Ask the Collective

What's the lowest acceptable margin for a craft premium brand when negotiating with a larger distributor, and how should founders secure advertising and promotional support?

Before accepting a lower margin, establish what you're receiving in return. The key tactic members recommend is **conditioning margin reductions on increased A&P investment from the distributor** — rather than simply giving away margin, structure the deal so you maintain control over promotional spend allocation. **Recommended approach:** - Don't accept squeezed margins without concrete commitments. Ask upfront what the distributor will deliver in return (advertising, promotional support, shelf placement investment). - **Convert margin concessions into A&P budgets.** Ensure any margin you reduce is explicitly converted into advertising and promotional spend on the distributor's side. - **Maintain co-investment control.** Rather than letting the distributor pocket extra margin, condition the deal on *you* investing additional A&P from your side while they invest from theirs — this gives you visibility and say over where the investment actually goes. - Be wary of distributors simply using extra margins to milk your brand or redirect spend to other products in their portfolio. Members emphasize that the uneven playing field between small craft brands and big brands (in terms of trade spend, refits, and cash support) makes it essential to negotiate visible, contractual promotional commitments rather than accepting margin reductions in hope of support.