Wholesaler margins on generic & nominated lines
Traditional wholesaler margin conventions would suggest that temperature category should inform the primary-level considerations. This is premised upon the rationale that ambient products are the most cost effective to stock hold and distribute, then chilled, with frozen product being the most costly. Therefore the contribution towards cost in gross margin should ladder in the same manner.
Beyond this primary-level consideration, I would say it depends on the type of the wholesaler. A broadline or ‘one stop shop’-style wholesaler might have product category margin targets whereby certain product groups are expected to deliver higher margins than others, for example, impulse products (such as drinks, snacks or confectionary) may be sold at lower margins than catering ingredients. This would of course be staged in alignment to the quality proposition of the product (think good, better, best). For specialist wholesalers, it could often be that margin may be dictated by classification of branding or the role the product plays in the differentiation to the wider market offering (ie unique or differentiated product).
Nominated margin is an entirely different beast! The nature of nominated product dictates that the commercial relationship is held between the manufacturer/vendor and the wholesaler’s customer. In this dynamic, the wholesaler is purely a third party within the dynamic, often providing stock holding and/or distribution. The mechanic by which the wholesaler derives their margin contribution depends on the nature of their contract with the customer. This can be expressed as a case rate or percentage on cost. I would advise any manufacturer/vendor to understand how the customer works with their wholesaler when discussing nominated lines.
