Dear UNFI

Dear UNFI,

We’re at an impasse. We’ve been together for as long as I can remember but as the retail environment changes, so do we. In order for this to work, we have to be able to communicate better. I’m willing to listen because I know that each of us has our own challenges but we have to make this work for the customers. It’s gotten so bad that every night I close my eyes and I go to sleep angry. And I need you to know why.

           While extending this metaphor certainly appeals to the writer in me, It’s probably best that I cut to the chase and make the assertion that the relationship between brand and distributor is no longer a functional one. The intent of this article is not to demonize one side because I know that UNFI, Kehe, DPI and other specialty distributors have all experienced hardship as our industry faces consolidation, increased freight costs, complex labor systems, and an onslaught of competition from ecommerce upstarts. The intent of this article is to initiate a conversation between my side (the CPG startup) and yours (the distributor). I sincerely believe that if we are able to create a dialogue we can embrace the possibility of creating an environment that supports small food and beverage brands and allows distributors to operate profitably.

           As in any counseling session, a good first step is to articulate my frustration so I’ll use some examples from my day-to-day to illustrate the dysfunction of our relationship. Given my role as an advisor to many food and beverages brands and my own personal experiences I’ve often had to deal with unexpected chargebacks. A glaring example was a recent “opening order and retailer placement” charge passed along by UNFI to an up and coming brand.  As it turns out, the founder had signed a form in early 2016 that authorized free fills for any “conventional A account”. Given UNFI’s retail customers generally require free-fills to support new items, the intent of the program is to encourage new distribution. However, in this case, the retailer neither requested a free-fill, nor did the incentive of a free fill influence the placement decision. Nonetheless, UNFI charged the brand an $8,000 fee. To make matters worse, the same company has had ongoing issues with all of their distributors taking advantage of the 2%, net 10 terms without ever paying within 10 days. Further compounding their financial woes, the MCB charges are routinely being applied to the distributors listed wholesale cost (the maximum price an independent retailer pays but certainly not the average) rather than the cost plus price that most major retailers are charged. Couple that with the fact that the distributors are buying over 80% of the product for the entire year on quarterly off invoice months (the buying period of which having been extended to 6 weeks vs. 4, effectively creating a fifth month of deals). All of this might be palatable except for the fact that the brand is forced to sign up for annual ad programs that are big on dollars but weak on retailer engagement or sell through. Worst of all, the supplier relationship managers who are positioned as the brand stewards don’t have the ability to handle any financial disputes but are instead trained to instruct the brand to email a generic collections group whose priorities are certainly not aligned with a founder whose life savings are being treated as frivolous collateral in a system that doesn’t seem to be working for anyone. Add the newly installed 3% freight charges for delivered product, the 1.5% fee to gain access to sell through data, the 90 day off invoice price for any new items in any new distribution center, the $1,000 charge for any price changes without sufficient warning, etc. etc. etc. etc. etc. etc. How can any of these brands possibly succeed in retail? Breath.

           Ok, now your turn. I know it’s not easy for distributors in our current environment, and I can say without trepidation that I have a multitude of friends who work for the big distributors who are the smartest, kindest, most passionate brand supporters that I know. Through them, I have experienced how frustrating it can be to lose business because the brands that they bet on don’t provide consistent and accurate supply of their product. I can empathize with the fact that in distribution, margins are unbearably thin and often predicated on external factors like labor rates, real estate and gas prices. I can only imagine being held hostage by major retail customers who can be fickle and continually demand better pricing and better service under the threat of finding other means of distribution. How difficult it must be to appeal to the constant shifts in consumer demand in a warehousing and inventory management environment that can’t change nearly as fast. And I know how difficult start-ups can be as customers. As a distributor, to be complacent is to die and to scale is the only means of survival. I think I understand some of what you are facing but I’m desperate to know more. 

Despite all of these challenges I am optimistic that there is a better way. I believe that we can create a more meaningful dialogue between brand and distributor to create solutions collaboratively vs. in a vacuum. Rather than an annual meeting with a Supplier Relationship Manager where the principle agenda is to sell more programs, why not a meeting to identify opportunities, new distribution, freight efficiency, margin analysis, and best practices. I believe that data should be made accessible and disseminated in a way that help brands sell more product vs. sold in clunky formats so that only brands who have raised enough capital can afford them. Even then, very few brands are at the stage where they have access to someone who can analyze the data to determine what to do with it. I support programs like UNFI Next but in their current format they seem under-funded and under staffed. Why not create a robust accelerator program that trades access for equity thereby generating long term value for both brand and distributor. It’s time to end advertising programs that have nothing to do with selling product and everything to do with filling profitability quotas. I fervently believe in promotional trade but only when it is properly evaluated and executed and distributors have the data and brain power to make it happen. Rather than 90-day intro discounts for new items, why not implement ride along programs between account managers and brand owners to educate distributor selling teams on new items? New item webinars are ok, but honestly how many of us pay attention on lengthy phone demonstrations. Not me. I realize that some of these high touch programs aren’t feasible for all brands but distributors could certainly try to target the more vulnerable start up community. Rather than creating a take it or leave it environment, why not create a messaging platform where brands can ask questions to distributor reps in real time. How can we better leverage technology to bring us closer?! I’m not talking about Snapchat or Insta Stories, I’m talking about free performance portals, opportunity gaps, buyer to brand virtual meet ups, and planogram previews. Why not create a small brand coalition to meet with distributor executives on a regular basis to address concerns and better articulate positions on both sides? When did our relationship become so adversarial? Distributors and food producers have been working side by side since food moved from farm to community and it will only become more important as our population grows. It’s our duty to make this work.

I don’t mean to pontificate, I know you’ve accused me of that in the past. I don’t mean to belittle you or make light of your own frustrations in dealing with me. I respect you and I know you want the best for me and our beloved customers. You and I, we’ve created something over the past 30 years that goes beyond a bottom line. We got into this business because at the end of the day we love feeding people good food. Let’s put our differences behind us and focus on doing that. I’m ready when you are.