A frequently asked question that we hear from companies is why and when would a food manufacturer work with a food broker.
A broker acts on behalf of a food company to communicate with potential and current retail chain customers. Brokers have contacts with retail chains and expertise on presenting product and negotiating agreements. This can be especially helpful when working with major retailers that may have a complex set of requirements. Brokers do not take ownership of product but charge a commission that can range from 5-10% of sales revenue.
It is helpful to know that a broker is different than a typical "distributor” that takes ownership of product and sells and ships to retail customers for a profit. Some companies hire a broker to establish and manage retailer sales relationships and uses a distributor to store and deliver product. Keep in mind that some “full service distributors” also offer retailer account management and a separate broker may not be needed.
Food brokers select their portfolios of companies carefully and seek products with potential for sales growth. Early stage companies may need to demonstrate their product and market potential to a potential broker.
For some company founders, pitching to and working with customers is their passion and they are successful building their own retailer connections. Others may choose to focus on different business initiatives and hiring a broker can be a effective growth strategy.
Tip: When talking to a potential broker understand the contract terms and commission details, their proven retailer connections, and who and how they will represent your product, brand and company.
From more info, the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) website has helpful resources: http://www.omafra.gov.on.ca/english/new/food-broker-dist.htm
By Marlis Bens, Venturepark Labs Program Manager