Freight Allowance or Fuel Surcharge? I find these terms going through my head twenty-four hours a day. A freight allowance is usually passed down to beverage distributors from their suppliers to alleviate the financial burden of high freight rates. Freight Allowances are also used to equalize FOB’s for beverage distributors located long distances from where the products are produced and shipped. A fuel surcharge is an incremental charge added to the total invoice from a beverage distributor to a retail establishment. If your company is not receiving freight allowances or passing on a fuel surcharge to your customers, you need to ask yourself some serious questions.
Freight Allowances
Many beverage distributors receive freight allowances from their suppliers. If you are not receiving them, you need to demand an allowance from your suppliers. I have heard and seen instances of beverage distributors in California, Texas, and Florida receiving substantial freight allowances from many well-known suppliers. If your suppliers are doing this for one distributor, they should be doing it for all.
Fuel Surcharges
Some distributors, including myself, have added $1.00 and $2.00 fuel surcharges to retail invoices. There has been some backlash from the suppliers and major chains, but overall many retailers have come to expect a fuel surcharge. I am considering changing my surcharge to a percentage of the total invoice. It will probably be 2% to 2.5% of the total invoice cost.
With rising diesel and gasoline costs to beverage distributors, make sure you start asking for freight allowances and adding fuel surcharges now. Fuel for our trucks will never be cheaper than it is now. And that causes many sleepless nights for me.
Wednesday, April 30, 2008
Freight Allowances and Fuel Surcharges for Beverage Distributors
Monday, March 03, 2008
Calculating Gross Profit per Case
An excellent, straightforward reference for checking the health of your beverage business is calculating your gross profit per case. Many route accounting systems have report functions that will give you an estimate of this figure, but route accounting systems don't take into consideration all of the outside influences; such as samples, free cases, breakage, discounts, promotions, or theft. I use a simple spreadsheet program that will give you the exact figure once you have entered the neccessary sales information. At the end of the month, I enter my individual case sales, gross dollars by individual case, any promotional dollars and then, in a flash, I get my figure. It stands at $4.65 a case at present, which is up substantially from three years ago, when it was a stagnant $3.87. In fact, my margins have also increased a nice 3 percentage points to 26.4%.
Analyzing your gross profit per case will undeniably impact your margins and profits in a positive manner. This simple report will also give you needed guidance in reducing unneccessary discounts, rationalization or elimination of unprofitable SKU's, monthly forecasting and ordering, and a wealth of data about your portfolio.
This program is built using simple excel formulas that you can develop very easily. If you want an example of mine, you can download it here.
Tuesday, February 19, 2008
Three Tier Contemplation
Everyday I hear someone in the Beverage Industry speak about the Three Tier System. In beverage terminology, the three tier system is the arrangement carved from the repeal of prohibition that sets legal boundaries between breweries, wholesalers, and retailers. Section 2 of the 21st Amendment to the Constitution of the United States gives the actual states authority to regulate the production, importation, distribution, retail, and consumption of alcohol beverages inside their own state lines. In most states, breweries can't own distributors, distributors can't own retail establishments, retailers can't own breweries, and so on. The restrictions imposed upon each tier are in place for reasons of control, such as taxation, consumption, and licensing.
Controls and restrictions on the beverage industry were set in motion by men of vision and moderation. They knew the excesses of pre-prohibition times all too well. Every corner saloon was owned, or tied to a brewery. This made the brewer a retailer. Therefore, it is my opinion that brewers' influence upon retailers was the fatal mistake that brought about prohibition. This influence over retailers is the reason why a "middleman" or distributor tier was created. Today, I see many instances of the breweries circumventing laws enacted to prevent the abuses of alcohol:
1.Suppliers never go empty handed into a sales presentation with a convenience or grocery store representative. It is common practice for them to give a gift when starting the meeting. Guess what...these retailers now have their hand out every time we see them.
2.Breweries giving away coupons to consumers. There are laws on giving away free or reduced price product.
3.Suppliers forcing distributors to host taste challenges in local bars. It is against the law in most states to buy a consumer a beer.
4.Breweries hiring sales forces that interact with consumers in stores and bars.
5.Breweries hosting websites that any teenager can gain access to.
Face it, the big brewers are trying to sidestep the wholesale tier. Wholesalers...never, ever think that brewers or retailers are your "partners". The 21st Amendment prevents this from happening. I love to see Brewery CEO's tout the praises of the three tier system. What a load of BS. It's painful to realize our business is more about politics than how hard you actually work.
Monday, August 06, 2007
Around the USA with Beer Distributors....
I've found some interesting articles from around the USA written about the most popular people in town, local employees of beer distributors....
Salesman from a Minnesota Budweiser Distributor
Alabama Miller Distributor
Montana Budweiser Distributor
I hope you enjoy these interesting articles about beer distributors around the USA. I will bring you more later.
