Are Emerging Brands Being Pushed to Distributor Too Early?

In the competitive world of consumer packaged goods (CPG), the allure of rapid distribution can be tempting for emerging brands. However, without sufficient volume sales, this rush can lead to significant challenges, particularly when it comes to maintaining financial health and building brand awareness.

The Need for Volume Sales

When CPG brands enter distribution channels, they often sacrifice margins in exchange for market access. Distributors typically take 25-45% of the sales, a trade-off that is only sustainable if accompanied by substantial volume sales. Without this volume, brands might find themselves with depleted working capital, leaving little room for crucial marketing activities and other operational costs.

Challenges of Insufficient Volume

1. Financial Strain: Without adequate sales volume, the reduced margins can quickly eat into a brand’s working capital, limiting its ability to reinvest in growth and manage inflationary costs.

2. Limited Brand Building: Insufficient funds can hinder marketing efforts, preventing brands from effectively creating demand and building consumer awareness.

3. Market Presence: A lack of brand visibility can result in slower growth, as potential customers remain unaware of the brand’s offerings.

4. Handling Inflation: With slim margins, there is often nothing left to cope with rising inflationary costs, which can further strain the brand's financial health.

Retailer Pressure and Strategic Distribution

How many times have we heard from brands that they can't get into retail without a distributor? Retailers often push brands into distribution to optimize their workload, but this can backfire. Without the necessary cash flow, brands can't invest in building demand and driving customers to their doors. It's time to think more strategically and take a broader, more impactful view of the merchant-vendor relationship. That's where Purchs comes in—reducing workload and costs. 

Purchs gives retailers the ability to evaluate product-market fit without being preoccupied by impact on workload. By using Purchs, merchants are able to manage all their vendors in one place for better manage of their resources. In return, a brand has the resources for demand creation and achieving sustainable growth.

Conclusion

While the prospect of rapid distribution is appealing, CPG brands must carefully consider their volume sales and financial readiness. A balanced approach that prioritizes sustainable growth and brand awareness is key to long-term success. With Purchs, brands can navigate these challenges more effectively and strategically build their market presence.