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Food, Beverage & Consumer Goods

Navigating the Grocery Aisles: The Broker’s Role in Consumer Packaged Goods (CPG)

Author
Norberto Lopez Director
Author
Matthew Laredo Director

As consumers, we’ve all experienced that familiar sensation—the one that strikes as we stroll down the aisles of our favorite grocery store, surrounded by a dizzying array of choices. The shelves teem with products, each vying for our attention. Should we stick with the tried-and-true brands we’ve known for years, or venture into uncharted territory with something new? Perhaps it’s the eye-catching packaging, a competitive price or the promise of better taste and health benefits that sway our decision. And let’s be honest, sometimes it’s simply the product, well placed at the end of an aisle, triggering our impulse buying.

This everyday consumer reality creates a challenge for food and beverage manufacturers who compete for the opportunity to catch a consumer’s eye and wallet. Breaking through a retail buyer’s calendar and into their planogram is access not afforded to every up-and-coming brand. As consumers, we see successful new entrants into our cart routinely, but how do these manufacturers achieve this in a crowded marketplace?

The Broker Ecosystem: Behind the Scenes

Many food and beverage companies, especially those not yet household names like Kraft Heinz or Nestle, rely on a critical behind-the-scenes player: the broker. These brokers play a pivotal role in ensuring that products secure prime placement on store shelves and receive the promotional support needed to move off those shelves and into consumers’ carts.

But what exactly is a broker, and how does this ecosystem work? Let’s delve into the details:

1. The Broker’s Role

  • CPG Brokers: These intermediaries act as liaisons between manufacturers and retailers. They can negotiate deals, manage relationships, and facilitate product distribution and merchandising. Essentially, they bridge the gap between the producer and the consumer.
  • Distributor Ecosystem: Brokers collaborate closely with distributors—the entities responsible for physically moving products from manufacturers to retailers. Distributors handle logistics, warehousing and delivery.
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Food and Beverage - Routes to market - Alexander Group, Inc.

Routes to Market

2. Key Questions for CPG Companies

For CPG companies, especially those with limited direct sales teams, several critical questions arise:

  1. Which Accounts Require Broker Engagement? Not every account necessitates broker involvement. Identifying the right accounts for broker collaboration is crucial to economically expanding your coverage.
  2. How Should the Broker Relationship Evolve Over Time? Brokers’ roles can shift as products mature or new opportunities arise. Adapting the relationship is essential as your supplier power increases.
  3. How Can Companies Hold Brokers Accountable? Ensuring broker accountability is key for success. Metrics, performance evaluations and clear expectations play a vital role and need a standard cadence for review.
  4. Which Brokers Deserve More Attention? Some brokers excel, while others may underperform. Companies must consider their investment decisions and allocate resources wisely.
  5. Is Your Broker Spending Effective? The money spent on brokers should be yielding the desired results to be worth the investment. Regular evaluation is essential.

3. The Broker Performance Model

To address these questions, consulting firms collaborate with leading organizations to tailor a broker performance model. Here are the key components:

  1. Define Broker Relationship Tenets for Each Account. Clearly outline expectations, roles and responsibilities for brokers working with specific accounts.
  2. Evaluate Broker Performance by Category Within Accounts. Assess how brokers perform in different product categories. Identify strengths and areas for improvement.
  3. Identify Value-Adding Opportunities. Determine where brokers can provide the most value within each account. Redirect efforts as needed.
  4. Continuous Review and Evolution. Regularly review broker performance, track progress and adapt strategies. Reward outstanding performance.
Food and Beverage - Broker Evaluation Process - Alexander Group, Inc.

Broker Evaluation Process

4. The Pitfalls of an Unstructured Broker Program

Without a structured approach, broker programs can fall short. In the worst-case scenario, companies may feel beholden to brokers rather than the other way around. As one executive aptly put it, “Without ongoing accountability, it feels like we work for the brokers.”

5. Assessing Broker Effectiveness

When evaluating brokers, consider these key areas:

  • Year-Over-Year Growth of the Account
  • Number of Broker Representatives Assigned to the Account
  • Average Revenue Brought in by Each Broker
  • Communication Frequency with Broker Reps
  • In-Category Product Portfolio and Entire Product Range
  • Financial Performance (Broker Fees, Trade Spend, Profit)
  • Buying Model (Centralized or Regional)
  • Product Commoditization Level
  • Strength of Distributor Relationships
  • Broker Capabilities

Conclusion

As the Food & Beverage CPG industry strives for sustained profitable growth, optimizing broker relationships becomes paramount. While internal resource management is essential, the true impact lies in nurturing effective partnerships with brokers. So, next time you’re in the grocery aisle, remember that behind many of those neatly arranged products, there’s a network of brokers working diligently to ensure you find exactly what you need.

Need a Fresh Approach?

For more information, please contact Alexander Group. Let’s navigate this complex landscape together and drive success for your brand!

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