259. CPG Brokers Explained: When You Need One (and When You Don’t)

0:00Welcome to Startup to Scale, a podcast by FoodBevy. I'm your host, Jordan Buckner. Join me as I talk to aspiring entrepreneurs, seasoned industry experts, and everyone in between as we unlock the keys to growing from startup to scale.

0:18Hiring a broker in CPG can unlock retail growth or become an expensive distraction. The reality is that brokers don't build your business for you. They really are great at amplifying what's already working. If you don't understand how they actually operate, what they care about, and how they get paid, you can burn tens of thousands of dollars with very little to show for it. So today I've invited on Lisa Thorson with Run the Numbers to break down exactly how CBG brokers work from what they actually do day to day, week to week, to when you should hire one and know if it's actually working. Lisa, welcome on the podcast.

0:57Thanks, Jordan. Appreciate it. So I want to talk with you because you actually come from the broker world, which is what led you into the current work that you do. And so I'd love to kind of hear just what that experience was like working with in the brokering world versus kind of working with CPG brands and the difference between how both sides operate. Yeah, and I'd love to tell you how many years ago it was now, but I can't remember. So we'll just move forward past that one. But about five to six years of my 15 year career has been as a broker. And as a broker, kind of when I ended my career, I was selling to Safeway and Sprouts.

1:32And your job is just to sell to Safeway and Sprouts. I had about 100, 150 brands that I was trying to get into those two retailers. And what I saw a lot of times is, you know, we didn't go through the details of their business. We just said, this is how you get in. This is what you promote. This is how you do it. And I saw a lot of brands struggle that didn't really understand the cost of doing business. No matter how much you shared it with them, there's this whole backside that they need to be prepared for. So after that, I personally went to a company called Laird Superfood and we took them IPO during COVID, which was very exciting.

2:04And in that experience, seeing how a brand can be a really large size and still not know what your trade spend needs to be or what the expectations are going into retailers. So started Run the Numbers to be able to educate brands and understand, yay, I got into Whole Foods. I'm going to make so much money. Hold on. You're also going to spend this. And then this is when you're really going to make the money. So that was really important for us to build a business model around that helping brands. I think that's so important. Glad that you see it from all different perspectives. I think there's a lot of misinformation out there as well because it is a fairly like varied feel.

2:39So I'd love for you to break down what exactly is a CPG broker and why they exist in the retail ecosystem. It's pretty basic. So you got a broker who has relationships with all these retailers. And so you'll have a regional broker may just have relationships like Rocky Mountain Region with the Whole Foods, the Sprouts, the King Soopers and Safeway. They talk to those buyers consistently. And for that, when a brand comes in, a brand asks them for their help. They already know who, let's say, Tom is at Safeway or who Stephanie is at Whole Foods. You know, so they already go in there and have those conversations and help them bridge the gap of all the challenges of the paperwork, the submission, the review time, all of that.

3:22The broker helps kind of bridge that gap for the brand. Now, does a broker go off and do that work on their own? You hire a broker and then they just go off and get you into Safeway or Whole Foods? Or is the founder or salesperson still integral in helping to push those deals forward? 100 % need to be part of it. Really, a lot of brands, one of their big things is like, okay, I got a broker, I'm good now. Well, you need to keep working with the broker. They're part of your team. They don't just go off and do it. They don't know what your operations is like. They don't understand your cogs. They just know here's the SRP, here's the product, here's the attributes, go sell.

3:58So the brand really needs to support the broker in that process. And that makes a much healthier relationship and expectations. Are brokers actually doing like sales pitches on their own to kind of get you into stores? Or are they usually better strength at the like paperwork, getting the relationship going, like basically introducing you to the buyer so that you can have or the category manager, whatever that is, so you can have that relationship and they kind of support or do they take the lead? How does that usually work? Yes. And kind of to everything you just said. So when you get a broker, let's again, do an example.

4:32You got a broker to help you with Sprouts. They know when the review schedule is. So say it's in March. They know who to reach out to for that meeting. And sometimes the buyers only want to see a broker. But if the broker can bring you in, that's a really good broker too, saying, hey, I want you to come into this meeting with me and Sprouts. The brand is expected to know the brand, know all the ins and outs, all the story, the history. And the broker is supposed to really know the details. So if you can get a meeting with a broker, great. But brokers also do handle meetings on their own as well.

5:01But they will ask for the brand's help to prepare. Okay. And then kind of around this definition part, what's the difference between a broker and a sales agency? Are they similar? Is there an overlap? I know there's a lot of confusion there. So when you have, think of, if you're the founder of a company, you're doing everything. So if you hire a broker without any sales team, you are the sales team. So you're going in with the broker. What a lot of brands have found is they can't handle that much or they're not very good at sales a lot of times. So they hire either somebody in-house or a fractional salesperson.

5:34And that's kind of what we had created. We create where you get somebody five, 10 hours a week that can go in and make those presentations for you and with the broker. But the big difference is the fractional sales or your in-house salesperson knows all about your business model already. They understand your operations, your cogs. They know what your cash flow is, what your budget is, how to work with finance. You know, you want that in-house person, whether it's the founder of the company, an in-house salesperson or a fractional salesperson, to be working with the broker. So the salesperson always like represented worse with the brand and the company versus the broker's primary relationship is with the retailer.

6:13Probably like they're an expert in the retailer, not an expert in your brand. Of course, they're going to learn, but they don't know everything about it because they represent multiple brands. And you bring up a really good point. The broker has the relationship with the retailer. The salesperson or a fractional salesperson has the relationship with the brand. I think that's really important to know. So some brokers will push brands to do things that they know the buyer would want, the retail buyer would want, but may not be considering all the factors that a brand is going through. Okay, that makes a lot of sense.

6:43I would say like not that you want this to happen, but right, like if you leave the broker, they're still going to have that relationship with the retailer. And that's how they're going to pull people in, right? Like they stick with the retailer, they don't stick with the brand. Like, you know, that's probably their business is to keep and maintain the relationship with the retailer. And you want them to do that. You want them to have a good relationship with Tom, you know, or whoever the person is, because that's that's important. That's what you pay them for is that relationship. So when is the right time to hire a broker versus doing those relationship outreaches yourself as a founder or the sales team?

7:18Great question. Because as a broker, I've seen a lot of brands go into hiring a broker too soon. You really want to have some distribution, particularly in KE or Unify, and you want some distribution in some retailers. Reason being is it takes a while. First of all, if you aren't in KE or Unify or have no distribution, it takes a while to get in there and you're paying a monthly retainer with a broker until that happens. So you should get that done ahead of time. And then having, you know, 100, 200 stores, you going and getting them, the founder or a salesperson that you're working with, getting those first before, again, you're paying that retainer with a broker.

7:54Once you get into like the K Unified, then the broker can really run with it and be excited about it. Okay. And then when you're kind of at that level with a CAHU and UNFI, is the broker then kind of helping facilitate with the distributor as well? Because I know as people in the CBG space are listening, there's this weird dotted line relationship where like technically you sell your product to the distributor and then the distributor sells to the retailer, but you have to work with the distributor and the retailer for all the promotions, trade, spend, plans, deals. And so how does the broker kind of interact with distributors as well?

8:27So I've worked with a lot of different brokers, and I will say they do, most of them do have some sort, they have like one or two people that help with KE and Unify. I think it's really important that the brand keeps that relationship very close with them as well. If they don't already have a KE or Unify rep that they have a relationship with, getting that person with the broker. The broker does help, but a lot of times, I mean, again, they're dealing with 20 to 150 brands. and there's always issues with KE and Unify. So you want to have a personal relationship with those distributors to be able to reach out to them directly.

9:03But the broker will help facilitate that relationship. And then how do brokers get paid and how should founders evaluate like the cost structure and when that makes sense? Sure. They get paid by retainer, a monthly retainer, or by a percentage of sales. And so that's also a reason to try to get some movement on your own because then if you have like, say, 100, 200 stores in a region and you go to a broker, you can negotiate between a 3 % and 5 % with a broker. Where if you don't have any placement, you're definitely going to a monthly retainer. That when you start with a monthly retainer, there's a lot of times it could take 3, 6, 9, even 12 months until you start seeing the momentum going.

9:44I think a lot of brands get really frustrated at that. So I highly recommend do the work up front, work with the sales manager if you don't know how to do it, but do more work up front before going to a broker. Yeah, and I've seen some of those retainers, and it's going to vary based on everyone, but they're usually from like$1 ,000 a month to up to$5 ,000, and most kind of fall in between I've seen. And as you mentioned, that percentage of 3 % to 5%. And then most will tell you that like, oh, we'll move to a purely percentage model once we're bringing in that retainer value in a monthly percentage.

10:17But as you mentioned, I think the biggest gap in expectation is when founders can actually expect to start generating sales from a broker relationship. Is that kind of what you found as well? Yeah, I mean, it's tough. So you got these open reviews, right? So those are great. You can do those like right off the bat. But even if you get approved in them, it doesn't mean you're hitting the shelves for three to six to 12 months later. Okay, 12 months, a little far, hopefully, but nine months even. And then sometimes you miss a review. And actually, that's a big one, too. when you're going to a broker and if you have a certain read, like say you just want Whole Foods and Sprouts, by the way, don't just do Whole Foods and Sprouts, do other ones.

10:54But let's just say for the sake and find out when your review is. So if it's January and the reviews aren't until May, you don't need to be in. You're only going after those particular brokers. You can wait until like a month or two before that to sign on with the broker. Some brokers will tell you that. Totally respect that. Some won't. It's just something you got to think about when going in. Yeah. And I think that um you know like the reality from why it seems like most brokers in the space and people they're just you know they're just people running their businesses and if they can bring in you know two or three extra months of revenue now to help support them and they probably are doing some prep we're learning the brand they definitely are you know like they're doing something but i think that's the biggest thing they're like okay we need some time to prep and get this ready so that i can present but on the brand side it's usually thinking like i'm going to start seeing results in a maximum of three months.

11:45I honestly think like just from my own experience and talking to founders, that's especially, you know, founder led companies are under five people to say is like, I need to see results within three months or this isn't like worth it. And I think that's where a lot of the mismatch and poor expectations come in. I mean, even the personal story, I worked with a broker that's pitched on getting us into hotels and these really unique food service accounts. And they're like, hey, we have these relationships. We're going to start pitching you. And after two months, they're basically like, yeah, we don't like reviews actually aren't going to be until next year, but I'll keep pitching you.

12:19And I had to drop them because honestly, I was paying them $3 ,000 a month in retainer. And I was only paying myself like$3 ,000 as a CEO of the company, right? Like we had no money and I wasn't taking much salary. And so in my calculus, it's like, I'm paying them my same salary to run my entire company as they're supposed to be out getting deals. And that's not fair on them, but it's the reality of where my mindset was. And I think that's what happens with a lot of founders is they're like, oh, they're going to get me sales immediately and start paying for their costs. And that usually doesn't happen, which, as you said, helps to have that book of business beforehand.

12:55Definitely. I really emphasize that book of business beforehand. I think it helps with the cost of everything. It also puts the brand through that experience. So there, I mean, so there is some empathy to the broker because like that sounds funny, but brokers get told no a lot and a good salesperson just keeps going past those. So it's doing some of those yourself really help with the experience. So what are reasonable expectations with that the brand should have in working with a broker and how should they manage that relationship like on a weekly basis or monthly basis? Like what should brands be doing to make sure that everyone's aligned to the expectations.

13:34So when you come to the table, all brokers will ask you for a bunch of files. They'll ask you for your sales sheet, your spec sheet, your presentation. They'll ask you for a bunch of things. Get organized, get those things done ahead of time and make sure everybody has access to them and do not change them within the first six months because what happens is that information is sent out to all the brokers, all the reps. And if it changes, it does get confusing. The other part is you need at least you need to touch base with each one of your brokers and have a monthly meeting with either the regions or the account executives or maybe you have a head person that you talk to.

14:11You need to have those meetings and communication going often. Also, you need to manage as a brand. You need to manage the communication and the talks with the different retailers and the different account execs. Account execs will do that for you, the reps, but you need to know what's going on with your business at all times. as well. So bringing in KPIs, like how many people for the whole broker, how many people reached out to who? When is the review scheduled? Did I have communication? How many wins did we get? On a monthly basis is great. Again, heads up, you probably won't get a lot of wins right off the bat, but you should in the first couple months get meetings and hopefully get some in-person meetings as well.

14:51What is reasonable to expect in terms of outreach, right? Like if you're hiring are broker primarily for Whole Foods and Sprouts, but maybe some other accounts? Is it literally like, I emailed two people this month and now I'm waiting. Like, is that the expectation or should they be reaching out to 500 or nothing, but like 50 buyers in a month? Well, so you got to think about it. Some of the accountant's ex only have five accounts or even two accounts or maybe just Sprouts. So each one's not going to be the same. You're going to want to rate them on like the whole team. So how many people, many accounts were contacted this month and what's the progress of them.

15:29So say you get them for, if it's just a region, like let's say the SoCal region, you know, we have the Lazy Acres, the Bristol Farms, the Air Ones, the Lassens. You have a whole list over there where when you look in the Rocky Mountain, you don't have as many of those. So it's really doing it as a whole. And then if you are looking nationally, you should be busy. If you're a national, got a national broker, you're paying for it and you should be very busy. If it's regional, it will be slower. But the one thing is these brokers do talk to these retailers on a consistent basis. So even when you're not in like rhythm for a review, they will say, hey, we just got this new brand.

16:05I'm really excited. I want to share this with you. So that's also helpful. Yeah. And I think the biggest thing I hear from founders and brands is that they're tempted to pull out of relationships quickly. And so I guess I'm wondering, like, how do you know, like, if a broker is doing what's expected and their job and it's part of the process or if it's just not a right fit for either like your product or the retailer or the timing, right? Like, will they tell you no? Like, all right, they don't want your product. So we'll stop working with you. You don't have to pay us anymore. Or like as a founder, like when do you pull that relationship or to know like when to overcome it, right?

16:43Because I think it's so easy to say like, okay, this isn't working because they've been talking with them for a month. We haven't seen any progress. So I'm going to stop paying them. I mean, I've talked with a retailer for a year, got rejected and then talked with them another year and got approved. And then two years after it, we got in with like eight items like that. It's just the hard part about the business. So with a broker, you know, you need to, first of all, is there enough communication? Are you seeing what's going on? Does it fit your strategic model? That's another thing. Like if I was a young brand, I wouldn't go to a national broker right off the bat.

17:17I would go, what is my region? What's my backyard region first? So I'm in Colorado. Backyard is Rocky Mountain. I'm going to blow that out on my own first. And then when I got that, I'm going to expand, let's say, to the Texas region and the SoCal. Or maybe I'm not going to go region. Maybe I'm going to blow out the Rocky Mountain and then go to Sprouts. And that will open, especially if you go to Sprouts and you get in Sprouts, all Sprouts, you're opening up like seven DC and a ton of stores. And that, by the way, timing, if you do that, get a broker. A broker will be able to help you build out those DCs too.

17:50but I hear what you're saying. I tell most brands, like be very careful who you pick and stay with them for one year. After a year, if, and put out the KPIs, this is what I'm expecting. Is this realistic? Work out the KPIs with your broker and if you don't get that after one year and make sure you have the cash flow to pay for that first year, if you don't get that, then move on. But I've even talked to broker friends who have been like, man, sometimes it's two years. So don't hire a broker if you don't have the cash flow because it does take time. I think that's so important because I honestly, a lot of smaller brands will work with brokers.

18:21One, brokers tend to be very good salespeople. And so when they're talking to brands, they're like, oh, wow, like they're selling the dream, of course. And they're like, look, like these, this is what it could be. These are the most successful cases. They're not saying like, oh yeah, this, you know, average, you know, it's this and it takes six months and maybe you'll be below average and it takes two years, right? But that said, I think for the brand, it's so important to like, if you need it to work in three months to start generating sales, or you have to cut it, like share that with the broker and see if they will agree.

18:49And a good person, if you're like being very direct, they'll say like, that's not gonna happen in three months. Like this isn't a good fit. And like, that's a good relationship to walk away from. And others might say like, hey, look, the review is in two months, start working now. If we don't get in through this review, then maybe we'll pause and wait until next year. Again, like if they don't fit other accounts. But I think the biggest thing is like, if you have a clear expectation of what you need from the broker, share that and get them to agree with it. in writing. And if not, then, you know, like, that's okay.

19:21And like, don't work with them as you, you know, because that's not going to meet your expectations and only end up with disappointment. So that's one thing that I've seen and learned. The word you said, expectations, is huge. So both the brand and the broker have to put in what the expectations are. And I think just as humans, that kind of gets lost in the shuffle, like in the excitement. And as you said, they are salespeople. They're very good at what they do. But I, you know, go in with, I expect this to happen. Is that realistic? And hopefully they tell you the truth back. One thing I'll put out there, too, is I haven't named any broker names because I don't know if that's the type to hear, but there is brokers out there that will just submit on your behalf.

19:59So without signing on for like a regional like or a national plan, they'll just submit to like Whole Foods. And if you get in, then that's when you sign up with them. So it's like I think I can't remember. It's like 500 bucks just to submit. And that gives you kind of that in because that's that relationship with that broker. But then you're not paying until you actually get in the store. That's pretty cool. Not many brokers do that. Yeah, I love that. And I think that's a great model, especially for them to like find which is successful. Because I think the other, I won't say like dirty secret, but there's a lot of products that are not ready for retail growth, even when founders think they are.

20:35There's just like there's not enough momentum. There's not enough interest from the retailers or consumers. There's not enough awareness for it to be successful. And I feel like those products also have a really challenging time. And have you seen that where you see a product and it's like buyers just aren't interested. Consumers aren't really set up like the brand isn't ready for this growth. It's that Me Too product. So it's like, I'm a great chip. You should buy me. I'm in a delicious chip. Well, what makes you different than all the other chips on the shelf? And the social media side, man, after COVID, that has taken off.

21:05Buyers, I mean, all buyers are on Instagram, on Facebook, on TikTok, like trying to see what the latest and greatest is. It's like going to Expo West without actually going to Expo West. You know, you just look online. So that I'm with you. But I think the Me Too products, that's the biggest one is like, OK, you're a great chip. Why? What makes you different? besides price too. Yeah, I think that's so important. And I mean, throwing myself under a bus with my company, Tea Squares, I run, we were a tea infused energy snack, essentially an energy bar that was made with tea, but we had very low awareness.

21:37And so even if we got on the shelf, oh, I was going in the store to look for a product like ours. And so that would have been just really detrimental because we didn't have the awareness to drive traffic into the store. I think it was a mind shift that I even had as a founder. I thought that the role of stores were to drive people to my product, but I actually realized that retailers are like, no, no, you actually, we want you to drive customers to our store to buy your product. That's not our job. That's actually your job. Like, we'll work with you, but we want you to bring in new customers to the category, right?

22:11And we're just the shelves. And then, of course, like, they have their own brands, but those are the companies and the products that are most successful if you can bring consumers into the store looking for your product. I mean, Jordan, everything's put on the brand. Everything. It's like, not only do you have to pay for your promo, you have to pay to be on their shelves. You have to pay to get people into the stores. I mean, it's it is a very hard time to be a brand in the last couple of years in particular. I mean, you also got to pay for the tariffs. You got to pay for everything. You got to pay for help.

22:40So I think that's why this conversation is so important is like, don't just if you when you're ready for a broker, have the cash flow, you know, have the brand awareness. Like you said, I think that's totally right on. Have the strategy and like be very clear what your goals are. And I think that that helps. I mean, also with a bar, that's tough because that is a very saturated area. So are chips, so are cereal, granola. It's tough out there. So, you know, bringing the whole picture together is important. And a broker is just a part of that picture. So, Lisa, I love that you have so much experience.