Building Strong Relationships with Distributors

Jordan Buckner: [00:00:00] Today we're going to be talking about one of my favorite topics, not because necessarily it's the most fun, but it's one of the most crucial for CPG brands to get right. And that is working with distributors and all the opportunities and challenges that come from it. And for this conversation, I am happy to have on Elizabeth Hemphill-Burns, who is a seasoned sales leader and business strategy with over a decade of experience.

She has an extensive background of building strong relationships with distributors, managing PNL and expanding market reach for brands like press and working with Kehi. So in addition to your leadership roles, Elizabeth serves on the board of directors for the specialty food association and contributes to various.

Advisory boards, she recently launched Intelli Cucina, a fractional sales and marketing firm, and provides consulting services and looking at for brands looking to scale, right? And natural and specialty food space. She's also working with partners like Glimpse, which [00:01:00] helped to manage distributor charge backs.

And so she's seen this from all sides of the equation. Elizabeth, thanks so much for being on and welcome. 

Elizabeth Hemphill-Burns: Thank you so much for having me, pleased to be here. 

Jordan Buckner: So I want you on because a lot of founders right now are talking about. How the best work with distributors, we saw a big launch of brands kind of coming out of COVID into retail.

Retail has been actively pushing for emerging brands again. But that's created a situation where founders are new to selling with distributors and selling with retailers. And they're kind of going into it, not really understanding what to expect. I think that causes a lot of potential issues when there's kind of misalignment with terms of like what the brand and the founder's expecting versus what the distributor is.

So I'd love for you to kind of share your perspective first on maybe the opportunities that the distributors provide and things for founders to know going into those relationships. 

Elizabeth Hemphill-Burns: Great. It is absolutely fundamental to build strong [00:02:00] relationships with distributor partners from the forefront, from the start, from the foundation of your organization.

your business and your effort to scale. Understanding your distributor needs and goals is essential for building a successful, sustainable partnership. By actively engaging in open communication, you create a foundation that really allows both parties to align on objectives. This mutual understanding fosters a collaborative atmosphere rather than a combative one, which it can be at times, where distributors become your strongest allies in their strengths and their partnerships with their retailer partners and customers.

And when nurtured effectively from the beginning these relationships can lead to better inventory management, smoother logistics, and enhanced market reach. So it's really important that you're honoring from day one. You know, regular check ins, being transparent about challenges, ensuring that both your [00:03:00] brand and the distributor can adapt and thrive together.

No two brands are the same in terms of their experience, in terms of their path to market. And so, although we all struggle with certain things, i. e. managing chargebacks typical things to watch out for as you're growing and scaling, it's really imperative that you are establishing your own unique relationship with both your category manager and all of the different parties within the distributor relationship.

specific things you want to watch out for. So when you're first starting with a distributor, you need to be vigilant about understanding potential fees or hidden fees for that matter. If you didn't read Policies and procedures closely compliance requirements are critical to get to understand and really make sure you're giving yourself time to read through the fine print in the distribution contracts.

Most of our major [00:04:00] leading national distributors and regional distributors have become quite adept at updating and communicating regularly about fees, changes to fees, and you know, basic information about how to do better business with them. It is your responsibility to stay on top. of those communications and make sure you're giving yourself time to read through them.

Also, if you don't understand something, there are a host of different people within each distributor that you can reach out to and schedule time to kind of deep dive on a specific area of the distributor's requirements. What are we talking about specifically? So distributors may include charges for marketing, handling, or storage, which frankly can erode profit margins if not accounted for up front.

And you want, as you're building out your unit economics model, to understand what all of these fees will do to your final cost of good. Compliance with a [00:05:00] distributor's requirements can erode profit margins if not accounted for up front, right? So again such as packaging specifications or labeling standards, these can also pose challenges and they're things that growth stage brands are working on in the beginning and have to tweak and you want to make sure as much as possible there's a lot of planning prior to.

Making changes, launching, understanding the fees associated with making that decision. 

Jordan Buckner: Elizabeth, you know, it's so interesting because I've been thinking a lot about like distributors and the role. I think one thing that a lot of founders don't fully understand are like how massively large these national distributors are, both in terms of like, I think mostly in terms of like the volume of product that they are moving consistently around the country and I think because of that, right, like they operate on slim margins and one of their biggest focuses , on optimizing their logistics.

And [00:06:00] so do you think that like small brands come typically with, more changes and issues that kind of disrupt that fundamental equilibrium they're looking for just because of like the size and amount of handholding. Do you think there's ways of like, if a brand is doing 30, 000 in business with Kehi, that's tiny compared to their other accounts.

And so like, how do you have a place there while still navigating that growth as a new brand? 

Elizabeth Hemphill-Burns: Yeah, that's a great question. It's certainly a challenge. You need to ensure that your product is differentiated enough to stand out in the market, right? And that you have a pricing model that benefits both parties and an understanding of how any changes at the year the beginning stage will impact profitability.

There's just that acknowledgement needs to be there. Also it's equally important to assess the level of marketing support your distributors offer, or you plan to offer and how that aligns with your efforts to grow and sort of [00:07:00] ensure sustained growth for the brand at any particular. revenue juncture, right?

And that's one of the challenges. I mean, growth stage brands faced several pressures from the very start. It's that pricing pressure, it's compliance and operational complexities, depending on, you know inventory management, compliance requirements. It's lack of control over brand messaging whether that be limited marketing support or not accessed or understanding what a distributor could provide.

Competing for attention. So you brought up a great point. Distributors are massive and they have brands of all different sizes bringing in, you know, ranges of revenue. And so, you know, distributors and brokers for that matter often present multiple brands. Well, how is a growth stage? Do you get the attention you need as larger and more established brands often receive priority?

One way you can do that is working directly with the retailers, leveraging your [00:08:00] partnerships, securing favorable shelf space, or inclusion in promotional campaigns. You know, distributors prioritize, generally, brands that have already proven sales records. And so if you're not that big and you have a regional focus, a really great way to do that is to provide proof of performance or proof of concept in a specific retailer.

We have retailer partners such as Sprouts and Whole Foods doing, you know, innovation aisles and foraging trials. It is imperative to own those. and to win at those opportunities because the distributors too are looking at data from that and will certainly give you more precedence if you perform well with those opportunities.

So hard question to answer if you don't know the size of the brand, but I would say for growth stage brands in terms of the way that they're competing for attention you know, there really are opportunities to work directly with the retailer and own [00:09:00] and win the immediate distribution that they do have.

I would say that would be the one priority. Don't just keep opening up doors and walk away. Manage those doors effectively. Understand the vertical growth opportunity. Within those retailers and then scale and span, scan accordingly. 

Jordan Buckner: Yeah, and I think, you know, similar to retailers, distributors are also looking at their assortment and so they're probably thinking like, what are the brands that are exciting?

Which ones are removing, which ones are growing? And those are the stories that directly affect, you know, their profitability and their growth. And so, you know, I think there's this expectation from founders, basically, that once you're in the door working with a national distributor, that they should be taking care of you, right?

From the standpoint of like they're just a means to an end to get to the retailer. And instead of, as you mentioned, like really understanding their priorities and their goals, right? And so as we mentioned, if they have Tight margins, and they also have a large assortment to manage kind of [00:10:00] for their team What are the things of ways that you can stand up where you actually matter to you to their business as well, 

Elizabeth Hemphill-Burns: right?

And then also remember In the beginning, it's a careful strategy and in what path you take Balancing direct sales with distributor channel sales is a huge part of that, how quickly you, you scale for that matter. You know, while direct sales can provide higher margins and that's a benefit, distributors provide the reach necessary for scaling.

And so there's a tension there in managing both channels efficiently. And I would caution you as you're working to make those decisions about how they'll impact one side or the other. From both scaling logistics and production, and then also that concept of competing for attention, you may be doing very, very well with direct business in a certain retailer.

How do you communicate that effectively to a distributor? and allow them to see your value or worth even though the [00:11:00] business is not with them. 

Jordan Buckner: You mentioned relationships. What are some of your key ways of building strong relationships with distributors? Because one thing I've heard, I did a quick survey a little while back, the brands that had the most positive relationship with distributors actually had a good relationship with their like account manager, right?

And then those that didn't, they like never could get ahold of them. 

Elizabeth Hemphill-Burns: Yeah, that's a great question. So I see your category manager as like the palm of a hand, right? And then extending from that distributor hands you have all of the account management and account teams that are embedded within the retailers.

And so your goal is to. Manage your top line and your business review with your category manager. Make sure that again they know about what your brand is, the value it brings. You know, any innovation you have in the pipeline, how you're performing overall [00:12:00] in the current customers that you have and your strategy for growth.

Beyond that you really want to connect directly with the key account managers in the various retailers across the country. That can be done, in a simple sort of outreach via email really educating them on what the brand is from a product standpoint, what the brand is in terms of a lifestyle value add where the brand is in terms of distribution.

Or it could be the old school way of picking up the phone and calling or working with these representatives to talk about getting an appointment at one of these retailers. There's both an education and a hunting side of the strategy. That's really, really valuable for most distributor key account teams.

The more. The distributor knows about your product. The more potential there is for them to recommend you to a retailer partner. The longer you're in partnership with a [00:13:00] distributor, you can go another level. If you have people on your supply chain team or ops team, have them connect with, you know, the warehouses.

Have them work with people on supply chain logistics and production. Send samples to your favorite you know coordinator at your biggest warehouse. Right? Get them involved in knowing about what your brand's doing and how the product's selling and where you're selling. Because at the end of the day, if you need something locally for them to address, whether it be a letdown or whether you'd be go look in a bin to make sure the product's there, you've developed that relationship.

The same thing we do at retail, which I usually use the term detail at retail. We should be doing With our distributors, so detailed account management, detailed warehouse management. Each warehouse that we have should be managed like its own business entity. 

Jordan Buckner: I love those suggestions and I think that can help alleviate some of the next problems as well, which come into chargebacks and deductions that [00:14:00] brands get.

And usually there's a couple of camps they usually fall into, right? Charge deductions, chargebacks, and then usually relate to like freight and inbound and shipping and product damage. And then there's also the appropriate ones that are agreed upon or that happened. And then occasionally there are deductions and chargebacks that are invalid and that actually didn't happen or wrong with the contract.

So. It's a big topic, but I guess in the next two minutes, can you share like your view on deductions and how brands can better track, manage, and dispute them? 

Elizabeth Hemphill-Burns: Yeah. So I think there are really two buckets that are going to simplify it. So it's chargebacks for non compliance rate, incorrect invoicing, missed delivery windows paychecks.

Pricing discrepancies and all of these things lead to costly chargebacks and impact cash flow, which nobody wants, particularly in a. Growth stage brand and it creates a lot of tension because you need that money back and the repayment time is often too long. The other bucket is promotional deductions.

So, you know, an [00:15:00] inaccurate charge around a promotion or charge back without prior notice, which further affects the brand's bottom line. One of the best ways is to Understand what all of these fees and charges are where they're coming from and have your sales team work in tandem with accounting in some sort of regular cadence to make sure that the two sides are talking and that their approvals.

That a sales person may have given is then understood on the back end as a relevant and approved charge for accounting and finance. That takes a lot of time, both the communication side of it and then also the organization around it and having somebody in sales or accounting for that matter, be an expert takes quite a bit of time.

And so we have a lot of programs that have dropped up. Glimpse which is one of the brands in my portfolio that I've chosen to work with because this is such a large issue for growth stage brands. And I want to feel [00:16:00] confident about referring a great. AI deductions platform is the perfect example of you know, a system that has been created to prevent all of that lost time from being incurred by both parties, accounting and sales.

It more or less automatically goes through chargebacks for noncompliance and promotional deductions. And the disputes are done for you. And so, what is often taken away from organizations and sales teams in terms of the lost time spent going through all this is given back by a program like Glimpse.

And , there's several out there, they're wonderful and extremely helpful. They also allow you then, once you get a handle on managing chargebacks and deductions to go back to your team internally and evaluate things that might need to be done better. Right? So if in fact it isn't an error and there isn't a chargeback that needs [00:17:00] to be contested, you can then flip it around and look at it as a process improvement tool.

Which is something we're all looking to do to become more efficient and agile in the way that we think about spending on trade. 

Jordan Buckner: I love that. And such , hopeful tips. I'm also going to drop a link to Glimpse and the show notes as well. You can actually do it, get a free trial. To see how much money that you can save and get back from disruptions and chargebacks.

So definitely make sure to take advantage of that. Elizabeth, thanks so much for being on today and for sharing the experience and love having you on. 

Elizabeth Hemphill-Burns: Thank you so much for your time.