A food broker sells your product to stores and distributors for you. Brokers don't buy the product or move it: they pitch it to buyers, get it on the shelf, check the shelf, and set up promotions, and they're paid a commission, a percentage of your sales in their territory. The rate is in the broker contract, and two questions matter more than the rate itself: a percentage of what, and is there a monthly minimum. A commission on what the distributor pays you is smaller than one on what the store pays, and a monthly minimum, or retainer, makes the broker cost more than the rate says until your sales pass it. The commission comes off the bottom of the price ladder, after the store's and the distributor's margins, along with whatever the brand pays for promotions. In the example below, a Hawaii taro chip brand works out what a broker contract leaves it.
The short version
- A broker sells to stores and distributors for a commission; the distributor buys and delivers.
- The rate is in the contract: ask what it's a percentage of, and whether there's a monthly minimum.
- Below the minimum, the broker costs more than the rate.
- The commission and promotions come off what the distributor pays you.
- Work the ladder top down: shelf price, store's margin, distributor's margin, broker, promotions, your cost.
- Agree an end date for the minimum, and a way out if sales don't come.
- TaroStack shows each customer's margin on what things cost, so the broker's share is on top of a real number. More below.
Broker or distributor
| Broker | Distributor | |
|---|---|---|
| Buys your product | No | Yes |
| Warehouses and delivers | No | Yes |
| Paid by | A commission from you | Its margin on the resale |
| Does | Pitches buyers, gets shelf space, checks stores, runs promotions | Takes orders, stocks, delivers, invoices stores |
How the distributor's margin works is in distributor margin, and what stores ask a new brand for in selling to grocery stores requirements.
The price ladder, with a broker
Windward Roots, the made-up taro business on Oʻahu I use in these examples, has a broker offering to take its taro chips to grocers on the neighbor islands. The contract asks 5% of what the distributor pays Windward Roots, or $500 a month for the first six months, whichever is more, and the brand budgets 6% for promotions:
| Step | Amount |
|---|---|
| Shopper pays the store | $5.99 |
| Store pays the distributor, after its 35% | $3.89 |
| Distributor pays Windward Roots, after its 25% | $2.92 |
| Broker's commission, 5% | −$0.146 |
| Promotions and deals, 6% | −$0.175 |
| Full cost of a bag | −$1.95 |
| Left for Windward Roots | $0.649, 22.2% |
Without the broker and the promotions, the bag leaves 97 cents. With them, 65 cents, a third less; that's the price of shelves Windward Roots couldn't reach on its own. Promotions such as slotting are in slotting fees.
The monthly minimum
| Bags a month | Windward Roots is paid | 5% commission | Broker is paid | Share of sales |
|---|---|---|---|---|
| 2,000 | $5,840 | $292 | $500 | 8.6% |
| 4,000 | $11,680 | $584 | $584 | 5.0% |
| 8,000 | $23,360 | $1,168 | $1,168 | 5.0% |
At today's 2,000 bags a month, the $500 minimum makes the broker cost 8.6% of sales, not 5%. The commission passes the minimum at about 3,425 bags a month. Windward Roots signed with the minimum ending after six months, and a 30-day way out if neighbor-island sales haven't reached 3,500 bags a month by then. The sales sheet the broker carries is in sell sheet template.
Get the calculator
Download the food broker commission calculator. Two sheets: the price ladder, with the shelf price, the store's and distributor's margins, the broker's commission and promotions as shares of what you're paid, your full cost, and what's left; and commission or minimum, with what the broker is paid at several sales levels and where the commission passes the minimum. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
The ladder is one product at one price. A brand with five products, two distributors and a broker on some accounts needs to know which customers actually make money once every share is taken out, and a spreadsheet's full cost is often last year's guess.
How TaroStack does it
TaroStack shows each customer's margin on what things cost, so the broker's share comes off a real number.
True cost. Each bag's cost comes from its recipe and the batch it was made in, with packaging and landed costs.
Margins by customer. Margins are reported by product and by customer, on what things cost, so the distributor's account and a direct store sit side by side.
Lots to every store. Shipping records which lots went to which customer, so a store the broker opened is traceable from the first case.
| The job | Spreadsheet | In TaroStack |
|---|---|---|
| Full cost of a bag | Last year's estimate | True cost from recipe and batch |
| Which customers make money | A guess | Margins by customer |
| Which lots went where | Invoices | Lots on each delivery note |
Costing, margins and lots are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.