I often see farmers reminiscing on social media about Funk’s G, even though it hasn’t been in the market for decades. Farmers recall how much they enjoyed the people, the products and the buying experience. Talk about brand equity!
It got me wondering: would the Funk brothers have taken on a distribution brand?
Distribution brands certainly have appeal. They can add simplicity and cost savings during a time when seed company margins are razor thin and staff is stretched. They can get your company access to new genetics and might be the only way to expand your margin opportunity.
But they can also erode your own brand’s equity. The effort you put into building your brand is now spent on building someone else’s. The weekend sales calls, delivering that extra bag to the field, and the countless hours spent on product selection have distinguished your brand from your competition. That effort now helps build the equity of the distribution brand.
To see if a distribution brand is right for your company, I see five key questions to ask:
- Can you maintain a strong company brand while adding a distribution brand?
- How does the distribution brand fit into your company’s strategy today and over the next decade?
- Does your company or the parent company control the terms, pricing, and duration of the distribution brand commitment? Is it at your option when to exit or to continue indefinitely?
- How does having or not having a distribution brand impact sales volume and profit? Which is more important to your company?
- How will you structure the sales team and incentive programs to ensure the proper focus and discipline versus just taking orders of the distribution brand?
Answering these questions is fundamental to the success of whichever strategy you choose. Each company will view them through its own, unique lens based on its sales territory, current product offerings, and long-term goals.
This decision also doesn’t exist in a vacuum. Many parent companies offer distribution brands as part of their out-licensing strategy, so your neighboring seed companies are considering these same questions. Regardless of the decision you make, you will compete against those brands and quite likely the parent companies as well.
This is a pivotal moment in the industry and taking on a distribution brand is a complex decision. Whichever direction your company chooses, make sure it’s based on a thorough analysis of how it impacts the short-term and long-term health of your company.
