The Startup CPG Podcast

Matt Merson
You can imagine all the food and beverage brands that start every year, I would say 75% of them skew towards the broker side versus building a direct sales force which is largely found on the snack and beverage high velocity DSD type products. But the rest of them all need broker representation and the churn is very real. You know, brokers have to keep putting brands into the top of their funnel because out of the bottom some brands get acquired, many brands go bankrupt. So they're constantly putting new partners in their portfolio so they can cover their monthly expenses. They have, you know, rent, they have many people, they have systems in place.

00:50
Daniel Scharff
Welcome, welcome, founders and friends. Today we've got Matt Merson, the salesperson to explain it all around brokers. Matt is head of strategy and sales for Once Upon a Coconut, which is some seriously delicious co. He's a 33 year veteran in the CPG space. He's done it all from the biggest to the smallest CPG companies. And today he has dropped an absolute gem of an episode here. It's going to be all about what a broker does, who needs one and when, how to find and evaluate them, how to negotiate with them, how to set them up for success. And he even dropped some of his favorite ones to work with. I hope you love this episode as much as I did. Here we go. All right, welcome everybody. I think this is going to be one of my favorite episodes ever.

01:34
Daniel Scharff
We are back with Mat Merson who recently blessed us with the how to drive velocity with sales episode. So definitely check that out if you haven't yet. That was a banger. Matt, for people who don't remember from that episode, could you just start us off with a quick intro please?

01:49
Matt Merson
Yes. Daniel, great to see you again and connect here on broker management. Matt Merson. I've been in the industry here for, wow, almost 35 years. First 15 or so big classical CPG stuff with Dan and yogurt, Sarah Lee, Coca Cola. But really the last 20 on better for you emerging disruptive building brands.

02:10
Daniel Scharff
All right, so you have run the gamut. You've done it at the big scale, you've done it at the smaller scale, you've done it from scratch, right?

02:16
Matt Merson
Correct. Both direct Salesforce, broker Salesforce. 15 years in food service, 15 years in retail, 15 years on food, 15 years on beverage.

02:26
Daniel Scharff
All right, this is the guy, this is why he's here. Okay, so let's get into this. So first, can you just tell everybody in your view, what does a broker do? Like what is their role and how do people Work with them.

02:38
Matt Merson
For me, the broker is an outsourced salesforce. You can build a team. One or two ways to address sales. The first way is to have your own direct employees. Requires a lot of capital, a lot of funding. Or you can partner with a broker who is your de facto internal salesforce.

02:56
Daniel Scharff
Okay, so, and just to ask a quick follow up on that, do you feel like people should have their own sales teams also as they start, if they are getting a broker, or should they just completely trust a broker to do all of the sales for them?

03:09
Matt Merson
The broker has to be managed internally. So if a founder has the capacity and wherewithal and knowledge base to effectively manage the broker, that might work. But, you know, for me, first hire is always going to be somebody who is familiar with sales and strategy, and then that person acts as the broker manager.

03:29
Daniel Scharff
Okay, we're going to get into all of the questions today. Let's go through them one by one to really build this up so that by the end of this episode, everybody really understands how to find, work with, and evaluate a broker. So, first one, when should I go for that broker? I think a lot of founders starting out would get really excited about their product. Like, hey, I should start selling it. I don't even have my samples yet. But let's just go out there and get some commitments and get really excited. But brokers come with retainers. They need things like samples and sales collateral. So when do you think about bringing on a broker?

03:59
Matt Merson
There's a lot of inputs there. Certainly it's going to be driven by your financial Runway. You know, do you have investment or capital or funding to compensate that broker if there's zero sales, zero distribution? There's sort of a big difference in hiring a broker when you don't have anything and they're doing a lot of pioneering work, versus you already have a book or a base of business, and you're bringing a broker on board to expand that. So that the latter tells me you have distribution. You have some accounts being serviced by distribution, but you want to grow and expand it so you know where you are in your life cycle of the brand. What kind of Runway do you have? Is somebody internally set up to manage the broker?

04:37
Matt Merson
Those are all things that I would consider important in the timing of bringing on the broker. And obviously, to your point, Daniel, you have to be ready with the materials that this broker needs. Selling decks, sell sheets, samples, point of sale.

04:51
Daniel Scharff
Yeah. Also, do you have the money for the success of that broker? If they do a good job and get you those accounts? Do you have the money for the inventory? Do you have the money to support those accounts with promos, all of that kind of stuff. And you know, also on that first kind of model you mentioned, if you don't have anything, just know it's going to take a long time. If you are starting from scratch and you get a broker, they're probably going to tell you right away you might not get anything for a year. And we don't want you to be angry if that happens. The sales cycle can be very long with retailers and distributors. What do you think? Is that fair, accurate? All right, so well, let's get into that.

05:24
Daniel Scharff
When you're actually getting started then, what are the kind of things you really need to have ready? Let's start. Actually, I think from a strategy perspective because if there's one wish that I have for brands, it's to really think a lot about truly, what is their strategy? To hopefully reduce the chance of having to go back and undo everything that they've built at some point, including changing products, changing channels, focus messaging, whatever.

05:48
Matt Merson
Right. So the strategy should already be in place on the brand. And like, so who is your core customer at the brand? And then drill down to where is that customer shopping? So if I had a natural product brand and my consumer was, you know, skews female, higher educated, higher income, smart about health and wellness, they're a whole Foods and sprouts shopper. I'm going to want to target a natural channel broker. If I have a mainstream product like peanuts or butter, my focus is on conventional grocery where there's 35,000 potential outlets. For me, I'm going to want to target a broker that has deep relationships on the conventional side.

06:26
Matt Merson
So for me it starts with strategy, essentially where to fish, where your customers are shopping and making sure that you're getting your product in front of the proper audience will drive your targeted accounts, targeted distribution, how to select the broker.

06:39
Daniel Scharff
So, Matt, maybe it's the circles that I run in, but I feel like most founders start with that natural channel approach. They're like, I'll get into some of these nice high velocity stores that are friendly to early brands interested innovation, kind of penetrate natural channel, maybe in a region later, expand the conventional. But every now and then I meet brands who are like, no, my target is actually dollar store. And I actually find it really refreshing when people have a different take on who their customer is and how they're going to reach them. Maybe hunt in some areas that aren't as crowded Right. What do you think? Do most people just default to that natural kind of, you know, I want millennial moms kind of assumption, or do you see people doing some other kinds of stuff?

07:18
Matt Merson
I think it runs the gamut, Daniel. And I do think you run very heavy in the better for you natural emerging circles. But there's lots of people out there that create products, right, for dollar stores. There's lots of people out there that have products that are ripe for conventional. There's lots of people out there that might have brands that belong in specialty retail, which could be anything from an Old Navy to a Home Depot to dollar store channel. It runs the gamut. So you really got to be clear on what your focus is and where to fish first.

07:46
Daniel Scharff
All right, so hopefully everybody has that part figured out, especially the channel thing. So you even know what kind of broker you want to talk to, because they are really different with different kinds of specialties. But I also want to say, when I started one brand, we actually couldn't really find a reputable broker to work with us. They, I don't know, just didn't want to take a chance on it, and we ended up only finding one who was excited to work on it. That was a big surprise to me. We're like, we're trying to pay you money to do this stuff.

08:12
Daniel Scharff
But, you know, I think ultimately brokers have a lot of brands reaching out to them, and they know that their success is measured on their ability to drive those brands into retail, and they won't take a product they don't believe that they can do that with. Right. So what do you think you really need to have ready once you start talking to them, just to make sure you're both going to know if it's.

08:31
Matt Merson
A good fit, 100%. And you can imagine all the food and beverage brands that start every year, I would say 75% of them skew towards the broker side versus building a direct salesforce, which is largely found on the snack and beverage high velocity DSD type products. But the rest of them all need broker representation. And the churn is very real. You know, brokers have to keep putting brands into the top of their funnel because out of the bottom, some brands get acquired, many brands go bankrupt. So they're constantly putting new partners in their portfolio so they can cover their monthly expenses. They have, you know, rent. They have many people. They have systems in place.

09:11
Matt Merson
If I'm a broker evaluating a brand and I'm flipping the tables here for a minute, you know, I want to see A brand with a unique point of differentiation. I want to see that brand in a category that is showing growth. So you're going to need some data to show, hey, I'm operating in. Widgets in the United states are up 20%. My widget has this incredible point of difference. Maybe I already have some traction because I started locally and I'm growing in concentric circles outside of my home base. And now I really want to expand nationally. I want to. So I want to show some data that shows repeat purchase growth over prior period, incremental distribution points. Those three are probably most important to me as a broker.

09:52
Matt Merson
I got a category that's growing, I got a brand in the category that's leading that growth. And this brand has a real point of differentiation.

09:59
Daniel Scharff
And then they also want to see that you have some tools for them to go out with. Right. I mean, I think the first one, if I were a broker that I would be asking really is around, how are you going to support this business? Because that is the first thing that a lot of buyers want to know is this a serious brand and they are going to pay the money honestly that we need in a lot of instances to support, you know, free fills, promo calendars, whatever drive this thing. So, you know what do you think you need to have ready in that instance?

10:27
Matt Merson
I think that's a fair question. Again, if I'm in the broker chair, I'm going to want to look at the organizational chart. Is there a CMO in place? Is there a financial Director of finance or CFO in place? You know, what does this sales team look like? What's the history of the people leading the brand? Have they been with other successful brand? Are they early stage entrepreneurs? Do they understand the marketplace? What's the financial Runway look like? Do you have funding from trustworthy VCs, family offices, ET cetera? What does a board of directors or advisors look like? You know, who's helping steer the ship? If many founders here are coming from outside our space, you know, they were in banking or human resources and don't really understand or know cpg. So, you know, who are they leaning on for sage advice?

11:16
Daniel Scharff
All right, I love it. I think that's all very true. So, okay, now you're reaching out, you're trying to find the right broker. First of all, how do you even know what broker to reach out to? I think obviously, you know, ask in the startup, cpg, Slack and ideally, when you do it, try to put all that information that we just talked about, like your focus. If it's regional channel focus that will help people direct you to the right person. But Matt, what other ways are there for people who don't have your Rolodex?

11:42
Matt Merson
Well, certainly first I would say networking. You know, startup CPG is an awesome place to start. You got 20,000 plus people in the industry helping each other grow and thrive. So if you're very clear on what you need, I need a natural channel broker that's focused on sprouts. I need a conventional broker that operates in the northeast. I need a produce broker that's strong in the Midwest. You will get some very good answers from people. So you know to have multiple references from brands in your space. Do you like your broker? Is your broker performing? How easy is it to work with your broker? Does your broker have any competitive threats in their portfolio? Already are all great questions to ask.

12:20
Daniel Scharff
I like it. And we do actually have a database of a bunch of brokers. Just so everyone knows. If you go to startupcpg.com and click on founder resources under our databases, there is a list of a bunch of them and it includes information like what channels they support, where they're based, all of that kind of stuff. But as much as we have all that stuff too, I still really like the networking part that you're talking about and being at shows and talking to other brands about who they think are good and who's working hard for them at the moment. Because it also, it can really vary. And if it's a smaller broker based on the quality of some of the people that they have and they might have brought on somebody good who really can crush certain kinds of accounts.

12:57
Daniel Scharff
So it's good to stay current on that kind of stuff. So when, okay, now let's say you know who you want to talk to. Hopefully you reach out and they get back to you and you end up on the phone with them. What do you, what do you think you should evaluate about them when you're actually talking to them? Because obviously it goes both ways.

13:14
Matt Merson
Yeah, fair enough. And I would say that another dimension here is to ask your retail targets, who do they prefer as a broker? You know, if you're really targeted on whole foods and you're already engaged with your buyer, a fair question would be, do you have a broker that is seamless to work with, that has performed well and grown the brands in your category for you? So you don't only have to go to brand partners, but you can also get the dimension of broker success from your retail partners. But a lot of brokers now Have a portal where you have to apply. Because of your earlier comment that there's so many brands looking for representation, you now have them on the phone. You know, it's a two way interview here.

13:54
Matt Merson
You know, the broker is going to be asking you all the questions we just covered about the brand and the brand's Runway and stability. And you certainly want to ask the broker about their portfolio, their feet on the street, their leadership team, the brands they've had success with, what are the expectations? Do they have the tools like a, a calendar review schedule for your category? You know, do they have existing relationships for buyers for your category? Those are a lot of the main questions you want to get answered.

14:26
Daniel Scharff
I think this part is hard also because the brokers out there, their decks will all be convincing. They are going to tell you a story about how every single person who works there is best friends with every buyer, came from the buyer or you know, golfs with the buyer or just, you knows all of them and has this incredible track record. It's, that's why I just, I think that part about due diligence with other brands is so important because they will give you the real deal. Like, yeah, okay, we worked with them for a year and a couple of them just are submission pushers and aren't actually really tight with the buyers.

14:56
Daniel Scharff
And yeah, I have heard that from buyers also because I ask them all the time and sometimes they're like, oh yeah, we won't even talk to that company anymore because they really pissed us off. So they're not getting any progress with us. So it is good to be out there asking. And I think for me maybe just reinforces how important it is just to be networking with other brands in general and not in just a social way but really asking each other questions about the business. Talking like, how's it going on sales? What are you doing on ops right now to just make sure you're sharing a lot of the learnings. So can you just give me a little bit of a landscape for what kind of brokers are out there? Because they're really different.

15:32
Daniel Scharff
There are a couple that we've all heard of that are national ones and then I'm constantly meeting really specialized brokers. And I know you also have a approach to working with brokers where I think you're really focused on regional ones. Right. And specialty focused ones.

15:45
Matt Merson
Is that for sure on the specialty side? You know, me being a DSD coconut warrior, I don't really use brokers in too many spots where I do overlay brokers. I feel that in the industry, the big natural channel brokers and the big conventional channel brokers are not experts in isolated customers like Target, Walmart and Costco. So if I was to hire a broadline broker, somebody to cover the 5,000 retail stores in the natural channel or the 35,000 restores in the conventional channel, I wouldn't not have that broker as my Target, Walmart, Costco broker. You know those brokers, to me you need to be in their home market with a partner, somebody in Bentonville that has deep expertise with Walmart, somebody in Minnesota, deep expertise with Target, and somebody really coming out of Kirkland, Washington that knows the Costco system.

16:39
Daniel Scharff
It's interesting to hear you say that because I, I mean, yeah, when I've talked to brokers, they're like, yeah, no, of course we do that, we're great at it. That person has a good background, our account manager for that one. But, but yeah, I mean the people that I think I trust the most in the sales world say what you're saying. And obviously that's why there are these specialty brokers. If you get one of those national brokers, they will fight to try to keep that business from like, from you taking that business somewhere else. Right?

17:04
Matt Merson
For sure, for sure. I mean they definitely offer those services because that the brokers have to grow and expand. But Dan, this is a mission critical step for a brand, right? You're not going to be able to sign a one month contract. You're going to be hooked up to these guys for a year. You know, be it specialty broker or one of your national or conventional brokers, you're going to be engaged for a year here. If it doesn't work out, it's a huge setback in time and money for the brand, right? So making sure you do the due diligence on the broker and you select the right partner is really mission critical to launching your brand.

17:39
Daniel Scharff
I had one broker miss the submission for Whole Foods. I could not believe it. We were like, you know, changing scope on products, launched a new one and they just didn't submit it for the right category. They're like, oh, but it's not that one. And then the buyer was like, of course it's that one and it's gone, it's passed. And I don't know if I've ever been so pissed honestly at anyone in the industry. I'm like, this is your job. You had one job submit the thing during the window and they didn't. And they just like, how can they Even take accountability for that. It's such a deep mistake. But somebody who lives Whole Foods knows that and they know the buyer for the account and they are in the store all the time. So I appreciate that.

18:18
Daniel Scharff
And, you know, I kind of wish I had gone with more of a specialist in that instance. And I see a lot of the big brands do it because I see some of those specialty brokers posting about the wins for all the ones that they work with. And it's big brands. It's big brands that work with, you know, specialty ones that even don't even seem that big to you. So that's very interesting. So when you're an early brand talking to some of those national brokers, you think you can carve it out even in those days, because it's going to be hard later. Right. If you've signed the contract with one of these national guys to later be like, by the way, I think we're just, let's stop talking about Target because I'm going to go with someone else on that.

18:49
Daniel Scharff
You kind of have to negotiate it up front, don't you?

18:51
Matt Merson
You know, this goes back to the strategy part, Dan. If you're launching a natural channel brand, you think you're ready for Costco? No, probably not.

18:59
Daniel Scharff
Although a lot of people are trying these.

19:00
Matt Merson
I ask, you know, if the natural channel broker is asking me to sign away Costco, like, why are we even talking about Costco now, even on the conventional side? Like, look, I'm interested in Publix and Stop and Shop and hold and Hebb. I'm not ready for Costco. You can't ask me to make a decision on Costco when I'm, you know, I haven't even considered it three, five years from now. So, you know, I'm willing to partner for the conventional or natural channel business, but these customers are not even on my radar yet.

19:25
Daniel Scharff
That's a very smart way to say it. And I would not know to say it that smartly. I would say it a bad way and it would have to be a bad discussion. But the way you say it makes a ton of sense. So everyone say it that way. All right, so, okay, so just getting back to like, what kind of brokers there are out there. So there are some, I don't know if that's even the right word, but like specialty ones, let's say that focus on a particular customer. In a lot of instances, there are others that will focus on a cluster or region. Right.

19:50
Daniel Scharff
I've talked to some Brokers that are even like collection of a bunch of different regional brokers or sometimes the somebody will have like a state or two that they cover, but they maybe have a partner who can do it to some other states. What do you think about those kind of guys?

20:01
Matt Merson
Yeah, I mean, I think they're all very viable. I do happen to use a broker for just Midwest states they cover from Wisconsin to Ohio. And they're just a very diligent, focused Midwest broker. So they call on all the distributors in that footprint. They call on, you know, Giant Eagle and Meijer and Jewel and Fresh Time Farmers Market in that footprint. But great regional broker. I don't ask them to do anything outside the region and they don't do anything outside the region. But their expertise in the region is unparalleled. So I do use them and they probably have, you know, there's others examples of that for the Northeast, the Mid Atlantic, the Southeast. I think there's specialty brokers on everything from TJ Maxx to Home Depot and Menards to, Gosh, anybody that would sell food and beverage.

20:50
Daniel Scharff
All right, there are a lot of them out there and you know, you'll meet them all the time at trade shows. It really is just the question of like, yeah, but are you good? Like, how am I gonna know that? But I think just kind of goes back to that question of trying to identify a bunch of them, ask them for references. I think you can do that. And if they're afraid to tell you anyone that they work with, that's not a good sign. A good sign is, sure, I'm an open book, here are my customers, talk to them. It's going better probably for some than others, but you know, you can't control everything. But they'll tell you what I do and that, you know, I say what I do and I do what I say.

21:21
Daniel Scharff
Hopefully that's kind of stuff that they're going to be pretty open about sharing. So, Matt, what about fees for all these different guys? You've probably paid it all, like different ways of doing contracts. What do you think people should expect to work with maybe a national broker or a regional or a specialty broker? And how can you try to get those to be a little more advantageous for a brand?

21:41
Matt Merson
I think there's two types of contract fees. One is going to be on a retainer and the other is going to be commission based. So it squarely depends whether or not you're asking them to do everything from day one and pioneer distribution and Pioneer Retail Authorizations. That is going to be a retainer based model. Brokers have cost, they have systems in place, they have to train their people, they have to ramp up and they're certainly providing you some of their intellectual knowledge of hey, here's the category review schedule. Here's where we think you should fish. So they're going to want to be on a retainer until the time that commission, like a 5% commission would exceed the retainer. Then the retainer will disappear and it'll go to a commission based model.

22:24
Matt Merson
If you do have a book of business and you are in distribution and you need help growing that from there is very possible that the volume you're already doing is enough commission to get the broker off the ground and then it becomes just a commission based model.

22:39
Daniel Scharff
And some of those, when I've talked to the national broker, sometimes they'll have like, oh, it might be 8,000 bucks a month or 10,000. It kind of depends on how many channels you're putting on there or maybe regions in some instances even up to all the way up to I think 15k. I've heard as well, even for kind of smaller brands. And then I mean there are some regional ones you can talk to that might be a thousand, two thousand, three thousand, something like in that range, depending on what exactly they do. And yeah, obviously those national ones they will switch over to the 5% once that's the greater number of the two. Does that sound about right or do.

23:13
Matt Merson
You think I'm, I think that's accurate. I think between 5 and 10k is probably, it might even between 5 and 12.12k now is probably the national retainer, regional and channel focus obviously much less. And I think that from a Walmart, Costco Target standpoint, given that the review only comes once a year, given that each Costco region could be worth five to $10 million if the broker believes in the brand and the positioning, they will sign representation for free. And that commission is typically less than 5% because the volumes are so big. You could probably sign a Walmart, Target or Costco broker anywhere from two and a half to 4%.

23:52
Daniel Scharff
That, that's very good information, Matt. I did not know that actually. And that's good to know that. You could try to negotiate it, maybe talk to a couple different brokers. If they really believe that they're going to get the product in there, they're probably seeing big dollar signs as long as the brand is ready for that kind of growth. Right.

24:08
Matt Merson
And listen, brokers are going to put the kitchen sink in front of you, they're going to ask for 5%. But it's just an ask. It's their starting point. You know, if they ask and nobody challenges it let them get 5%. But in reality, Costco Walmart is such significant business that you know, you got to think two, three, four years out, could this be a 20 million, 30 million, $40 million business? And look, the broker doesn't want to lose the line. At what point, you know, if you launch in a Walmart 4500 stores and your business is $20 million a year paying 5% commission, that's a million bucks to the broker. You know, at what point can you put on two full time people against Walmart and save half a million bucks to the bottom line?

24:49
Daniel Scharff
Yeah, and they know that and they're used to it and they know people could do that math.

24:52
Matt Merson
Right.

24:52
Daniel Scharff
So you can renegotiate or switch. And what are some other tips for negotiating with brokers? I remember one time working with a broker, I think, you know, one thing were very happy that we managed to do was at least change that commission number like the 5% from gross sales to net sales so that we're deducting all of the big slotting fees and the promos before we're paying a percentage on that. That is that a good one? What else?

25:17
Matt Merson
Well, let's pause on that for a minute because that's a very good point. And that goes back to my kitchen sink. You know, broker is going to put in front of you a contract that is absolutely 100% in their favor and they will absolutely put percentage of gross sales. What you have to be cognizant about here is you do have TPRs, you do have MCB's, you do have scans, you do have slotting fees. And while I believe that slotting fees are outside the purview of, of brokerage, you know, that is a marketing expense and on the brands, you know, anything that is a reduction in price.

25:49
Matt Merson
So if you have a 15% OI month or you run a special buy get deal, anything that reduces the price is a net revenue to the company and then you should be paying your brokerage off of net revenue.

26:01
Daniel Scharff
That makes a lot of sense. And especially with things like you know, free fills, it's like, wait, I have to pay you to give stuff away? That seems kind of wild. So I hope everybody at least negotiates that part of it. What else? Any other things that you think you would want to push for from the Brand side. In an ideal world, I think it's.

26:19
Matt Merson
Fair to sign a length of the agreement. It's typically going to be a one year agreement. You should really look at the renewal process very carefully. A lot of times there'll be language around, has to be notification 30 days in advance or the contract automatically renews. I think if there is a breakup. Another key factor here is a lot of these contracts include like a 90 day tail and you know, if broker goes and lands a big piece of business and the contract ends a month later, they're going to want to be compensated still for the business that they secured past the brokerage. So you have to be clear on, you know, how long the tail of revenue is past the brokerage agreement.

27:01
Daniel Scharff
Yeah, I think that makes a lot of sense. The thing that I hear most people complaining about is like, oh, I worked with some specialty broker and then it wasn't going well and maybe I missed that renewal clause or whatever. Or like I, you know, and I then I couldn't get out of it and they insisted and they're suing me and they're threatening my reputation and all this stuff where yeah, if you like really pay attention to the out clause there, like okay, what happens if it's not going well? Do I have a clear way to exit the relationship with that broker where I don't owe them stuff in perpetuity, they can't hold on to this. I think that's a really good idea, especially with smaller brokers where they wouldn't necessarily have the reputational risk that some of the national brokers might.

27:40
Daniel Scharff
I think in most cases the big national ones, if you don't want to be there, they don't want you there. They, you know, it's not good for them, it's not good for their morale, like for their account managers to be selling stuff that, you know, when there's kind of blood in the water on the relationship. What do you think? Agree?

27:54
Matt Merson
Yeah, I totally agree. And I mean these national brokers are set up to really manage big chunky national brands that are delivering, you know, five to $20 million in commissions. You know, if they're not set up to incubate startup brands, you could get lost in the shuffle. So you want to make sure that the national brokers properly can incubate emerging brands.

28:15
Daniel Scharff
Okay, so that's the like kind of the messy side of it. But let's talk about the beautiful side of it. So I found my dream broker. I have the best product in the world. They're going to Crush it with me. I'm going to save by not having to get all these full time resources and I don't even really like sales so they're going to do all that stuff for me. What are the right ways to kick off with them? What should I have locked and loaded day one or even a month before day one with them to just help them do their job so well.

28:42
Matt Merson
Sell first and foremost are selling deck and a tools right? You're going to want an incredible one page sell sheet that has all the information I see on the CPG Slack channel. A lot of people asking what should I include my up in my cell sheet. Scannable UPC codes, nutritional information, contact information, pack size. So a selling deck that is a very 6 to 10 page that has hey here's the opportunity, total addressable market or size of the category. Here's where we are in the category. Here's our pillars of the brand or clear points of differentiation. Here's the product and skus we offer. Here's the usage occasion. You know when do I use this brand? Might not be crystal clear if it's a snack or a meal or meal replacement. So you want to be clear.

29:29
Matt Merson
You know you're now arming third party to be your expert seller. So so clear concise selling deck. Clear concise sell sheet. A lot of sophisticated buyers are going to ask for data. So if you do have access to data as a brand in one of the emerging NIQ packages, certainly package up where your brand stands in the category. Cut it up different ways by customer, by channel, by region. Perhaps you're doing a broker kickoff video which can then live evergreen as the broker changes status. You don't have to go retrain staff. This video can be housed you communicating to the staff, they record it and now it's housed internally on the broker's portal or hard drive. An outline of the guardrails. Right? You don't want brokers giving away the house. So what is your policy on free fills?

30:18
Matt Merson
What is your policy on the promo calendar? What kind of marketing activities can they commit to? If it's a certain number of demos or big book ads, stuff like that. So guardrails around the finance and marketing stuff. What requires approval? If somebody wants more than a one case free fill or more than $50 free fill gotta come to the regional manager or whoever's managing the broker for approval. And one thing I wanna note Daniel is most of the brokers are kind of bifurcated where they have people that are experts in the customer. So Just picture Matt's brokerage. I have somebody that does Whole Foods, somebody that does sprouts, somebody that does fresh thyme, somebody that does the fresh market. Those people are out with all the brands on the customer side. They're typically not talking to the brand side.

31:07
Matt Merson
The broker will have the second side of their business, which are brand development managers. One internal point person at the broker that will collect all the information from their internal salespeople and also disseminate all the information you share with your one point person. Like, hey, we have a new SKU launching. It's a chocolate coconut water. I want to make sure it's in front of Whole Foods sprouts, fresh thyme, and the fresh market. That internal broker, business development manager then disseminates it to the sales team, brings back to you when the reviews are cut in, opportunities are. So you really are working with one. Of course, if you do want to. Specifically, if you do have the Whole Foods review coming up and you specifically want to deep dive with that rep, Absolutely, that'll happen. It's not like it's a roadblock.

31:49
Matt Merson
It's more of a streamlined process.

31:51
Daniel Scharff
And yeah, I've worked with some that would say we are also your. We're your outsourced sales team, and we are also a broker where. Which I found kind of tough when there was actually too much bureaucracy because you're talking about like one point person. Okay. But I've worked with one where they're like, yeah, no, we just. We are your whole sales team. We're all. We're like your fractional sales team. And then, you know, those are not actually people who have relationships with buyers. But then I feel like the messaging can get so diluted because now you have to work with just an entirely new layer in between you and the people. And they have managers and they have all these other brands also that they have to work with.

32:27
Daniel Scharff
And I actually just found that very difficult to try to get what I wanted to happen, which is those account managers to go and actually pitch the accounts. With that kind of layer in between, it just felt like, you know, you're playing a game of telephone that you're going to lose.

32:41
Matt Merson
For sure there's some telephone in there. But that's why your evergreen tools are so important. Your sales training video, your sell sheets, and a clear, concise deck, you know, so people can take it, interpret it, understand it, and run with it. You can only personally pitch and train so many people in your day. Right?

32:59
Daniel Scharff
Yeah, you're right. And yeah, I Mean, you can't be there for every meeting, for every call. And actually a lot of brokers won't let you into a lot because if they're running in and they need to pitch a hundred brands in an hour, they're not letting you come in and do your 30 minute like, you know, when I was a young boy, I dreamed of spiel, so which, you know, makes sense. So yeah, I think very good point of having like a good one pager stuff that really. And just having great packaging, you know, that even kids and live on its own because that's the like the people who pitch the best, they just hold up the product and it's actually almost all there and clear to see and that's how things, you know, can sell well on shelf too when you're not there.

33:34
Daniel Scharff
So okay, I think that makes a lot of sense. And then just on that free fill thing, because we're on that point, what do you actually recommend for early brands especially, okay, you get into some of the big accounts, you're gonna have to do it. It's gonna be a little more strict. You can negotiate in some instances. There are some accounts, especially like, you know, the northeast of the US for some reason they all like to try to ask for like five cases per skew, which is a little bit of craziness. But then, I mean, I've been at plenty of shows, like distributor selling shows where you've got somebody who's like, yeah, I have three stores and I'd like you to give me a free shipper for every store. And then maybe, I don't know, if it goes well, I'll consider ordering.

34:09
Daniel Scharff
But you can lose your shirt doing that. Right. So how do you think about authorizing free fills through a broker? Depending on the account and the strategy.

34:17
Matt Merson
You know, again, you got to just depend on the broker's expertise. And for me, again, there's two buckets here. One is national accounts, right? So I know that startup CPG has an incredible tracker of about 130 retail chains. You know who their distribution partners are? Those guys, their slotting fees are largely set. You're not going to get away from a 1 case per sku per store fee from Whole Foods, right? It is what it is. Where it becomes more challenging is to manage the rest of the market. Market. So all these independents that exist in a market I would expect a broker to have knowledge of, these are either A, B or C ranked independents.

35:01
Matt Merson
A, because of the traffic, the dollar sales of the store and the size of the store B and C, smaller traffic, smaller stores and you know, the guardrails you would provide or I would provide to the broker, I'd be like, all right, look, if it's an A store and I would ask for the list of from show me all the stores in Chicagoland that are independents and how you rank them, A, B and C and then the A stores if you were able to close, you don't have to come to me for a free fill. I'm willing to give one case per sku per store outside those guardrails. You need my permission. For the B stores I'm willing to do 50% free fill.

35:36
Matt Merson
So whether that's buy two cases at full revenue and get two free or if you want to MCB me back 50% for each case, I'll cover free fill for d stores at 50%, c stores at 25%.

35:49
Daniel Scharff
I wish I had known that to do that because it never even occurred to me to ask the broker for the list of stores. And the way that you say it so naturally like of course they're the broker. They need to have that makes a lot of them. Like, yeah, why didn't they have that? Why didn't they give that to me? So but look at the end of.

36:04
Matt Merson
The brokers want to sell, right? And if there's no guardrails on, they're going to be like hey, I got a new widget. It you know, I'm friends with these little tiny natural channel stores and I'm going to give them free fills and hopefully it turns themselves. But a lot of brands will go under because you know, there's a fee associated with that. It's not just your cost of goods. You're going to get build back at full revenue from unfi and khe and then all these little C store, C not convenience stores, but C size stores that start adding up for all these tremendous refills are not going to deliver the velocities and revenue of an A store or potentially top B store. So you just got to be really careful about arming people for broad based free throws.

36:48
Daniel Scharff
I really agree with that. I think it's very important because it's like a party trick. You can get like oh, I got a bunch of placements, meaning I gave away a bunch of free stuff and then they never ordered again and you got to pay for all that stuff. So I think that's a really, really important point I think that you've highlighted here. So okay, so let's say you're going along the journey now with the broker, you have that clear prioritization. They have your tools, they have their strategy. You're getting some accounts, hopefully they're support those accounts. Well, what do you think you can expect from the broker? Also when you're getting into an account, like, I've had ones where they're like, hey, can you send me a bunch of pictures from the store? Like how the products are in the store?

37:26
Daniel Scharff
And they're like, oh, no, I mean, we don't have people in the store. I don't know. And then I think there are other brokers that really do have people in the store on a frequent basis. What do you think you can expect from that perspective? Obviously, a lot of them have data packages also. Maybe just the distributor data, maybe the retailer, their data. Some of them have partnerships with some of the data providers.

37:44
Matt Merson
Daniel, it's a part of your due diligence. And we touched on this around velocity and merchandising. And, you know, if you're expecting your broker to merchandise, you need to ask those questions up front. I don't think it's unreasonable to ask for a picture here and there of placements because you're obviously not in the market. But you should be clear whether or not the brokers offer that service to go in and take before and after photos and upload them into a portal so that you can have easy access to them. So it's a good call out. But I don't think it's unreasonable to, you know, get one or two pictures here and there that could lead into, you know, what are your expectations of a broker in year one? Right?

38:23
Matt Merson
To me, some of the things that go into that would be, you know, in the area or channel or market that you're addressing, how many independent accounts are there? How many chain accounts are there? Can we expect that you would get 25% of the independence account secured in the first year and that those accounts might do two cases per store per week? And if there's 35 chains in the region and you're calling on 35 chains, is it likely to assume we could secure 20% of them? You know, can I count on a good seven chains? So those are the kind of metrics that I'd set with the broker expectations, you know, to be aligned with them. Like, hey, these are the goals we're going to track against every month, every quarter, once a month, once a quarter.

39:07
Matt Merson
We're going to measure up against that and see where we stand. If you're not there what are the roadblocks that are preventing it? Like why did we not get into the said number of independents that we set? Why were we rejected by chains? Or Conversely, we got 14 chains. What made this selling so easy so that we could continue to hone the message and focus in on that.

39:27
Daniel Scharff
So I like those points and I think also maybe it's a little bit easier to do that with let's say a account focused broker. But when it comes to national brokers, I'll tell you, when I was working with one, the struggle for me was when I started out I didn't even know who all the accounts were. And I would say year one was me just learning the lay of the land. Who are the retailers I should even be focused on because I just didn't have enough experience to know that, to know all the chains. Now I see the badges at Expo and I pretty much know who all the chains are. Like you mentioned, we have that resource of the retail sales tracker on our website that now lives list all of the ones we think are relevant for early stage brands.

40:01
Daniel Scharff
But how do you know if the broker's really like okay, yes, our whole team is working on this. We've submitted to everywhere that you want us to in the right way and we're doing the follow ups. We're trying to get you those meetings versus if they just haven't prioritized it yet, how can you be really trying to make sure they're doing what they should be doing in the right way, not just pushing them to do things too fast.

40:20
Matt Merson
But yeah, you need a de facto, whether it's the founder or your head of sales, but you need a de facto person who is going to manage and track that broker's activity, you know, back to the due diligence. If you're focused on the natural channel and you're interviewing a natural channel broker, you know, tell me about the team calling on Whole Foods and Sprouts. Tell me about the authorizations that you've gotten for brands in the last 18 months and then go call those brands.

40:46
Daniel Scharff
I think that makes sense. All right. And you know, that really is one of the reasons why we built that retail sales tracker. And Matt, you helped me on that also with some really great input. And that was because I don't want people to have a broker like that who just isn't really transparent about the universe that's out there and helping you understand what they should actually be doing so that you can then hold them accountable on it. Yeah, I mean just going back to Brokers I've worked with, in the end with some, I just would really end up going around them to the buyer in a lot of instances, which they don't like. But actually it can often really jumpstart a relationship as well.

41:21
Daniel Scharff
And I mean, I think some buyers are just more responsive to a founder if you hit them on LinkedIn or meet them at a show. So I think I kind of found a way to handle that because if you are, if you like doing sales and you're good at it and you're a founder, I think it's important for you to find ways to do it. Because if they're pitching tons of brands, but you're hitting them on LinkedIn and they're seeing your content and they're engaged with you, and that can get you a special kind of look. What do you, what do you think about, like, yeah, your team kind of interfere, let's say what the broker would call maybe interfering, but what you would call just advocating for your brand always.

41:53
Matt Merson
I think buyers love to hear from founders and a lot of times you can get a better, quicker response. Coming directly from a founder shows the importance to the buyer, the account to the brand. You know, brokers are tactical and nobody's going to sell the brand better than the founder. So depending on, you know, obviously the top whole food sprouts, fresh market, fresh time, would love to hear from founders. You get into them smaller regional chains, you know, you could go as deep as your bandwidth permits. I mean, if I was a regional chain as a buyer and some founder is calling me from California, Florida, New York, that's incredible. Like, wow, can you imagine the message? Like, this regional Natural Channel account is super important to me and my brand that I'd like to speak to you directly.

42:38
Daniel Scharff
I love it. Okay. And, but, you know, some, but you know what I mean? Like, sometimes the brokers don't love it when you do that. Like, I'm working on that. I'm talking to that guy. Don't mess with this.

42:46
Matt Merson
It's a fair point. And it happens all the time. And, you know, I try to put myself in their seat. And, you know, if I'm the broker and I'm responsible for Whole Foods, I want to be responsible for Whole Foods. I want to control the flow, set the appointments. You know, I want Whole Foods to call me the broker versus you, the brand. I get it. It's a dance. And so I know one of the things is, you know, you're coming into a broker for the first time and how do you get them to prioritize your brand? Right, they already have a portfolio. Some of these natural channel brokers, I'm going to tell you, already have a hundred brands in their portfolio and maybe split between HBA and food and beverage, but nonetheless it's a hundred brands.

43:28
Matt Merson
And so how do you get the broker reps, your business development manager to spend an inordinate, disproportionate amount of time on your brand versus a brand that's more mature paying six figure commissions? That is the science.

43:45
Daniel Scharff
I like it. You know, I've had this happen also where I've worked with some different kinds of brokers where they weren't getting something done and they didn't have the relationship with the person. And then I got it and I met the person on LinkedIn or you know, at a trade show, whatever, and I got the meeting. And then they like send their team, they like really want to come and they'll send a bunch of their team members then to meet the buyer. Where I like made that relationship or I've even had others where I got the relationship and then pass it to the broker because I'm trying to do the right thing. And then I see that they're actually then like great, let's have a meeting. By the way, I have three other things I want to pitch you.

44:17
Daniel Scharff
Like what on earth are you doing? Have you been in those kind of situations?

44:21
Matt Merson
Listen, you have to have the mindset set that the broker is your partner. You cannot have a combative relationship with your broker, the broker. You've made the decision to go the broker route. You've selected through due diligence a broker partner. The broker is now your partner. You're going into battle together. You know, if you can help the broker get wins with other brands because of your relationship, so be it. Now the broker is going to give you a little bit more share of mind and time. If the broker brings you a relationship and gets you a win, that's what you want. It's gotta be a symbiotic relationship. There's no broker out there that has unbelievable, incredible relationships with every account across the board that you cannot help facilitate. It's just, it's just the unicorn.

45:07
Daniel Scharff
And I haven't seen that Sounds like a very mature way to look at it where I would just be like what? And you're like, no, it's good. If you can help them do that then great. I'm like, no, I got that. So that's why you are who you are. And I'm just here on this podcast. So let's say hopefully it goes well and you and that broker, partner together forever and it's fantastic. When how should you know if it's not going well and maybe it's not the right fit and you should consider another broker or another strategy.

45:36
Matt Merson
Well, I would say two things. One, it maybe it's not the right fit or you know, a lot of emerging new brands, maybe it's not the right, you know, that something's missing in the brand. You know, you can aggregate all the feedback you got in your chain account pitches. You can ask the broker to aggregate the feedback that they're getting from the independents in the trade and see if there's an issue on price. People are confused about the packaging. People don't know how to use the product. You know, they already have something in the store that or marketplace that is cheaper and same product. But you know, no brand coming out of the gate is going to be the brand for the rest of the way. Maybe the packaging isn't right, the size isn't right, the pricing isn't right.

46:15
Matt Merson
So it's important for the broker, manager or the founder to get two way feedback back to them and bubble up common themes about what is and what is not working in the trade.

46:26
Daniel Scharff
Yeah, I think that's a good point. And hopefully everybody also hears it themselves because they're out there demoing or they're out there, you know, pitching at trade shows and so they get a chance to actually hear some of it and you know, not be afraid to ask for it because you know, we had a startup CPG event the other night and there were tons of buyers there. And I'm really encouraging early stage brands like feel free. They're like, hey, that it didn't really seem like they wanted to take it right away. Like you can ask them, hey, you know, just interested in your feedback, what do you think about this?

46:50
Daniel Scharff
And often a lot of those early stage buyers are very happy to help and give some feedback because they mostly are in that position because they do like supporting brands and they want to win and they want you to get better and then maybe work with you. And they also kind of like it if you're coachable. So I do, I love that discipline of just getting feedback whether it's from buyers or from your brokers. And I thinking back to working with a broker, I think the kind of feedback that they bubbled back up to us when were, you know, not so happy with the Amount of yeses that were getting were, you know, I don't know, it'd be like some just had an issue with an ingredient or.

47:25
Daniel Scharff
I think the main thing honestly is they would just be like, there's a lot of competition in this space right now and it is growing, but there's just so much in here and you know, they want to see more traction and more penetration in the region. And obviously that's a chicken and the egg because you need them and others like them to take it to get the penetration in the region. But yeah, I don't know. I think it worked out because were playing a numbers game. We weren't just relying, I think one chain. We were really open to working with a lot of them. So we ended up getting a lot more yeses than no's, I think overall, what do you think? Any reflections on that?

47:54
Matt Merson
Well, I would just add that pro, you know, aside from bubbling up the feedback, there probably is some quantitative metrics that you need to track and evaluate whether it's time to park with your brother broker. You know, if you've upfront you should agree on like how many sales calls per week person, per region should I expect them to make? Are they going to pitch my product to 10 people in each region? Is it 10 people at each channel? You know, and then on the national account side, you know, was the submission made on time and in full? So there's some quantitative metrics that like, oh yes, the team, you know, here's 40 calls the team made this week. Week that was the agreed to number. Here's the feedback from it, the pros, the cons, the good, the bad and the ugly.

48:40
Matt Merson
So if you see that they're making the calls and you feel like they're pitching it correctly, maybe it's something on the brand side. However, if only five calls were made out of 40 or 20, whatever the number is, and that's happening week over week, that is grounds for a serious discussion.

48:56
Daniel Scharff
I gotcha. Okay. And I also just coming back to the point you made earlier about like, you know, make sure you have some data for your broker to use. Oftentimes they'll have it. But yeah, you mentioned the reports that we have with NIQ buys. So I really do recommend everybody take advantage of those free reports because you can get some info at least on like, is your category growing? You know, who's the competition? They have the Whole Foods data. So we'll put the link here in the show notes but get some free reports that definitely will Help you. And so Matt, probably everybody listening right now would love for me just to ask you, based off your experience, can you actually just rattle off a bunch of names for people you think could be good partners for early stage brands?

49:31
Daniel Scharff
And obviously everybody should go out there and do their due diligence sense.

49:34
Matt Merson
Yeah, for sure. I mean I think in the Natural channel there's two brokers that really separate themselves from the rest. Now obviously these are national brokers, they represent a lot of brands. But if you have the strategy in place and you have the financial Runway, you know, GreenSpoon sales is one and presence marketing is the second. Those are probably the top two natural channel focused. I'm sure they do have strengths on the conventional side. Side. But if I was hiring for National Natural, those would be the two I go to first. On the conventional side, you know, I'm partial to advantage sales and marketing. I think that they are probably the best well run conventional channel broker. They have partnered with the former fdm so they're set up to incubate emerging brands. I like C.A. Carlin out of Chicago.

50:24
Matt Merson
Those would be my two national conventional broker partners and there's lots of little ones. You know, I want to shout out my J and W Sales is my broker once Upon a Coconut here in the Midwest. Fantastic family run organization. They cover up and down the street from Ohio to Wisconsin. They make all the chain accounts. They've secured some big business for us. So that's an example of just a regional broker in the Great Lakes footprint that we're partnered with.

50:51
Daniel Scharff
All right, Matt, I think we've covered it. This is another podcast in the overall series of podcasts that I want to do with you to try to extract as much as possible from that big beautiful sales brain of yours to help benefit everyone in the community. Because if I know one thing, it's that every time I told Matt something that I was doing and he was like that's not a good idea, it wasn't. So I really appreciate it. So Matt, hey, thank you so much. This is incredibly helpful for all of the brands out there, getting just a real cheat sheet on brokers and you know, we just, you know what it's like to just start and have no idea about any of this stuff, to not even understand brokers place in the industry and how important it is.

51:32
Daniel Scharff
So just thank you again for being so willing to share all of the knowledge that you've built up with our huge community here.

51:39
Matt Merson
Well, great seeing you Daniel and appreciate you having me and happy to chat anytime.

51:43
Daniel Scharff
All right, everybody, thank you. All right, everybody, thank you so much for listening to our podcast. If you loved it, I would so appreciate it if you could leave us a review. You could do it right now. Now, if you're an Apple podcast, you can scroll to the bottom of our Startup CPG Podcast page and click on Write a Review. Leave your company name in there. I will try to read it out. If you're in Spotify, you can click on about and then the star rating icon. If you are a service provider that would like to appear on the Startup CPG podcast, you can email us@partnershipstartupcpg.com lastly, if you found yourself grooving along to the Music It Is My Band. You can visit our website and listen to more. It is superfantastics.com thank you everybody. See you next time.