Choosing Product Brokers

Choosing and Using Brokers

Summary

Brokers and/or sales representatives are intermediaries hired by the manufacturer or distributor to
sell your product to your retail trade. Brokers or reps do not purchase product from you, but
make sales for you in your chosen market territory. Brokering firms typically serve one specific
market segments such as mass market grocery, natural, specialty, or convenience store. Brokers
represent numerous product lines. Fees for services and/or commissions generally range be
tween 5 percent and 15 percent of wholesale sales revenues. For instance, in the specialty food segment
a broker may receive 10 percent for sales to retailers and 5 percent for sales to distributors. A
broker may also play a key role in your search for a distributor. Manufacturers should consider
using brokers or sales representative when they are ready to market at a regional or nationallevel.

Key Issues

Researching Appropriate Brokers

Brokers play a key role in the growth of your business. When you become unable to add and
service new accounts, they act as your virtual sales staff by disseminating your product literature,
samples, and point of purchase materials, and by taking orders. Using brokers can be the most
cost effective method for expanding your access to markets. An experienced broker generally
represents many different food lines. Brokers will review your product line for compatibility
with their overall catalog of product representation and territory.

Attracting broker

Listings and advertisements of brokers are routinely published in trade journals. The National
Association of Specialty Food Brokers, Natural Food Merchandiser, and Natural Business are
good resources for the natural and specialty food segments. Contact information is included in
the resource section.

Trade shows.

Exhibiting at statewide, regional, or national trade shows is a good way to
showcase your product line to brokers. Manufacturers will often place a “broker wanted”
sign on their table to attract interest.

Distributors & retail contacts.

These contacts can be especially valuable in locating and
evaluating your choice of a broker. Most retail accounts and distributors can make
recommendations to you about brokering firms that serve their region and market segment.

Choosing your broker

After you’ve identified possible brokers, you should meet with them to review their experience
and requirements. Some issues to consider include:

Are they respected within the industry? Do your retailers and/or distributor currently
work with them? Review their references.

How much experience do they and their staff have?

Do they cover a market territory appropriate to your market segment and targeted expansion?

What kinds of accounts service do they provide? Do they service your current accounts
and the markets you have targeted for access?

Is your product line compatible with the lines they currently represent? Will competition
be a problem for positioning?

What are their account requirements for sales? Do your production and market capacities
match their needs for adequate activity and compensation?

Finalizing the deal

Contracts

When you’ve found the right broker for your product line, prepare a contractual agreement that
covers all aspects of your business relationship. A contract should include geographic territory to
be covered, rate of commission, conditions and terms of sales, merchandizing support you will
provide, and payment schedules.

Partnering with your Broker

Make sure you give your broker all the tools he/she will need to effectively represent your
product. Some tips for fruitful partnerships include:

Design and plan product promotions, introductions, and merchandising programs with the
broker’s input.

Make joint calls on new retail customers and key existing accounts several times a year.
Provide your broker with monthly updates on specials, demos, introductory offers, and
other promotion events.

Request that your broker visit and work your exhibit at trade shows.

Definition of Terms / Commission

The fee the broker receives for services rendered, usually paid on a monthly basis.

Territory

The geographic area that a broker will cover, per your contract, to establish new
accounts and service existing accounts

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