Using Food Brokers in the Northwest: A Guide for New

Using Food Brokers

in the Northwest

J.A. Beaman and A.J. Johnson

EM 8922 • December 2006 • $2.00

A Guide for New Manufacturers

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Contents

A professional at sales ....................................................................1

Types of manufacturers represented by brokers .........................3

When to use a broker .....................................................................3

How to pitch to a broker ................................................................4

Commissions and fees ....................................................................5

Do your research .............................................................................5

Choosing a broker ..........................................................................6

Contracts and terms .......................................................................7

Working with your broker .............................................................7

Words of wisdom ............................................................................8

Summary .........................................................................................8

Appendix A. Broker research form ..............................................9

References ...................................................................... back cover

Jill A. Beaman, faculty research assistant, and Aaron J. Johnson, food business

strategy specialist; both of the Food Innovation Center, Oregon State University.

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Using Food Brokers in the Northwest • 1

Food business entrepreneurs who want to sell new

products on retailer shelves need more than a unique

product, great packaging, and luck. Successfully sell-

ing a product requires money, contacts, distribution,

a marketing plan, and aggressive selling. While many

food manufacturers handle their own sales, others

have discovered that food brokers are a great resource.

Brokers often are the only way that a new food manu-

facturer can gain access to retailers and consumers.

This publication explains how new food manufac-

turers can benet from using a food broker. It cov-

ers the broker’s role, when to use a broker, broker

requirements, commissions and fees, and contracts.

It also explains how to choose and manage a broker

and offers words of wisdom from food brokers in the

Northwest. This information can help you be better

prepared when interviewing potential brokers.

A professional at sales

Food brokers act as sales agents hired by manufacturers to represent

their products and make sales to retailers, foodservice companies, and

distributors. They can help nd distributors, and they broker deals between

manufacturers and distributors as well as between distributors and retail-

ers. Unlike distributors, brokers do not take title or physical possession of

products, nor do they transport products to the buyer.

Food brokers are an efcient and cost-effective alternative to direct

marketing of food products. Brokers spread their overhead costs over a

number of product lines (usually noncompeting); thus, other manufactur-

ers share your sales costs.

A broker’s greatest value is his or her experience, expertise, and long-

standing relationships with customers. Brokers can provide more services

than just sales calls. For example, they can help develop promotional

activities, such as in-store demonstrations and new product introductions

(Hall). Overall, brokers are experts at selling; they use their relationships

with customers to efciently arrange the sale of a manufacturer’s food

products to the retailer.

Using Food Brokers in the Northwest

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2 • Using Food Brokers in the Northwest

Each food broker typically handles a specic region and market seg-

ment, such as supermarkets, natural foods, specialty, or convenience.

Local independent brokers specialize in knowing the local market’s

consumers, distributors, and retailers. They usually handle one manufac-

turer per product category to avoid conict of interest, although there are

exceptions.

A broker’s role includes the following:

• Negotiating the best deal and promotion for the manufacturer

• Protecting the integrity of the product and organization he or she

represents

• Presenting a product line

• Providing sales data to help sell a product

• Writing orders

• Following up on orders to ensure delivery of the product

• Ensuring the product is properly displayed by offering merchandising

advice

• Ensuring that all product promotions and deals are applied to an order

• Monitoring the completion of the sale

• Arranging for product demonstrations or sampling (increasing product

exposure)

• Walking through a payment if required

• Staying familiar with industry trends and relaying this information to

the manufacturer

• Providing a “voice” within the industry

There are many advantages to using a food broker. Food brokers have:

• Knowledge of local markets

• Relationships with buyers in retail and foodservice establishments

• Selling experience

• Specialization in retail, foodservice, and specialty categories

The main disadvantage to using a broker might be that you are not his

or her only client and your products might not receive adequate attention.

In addition, the broker might not accurately represent your primary goals.

For example, the broker might promote a product solely on the basis of

price and ignore your focus on product quality.

Wolfe, K. Specialty Food Brokers. ADC Info #22. The University of Tennessee

Agricultural Extension Service (1998).

Brooks, J. Are Food Brokers Right for You? Oklahoma State University, Food and

Agriculture Products Research Technology Center. FAPC-130 (2004).

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Using Food Brokers in the Northwest • 3

Types of manufacturers represented by brokers

Brokerage rms usually work for three types of manufacturers: large,

national manufacturers; regional manufacturers; and small, niche-market,

specialty manufacturers. Brokerage rms working for large national manu-

facturers usually have account executives who devote most of their time to

a particular manufacturer’s products. The added time and attention given

to these large companies are well worth the effort because four or ve

national manufacturers might represent up to 70 percent of a brokerage

rm’s monthly income.

Regional manufacturers often have a district manager who works with

a broker to establish sales. The district manager often accompanies the

broker on sales calls and sets up monthly or quarterly meetings to help

develop a good customer base. Regional manufacturers generate approxi-

mately 25 percent of brokerage rms’ monthly sales and produce a signi-

cant number of the products brokers represent.

Most new food manufacturers fall into the third category—small, niche-

market, specialty manufacturers. Although these manufacturers usually

need a broker’s assistance more than regional or national manufacturers,

they represent only about 5 percent of most brokers’ revenue. Thus, bro-

kers usually represent four or ve small manufacturers but cannot dedicate

as much time and effort to them as they do to larger clients.

A broker’s ideal client is a large, established manufacturer with estab-

lished sales and demand. This makes it difcult for new market entrants to

hire a broker; they need to convince the broker that their product is unique

and protable.

When to use a broker

The decision to use a broker depends on the manufacturer’s goals.

Brokers might not be necessary for large, established manufacturers with

an extensive product portfolio. These companies might nd

it best to employ their own sales force and work directly with

retailers.

Many new food manufacturers start by selling directly to

local retailers, establishing relationships and making sales calls

on their own. They might not have adequate production and

sales to attract a broker at rst. It is time to hire a broker when

you no longer can manage all of your retail accounts and/or

you want to expand to other retailers and supermarkets.

Manufacturers also might employ a broker if they are having

difculty penetrating markets, selling to particular retailers, or

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4 • Using Food Brokers in the Northwest

nding a distributor. Because of their relationships with retailers, brokers

might be able to get products onto a retailer’s shelves when a small manu-

facturer might not get through the door.

How to pitch to a broker

Brokers want to see established sales before agreeing to sell a new prod-

uct. This makes the broker’s job easier, as it will take less time and money

for the product to become established in a larger market. For a small to

medium-size brokerage rm representing 6 to 15 manufacturers, a new

product from a new manufacturer is a big risk. Because of the enormous

amount of resources needed to “pioneer” a new line, a broker will consider

taking on a new product only if it is unique and lls a niche. When you

approach a broker, the sales pitch is to convince the broker that the product

will sell successfully.

In the Northwest, natural and organic food sales are growing, and retail-

ers are seeing demand for these products. A broker, distributor, or retailer

is more likely to take on a new product in this category. Remember, the

broker must be convinced that the product has sales potential and is better

than alternatives (Lelack).

When sending products to a broker or interviewing a broker, you must

exhibit knowledge of the industry. Brokers want evidence that you under-

stand their job and incentives, as well as margins and fees. You should

have a well-thought-out marketing plan—including target customers,

marketing budgets, and product information sales sheets—and passion

for the product. It is important to establish a good rst impression; even if

the brokerage rm does not pick up your product immediately, it might be

interested in the future.

Although it usually is helpful to have established

sales before approaching a broker, some brokers pre-

fer products that have yet to be introduced to retailers.

Lori Lansing, vice president of Co-Sales Northwest,

says she prefers new products and advises manu-

facturers to decide early whether they want to use a

broker. If they try unsuccessfully to sell to retailers

on their own, it is more difcult for the future broker

to call on those same retailers, who might say, “Don’t

bother, I’ve already seen it” (Lansing).

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Using Food Brokers in the Northwest • 5

Commissions and fees

Brokers are paid a commission that is a percentage of the wholesale

price. Commissions can be as high as 15 percent, but they average around

5 to 7 percent (Brooks). The commission depends on the food category

(e.g., perishables versus dry goods) and the customer (distributor versus

retailer). For instance, a commission for a branded product usually is

around 5 percent, while a commission for a private label product typically

is closer to 3 percent (Food Brokers USA). Commissions for sales to a

retailer might be higher than commissions for sales to a distributor.

Start-up fees commonly pay for the broker’s efforts in establishing

sales. The start-up period can last around 6 months and can cost from $500

to $2,000 per month. Fees vary by brokerage rm, product, and manufac-

turer. The more time and effort it takes to sell the product, the higher the

start-up fees. These charges usually act like a guaranteed commission: if

sales occur during this period, commissions replace the start-up fees.

In-store demonstrations are a good way to introduce a new product

and often are required by retailers. In a brokered deal with a retailer, the

retailer might agree to carry a product if there will be a certain number of

in-store demos. Brokers either staff demos themselves or hire a demonstra-

tion service to learn about the product and conduct demos. Demonstra-

tion services usually charge $75 to $100 per event. The broker will pass

these fees back to the manufacturer. For large retail chains that require a

monthly demonstration at all of their stores, these fees can add up quickly

and should be evaluated as to their benet to sales. Brokers also may ask

the manufacturer to staff the in-store demonstration, depending on the

requirements of the retailer.

Do your research

There are several ways to nd brokers. You can check the local yellow

pages, as well as websites (for example, www.foodbrokersUSA.com).

Many brokers have websites with company and product information.

Other food manufacturers, retailers, and distributors are great sources of

recommendations. By attending trade shows, you often can meet brokers

from many geographical areas.

It is important to do some homework before approaching brokers. In

order to sell successfully, the broker needs to understand your product and

your business goals. You should be comfortable working with the broker

and feel condent that the broker will have the time and staff to commit to

selling your product. Completing the “Brokerage research form” (Appen-

dix A) will help you answer some important questions about each broker.

It may be useful to work on this form prior to the rst interview and/or to

use it as a guide during the interview.

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6 • Using Food Brokers in the Northwest

Choosing a broker

Choosing the right broker is very important. The broker–

manufacturer relationship can determine the success of the

product. A successful match will benet both the manufacturer

and the broker. Due to consolidation in the retail grocery indus-

try, there are fewer and fewer retail “full-service” brokers, but

it is wise to interview several (at least three) before choosing

one.

New manufacturers should choose a small or medium-

size brokerage rm that has experience representing multiple

product lines and multiple manufacturers but doesn’t carry too

many lines. Brokerage rms that represent six to nine manufac-

turers are a good size to look for (O’Halloran).

A good broker will have experience working in the food-

service industry or retail grocery industry. Good brokers have knowledge

of the local or regional market and have established relationships with

retailers and distributors. It is all right if the brokerage rm is new, as long

as its brokers have many years of experience and have developed relation-

ships with buyers in the area.

Although it might seem that you are the one being interviewed when

you visit potential brokers, be sure to ask key questions to make sure

you’ve found the right sales people. Also, asking educated questions may

indicate to the broker that you are a viable food company. Always check a

potential broker’s references with distributors and retail stores (Brooks).

Ask brokers the following questions:

• How many years have you been a broker?

• Who are your major clients?

• Who are your major customers? How long have these relationships

existed?

• What distributors do you work with?

• Do you sell any products that would complement or compete with my

product?

• Are you familiar with my product category?

• Who would you assign to my account, and what accounts do they cur-

rently have?

• How long do you anticipate it will take to get sales?

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Using Food Brokers in the Northwest • 7

Contracts and terms

Typically, the manufacturer creates the brokerage

agreement. When interviewing brokers, take a contract to

each interview. In most cases, the manufacturer proposes

a commission rate that can be modied in negotiations

with the broker (Lelack). Rates often are determined by

the anticipated degree of difculty to establish and sell

the product, as well as the potential sales volume.

Brokerage agreements differ from company to com-

pany, but most include:

• Commission rate

• Dened territory

• Terms for termination

• Incentives

• Commission payment schedule

• Procedures for unauthorized credits and uncollected accounts

• Conditions for competitive products

Historically, brokers worked on a 30-day contract, but more and more

they are locking in manufacturers by requiring a 1-year minimum contract.

Because of the cost, effort, and maintenance involved in launching a new

product (setting up appointments, making sales calls, and getting purchase

approval), it can take up to 6 months for a broker to get an order. The

process can take even longer because some retailers take sales calls only

during certain times of the year (Food Brokers USA).

Some brokers do credit checks on new accounts and collect overdue

invoices. Discuss these services during contract negotiations (Hall).

Working with your broker

Managing a broker is just as important as selecting the right one. Visit

key customers with your broker several times a year. Large brokers have

a monthly call frequency (O’Halloran), whereas a smaller brokerage rm

might call on retail customers more often.

It is important to send product updates to your broker. The more infor-

mation brokers have, the better they can sell. Brokers can use new product

information, testimonials, and success stories to market your product.

Brokers can help promote products by working at trade shows, festivals,

or other public events that display products to the public or trade (Hall).

Brooks, J. Are Food Brokers Right for You? Oklahoma State University, Food and

Agriculture Products Research Technology Center. FAPC-130 (2004).

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8 • Using Food Brokers in the Northwest

When creating promotional strategies, you and your broker should develop

a plan that will work for both of you.

If you aren’t sure whether your broker is showing your product ade-

quately, request a monthly sales report. Check whether your broker is pull-

ing product from your inventory. If not, he probably isn’t showing your

product to retailers (Lelack).

Brokers should know when retailers will look at new products. They

also should be able to nd out about retailers’ additional fees or require-

ments. Ask your broker these questions before approaching retailers.

Words of wisdom

An independent food broker in Portland, Co-Sales Northwest, recom-

mends that new manufacturers consider the following (Lansing).

• Know how pricing works.

• Understand fees, commissions, and markups and how they affect the

nal retail price.

• Money: Expect to spend a lot to pioneer a new product.

• Packaging: Have a unique label and a uniform container.

• Product: It is easier to sell a new product if it is unique and ts a niche.

• Have a plan and be informed and knowledgeable about the broker’s,

distributor’s, and retailer’s businesses.

• Decide early whether you want to use a broker.

Summary

Food brokers are a useful resource for manufacturers who want to

expand their sales. Brokers are experts in selling and have built their busi-

ness on developing relationships with customers. They have proven to be

invaluable to new and existing food manufacturers.

With consolidation among food brokers, nding the right broker can be

challenging. You must convince brokers that your product will generate

adequate sales. Having a plan and showing enthusiasm and willingness to

promote your product will help you gain a broker’s respect and interest.

Securing a broker is not the end of your sales efforts. Often, new manu-

facturers still must do sales work, either independently or with the broker.

Successful manufacturers aggressively pursue sales even when using a

broker (The Food Institute Report, October 22, 2001).

It takes a lot of time, effort, and money to introduce a new product.

Having a sufcient level of production, as well as an understanding of all

the costs involved in marketing a food product through a broker, is vital.

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Using Food Brokers in the Northwest • 9

Appendix A. Broker research form

Company name

Address

Phone Fax

ebsite

Years in business

Recommended by

Contact name

Contact e-mail

Contact title Contact phone

Area of coverage

Food categories

Ser

vice highlights

Marketing programs

Current manufacturers

Retail customers

Requirements

Form/contract requirements

Start-up fees

Additional fees

Comments

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References

Brooks, J. Are Food Brokers Right for You? FAPC-130. Oklahoma State University, Food and

Agriculture Products Research Technology Center (2004).

Brooks, Jim (e-mail correspondence). Oklahoma State University, Food and Agricultural Prod-

ucts Research and Technology Center (August 4, 2006).

“Brokers Can Help Small Food Business Owners Who Pound the Pavement,” The Food Institute

Report (October 22, 2001).

Food Brokers USA. www.foodbrokersusa.com

Hall, S.F. From Kitchen to Market: Selling Your Gourmet Food Specialty. Dearborn Trade Pub-

lishing, Chicago, IL (2005).

Lansing, Lori (interview). Co-Sales Northwest (May 17, 2006).

Lelack, Dave (interview). Cascade Food Brokers (April 26, 2006).

O’Halloran, Mike (interview). Advantage Sales & Marketing (May 9, 2006).

Wolfe, K. Specialty Food Brokers. ADC Info #22. The University of Tennessee Agricultural

Extension Service (1998).

For more information

Food Distribution Channel Overview, EM 8921

Grocery Retailers in the Northwest, EM 8924

Using Food Distributors in the Northwest, EM 8923

These publications may be viewed or downloaded from the Web. Visit the online OSU

Extension Service Publications and Multimedia catalog at extension.oregonstate.edu/

catalog/

Hard copies also are available from OSU Extension and Experiment Station Communica-

tions. For prices and ordering information, visit our online catalog or contact us by fax

(541-737-0817), e-mail ([email protected]), or phone (541-737-2513).

Visit the Food Innovation Center website at c.oregonstate.edu/

This publication was produced and distributed in furtherance of the Acts of Congress of May 8 and June 30, 1914. Extension work is a coopera-

tive program of Oregon State University, the U.S. Department of Agriculture, and Oregon counties.

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mentioned.

Published December 2006.

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