Do Food Brands Need A Consignment Agreement?

Yes - if you're placing your sauces, baked goods, preserves, drinks or other artisan food products in cafes, delis or gift stores on consignment, you should have a written consignment agreement.

Consignment can be a great way to get your products onto shelves without asking the retailer to buy stock upfront. But food products need extra care. You're not just dealing with ordinary retail stock - you're dealing with shelf life, storage temperatures, allergen labelling, spoilage, customer complaints and sometimes product recalls.

A good consignment agreement for food products in NZ should make it clear who owns the stock, when you get paid, who is responsible if products expire or are damaged, and what happens if something needs to be pulled from shelves.

What Is A Consignment Agreement For Food Products?

A consignment agreement is a contract where you supply products to a retailer to sell, but you usually keep ownership of the stock until it's sold to the customer.

For example, say Hana makes small-batch chilli oil in Wellington. A local deli agrees to display 30 jars near the counter. The deli only pays Hana for jars that are actually sold, and Hana collects or replaces the unsold jars later. That's a typical consignment arrangement.

In a food context, your agreement should do more than cover payment. It should deal with practical issues such as:

• whether the retailer can move your products to another store or online channel
• how products must be stored and displayed
• who checks best-before or use-by dates
• what happens to damaged, expired or spoiled products
• how sales are reported to you
• how quickly you're paid after a sale
• what happens if there's a food safety issue or recall

This is where a basic retail consignment agreement may fall short. A candle, greeting card or ceramic mug doesn't usually need a temperature log, allergen warning or batch number. Food often does.

Is Consignment Better Than Wholesale For Artisan Food Brands?

It depends - consignment can make it easier to get shelf space, but wholesale usually gives you cleaner cash flow and less ongoing risk.

With a wholesale agreement, the retailer buys stock from you upfront, then resells it to customers. Once the stock is delivered and paid for, the retailer normally carries the risk of whether it sells, unless your terms say otherwise.

With consignment, you may keep ownership until sale, but you're often carrying more risk. Your products might sit on a shelf for weeks, expire, be discounted without your approval or be mishandled by staff.

When Consignment Can Work Well

Consignment can be a sensible option when:

• you're testing demand in a new area
• a retailer likes your brand but isn't ready to commit to a wholesale order
• your products have strong visual appeal and benefit from in-store discovery
• you want to trial a seasonal range or limited run
• you can monitor stock levels and expiry dates easily

When Wholesale Terms May Be Safer

Wholesale terms may be a better fit when:

• your products have a short shelf life
• you can't regularly visit or check the retailer's site
• the retailer wants control over pricing, promotions or bundling
• your margins are tight and late payment would hurt your cash flow
• your products need chilled or frozen storage

You don't have to use one model forever. Many food brands start with consignment for trial locations, then move reliable retailers onto wholesale terms once there's a sales history.

Who Owns Stock On Consignment In New Zealand?

You can agree that you own the stock until it's sold, but you may need extra protection under New Zealand's Personal Property Securities Act 1999.

This is one of the areas many small food brands miss. A consignment arrangement can be treated as a security interest under the Personal Property Securities Act, especially where it's a commercial consignment. If the retailer becomes insolvent, simply saying you own the stock in your agreement may not always be enough to protect you against other creditors.

To strengthen your position, you may need to register your interest on the Personal Property Securities Register, often called the PPSR. For inventory, timing can matter. If you want priority as a purchase money security interest, you generally need to register before the retailer gets possession of the goods.

That sounds technical, but the practical point is simple: if you're leaving valuable stock with retailers, ownership wording and PPSR registration should work together.

Your consignment agreement should say:

• title to the products remains with your business until sale to the end customer
• the retailer must keep your products identifiable and separate where practical
• the retailer can't grant security over your products
• the retailer must let you access, count and collect stock during agreed times
• you can register your interest on the PPSR if needed

If you're placing stock with multiple retailers or higher-value stockists, it's worth getting tailored advice on the PPSR position. This is a good example of where a template can miss the part that actually protects you if something goes wrong.

What Should Your Food Consignment Terms Cover?

Your consignment terms should cover the commercial deal, the food-specific risks and the day-to-day process for sales, stock and payment.

At a minimum, your agreement should clearly set out the following.

Products And Territory

List the products covered by the arrangement, including sizes, flavours, SKUs or batch details if relevant. If the retailer can only sell from one store, say so. If they can sell online or through delivery platforms, say that clearly too.

This matters because your brand positioning can change quickly if a retailer lists your premium jam on a discount marketplace or bundles your product with something that doesn't fit your brand.

Pricing And Commission

Your agreement should state:

• the recommended retail price or fixed sale price
• the retailer's commission, margin or consignment fee
• whether the retailer can discount products
• whether discounts need your written approval
• how GST invoices and sales records will be handled, if applicable

You should also decide whether the retailer gets paid by keeping a percentage of each sale, or whether they pay you an agreed amount per item sold. The wording should match how money actually moves.

Sales Reporting And Payment

Set a regular reporting cycle. For example, the retailer might report sales on the last day of each month and pay you within 7 days after that report.

Your agreement should cover:

• what sales information the retailer must provide
• when payment is due
• whether payment is based on point-of-sale data, stock counts or both
• what happens if sales records don't match stock levels
• whether you can inspect records relating to your products

Without a written process, you may find yourself chasing screenshots, handwritten notes or vague updates like, we sold a few jars last week. That's frustrating, and it makes cash flow harder to manage.

Brand, Marketing And Display

Your agreement should say how your products can be displayed and promoted. This can include shelf placement, refrigeration instructions, use of your logo, social media posts, photography and approved product descriptions.

This also connects with the Fair Trading Act 1986. Claims about your products must not be misleading or deceptive. If a retailer describes your product as organic, sugar-free, made in New Zealand or suitable for a particular dietary need, that claim needs to be accurate and backed up.

How Should You Deal With Spoilage, Expiry Dates And Unsold Goods?

Your agreement and product specification schedule should say exactly who is responsible for spoiled, expired, damaged or unsold goods, because this is where food consignment arrangements often become messy.

Start by separating the causes of the problem.

If The Retailer Mishandles The Products

If the retailer fails to store or display the products properly, it's reasonable for your agreement to make the retailer responsible for the loss.

For example, if your chilled dessert cups must be kept below a required temperature and the retailer leaves them unrefrigerated near a sunny window, your agreement can require the retailer to pay for those products or remove them from sale immediately.

Your terms should cover:

• storage temperature requirements
• cleanliness and pest control expectations
• whether products can be opened, sampled or repacked
• who checks products for damage
• what records the retailer must keep

If Products Expire Before They Sell

If products simply don't sell before their best-before or use-by date, your agreement should say who wears that cost.

Common options include:

• you collect unsold products before a set date
• the retailer discounts products only with your approval
• the retailer pays for products not made available for collection
• the retailer removes expired products from sale and records disposal
• you and the retailer share the loss for approved promotional trials

For perishable stock, it helps to include a minimum remaining shelf-life requirement on delivery. For example, you might only deliver products with at least a set number of days before expiry, and the retailer must tell you if stock isn't moving by a certain point.

If Goods Are Unsold At The End Of The Arrangement

Your unsold goods consignment terms should explain what happens when the trial ends or either side gives notice.

Cover practical details such as:

• how much notice either side must give
• when you can collect remaining stock
• who pays return transport costs
• what happens if the retailer can't locate the stock
• whether unsold food can be donated, discounted or destroyed

Be careful with donations or disposal. Food that's no longer safe, no longer labelled correctly or past a use-by date shouldn't be treated as a marketing opportunity. Your agreement should give food safety priority over clearing shelves.

What Happens If There Is A Product Recall?

Your consignment agreement should have a clear product recall response process, because food recalls need fast, coordinated action.

In New Zealand, food safety obligations sit mainly under the Food Act 2014 and related food standards. Depending on your activities, you may need to operate under a registered food control plan or a national programme. The Ministry for Primary Industries and local councils are commonly involved in registration, verification and recall processes.

A recall might be needed because of:

• undeclared allergens
• contamination
• incorrect labelling
• foreign objects
• temperature control failures
• incorrect use-by or best-before dates

Your agreement should require the retailer to act quickly if you notify them of a recall or withdrawal. It should also require the retailer to contact you immediately if they receive a complaint, find a safety issue or become aware of a potential labelling problem.

A strong recall clause or product recall plan usually covers:

• who can make the decision to recall or withdraw products
• how each party must notify the other
• how affected batches will be identified
• how stock will be removed from sale and isolated
• what customer or point-of-sale information the retailer must provide, where lawful
• who manages communications with MPI, verifiers or registration authorities
• who bears the cost, depending on the cause of the recall

If your products are batch-coded, your agreement should require the retailer to keep batch information visible and not remove packaging or labels. That small operational step can save a lot of time if you need to trace affected stock.

How Do NZ Consumer And Food Laws Affect Your Agreement?

New Zealand consumer and food laws affect your agreement because they shape what you can promise, how products must be labelled and what happens if customers complain.

The Fair Trading Act 1986 is especially relevant for product claims. Your product descriptions, packaging and marketing must not mislead customers. This applies to claims made by you and, in many cases, claims repeated by the retailer.

Be careful with claims like:

• organic
• natural
• gluten-free
• vegan
• made in New Zealand
• locally sourced
• no added sugar
• health or wellness claims

The Consumer Guarantees Act 1993 can also be relevant because customers buying food from the retailer have rights if goods aren't of acceptable quality or don't match their description. Even if the retailer deals with the customer at the counter, your agreement should explain how you and the retailer handle complaints, refunds, replacements and product investigations between yourselves.

Food labelling and safety requirements may come from the Food Act 2014, the Australia New Zealand Food Standards Code and related rules. Depending on your product, you may need compliant ingredient lists, allergen declarations, date marking, storage directions, nutrition information and supplier details.

Your agreement shouldn't try to shift legal responsibility in a way that doesn't reflect reality. If you manufacture and label the product, you're likely responsible for getting that right. If the retailer stores the product incorrectly or makes an unauthorised claim at the point of sale, the agreement can make the retailer responsible for that conduct.

Common Mistakes To Avoid

The most common mistake is treating food consignment like any other shelf-space arrangement.

For artisan food brands, the details matter. Try to avoid these traps:

• Leaving payment timing vague: say when sales are reported and when payment is due.
• Ignoring PPSR protection: ownership wording may not be enough if the retailer becomes insolvent.
• Letting retailers control discounts: heavy discounting can hurt your brand and confuse other stockists.
• Forgetting expiry dates: agree when stock must be checked, collected, discounted or removed.
• Skipping storage rules: spell out refrigeration, display and handling requirements.
• Having no recall process: food safety issues move quickly, so your contract should too.
• Not controlling claims: make sure retailers can't make health, origin or dietary claims without your approval.

A simple, tailored supply agreement can make the relationship feel more professional from day one. It also gives the retailer confidence that you have thought through the practical parts of selling food safely.

Key Takeaways

• A consignment agreement lets you place food products with retailers while usually keeping ownership until sale.
• Food consignment terms need extra detail because of shelf life, storage, labelling, spoilage and recall risks.
• In New Zealand, the PPSR can be relevant if you want to protect your ownership against the retailer's creditors.
• Your agreement should cover payment, sales reporting, pricing, discounts, stock checks, expired goods and return processes.
• Food safety, Fair Trading Act claims and Consumer Guarantees Act issues should be reflected in your contract.
• Clear terms help you grow retail stockists without losing control of your products or brand.

If you'd like help with your food consignment terms, wholesale trading terms, recall clauses and supplier agreements, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.