing a contract. A distributor is an essential partnership, so you’ll want to take your time choosing one. Here are a few things to consider along the way:

What are your business goals and values? If your company’s plan is to grow the business sustainably and work with small stores, it is important to look for a distribution company that prioritizes this method. However, if your target market and goals lie in getting into big-box retailers to boost your sales, pick accordingly.

What are their sales and marketing capabilities? Make sure to do proper due diligence on the distributor. You will want to know their ability to generate leads, performance metrics, distribution process, what niches they specialize in, technical competence, and the outside and inside sales force size. Also, take a look at the past sales figures history for the same or similar products.

How are their management skills and systems? Take a look under the hood of the distributor’s own planning, training, human resources, and financial management. Using this information, you can then understand whether the distributor can keep pace with anticipated growth in the target market. It is also vital to look into the distributor’s inventory handling capabilities. Finally, look into their ability to manage warehouse spaces and their ability to track important statistics such as turnover rates.

How big is the distributor? It is important to work with a distribution partner that can give your business the attention it needs without heavy delays in communications. You should be looking for the distributor to provide prompt communication regarding changes in management and other personnel and operating policies and shifts in the local market.

Tip: Consider partnering with a small distributor or a non-traditional distribution partner, such as a local community organization, to reach niche markets.

How Settle Can Help

Once you’ve found the right distributor that you want to work with (and that wants to work with you!), you’ll need to set up a strong working relationship. That starts with making sure everyone is paid on time. That’s where Settle comes in.

Settle helps companies with cash flow management in times of expansion and growth — like at the moment a business evolves into a distribution model. Going to distribution requires new levels of financial planning, budgeting, and forecasting. For payers, Settle frees up cash flow so you have the capital you need to grow your business. For your newfound distributors, Settle helps them to get paid on time. develop strong relationships with suppliers by getting all invoices paid on time.

Schedule a demo with us today to learn more.

Sources:

Total US retail and food services sales, 2022 | Statista

Free Keyword Search Volume Tool | Search Volume

Who We Serve | NAW

SharePlatform iconPlatform iconPlatform icon

Subscribe to our newsletter


OR

Recommended Articles

What Are Net Terms?
Learn4 min read

What Are Net Terms?

Making use of net terms can enable both buyers and vendors to increase their profitability and sales dramatically. This is what net terms are.

Settle Spotlight Series: Q&A with Vividly
Learn9 min read

Settle Spotlight Series: Q&A with Vividly

We sit down to chat with Alyshah Walji from Vividly, a trade promotion management (TPM) software built by and for the consumer packaged goods industry.

What is the Cash Conversion Cycle?
Learn6 min read

What is the Cash Conversion Cycle?

A company’s cash conversion cycle can speak volumes about its operational efficiency and financial stability. It can also determine whether people get paid on time.

Accounts Receivable Factoring 101
Learn4 min read

Accounts Receivable Factoring 101

Accounts receivable factoring can help companies can improve their financial stability and cash flow. We’ll explain what it is and how it's beneficial in our guide.

How to Create an Invoice
Learn6 min read

How to Create an Invoice

Creating invoices can be tedious, especially for new businesses processing everything manually. Learn how to create invoices effectively and efficiently with this detailed guide.

Settle Spotlight Series: Q&A with SourceMedium
Learn14 min read

Settle Spotlight Series: Q&A with SourceMedium

In this month’s Settle Spotlight Series, we chatted with Will Holtz from SourceMedium about how interconnected data can be a superpower for brands in hyperscale mode.

Why Supply Chain Visibility Matters and How to Achieve It
Learn5 min read

Why Supply Chain Visibility Matters and How to Achieve It

Improving supply chain visibility is becoming a priority for many companies, as it’s essential for streamlining operations, boosting efficiency, and maintaining strong customer satisfaction for consumer brands.

Do I Need an ERP to Manage My Supply Chain?
Learn4 min read

Do I Need an ERP to Manage My Supply Chain?

Effectively managing a supply chain is essential for any consumer brand working with a network of suppliers, distributors, and partners. If you're considering an ERP for your business, here are some key factors to evaluate to ensure it meets your supply chain needs.

The 2024 Settle Staff Picks Holiday Gift Guide
Learn2 min read

The 2024 Settle Staff Picks Holiday Gift Guide

Do you really need another gift guide this time of year? Our Settle team spends so much time obsessing over our customer brands, that the right answer is obviously yes. We have compiled the inaugural Settle Staff Picks Holiday Gift Guide, with the most fire small brands out there. So read on for ideas from stocking stuffers to travel accessories – for everyone on your list. And join us in shopping small this holiday. 

Settle 2023 Product Wrap
New Feature3 min read

Settle 2023 Product Wrap

A year in review of Settle's product releases that make running CPG brands easier.

Your purchasing process. Made simple.
New Feature2 min read

Your purchasing process. Made simple.

We brought simplicity to bill pay. Now we’re bringing it to the purchasing process, with end-to-end support that takes a load off your plate.

Invoice vs. Receipt: What's the Difference?
Learn6 min read

Invoice vs. Receipt: What's the Difference?

Invoices and receipts are similar in concept, but differ in the details. Here’s what differentiates invoices from receipts, and why it’s important to understand.

The CPG Guide to Managing Tariff Uncertainty
Learn2 min read

The CPG Guide to Managing Tariff Uncertainty

Proper planning is key to protecting profit in times of tariff uncertainty. With potential plans to impose a 60% tariff on Chinese goods and a 10% to 20% tariff on other imported goods, many CPG brands are taking 4 key steps now so they don’t get a shock to their COGs.

What is an A/P Aging Report?
Learn6 min read

What is an A/P Aging Report?

The Accounts Payable Aging Report is an essential tool for businesses with a large number of accounts payable to track. Here’s a general breakdown of A/P Aging Reports.

What Are the Consequences of Equity Dilution?
Learn5 min read

What Are the Consequences of Equity Dilution?

Equity dilution can be a very concerning process for shareholders who are unfamiliar with its consequences. This is how to avoid equity dilution and keep stocks healthy.

What is the Accounts Payable Process?
Learn4 min read

What is the Accounts Payable Process?

Accounts payable (AP) refers to all the payments that a business owes its suppliers and creditors. Neglecting your accounts payable process can lead to production and supply issues.

Black Friday CPG Prep Checklist
Learn6 min read

Black Friday CPG Prep Checklist

Black Friday sets the tone for your business’ holiday season. Start early on forecasting demand, devising marketing strategies, and preparing your site.

How to Evaluate Accounting Firms
Learn7 min read

How to Evaluate Accounting Firms

Figuring how to find the right accounting firm for your company can be difficult. Here’s how to choose the best accounting firm for any business.

A Guide To Inventory Management for CPG
Learn6 min read

A Guide To Inventory Management for CPG

Learning to navigate inventory management can be a tricky part of growing your brand. Check out our guide to inventory management to find out more about it.

Non-Dilutive Funding Guide for CPG Brands
Learn7 min read

Non-Dilutive Funding Guide for CPG Brands

A popular source of funding is financing from angel investors and VCs. Yet many companies fail to recognise non-dilutive funding — where no ownership is lost.

Navigating Distribution And Retail Margins for CPG Brands
Learn8 min read

Navigating Distribution And Retail Margins for CPG Brands

For emerging CPG brands, navigating challenges like supply chain disruptions and retail changes underscores the critical importance of understanding and managing retailer and distributor margins, as it directly impacts profitability and success in the industry.

How to Find a CPG Distribution Partner
Learn5 min read

How to Find a CPG Distribution Partner

Partnering with the right distributor is arguably one of the most essential tasks for a retail company. Find out what to look for in distribution partners and how to source them.

Accounts Payable vs. Accounts Receivable
Learn5 min read

Accounts Payable vs. Accounts Receivable

Understanding accounts payable and accounts receivable is an essential part of business workflow. So how do they differ? Learn more about them in this guide.

An Introduction to Cash Flow Forecasting
Learn6 min read

An Introduction to Cash Flow Forecasting

A company’s ability to make a cash flow forecast is essential in the world of modern business. Here is everything you need to know about cash flow forecasting.

What Is Amazon FBA and Is It Right For You?
Learn7 min read

What Is Amazon FBA and Is It Right For You?

Using Amazon FBA is a great way for companies to expand their scalability and fulfillment abilities. Here is how it works, and how businesses can benefit from it.

How Long Does a Wire Transfer Take
Learn7 min read

How Long Does a Wire Transfer Take

Wire transfers can be the quickest method of exchanging funds. Knowing how long it takes can help determine whether wire transfer is the best solution.

Guide: The ABCs of cashflow
Learn2 min read

Guide: The ABCs of cashflow

We put our heads together with the folks at IndieCPG to create a guide to the basics of cashflow for new (and maybe even not-so-new) founders.

Settle blog

Insights in your inbox

Join our newsletter and never miss an update on Settle's latest features and industry trends.