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Natural Foods Merchandiser

Distribution update: retailers and distributors adjust their partnerships

Natural products distributors, facing challenges from a turbulent economy and rapidly changing technology, are finding new, streamlined ways to get products on store shelves and forge stronger ties with retailers. At the same time, distributors’ customers, facing challenges of their own, are looking for the best price, reliably stocked inventories, on-time deliveries and attentive service. Natural Foods Merchandiser explores how the products get to their destinations and who gets them there in this four-part look at the natural products distribution sector.

Natural products retailers view their relationships with their distributors as just that: relationships.

Price is primary, but it’s not just about price. “It’s service, in-stock position, how open they are to collaborating with us on buying,” says Doug Sanders, president of Phoenix-based Sprouts Farmers Market. Summer Auerbach, vice president of operations at Rainbow Blossom Natural Food Markets in Louisville, Ky., calls it “flexibility, the sales staff working with you and responding to you.”

“Out-of-stocks are huge,” adds Mike Gilliland, head of Sunflower Farmers Market, a chain of 30 stores in Arizona, Colorado, Nevada, New Mexico, Texas and Utah. “We’re seeing tighter inventories because of cash flow. And the end user—the retailer—pays the price.”

Gilliland sees the retailer-distributor relationship from both sides: He uses his own distribution facility for about half his stores’ business as well as contracting with distributor UNFI for another 25 percent. “Everything has gotten more competitive,” he says.

Rainbow Blossom’s two primary distributors are UNFI and Tree of Life. “We want to have strong relationships with both parties,” Auerbach says. “And having a little competition is good for the industry.” The retailer orders from both distributors every week in addition to smaller specialty and local distributors.

“Large distributors can get us the products we are expected to carry. And you get a volume discount,” Auerbach says. “On the other hand, your competition also carries what the large distributors are offering. We know that if we only buy from UNFI, we get what Whole Foods gets.” And yet, small distributors usually charge a shipping fee. “So there are definite advantages to buying from both large and small distributors,” she says.

Auerbach also says Rainbow Blossom has been trying to figure out how to pay for a fuel surcharge distributors initiated when gas prices rose. “You never used to pay for deliveries,” she says. “Distributors pass the cost on to us, but we can’t always pass the cost on to our customers.”

Promotional and marketing support, the ability to order one item only rather than a full case, longer dates on perishables and new products—sometimes given away free as introductory offers—all play into the retailer-distributor relationship as well. Sanders sees it as a two-way street. “We have to do a good job of forecasting,” he says. “A lot of it comes down to the retailer telling the distributor what they want six, eight weeks out.”

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