It’s time for you to hire a consumer packaged goods (CPG) broker. Or is it? And if it is, how do you find one and manage them? You’ve got questions. We’ve got answers.
CPG brokers make sure your products stay on the shelf. They help brands connect with retailers, negotiate deals, and much more. Working with a skilled broker will help develop and maintain important relationships with leading major retailers and smaller specialty stores.
If you are thinking about hiring a CPG broker but don’t know where to start, you’ve come to the right place!
Four Reasons You Need a CPG Broker
Here are four top reasons why you need a CPG broker:
- If your team is small or you want to grow fast, using a broker is a must.
- Brokers might get you in with retailers faster because they already know the buyer and sell products to them.
- Hiring a broker can have a less immediate impact on cash flow than hiring in-house sales staff.
- Good brokers help with paperwork, navigate retailer vendor systems, and compile sales data weekly, especially with the major retailers.
Where to Find CPG Brokers
Start with referrals. Check LinkedIn, internet searches, tradeshows, and associations related to your products. You can also ask the category buyer at the retailer for referrals and look for ads in magazines or trade journals related to your products.
Finding a CPG Broker Top Tips
- Keep in mind, the size of the brokerage company does not determine its capabilities or success.
- Ask if the company currently reps any direct competitors.
- Some brokers have been in the industry forever and know the category, buyers, and retailers, but they underperform while others with much less experience or access have the motivation to be high performers.
How to Manage CPG Brokers
First off, you need a written agreement in place that defines:
- The geographic territory
- The channels
- The specific retail chains
- Sales materials that will be provided to the broker
- Whether the broker can hire sub-brokers
- The term (usually 12 months)
- Other standard contractual terms
How to Work with a Broker
While working with the broker, you should:
- Create and supply all the selling materials to the broker. They should not create or modify selling collateral without your pre-approval.
- Tell them what new retailers you want them to target.
- Clarify what they need to do to grow sales with existing accounts.
- Set goals with timelines so that you can track success.
- Regularly communicate with your broker so you’re in front of them and can catch problems or any issues as they arise.
Brokers generally get paid according to the following:
- Specialty/Natural channel: 5-12% + monthly fee of $500-$1000.
- Mass, Club, Grocery channels: 5%;
- Drug channels: 5-7%;
The percentage you pay should always be on net sales (minus returns). This is crucial: they get paid after the retailer has paid you. At the end of your term, you may be able to negotiate the percentages down.
When to Fire a Broker
No progress with selling you into a retailer? Let the broker go.
Typically this will be a mutual decision. How long do you wait? Three months is usually sufficient time to secure a meeting. In some cases, the retailer might not review the category for another 6-12 months.
Is the broker dragging their feet, not committed to selling your product, or have they performed some other infraction? Fire them.
At some point, when your company has grown enough to pay a staff hire to get the work done, you can let the brokers go.
Overcome Sales Barriers with Momentum CPG
At Momentum CPG, we are committed to overcoming the sales barriers that are holding back your growth. Request a consultation!