How to Get a Distribution Deal: Molson-Coors Enters Partnership with Bavaria (UK)
You have a great product. You need to get it out into the marketplace. You want it to be stocked in key places whether this is major supermarkets, High Street chains, independent shops, bars, restaurants, wholesale suppliers, online shops etc.
But as a small, medium or even large firm, it can be very tricky to get your product into these places, especially when you need to preserve your margins as much as possible. Everyone has heard the horror stories about suppliers working with major supermarkets.
A distribution deal with one of the key players for your industry might be the perfect solution. They already have the necessary network, relationships and bargaining power. But how do you ensure the best deal for your company?
In this short article, you will discover how to arrange a distribution deal and how we helped Bavaria UK to secure a lucrative deal with leading global brewer, Molson-Coors. We will cover:
- The Benefits of a Distribution Deal
- The Key Points of a Distribution Deal
- The Pitfalls in Agreeing a Distribution Deal
- Why Else Solicitors
The Benefits of a Distribution Deal
A distribution deal offers many benefits to suppliers. It gives you access to:
- A wide distribution network including the major players and their supply chains
- The relationship network (and the accompanying trust and familiarity) needed to make deals with corporates and larger businesses
- A substantial marketing budget for your products
- A massive salesforce of trained individuals who regularly negotiate and sign major contracts which your products can be part of
These are all very attractive but not every supplier can find a distributor as you have to:
- Fit into their portfolio of products
- Have an established and attractive product so they know they can sell it
- Agree a price where they can make a good profit to pay for the above benefits and more
- Be able to produce enough to satisfy their buyers in the needed timeframe
A distribution deal is a commercial agreement between suppliers and distributors. As a supplier, you need to first consider how and when to structure these deals.
The Key Points of a Distribution Deal
A distribution deal needs to cover a number of key factors including:
- What products and ranges your distributor is going to sell
- Where they will sell them (countries, industries etc.)
- Pricing and volume– the distributor needs to know they are going to make a profit but you need to maintain your margins
- Stocking and fulfilment- how much does the distributor need to carry in stock and how quickly can you fulfil orders
- The use of your trade marks by the distributor
- Marketing guidelines for the distributor which outline how they can and cannot market your products
- What success looks like for the distribution deal to carry on after the first year*
*This is important as you might need to change or come out of the deal if sales are not as good as hoped.
It is important that you get the best deal possible and that your agreement protects your business and your brand going forward.
The Pitfalls in Agreeing a Distribution Deal
There are a many pitfalls in agreeing a distribution deal. These include:
1. Getting the best deal for your business
It is always tough to reach an agreement. Both you and the distributor need to make a good profit if any deal is to be workable. Suppliers of every size can feel they have to give away their margin to secure the deal when this is not the case. They often feel it is impossible to talk on a peer-to-peer basis with the distributor so they usually feel they are on the back foot to start with and are willing to concede margin when it’s unnecessary.
A third party who is not so close to the outcome can look at the situation dispassionately and is well-positioned to find a better solution for both parties.
2. Ensuring the legal paperwork accurately reflects what you have agreed
This is a major stumbling block. Typically, both parties walk away from the negotiating table with a different idea of what has been agreed. People tend to remember the things favourable to them and often forget some of the concessions they had to make to agree the deal.
It has often been said the person who writes the contract wins the day. Again, it is best to have a solicitor who is slightly distanced from the result to produce this.
3. Setting realistic expectations on both sides
If any distribution deal is to be successful, then both sides must start with realistic sales expectations and then discuss and agree what is likely to be achieved and what to do to ensure this.
Sales volumes are key for both you and your distributor.
4. Protecting your brand
The supplier has to allow the distributor to use their trade marks and market their products. It is vital that clear marketing guidelines are agreed in the deal so that your brand is protected and your products are not mis-marketed.
5. Protecting your business
Finally, it is important your business is properly protected by the deal. There are many things to consider here from payment terms and lead times to marketing and your on-going business relationship.
We highly recommend that you use a solicitor who has:
- Solid commercial experience
- Proven negotiating skills
- Worked as an in-house solicitor
This last one is important as your solicitor will understand the distributor’s in-house legal team and be able to present them with what they need and want.
Why Else Solicitors?
Else has been involved in organising a range of distribution deals for various businesses in a range of industries. We are particularly experienced in the brewing industry.
Our most recent success was being involved in the Bavaria UK – Molson Coors deal. Adam Gilbert, our Head of Corporate and Commercial Director, was instrumental in bringing this about.
Bavaria N.V. is a Dutch brewing company with a UK trading arm based in Staffordshire. They wanted to expand their reach and grow their market share and had been speaking to Molson-Coors for some time about a distribution deal for UK on-trade clients (e.g. bars, restaurants, hotels etc.).
Molson-Coors were keen to have the Bavaria range (including the world’s first alcohol free beer) as part of their offering.
Fred Landtmeters, Managing Director, Molson Coors UK & Ireland said
“Bavaria and Molson Coors both share a rich heritage and an unwavering commitment to producing excellent beer. The no/low alcohol segment is a growth area of the category and by working together with Bavaria along with the strength of our overall brand portfolio we are in a great position to maximise this opportunity.”
Adam was assigned by Bavaria UK to be part of their legal team and work on the negotiation with Molson-Coors and help their in-house Dutch legal team to understand the deal and the UK law surrounding it.
“Bavaria were in the process of negotiating an on-trade distribution deal with Molson-Coors. We were keen to accelerate the process so we asked Else Solicitors for their support. Adam effectively became part of our team and his understanding of the brewing industry was invaluable. With his support, we quickly agreed a distribution deal for both on-trade and off-trade making the deal even more profitable for both parties.” commented Rob Page the Managing Director of Bavaria (UK).
In Molson-Coors’ experience this type of deal would take 4-5 months to agree and sign. With Adam’s support, it was all completed in just 3 weeks. This was in part due to Adam’s enviable experience and skill set. Adam is not only an accomplished solicitor who knows the industry and has formidable business negotiating skills but he has also been an in-house lawyer.
He said
“This was a great project to be involved with. It was a pleasure to work with both Bavaria and Molson-Coors’ in-house legal team. I had previously worked as an in-house lawyer so I had a good idea of what they needed. It is very important to in-house legal teams that each agreement along with the little details that make up a distribution deal are fully nailed down. We worked hard to deliver such a deal and we were able to rapidly finalise it and get the contracts signed.”
As a third party, Adam was able to effectively represent Bavaria UK thus ensuring that both sides got a good deal and the contracts where quickly put in place.
If your business is interested in getting this type of support with distribution deals or general commercial agreements, then we invite you to contact Adam Gilbert, Head of Corporate and Commercial Partner at Else Solicitors on 01283 526229 or at adam.gilbert@elselaw.co.uk.