Distributors are an invaluable part of the supply chain. Not every state has distribution mandates but for those that do (especially those out West), you cannot leave distributors out of the equation. Even if your cultivation farm or processing company has an in-house sales staff, some US markets require by law that distributors be used to move products to store shelves.
For example, California (currently the largest cannabis market in the world), doesn’t allow cultivators to sell directly to retailers. All finished products must be transported from manufacturers to retailers by licensed distributors and all cash payments must be picked up by licensed distributors. In all markets, distributors have to be in the same state as the operator as nothing is allowed to cross state lines.
Here are a few rules of thumb, when dealing with Distributors.
Vet your distributors before working with them
Especially if you are an MSO expanding into a new state, you have to choose distributors that will work well with your business model. Things to weigh carefully include the territories they serve, the services they offer, their prices, and existing relationships with retailers. Ask for references and speak to other clientele they have worked with. You really want to know what you’re getting into before you start the relationship.
Treat them as business partners (because they are)
Distributors are one of the few cannabis operators out there that work with every node of the cannabis supply chain. They have their fingers in every pie, so to speak. The benefit to their partners is that they can offer extremely valuable insights into the market. Through Distributors, wholesalers can get a better idea of what retailers are looking for in terms of strains and popular products. In fact, Distributors offer a really unique opportunity for Wholesalers to build brands through their insights. Which is yet another reason that you want to choose a distributor that is right for you and you can trust.
Another thing to keep in mind is that distributors in some markets work with government-mandated oversight offices to conduct testing of your products and to ensure compliance in labeling, COAs, and the like. In this sense, they are not only partners in terms of market analysis, but also in quality control, labeling, and shipping logistics.
Don’t sign exclusive contracts
In larger markets especially, you will almost certainly want to utilize more than one distributor. This will help you gain coverage and retail presence in different territories. Some distributors will seek exclusivity in a contract. Our advice? Keep looking around. The cons of this arrangement far outweigh the pros.
But managing multiple distributors can quickly become overwhelming. Each one will have its own testing and labeling standards to maintain, as well as shipping manifests — a document that plans out delivery routes.
How can you keep it all straight?
When it comes to working with distributors, a platform is a great way to sell wholesale for all brands they manage. Having a way to send messages that are close to the point of sale can also be an easy way to track transactions and ensure that there are no fulfillment errors. You don’t want to send the wrong product to the wrong distributor.
Help Distributors move your product by having strong brand elements
Distributors often work with multiple wholesalers across the same territory. Sure, it’s their job to get your flower in the hands of retailers, but the more tools you can give them to successfully do so, the better.
Before you even approach a distributor, you should know what sets your strains apart, and why they would appeal to retailers, and ultimately the end-user. Also, you’ll want to share your COAs and any other brand documents so the distributors have them on hand.
If you use a platform, this is a great way to share those documents without the back and forth of emails or dropbox requests.
Distributors are key to working in mandated markets or expanding your operations into one. But successfully working with one or more distributors depends entirely on your approach. If you vet them beforehand, treat them as business partners with valuable market insights, and use a platform to manage and streamline your interactions, then you’ll be well on your way to utilizing distributors in a mutually beneficial (and profitable) way.
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