CPG distribution explained.

CPG (Consumer Packaged Goods) distribution is the system that moves products from the manufacturer to the end consumer. It typically involves a chain: manufacturer produces the product, sells to a distributor, who warehouses and delivers to retailers, who sell to consumers. Each level of the chain takes a margin for their services. The complexity and cost of this chain is the primary barrier to entry for new food brands.

Entry costs vary by channel. Wholesale marketplace listings: $0 upfront (platform takes a percentage of sales). Regional distributor: $5,000-$15,000 in initial promotional allowances and sell-in costs. National specialty distributor (UNFI/KeHE): $20,000-$50,000 including slotting fees, broker commissions, and promotional spend. National retail chain (direct): $50,000-$200,000+ for slotting fees alone, plus promotional commitments. Start with low-cost channels and reinvest revenue into higher-cost ones.

Slotting fees are payments made to retailers for shelf space. They compensate the retailer for the risk and cost of adding a new product: resetting shelves, programming POS systems, training staff, and the opportunity cost of removing an existing product. Slotting fees range from $5,000-$25,000 per SKU per retailer for regional chains, and $25,000-$100,000+ per SKU for national chains. Wholesale marketplaces and independent stores typically do not charge slotting fees.

Several paths work without traditional distributors. Direct-to-retailer: pitch and deliver to independent stores yourself (works for local/regional). Direct Store Delivery (DSD): hire a delivery driver or do it yourself for nearby accounts. Wholesale marketplaces: list on BoxNCase or similar platforms where buyers place orders and you ship direct. DTC: sell through your own website and ship via UPS/FedEx. Most successful brands combine multiple direct channels before adding a distributor.

Distributor margins vary by type and volume. Broadline distributors (Sysco, US Foods): 18-25% of their selling price to the retailer. Specialty distributors (UNFI, KeHE): 20-30%. Regional distributors: 15-22%. DSD distributors: 25-40% (they also handle merchandising). Wholesale marketplace platforms: 10-15% platform fee, no distributor margin. Your effective margin is your wholesale price minus the distributor's cut and any promotional allowances.

AI agents are becoming purchasing assistants for restaurants, caterers, and retailers. Instead of browsing catalogs or calling sales reps, buyers use AI assistants to find products that meet specific criteria (organic, price range, certifications, pack size). Brands whose products are machine-readable — with structured data, canonical identifiers, and API-accessible listings — show up in AI agent searches. Brands with PDF catalogs and phone-only ordering don't. BoxNCase's MCP server, UCP, and ACP protocols make listed products discoverable by any AI agent, from any platform.

A distributor buys products from manufacturers, warehouses them, and delivers to retailers — they handle the logistics and often the sales relationship. A wholesaler operates a marketplace or warehouse where buyers come to them (physically or digitally). In practice, the lines blur: some distributors have cash-and-carry warehouses, and some wholesalers deliver. The key distinction is service level. Distributors actively sell and deliver your product. Wholesalers provide a platform where buyers find and order it.