In today’s issue, I’ll go through the 5 most common reasons why drink brands struggle to manage their relationship with distributors. I'll show you my 3-steps to set the foundations right for a healthy relationship and brand growth.
By adopting this process, you’ll make sure you have solid basics in place before you even go into more details.
Unfortunately, most brand owners underestimate how crucial target-setting is. When they get it, they use it as a whip, making the relationship with distributors unbalanced.
Targets and KPIs should be used as a compass, not as a whip. They tell you the direction, but if you don't know where you're heading, they're useless.
I’ve had hundreds of meetings with distributors in 30+ markets across 4 continents. 99% of the time, one or more of these 5 challenges came up:
Challenge 1: you haven’t agreed on targets and KPIs. Agreeing on targets is tough. It's a painful chat to have, I get it. So why not procrastinate? We both want to sell "a lot" right? I've seen a lot of brands starting the discussion but then leaving it blurry and never managing to close it. Don't do that.
Challenge 2: the targets you’ve set are wrong. The second challenge is when both brand owners and distributors get overexcited. They agree on targets but they end up setting them too ambitious. I've seen a lot of hugs and toasts turning into blaming each other over underperformance.
Challenge 3: you refuse to readjust targets to a new estimate. This one is usually driven by the brand owner. Once that's clear that the brand is not going to reach its targets, owners keep pushing for it blindly. This demoralizes teams as they stop believing in it and they end up reaching even worse results.
Challenge 4: you've agreed on targets but the pace to reach them is wrong. This is the devil in the detail. Often all is clear on paper but there's a misalignment between the parties. - the brand wants to accelerate during the same year. Since both parties need to contribute to the investments, the distributor refuses.- the distributor wants to milk the brand and go mainstream very fast. They start using investments tactically. They start promoting the brand in the wrong places as they already had a premium portfolio. They needed a brand to cash in the upper-mainstream segment.
Challenge 5: you've agreed on targets but there is no clear KPIs to track them. Some brands think that setting the yearly volume target is everything. Once you know the end goal, you need to track how to get there. Most brands measure KPIs quarterly but that is often too late as you have only 4 times a year to course-correct.
Sounds tragic? There's a way to fix that. It's no silver bullet but if you put the effort into it, it will work. Here’s the 3-step process I use.
Step 1: Agree on SMART targets & KPIs you both believe in.
When you sit down with your distributor, you only have an idea in mind of how the brand will perform. Set an initial target to start somewhere and agree to revise it after six months (upward on downward). Don't talk about a 5-year plan when you have no market experience. Do that later in the year. That said, set a minimum under which you are not willing to continue.