Preparing for National Distributors: Are You Really Ready?
Many founders wonder, “Am I big enough for UNFI yet?” or “How do I know if I can afford working with KeHE?” while dreaming of placing their products on shelves nationwide. Partnering with a national distributor can indeed fuel expansion, but it also amplifies financial, operational, and marketing demands. Jumping in too early can cripple your margins, strain your supply chain, and damage retailer relationships if you can’t keep up.
This guide helps you evaluate whether your brand is truly ready for the big leagues. From margin math to marketing plans, we’ll walk through the critical steps to ensure you can handle the costs, capacity, and velocity required by distributors like UNFI and KeHE.
Margin Math: Do You Have Room for Distributor Fees?
When emerging brands ask, “Can I afford working with UNFI or KeHE?”, they’re usually focused on the distributor’s cost-plus markup. In reality, you must also plan for inside income fees—like data charges, promotional allowances, or spoils fees—that can cut deeper into your profit.
Plan for 25–30% Margin Loss: Most specialty/natural channels demand at least a 25–30% margin split between distributor and retailer.
Budget Promotional Spend: Expect trade promos or discount events to maintain shelf velocity.
Price Elasticity Check: Ensure your final SRP stays competitive. If your raw cost plus a 30% margin pushes you out of your target shopper’s price range, you might need to rework your cost structure or re-evaluate packaging sizes.
Reality Check: If your brand’s margins are already thin, you risk losing money on every unit once distributor fees kick in. Confirm your cost-to-serve and craft a profitable price before signing any distribution contract.
Production & Supply Chain: Can You Consistently Fulfill Larger Orders?
One of the biggest pitfalls for brands thinking, “Am I big enough for UNFI yet?”, is overestimating how quickly they can scale production. National distributors often place larger, more frequent orders than local or regional ones.
Co-Packer Capacity: Can your current co-packer ramp up if you land 500+ new stores? Are you prepared to buy materials in bigger lots, with longer lead times?
Warehouse & Freight Logistics: Distributors may require palletized shipments, specific labeling, and timely deliveries. Missing these benchmarks can incur costly fines or damage your reputation.
Inventory Management: Grocers and distributors expect consistent stock levels. Sudden out-of-stocks can lead to delistings or reduced reorders.
Reality Check: If you can’t meet demand or keep shipping consistent, national distribution can backfire. You might be better off growing region by region, perfecting your supply chain before scaling up.
Marketing & Brand Awareness: Do You Have a Plan to Drive Velocity?
Signing a contract doesn’t guarantee success. Velocity—units sold per store per week—determines whether retailers keep reordering your product. Distributors move boxes; they rarely promote your item unless you pay for specific programs.
Retailer Education: Arm your broker or sales team with a compelling story, strong sell sheets, and product samples.
Marketing Budget: If you’re entering new markets, plan for in-store demos, targeted ads, or influencer outreach that aligns with local audiences.
Proven Playbook: Have you tested your marketing tactics at the local or regional level? Replicate that success or refine it for national reach.
Reality Check: If you haven’t proven consistent velocity in a smaller region, national expansion likely won’t fix your marketing gaps. Validate your branding and demand generation strategy before going wide.
Broker & Sales Support: Who Will Manage Retail Relationships?
Another overlooked reality: “Distributors aren’t your sales team.” They stock and deliver product, but you (or a broker) must handle retailer pitches, promotional calendars, and shelf placement follow-up.
Broker Fit: If you choose to hire a broker, do they specialize in your category (e.g., natural snacks, refrigerated beverages)? Do they have existing relationships with key retailers?
Internal Sales: If you handle it yourself, ensure you have bandwidth for buyer meetings, store visits, and data tracking.
Communication Cadence: Proactive follow-ups with retailers and the distributor keep your product top-of-mind for new listings or expansions.
Reality Check: If you don’t have a broker or a dedicated in-house sales rep, your item could languish in the distributor’s catalog. Maintaining shelf presence across multiple regions requires hands-on sales support.
Cash Flow & Payment Terms: Can You Survive the Wait?
Large distributors may pay you 30, 45, or even 60 days after receiving product. This can create a financial gap if you need to fund raw materials or co-packing upfront.
Extended Payment Cycles: Prepare for 1-2 months of no cash inflow after delivering product.
Promotional Deductions: Keep an eye on statements for chargebacks or extra fees. A single large deduction can disrupt your working capital.
Financing Options: Some brands use purchase order financing or lines of credit to bridge the gap between production and distributor payment.
Reality Check: If your brand can’t float 60 days without payment, you might face a liquidity crunch. Confirm you have adequate cash reserves or financing in place before committing to large-scale distribution.
How to Know You’re Ready: A Quick Checklist
Margins: You can comfortably absorb 25–30% in distribution + retailer cuts, plus potential inside income fees.
Supply Chain: Your co-packer or facility can handle higher volumes, and you have a plan for timely freight.
Velocity & Marketing: You’ve proven local or regional success and have a repeatable promotional playbook.
Broker/Sales Team: You have a strategy for managing retailer relationships—either in-house or via a reputable broker.
Cash Flow: You can handle extended payment terms and unexpected chargebacks.
Administrative Readiness: You’ve budgeted time or resources for reconciling invoices, tracking shipping, and disputing unapproved fees if needed.
If you’re solid in these areas, you stand a much better chance of profitable national expansion. If not, focus on patching the gaps or consider a slower, regional rollout first.
The #1 mistake we see brands make with this decision:
“I don’t have the margins now, but when I grow my sales, the margins will come with it.”
With growth comes complexity and costs. Be in the place to make money today, and you will tomorrow.
Next Steps: