How to build a coffee equipment line that protects distributor margin

Work down from the retail price

Distribution margin is decided at the top of the ladder, not the bottom. Start from the price the end customer will pay, subtract the retailer requirement, subtract the dealer requirement, and see what remains. If what remains does not cover your buying cost plus your own operating cost, the product does not work in that channel at that price, and no amount of negotiation at the bottom fixes it.

This is uncomfortable because it often means a product that looks cheap ex-works is actually uncompetitive at retail. Better to discover that before the container.

Protection should follow performance

Exclusivity granted before a first order is a promise bought with nothing. The sequence that works is trial order, then a target, then protection tied to that target with a review date.

Protection can be narrower than most buyers expect and still be valuable: a channel, a SKU, a defined version, or a customer-specific configuration rather than a whole country.

The direct-sales question

If the brand sells directly at or below distributor pricing, distributor economics collapse, and the distributor will reduce inventory and stop promoting the line. Either commit to a channel boundary, or be explicit that a territory is shared — but decide before the distributor invests, not after.

Consignment is not a trial

A consignment arrangement transfers inventory risk back to the supplier but does not prove that the product sells. It usually delays the only question that matters. A small buy-in that the distributor owns outright produces a real answer far sooner.

What good replenishment looks like

Distributors get burned by supply, not by price. What they need is a stated lead time that holds, a clear answer on which items ship from stock, and advance warning when something changes. A supplier who says “six weeks” and means it is worth more than one who says “three weeks” and delivers in eight.

What to do next

Ask for the full ladder before discussing your own buying price, and ask what happens to your territory if you miss a target. The answer to the second question tells you how the supplier thinks about partners.