I work for a food manufacturer and we use distributors in each state to sell our products to a variety of customers - for example; independent supermarkets, health food stores, online stores, fresh food markets, specialty food stores/delis.
We don't tend to have formal agreements drawn up with our distributors, we have been doing business with them since well before I started with my company.
They are distributors rather than sales agents. We sell our products to them, then they mark up the products to sell to their customers.
I have a problem in a state where I have two distributors, one we've had a long standing business with and they sell to stores mainly in metropolitan Melbourne. We appointed a second distributor last year because we heard they were very strong in regional Victoria - Ballarat, Shepparton, etc where there are larger IGA stores that we weren't reaching previously. The second distributor knows that this is why we appointed them and this is the area we want them to focus on to develop our business.
Now the second distributor doesn't seem to be focussing on the regional areas, they are 'stealing' customers in metro Melbourne from the first distributor. So our first distributor is very upset and now not focussing on our products and demanding that I set strict territories for both distributors. I can understand this but am hesitant to do so as I feel like it might be exclusive dealing. Once I sell to the distributors, I feel like I'm not allowed to then restrict where they do business, either geographically or by channel.
However I believe its extremely common in this industry for distributors having contracts telling them where they can and can't sell the manufacturers products. For example - there's one distributor to sell into grocery and one to sell into health food stores. From my reading, this just doesn't seem legal. I think once a distributor has purchased the product from the manufacturer, they are allowed to sell it wherever they like at whatever price they like.
Rather than getting incremental sales growth, my second distributor is just cannibalising the sales from the first distributor and there's no overall growth in the state.
I've told the first distributor that I can't tell the second distributor that they are not allowed to call on particular stores. They simply don't believe me and the relationship is being damaged with this customer. Which I obviously don't want, particularly when I'm not getting incremental sales as a result of having two distributors.
Any answers would be great or advice on how to handle this situation.
Thanks,
Kate
We don't tend to have formal agreements drawn up with our distributors, we have been doing business with them since well before I started with my company.
They are distributors rather than sales agents. We sell our products to them, then they mark up the products to sell to their customers.
I have a problem in a state where I have two distributors, one we've had a long standing business with and they sell to stores mainly in metropolitan Melbourne. We appointed a second distributor last year because we heard they were very strong in regional Victoria - Ballarat, Shepparton, etc where there are larger IGA stores that we weren't reaching previously. The second distributor knows that this is why we appointed them and this is the area we want them to focus on to develop our business.
Now the second distributor doesn't seem to be focussing on the regional areas, they are 'stealing' customers in metro Melbourne from the first distributor. So our first distributor is very upset and now not focussing on our products and demanding that I set strict territories for both distributors. I can understand this but am hesitant to do so as I feel like it might be exclusive dealing. Once I sell to the distributors, I feel like I'm not allowed to then restrict where they do business, either geographically or by channel.
However I believe its extremely common in this industry for distributors having contracts telling them where they can and can't sell the manufacturers products. For example - there's one distributor to sell into grocery and one to sell into health food stores. From my reading, this just doesn't seem legal. I think once a distributor has purchased the product from the manufacturer, they are allowed to sell it wherever they like at whatever price they like.
Rather than getting incremental sales growth, my second distributor is just cannibalising the sales from the first distributor and there's no overall growth in the state.
I've told the first distributor that I can't tell the second distributor that they are not allowed to call on particular stores. They simply don't believe me and the relationship is being damaged with this customer. Which I obviously don't want, particularly when I'm not getting incremental sales as a result of having two distributors.
Any answers would be great or advice on how to handle this situation.
Thanks,
Kate