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What are the most effective ways to build a distribution network for your food business?

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If you have a food business, you know how important it is to get your products to your customers in a timely, efficient, and cost-effective way. But how do you build a distribution network that meets your needs and goals? In this article, we will explore some of the most effective ways to plan, execute, and optimize your distribution strategy, whether you are a small-scale producer or a large-scale manufacturer.

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Shubhendu Dash

Vice President & Head - Farm Sector, ACCESS Development Services
Mehmood Yousaf

Operations Manager at Valley Irrigation Pakistan (Pvt.Ltd) || Managing the maintenance and repair of Irrigation System…

1 Know your market

Before you decide how to distribute your food products, you need to understand your target market and their preferences. Who are your ideal customers, where are they located, and how do they shop for food? What are their expectations for quality, price, convenience, and variety? How can you differentiate your products from your competitors? Knowing your market will help you choose the best channels, partners, and methods to reach them.

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Shubhendu Dash

Vice President & Head - Farm Sector, ACCESS Development Services
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I once launched goat milk in Jaipur market (we were supporting one FPO). Initially all local retailors/HORECA segment either denied keeping the stock, or charged hefty shelf space. Then I undertook a deeper study with leading chefs of five star hotels in jaipur and Delhi NVR and paediatrician and dieticians of leading hospitals. Clearly, there was demand and availablity and quality trust was an issue. After failing in traditional channels, I arranged to keep the stock with an Organic agency (a friend). He also was initially apprehensive as he had no experience in the product and it was not organic. However, when I convinced him that it will have large demand with his organic consumers, he started moving the stock and sold around 1100 bottle

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Mehmood Yousaf

Operations Manager at Valley Irrigation Pakistan (Pvt.Ltd) || Managing the maintenance and repair of Irrigation System || Collaborating with other departments to develop & implement strategies
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To build a distribution network for your food business: Identify reliable suppliers and partners. Establish strong relationships with distributors. Utilize technology for efficient logistics. Advertise and promote your products to increase demand. Ensure a consistent and quality supply of your food items.

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Delton David

Advogado estagiário e expertise em Direito
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Agribusiness is a spectacular branch that provides you with several ways to make money as well as one of the best forms of commerce in the world, therefore there is a need for adequate investment in logistics as well as suitable suppliers to stay in the market once you establish your customer niche. , the supply chain is a crucial role for this sector.

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Silvia Mu?oz Pardo

Sales Manager & Team Leader | Executive Search | Consultoría de HR
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Conocer el mercado ya no solo en los productos de agroalimentación sino de cualquier tipología, debe ser uno de los primeros pasos a realizar antes de embarcarte en la apertura o expansión de cualquier negocio. El tener unas herramientas que sean capaces de generar una información fiable y robusta del sector y de los consumidores a los que te vas a dirigir, es esencial. Concretamente en este sector es crítico el mantener una continua actualización de la información del mercado y competidores, con el objetivo de ir adaptándose a un mundo cada vez más cambiante.

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2 Choose your channels

There are many ways to distribute your food products, depending on your business model, product type, and market size. Selling directly to consumers either online or offline offers more control over pricing, branding, and customer service; however, it requires more resources and logistics. Selling to retailers such as supermarkets or specialty stores gives access to a larger customer base, but also means sharing margins and competing with other brands. Wholesaling your products to wholesalers who then resell them to retailers or other businesses provides economies of scale; however, it reduces visibility, quality control, and profit margin. Finally, selling to food service operators such as restaurants or caterers gives a steady demand; yet, it requires meeting their specifications, delivery schedules, and payment terms.

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Shubhendu Dash

Vice President & Head - Farm Sector, ACCESS Development Services
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It's a chicken or egg situation. Whether to go for bulk production to cater to a large outreach/ low volume market or have a niche and premium placement strategy. Economies of scale can come only with mass production. In terms of processing agri-commodities, the large companies with a big holding capacity can dictate the terms in the market. Small players however, have to function at sub-optimal level to begin with and need to be cautious while designing the #gotomarket strategy. May be it is a good idea to go for B to C in a niche market, or go for B to B with a low profit margin to understand the pulse of the market and then scaleup as the risk taking capabilities grow. B to G is also a good option provided it is within reach.

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Juan Luis Gonzalez Montalvo

Gerente Comercial Combustibles Corpored
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La definición de canal dependerá, en primera instancia, de la capacidad de asimilar gastos. Para garantizar la sostenibilidad de la empresa, es importante tener la certeza de poder pagar los fijos. Si los recursos son suficientes, una apuesta a la venta directa a consumidores, donde hay más margen, pero el mercado se desarrolla más lentamente, puede ser mejor, pero si los flujos no lo permiten, es mejor apostar por un cliente "ancla" con bajo margen pero certeza de mediano plazo, de manera que los fijos queden cubiertos y se pueda entonces atacar un mercado de mayor margen.

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3 Find your partners

When selecting partners to help with transportation, storage, packaging, and marketing, unless you have the capacity and expertise to manage your distribution network yourself, you should consider a few key factors. These include the partner's reputation and experience in the food industry, their alignment with your values, vision, and mission, their network and relationships with your target market, their fees and terms of agreement, as well as their flexibility, responsiveness, and communication skills. Taking these elements into account will help ensure that you find reliable partners who can meet your needs.

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Juan Luis Gonzalez Montalvo

Gerente Comercial Combustibles Corpored
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En un mercado que no tiene una garantía de demanda, y donde se está incursionando por primera vez, es buena idea variabilizar el gasto, haciendo uso de proveedores para almacenamiento y distribución, hasta que la operación justifique recursos propios. Hay que tener claro que los proveedores logísticos, si bien son expertos, y tienen eficiencias que tal vez no podemos alcanzar, también tienen utilidades. Esto implica que hay un punto en el que deja de ser conveniente la tercerización. En ese sentido, si el mercado es estable, y permite el uso al 80% o más de un recurso, hay que pensar en convertirlo en propio. ?Cuidado con caer en la trampa de tercerizar para que otros hagan lo que no estamos dispuestos a hacer! No contratemos explotadores.

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Silvia Mu?oz Pardo

Sales Manager & Team Leader | Executive Search | Consultoría de HR
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A la hora de encontrar unos socios adecuados, hay que tener en cuenta el canal y el consumidor final al que nos dirigimos; así como la fuerza y la ventaja competitiva en la que nos encontramos en cada uno de esos canales. Se producirán casos en los que dado el canal, #routetomarket será dirigirse directamente al consumidor sin intermediarios como puede ser el caso de una venta online, y otros casos en los que sea necesaria la intervención de un intermediario, como puede ser un distribuidor, un agente comercial, una cadena u otros actores logísticos o comerciales, que ayuden a comercializar nuestros productos de manera eficiente, donde no se cuenta con la fuerza y/o la experiencia para conseguirlo.

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4 Optimize your operations

Once you have established your distribution network, you need to monitor and optimize its performance. This means measuring and analyzing customer satisfaction, loyalty, sales volume, revenue, distribution costs, inventory levels, quality standards, demand fluctuations, supply chain disruptions, product recalls, regulatory changes and more. Additionally, you should identify and resolve any issues or challenges that may arise such as seasonality trends, delays or shortages, damages or losses and market shifts or competitive threats.

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5 Innovate and adapt

Finally, you need to keep innovating and adapting your distribution network to meet the changing needs and expectations of your customers and the market. This could involve expanding your product range, variety, or customization; entering new markets, segments, or niches; leveraging new technologies, platforms, or tools; adopting new practices, standards, or certifications; or collaborating with other food businesses, organizations, or stakeholders. Building a distribution network for your food business is not a one-time event, but rather an ongoing process of learning, improving, and evolving. By following these effective ways, you can create a network that delivers value to both your customers and your business.

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Silvia Mu?oz Pardo

Sales Manager & Team Leader | Executive Search | Consultoría de HR
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La innovación en el sector agroalimentario es uno de los factores clave a la hora de desarrollar una rentabilidad sostenible en el tiempo, dada la evolución del consumo de productos de marca propia, el lanzar productos innovadores es una de las herramientas claves para los fabricantes a la hora de atraer nuevos consumidores y afianzar su posición en el mercado.

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Juan Luis Gonzalez Montalvo

Gerente Comercial Combustibles Corpored
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En un mercado competido, los bienes se transforman en comodities. Competir en el mercado de comodities nos obliga al juego del precio, donde los márgenes se castigan, y subsisten los miuy grandes, quienes tienen capacidad de crédito, o en algunos casos, también los que recurren a trucos fiscales y explotación disfrazada del personal para poder competir en el precio. Una estrategia diferente, puede ser descomoditizar el bien. Darle un diferenciador que el cliente perciba como un valor diferente. Ejemplos sobran, por ejemplo en el caso de las aguas purificadas premium, en muchos casos es solamente el empaque. La marca que es de todos los días en una región, se percibe como premium en otras...

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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What are the most effective ways to build a distribution network for your food business?

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3

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1 Know your market

2 Choose your channels

3 Find your partners

4 Optimize your operations

5 Innovate and adapt

6 Here’s what else to consider

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