Surviving KeHE

May 31, 2023

3-min read

If you’ve onboarded with one of the national distributors like KeHE, here’s the reality: distributor business can be crushing.

Here’s how to survive.

Brands doing business with distributors take an initial hit to cash flow. Be prepared and use these tips for minimizing how long cash will be tied up.

I’m going to use KeHE as an example, but doing business with UNFI is similar.

Payment timing

The #1 thing to know is you will not get paid until the initial POs in all DCs have sold. I know it’s exciting to get a big PO. But you have got to tie the amounts back to real retailers that you know are planning to bring your items in.

The way to manage your first PO order amount is to communicate with your retailers on the first fill and anticipated sell throughs. Scrutinize the POs and if it seems like too much, have them decreased. You cannot do this yourself – only the retailer can make the adjustment.

Payment amount

After finally getting paid you might think there has been an egregious error – they misplaced the decimal, right? Wrong. Remember all of those concessions you gave when you signed up? They are all coming out as deductions in that first invoice. Some invoices come back negative. Seriously.

Billed back inventory

Under New @KeHE, you must give 50% off your 1^st month orders and 25% off your 2^nd month orders, and you don’t get to pick and choose which retailers get the deal. Notoriously, KeHE will place large POs and anything that doesn’t sell after 6 months gets billed back at the KeHE cost +$0.29 handling fee per unit. How to prevent this is by having a clear line of communication with retailers that will be ordering. Don’t rely on your broker. And don’t be afraid to ask the retailer to decrease the amounts.

Double Dipping Promos

You should always fill out the KeHE Roadmap before any retailer specific planners are created. This avoids double-dipping, or giving twice the discount intended. All retailers automatically get the KeHE published deals, so anything above and beyond that you want to give is an additional discount. Remember, you are not able to cut off any retailers from getting the published deals.

Spoils

Don’t sign up for full coverage on spoils. Unless you are a highly perishable item, just give a 1% allowance and if it ends up being more, KeHE will switch it up later.

Escalating problems

When you have an issue – and you will – you can fill out a dispute and wait your turn to get it resolved. If you want more immediate attention, you have to be ranked high enough with KeHE to get help. KeHE ranks vendors as Good, Better, or Best -- and here’s what the rankings really mean:

Good -- means bad

Better -- is where you want to be

Best -- means you’re getting taken advantage of

Huh?

If you are giving the required payment terms of 2% in 10 net 30, your inventory is selling through, and you have published deals in the Roadmap, you should always be ranked Better. If you are lacking in these areas you’ll be dropped to Good (which is bad), and you won’t get any attention. Conversely, if you over-promote you’ll be designated Best status, which doesn’t get you anything more with KeHE other than the satisfaction of knowing you’re probably spending too much.

There are two ways of getting into KeHE and I’m keen on waiting until you have been authorized by one of their key retailers (such as Safeway/Albertsons, Meijer, Jewel-Osco, Erewhon, etc.) and avoiding the New @KeHE route.

To learn more, view the KeHE 2023 Supplier Connections handbook here.

I don’t like the distributor model any more than you do. It shouldn’t be this prohibitive. But until the model gets disrupted be sure you know what you are getting into when signing up.

All my best,

Jennifer