Distribution Agreements And Why You Need One

Whether you’re a manufacturer or a distributor, a Distribution Agreement is crucial to ensure the terms of your arrangement are clear to both parties.

Manufacturers typically engage distributors to sell and market their products at the wholesale or retail level.

Using distributors is a practical and straightforward way of getting your products into shops and establishing your brand with customers.

What’s In A Distribution Agreement?

A Distribution Agreement in New Zealand would typically include clauses about:

• Territory: this defines the area in which the distributor may sell the goods or services
• Term: this specifies the duration of the agreement
• Payment terms: the manner and timing in which the distributor must pay for the goods or services
• Subcontracting: whether the distributor is permitted to appoint other businesses to distribute the goods or services within their territory
• Exclusivity: whether the distributor is allowed to sell competing products
• Renewal: whether the agreement can be renewed or extended and the associated costs
• Termination: the conditions under which the agreement can be terminated

Marketing And Training

Provisions specific to Distribution Agreements in New Zealand often relate to marketing and training.

Having a distributor market the products is beneficial for manufacturing businesses. It allows the manufacturer to concentrate on product development while setting the terms under which distributors can market their products.

The manufacturer might require distributors to use certain marketing materials or adhere to specific guidelines in line with their brand strategy.

Manufacturers can also require their distributors to undergo training to provide adequate support for the products, especially for more technical items.

Occasionally, distributors may be featured in promotional material for the product, making it essential that they understand the product’s features and can offer support.

Example

Holly owns a distribution company in New Zealand that sells various types of skincare products. She realises she lacks the expertise to create face masks for her business.

She partners with a manufacturer, Mark, who produces different types of face masks using organic ingredients.

Mark is delighted that there is a way for him to sell his face masks without investing resources and time into marketing.

He arranges for a Distribution Agreement to be drafted to ensure that his arrangement with Holly is documented in writing.

It’s important to him that Holly exclusively markets his face masks on her website, so he includes an exclusivity clause in their agreement.

Need Help?

Whether you’re a manufacturer or a distributor, it is vital to have a Distribution Agreement to ensure that your products are sold efficiently and promptly.

It might seem like a complex task, but Sprintlaw has assisted numerous businesses in achieving their business goals and bringing products to market. Get in touch with us at [email protected] or call us on 0800 002 184 to find out more!

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