Marketing Aquaculture Products — 1

usiness are net-30, net-7, and net-10 days.
Just because you moved product to a distributor
or retailer and they sold it out of a store to
a consumer (who gave them money) does not
mean any income entered your bank account.
You have an open invoice. Th at invoice will be
paid by their accounting department whenever
they feel like it is a priority to do so. Th e longer
they hang on to their money the better it is for
them. Th is is why you need to concentrate on
short-terms. A net-10 day is certainly what
you want to try to negotiate. Net-30 may mean
you get your money 60-days or much further
out. You may put some frosting on the cake by
off ering discounted terms. Th is is where you
discount you invoice by 1 percent, 2 percent
or more to get yourself paid. By off ering this
concession, you invoice goes to the top of the
stack to get paid; if you let some buyers talk
you into a net-30, you may get paid in 100 days
and only aft er you made fi ft een phone calls and
threatened legal action.
Of course top-of-the-stack is a descriptive term.
Today, everything is done by computer invoicing.
Th e computer makes decision on who gets
paid fi rst, and who subsequently gets paid and
when the checks are issued based on the terms
of the contracts and some wiggle room that always
seems to make it into the equation. Make
sure you know what kind of payment schedule
to expect and have it in the contract with no
exceptions.
Program Money (aka Shelter Money) is money
usually paid to brokers that is used to promote
the product through the food-distribution
chain. It is essentially a monetary commitment
between a distributor and the producer
for money that is budgeted for marketing and/
or sales and procurement activities undertaken
by the distributor. Consider this money
for preparing to get the product in stores and
properly presented. It also may be used to give
the distributor’s salespeople a fi nancial reward
incentive to move your product. If you come
to a broker with a less expensive product that
clearly beats the competition, the broker may
not be interested. Th is is because the broker
may opt for the more expensive product since
that producer has factored in program money
that can go back to the distributer as program
or procurement funds.
If you are playing the game of going through a
distributer, going big or bigger with your business,
hidden expenses like Program Money are
important to consider. If you get the feeling
program money is extortion, well, just wait
until you consider procurement money.
Procurement money is 1 percent to 10 percent
of a shipment that is set aside by Tier-1 and
Tier-2 distributors (the largest distributors) for
special promotional consideration. Translation:
extortion money paid to knock out the
competitor and get your product top billing and
more importantly, gets your product a spot in
the warehouse. Frequently this is referred to as
a slotting fee. Th is also may be used to give the
distributor’s sales people fi nancial incentive to
move your product.
Distributors also may look for a regular 3% to
be used for marketing at food shows, printing
holiday-special fl iers, etc. Th ey may deduct this
expense from what they owe on your invoice in
the form of a bill-back or auto-deduct. If you
are introducing a new product, this could be as
high as 5 percent. Auto-deduct is a term used
to identify a transaction in which a distributor
deducts from a producer’s outstanding invoice
to cover procurement or marketing activities.
Bill-back is a term used to identify a transaction
in which a distributor invoices (bills-back)
Marketing Aquaculture Products — 31