FSMA
FOUNDATION
AGENCY SALES or DIRECT SALES?
Why Sales Agencies Are More Cost-Effective
and
Efcient than Direct Sales by Manufacturers
2 AGENCY SALES or DIRECT SALES?
CONTENTS
A. Executive Summary…………………………………… 3
B. Focus of White Paper ………………………………… 3
C. Research Methodology ……………………………… 4
D. Agency or Direct Comparison Considerations……… 4
E. Manufacturer Cost Estimate Challenges …………… 5
F. Manufacturer Key Cost & Activity Questions ……… 6
G. Conclusions …………………………………………… 7
H. Acknowledgments …………………………………… 7
I. Contacts………………………………………………… 7
APPENDICES
A. Necessary Costs of Sales Factors to Be Considered … 8
B. Agency Activities and Costs Factors ………………… 9
C. Sales Cost Analysis Tool -
Direct Sales Model Worksheet ……………………… 10
D. List of Sales Agency Outsourcing Studies……………14
© 2019 by the ASMC Foundation and the FSMA Foundation. All rights reserved. ISBN: 978-0-578-40124-9. No part of this publication
may be reprinted or reproduced in any way without written consent from the ASMC Foundation and the FSMA Foundation.
………………………………………………………………………………………………………………………
Why Sales Agencies Are More Cost-Effective And Efficient than Direct Sales by Manufacturers 3
A. Executive Summary
For more than 100 years, most foodservice Manufacturers have employed Sales and Marketing Agencies (“SMAs”) as
their main go-to-market method. It is estimated that upwards of 70-75% of US product volume sold through broadline
foodservice distribution involves an SMA. There are numerous reasons for this overwhelming propensity of use of
Sales and Marketing Agencies, with the chief reason being that SMAs are more cost-efcient and effective than
a Direct Sales Model.
Why are SMAs more cost-efcient and effective? Agencies are efcient because they are able to spread the sales,
marketing and support costs across the numerous Manufacturer clients (known as “syndication”) they represent.
This syndication ability of Agency services allows Agencies to perform activities cost-efciently compared to a Direct Sales
Model, which has no such advantage.
SMAs are also compellingly more effective than a Direct Sales Model. Syndicated Agencies provide experienced
multi-client sales and marketing services, culinary facilities, dry and cold storage, and customer service and order
management staff among many other services that would be cost prohibitive for almost all Manufacturers to replicate
in more than one location.
SMAs are also effective because they are closest to the customers in their markets, with long-standing relationships
and intimate market knowledge with all customer segments. Agencies offer consistent and constant representation
across all customer segments including commercial, non-commercial, healthcare, education and many others.
Regardless of the type of Agency representation chosen by a Manufacturer (national, regional or independent), or the
amount of commissions paid, this combination of efciency and effectiveness is the primary reason why Agencies
continue to represent 70-75% of products sold in foodservice.
B. Focus of White Paper
This White Paper was sponsored by the ASMC Foundation and the FSMA Foundation on behalf of the Foodservice
Sales & Marketing Association (“FSMA”) to respond to inquiries regarding the difference in cost and effectiveness of a
Manufacturer outsourcing through an Agency (“Agency Sales Model”) as compared to a Manufacturer employing their
own in-house/direct sales and marketing team (“Direct Sales Model”).
AGENCY SALES or DIRECT SALES?
Why Sales Agencies Are More Cost-Effective
and
Efcient than Direct Sales by Manufacturers
4 AGENCY SALES or DIRECT SALES?
The foodservice consulting rm of Franklin Foodservice Solutions was engaged by the Foundation to prepare this White
Paper and to analyze the advantages of Agency Sales compared to Direct Sales.
In this White Paper, at Appendix C is an Excel spreadsheet tool (“Sales Cost Analysis Tool”) to provide a unique
calculation tool to answer the age-old question of which sales method is the best for a Manufacturer and to help
it prepare a comprehensive analysis to estimate the costs of a “Direct” as compared to “Agency” go-to-market model
based not on industry averages, but rather on a Manufacturer’s actual and estimated sales costs.
C. Research Methodology
In preparing this White Paper, FSMA Agency and Manufacturer Members were consulted to better understand the scope of
Agency services provided to Manufacturer clients.
These activities were organized into a summary of 6 “Necessary Cost of Sales Factors to be Considered,” identied in
Appendix A more fully itemized in Appendix B as a guide for calculation of the actual and estimated sales costs. Not
surprisingly, the research showed that sales activities such as customer sales calls are only a small portion of the work
performed by Agencies in support of growth of a Manufacturer’s sales volume. While not all of the Appendix A activities
are needed by every Manufacturer, the Cost Factors identied provide a more comprehensive list of activities that Agencies
perform for their Manufacturer clients which are critical to provide an accurate cost comparison.
Lastly, the Sales Cost Analysis Tool for Manufacturers was developed to accurately compare fully loaded costs
associated between Agency and Direct sales models. The Sales Cost Analysis Tool includes instructions for estimating
the number and cost of human, infrastructure and other resources required to support the Direct Sales Model, and to
enable comparisons of these costs to current Agency Model costs. The Tool includes a ll-in-the-blank worksheet for a
Manufacturer’s comparison using their own internal costs and estimates, as well as two examples based on different
commission payment levels.
This White Paper and the Sales Cost Analysis Tool (Customizable Excel spreadsheet) is available for download at
no cost from the ASMC Foundation website @ www.ASMCFoundation.org and the FSMA Foundation website at
www.FSMAonline.com/FSMA-Foundation.
D. Agency or Direct Comparison Considerations
When FSMA is requested to provide guidance to Manufacturers regarding the comparative costs of the Agency or Direct Sales
Models, it often nds that many sales costs that should be part of the analysis are overlooked. A few reasons for this are:
1. Manufacturers rarely share their proprietary internal sales cost information.
2. Direct employee compensation rates for Direct Sales Manufacturers vary across geographic regions, making
generalizations inaccurate.
3. Direct Sales Manufacturers have differing strategies regarding:
a. Operator segments
b. Distributor support (private label, category
management, etc.)
c. Contract vs Street Business
d. Chain Accounts
e. Culinary Support
Why Sales Agencies Are More Cost-Effective And Efficient than Direct Sales by Manufacturers 5
The FSMA Foundation is aware of numerous outsourcing studies (See Appendix D) which conclude that, unless a
Manufacturer has a high enough sales volume to justify the total costs of the Direct Model
1
, the Agency Model costs less
than a Direct Model due to the syndicated activities that Agency represented Manufacturers take advantage of,
as compared to Direct Sales Manufacturers, who shoulder 100% of these costs internally.
Two other non-nancial considerations are worth noting, and must be considered by Manufacturers in considering the
“Agency or Direct” question:
1. The potential benet of a sales force, with high enough sales volume to justify the costs, that is 100% focused on a
single Manufacturer’s product line compared to the multi-client Sales Agency Model.
2. The potential disadvantage of Distributors having a strong preference for foodservice Manufacturers who use
Agency representation, since the syndication of numerous products with Operators gives them more sales credibility
and value and a more efcient interface than a Distributor having to build relationships with hundreds of
Manufacturers. Distributors also appreciate the many selling and marketing resources Agencies provide to them on
behalf of their Manufacturer clients.
E. Manufacturer Cost Estimate Challenges
In the numerous conversations with Manufacturers on this topic over the years most Manufacturer senior managers vastly
underestimate the scope and cost of support provided by their Sales Agencies, especially support activities which
are not directly related to “making sales calls.” But without these additional sales support activities identied in
Appendix B performed by Agencies in every market, sales growth is nearly impossible.
Therefore an accurate sales cost analysis of “Agency” or “Direct” must include the added costs associated with each of the
sales and marketing activities provided by Agencies to each individual Manufacturer client.
In a very typical (but often incomplete) cost analysis, a Manufacturer will state: “I pay $1 million in Agency commissions.
One Direct sales person will cost me $100,000. If I divide the cost of a sales person into the commissions paid,
that means I can employ 10 Direct sales people in lieu of paying my Agency(ies)’ commissions.”
That analysis is inaccurate, because it ignores all the other costs incurred in support of the essential sales and
marketing activities performed and paid for by the Agency as identied in Appendix B. These activities and costs must
be accounted for by a Manufacturer deciding whether to solely bear the costs in-house without the savings and efciency
of a syndicated sales and marketing agency.
1
In the Study “Maximizing the Impact of Outsourcing,” one $13 billion CPG said it “couldn’t make the math pay out” to maintain
a direct sales force at retail. See Appendix D. This Study further indicates that even manufacturers who are selling direct continue
to need sales and marketing agency services in areas where the agency can execute more efciently and effectively, due to their
syndication expertise such as at headquarter level.
6 AGENCY SALES or DIRECT SALES?
F. Manufacturer Key Cost & Activity Questions
Manufacturers who are considering Direct or Agency sales models should evaluate the nancial impacts of each model using
the customizable Appendix C Sales Cost Analysis Tool before risking signicant increased sales and marketing cost and
possible loss of effective sales of its products.
Key Questions for Manufacturers:
1. Which of the Appendix B functions are your Agencies performing for you now?
2. Which will you need to maintain in a Direct Sales Model?
3. How would you organize your Company to provide these functions on a local/regional/national level?
4. What are the skillsets required to perform these functions?
5. What will it cost, including:
a. Salary and Benets
b. FICA
c. Unemployment
d. Workers Compensation
e. Liability Insurance
f. Travel
g. Meals and Entertainment
h. Vehicle
i. Recruiting and Onboarding
j. Training (Product and Sales Training)
k. Turnover
l. Additional HR Stafng
m. Promotions and Incentives
6. What are the risks when changing to a Direct Sales Model, including:
a. Lost local relationships.
b. Learning curve and ramp-up time until full effectiveness is achieved.
c. Lost sales from aggressive competition sensing an opportunity during the transition.
d. Lost oat in cash ow because direct employee payroll costs are paid on a shorter and more regular time frame than
agency commission payments.
e. Manufacturers would need to replicate extensive equipment, computers, mobile phones, and culinary and other
equipment needed both initially and on a continuing basis.
f. Agency costs of sales are variable based on sales performance whereas In-House/Direct Sales have no such advantage.
In-House/Direct incur xed costs which are subject to inationary pressure whereas agency commissions paid to
an Agency are automatically adjusted based on the selling prices of products.
Why Sales Agencies Are More Cost-Effective And Efficient than Direct Sales by Manufacturers 7
G. Conclusions
In considering a possible change to an In-House/Direct Sales Model, a Manufacturer needs to measure and include the hard
and soft costs associated with an Agency as compared to a Direct Sales Model. This White Paper provides a Manufacturer
with the Sales Cost Analysis Tool to enable calculations of all costs in order to make an informed decision regarding
the efciency and effectiveness of each sales model.
Regardless of the type of Agency representation chosen by a Manufacturer (national, regional or independent), or the
amount of commissions paid, this combination of efciency and effectiveness is the primary reason why Agencies
continue to represent 70-75% of products sold in foodservice.
2
In a few words, the answer to the age-old question
of which method is best — Agency Sales or Direct Sales? Agencies sell products for their Manufacturing clients less
expensively and better than Direct!
H. Acknowledgments
Our thanks to Franklin Foodservice Solutions for researching and assisting in the production of this White Paper.
We also thank the following Contributors and Editors of the White Paper:
Rick Abraham, President & CEO, FSMA
Barry C. Maloney, CFO and General Counsel, FSMA and FSMA Foundation
The FSMA Foundation also gratefully appreciates the generous contribution from the ASMC Foundation which
sponsored this White Paper. The ASMC Foundation also sponsored the various comprehensive retail outsourcing Studies
on behalf of the Association of Sales & Marketing Companies (ASMC) referred to in Appendix D of this White Paper.
Special thanks to the FSMA Board of Directors for their support in the production of this White Paper.
A.J. Letizio Sales & Marketing, Inc.
Acosta Foodservice
Afnity Group – Elite Associates
Baker Sales Company/IBA
Food Sales East – Sales One
KeyImpact Sales & Systems, Inc.
Rizwitsch Sales/IBA
Total Source Foodservice/IBA
Waypoint
I. Contacts
If you have questions or would like to condentially discuss this topic with us, please contact us at:
Rick Abraham, President & CEO, FSMA
1810-J York Road #384
Lutherville, MD 21093
Email: rabraham@fsmaonline.com
Phone: (410) 491-7857
Barry C. Maloney, CFO and General Counsel
FSMA and FSMA Foundation
5225 Wisconsin Avenue, NW #316
Washington, DC 20015-2055
Email: bmaloney@maloneyknox.com
Phone: (202) 293-1414
2
This efciency and effectiveness mirrors the ndings in the retail Research Study “Collaboration Dynamics When Outsourcing,”
page 3: “Sales Agencies … have proven to be valuable to CPG Manufacturers and retailers [Operators and Distributors] because of
their ability to provide cost savings to the industry as well as their ability to increase product sales through a variety of critical activities,
including HQ sales, retail/in-store [Operator] execution and sales/administrative support.” (Brackets added to reect names of
foodservice industry partners.)
8 AGENCY SALES or DIRECT SALES?
APPENDIX A
NECESSARY COSTS OF SALES FACTORS TO BE CONSIDERED*
The following is a summary of “Agency Activities and Cost Factors” more fully itemized in the following Appendix B:
1. Business Development – those activities which involve the product and program presentations made by SMAs or
Direct Sales personnel to Operator and Distributor customers.
2. Marketing – ongoing activities that create a “halo” around Manufacturer brands in the local marketplace including
co-branding opportunities between Agency clients. Because they are often Distributor-focused, it is tempting for
Manufacturers to imagine they can be reduced or eliminated under a Direct Sales Model. But it is self-evident that
Agencies would not invest resources against Marketing Activities unless there was a clear connection to volume
growth and Agency compensation.
3. Planning, Reporting and Analysis – an ever-growing set of endeavors which is fueled by the growing availability of
(and interest in) local, detailed sales data.
4. Local Infrastructure – provided by Agencies which enhances their Marketing and Selling efforts. These include culinary
resources, kitchen and storage facilities, including freezers and coolers, local meeting space, ofces, etc.
5. Administration – all of the actions required to ensure smooth execution of trade programs, special prices, order
management, etc.
6. Post Administration Issues Resolution – countless unplanned responses to local customer demands for
information, problem-solving, labor, etc. which never rise to the Manufacturer level.
* Not all manufacturer clients utilize 100% of these services. Each Agency-Client relationship is unique. A Manufacturer’s
analysis would include only those services performed by its Sales Agency representatives plus the cost of activities already
performed in-house.
Why Sales Agencies Are More Cost-Effective And Efficient than Direct Sales by Manufacturers 9
AGENCY ACTIVITIES AND COST FACTORS
APPENDIX B
1. Business Development
a. Develop Presentations
b. Present to Operators
c. Present to Distributors
d. Distributor Business Reviews
2. Marketing
a. Food Shows – annual and segmented,
vendor fairs, state school shows, plus
Chef and Restaurant Associations
i. Planning
ii. Administration
iii. Samples
iv. Setup
b. Operator Telemarketing
c. Menu Development
d. Coupon Programs
e. Operator Database Management
f. Distributor Sales Meetings
g. Distributor Ride With’s
h. DSR Training and Cuttings
i. Entertainment
j. Promote new recipes, visibility and co-branding
between clients of the Agency
3. Planning, Reporting and Analysis
a. Preparing and Managing the Sales Plan
b. New Item Introduction Planning
c. Sales Reporting
d. Competitive Analysis and Feedback
e. Sales Forecasting
f. Distributor Stocking Sheets/Void Matrix
g. Data Analytics
h. Promotion Planning
4. Infrastructure
a. Culinary Resources and Test/Demo Kitchens
b. Conference and Sales Meeting Rooms
c. Sample Storage (Refrigerated and Frozen) and
Management
d. Food Show Equipment
e. Cars
f. Laptops
g. Phones
h. Ofce and Warehouse Facilities
5. Administration
a. Order Entry
b. Trade Program Negotiation
c. Trade Program Administration
d. Deviated Price Management
e. Damaged Goods
f. Deduction Management
g. Invoice Reconciliation
h. Bill-back Reconciliation
i. Manage Equipment
j. Manage POS
k. Manage Contract Compliance
6. Post-Administration Issues Resolution
a. Local Problem Solving
b. Issue Tracking and Communication
(Shortages, late shipments, etc.)
c. Local Operator and Distributor Relationships
d. Distributor Dedicated Resources
e. Dead Inventory
f. Operator Complaints
g. Product Transfers
h. Distributor Requests
v. Working the Show
vi. Teardown
vii. Follow-up
10 AGENCY SALES or DIRECT SALES?
APPENDIXC
SalesCostAnalysisToolFill-InWorksheet
CurrentAnnualCommissions: -$
Staffing
PositionTitle BaseSalary Benefits(1)
Number
Required
TotalAnnual
Cost
OperatorSpecialist
$- $- -$
DistributorBusinessMgr -$
$- -$
SalesSupport(2) -$
$- -$
SalesLeadership -$
$- -$
AdditionalHRStaff -$
$- -$
TrainingMgr -$
$- -$
Others(list) -$
$- -$
-$
$- -$
-$
$- -$
TotalStaffingCosts -$
Infrastructure
Requirement
Number
Required
TotalAnnual
Cost
Test/DemoKitchenSpace -$ -$
ConferenceRooms/Offices -$ -$
SampleStorage -$ -$
Equipment(FoodShows,Demos) -$ -$
EquipmentStorage -$ -$
EDICapability -$ -$
Carsw/insurance/maint/gas(3) -$ -$
Laptopsw/accessories&software -$ -$
PhonesandService -$ -$
Others(list) -$ -$
-$ -$
-$ -$
TotalInfrastuctureCosts -$
TotalAnnualCostEstimateforDirectModel: -$
Difference-DirectorAgencies:(4) -$
PLUSYear1Costs: Recruiting -$
Training -$
Equipment -$
TotalYear1: -$
Staffing:
Salaries,Benefits,Expenses:Fillinapplicablesalariesbasedongeographicareaandotherconsiderations
(1)AssumesSalary+25%SG&A+15%Bonus(+$10KTravelandEntertainmentforSalesStaff)
(2)SalesSupportStaffmayinclude:
SalesPlanningSpecialist ProductTraningSpecialist
SalesDataAnalyst OrderManagementSpecialist
LocalMarketingSpecialist Trade/DeductionCoordinator
FoodShowCoordinator Other
(3)Considerassumingall-invehiclecostsof$0.54permileandaverageof35,000milesperyear.
(4)Excludesfirst-yearcostsforrecruiting,training,andequipment,forexample,kitchens,freezers,andcoolers.
10AGENCYSALESvsDIRECTSALES
CostofEach
APPENDIXC
SalesCostAnalysisToolFill-InWorksheet
CurrentAnnualCommissions: -$
Staffing
PositionTitle BaseSalary Benefits(1)
Number
Required
TotalAnnual
Cost
OperatorSpecialist
$- $- -$
DistributorBusinessMgr -$
$- -$
SalesSupport(2) -$
$- -$
SalesLeadership -$
$- -$
AdditionalHRStaff -$
$- -$
TrainingMgr -$
$- -$
Others(list) -$
$- -$
-$
$- -$
-$
$- -$
TotalStaffingCosts -$
Infrastructure
Requirement
Number
Required
TotalAnnual
Cost
Test/DemoKitchenSpace -$ -$
ConferenceRooms/Offices -$ -$
SampleStorage -$ -$
Equipment(FoodShows,Demos) -$ -$
EquipmentStorage -$ -$
EDICapability -$ -$
Carsw/insurance/maint/gas(3) -$ -$
Laptopsw/accessories&software -$ -$
PhonesandService -$ -$
Others(list) -$ -$
-$ -$
-$ -$
TotalInfrastuctureCosts -$
TotalAnnualCostEstimateforDirectModel: -$
Difference-DirectorAgencies:(4) -$
PLUSYear1Costs: Recruiting -$
Training -$
Equipment -$
TotalYear1: -$
Staffing:
Salaries,Benefits,Expenses:Fillinapplicablesalariesbasedongeographicareaandotherconsiderations
(1)AssumesSalary+25%SG&A+15%Bonus(+$10KTravelandEntertainmentforSalesStaff)
(2)SalesSupportStaffmayinclude:
SalesPlanningSpecialist ProductTraningSpecialist
SalesDataAnalyst OrderManagementSpecialist
LocalMarketingSpecialist Trade/DeductionCoordinator
FoodShowCoordinator Other
(3)Considerassumingall-invehiclecostsof$0.54permileandaverageof35,000milesperyear.
(4)Excludesfirst-yearcostsforrecruiting,training,andequipment,forexample,kitchens,freezers,andcoolers.
10AGENCYSALESvsDIRECTSALES
CostofEach
APPENDIXC
SalesCostAnalysisToolFill-InWorksheet
CurrentAnnualCommissions: -$
Staffing
PositionTitle BaseSalary Benefits(1)
Number
Required
TotalAnnual
Cost
OperatorSpecialist
$- $- -$
DistributorBusinessMgr -$
$- -$
SalesSupport(2) -$
$- -$
SalesLeadership -$
$- -$
AdditionalHRStaff -$
$- -$
TrainingMgr -$
$- -$
Others(list) -$
$- -$
-$
$- -$
-$
$- -$
TotalStaffingCosts -$
Infrastructure
Requirement
Number
Required
TotalAnnual
Cost
Test/DemoKitchenSpace -$ -$
ConferenceRooms/Offices -$ -$
SampleStorage -$ -$
Equipment(FoodShows,Demos) -$ -$
EquipmentStorage -$ -$
EDICapability -$ -$
Carsw/insurance/maint/gas(3) -$ -$
Laptopsw/accessories&software -$ -$
PhonesandService -$ -$
Others(list) -$ -$
-$ -$
-$ -$
TotalInfrastuctureCosts -$
TotalAnnualCostEstimateforDirectModel: -$
Difference-DirectorAgencies:(4) -$
PLUSYear1Costs: Recruiting -$
Training -$
Equipment -$
TotalYear1: -$
Staffing:
Salaries,Benefits,Expenses:Fillinapplicablesalariesbasedongeographicareaandotherconsiderations
(1)AssumesSalary+25%SG&A+15%Bonus(+$10KTravelandEntertainmentforSalesStaff)
(2)SalesSupportStaffmayinclude:
SalesPlanningSpecialist ProductTraningSpecialist
SalesDataAnalyst OrderManagementSpecialist
LocalMarketingSpecialist Trade/DeductionCoordinator
FoodShowCoordinator Other
(3)Considerassumingall-invehiclecostsof$0.54permileandaverageof35,000milesperyear.
(4)Excludesfirst-yearcostsforrecruiting,training,andequipment,forexample,kitchens,freezers,andcoolers.
10AGENCYSALESvsDIRECTSALES
CostofEach
APPENDIX C
SALES COST ANALYSIS TOOL FILL-IN WORKSHEET
D
irect Sales Model Cost Worksheet - Follow Instructions Next Page
APPENDIX C
SALES COST ANALYSIS TOOL FILL-IN WORKSHEET
Direct Sales Model Cost Worksheet - Follow Instructions Next Page
Why Sales Agencies Are More Cost-Effective And Efficient than Direct Sales by Manufacturers 11
INSTRUCTIONS FOR USE OF FILL-IN WORKSHEET
SALES COST ANALYSIS TOOL
On the "Worksheet" tab, ll in all of the grey-shaded cells
1. Insert your current annual Agency payments in Column F
2. In the "Stafng" Box, estimate the Base Salary required in Column B*
· Column C will automatically add 25% SG&A, 15% Bonus, and $10K Travel and Entertainment for Sales Positions
· Then enter the number of people required for each position in Column D
· Column E will calculate the total annual Stafng Cost
3. In the "Infrastructure" Box, estimate the annual cost of each resource required, and the number of each
· Enter amounts in Columns B and D
· Column E will calculate the total annual Infrastructure Cost
4. Row 35 will compare your current annual Commissions cost to your estimated annual cost for the Direct Sales Model,
and the Difference
5. Row 36 calculates your Year 1 cost of Recruiting, based on 25% of base salary
6. Row 37 estimates your Year 1 cost of Training and Equipment based on your experience
7. Row 38 estimates your estimated annual cost plus recruiting, training and equipment, for example, kitchens, freezers
and coolers.
* In lling out the worksheet, a Manufacturer should look at costs/stafng expenses over
and above what currently exists in order to have a true comparison.
12 AGENCY SALES or DIRECT SALES?
AGENCYSALESvsDIRECTSALES
EXAMPLELARGEMANUFACTURER
DirectSalesModelCostWorksheet-ExampleBasedon$5MMAnnualCommissions
(ActualcostswilldifferdependingoneachManufacturer'srequirements)
CurrentAnnualCommissions: 5,000,000$
Staffing
PositionTitle BaseSalary Benefits(1)
Number
Required
TotalAnnual
Cost
OperatorSpecialist
$66,000 $26,400 50 4,620,000$
DistributorBusinessMgr 84,000$
$33,600 25 2,940,000$
SalesSupport(2) 50,000$
$30,000 20 1,600,000$
SalesLeadership 96,000$
$48,400 12 1,732,800$
AdditionalHRStaff 65,000$
$26,000 3 273,000$
TrainingMgr 100,000$
$40,000 2 280,000$
TotalStaffingCosts 112 11,445,800$
Infrastructure
Requirement
Number
Required
TotalAnnual
Cost
Test/DemoKitchenSpace 12,000$ 50 600,000$
ConferenceRooms/Offices 18,000$ 50 900,000$
SampleStorage 3,600$ 50 180,000$
Equipment(FoodShows,Demos) 5,000$ 50 250,000$
EquipmentStorage 3,600$ 50 180,000$
EDICapability 2,500$ 1 2,500$
Carsw/insurance/maint/gas(3) 18,900$ 50 945,000$
Laptopsw/accessories&software 1,250$ 100 125,000$
PhonesandService 1,500$ 100 150,000$
TotalInfrastuctureCosts 3,332,500$
TotalAnnualCostEstimateforDirectModel: 14,778,300$
Difference-DirectvsAgencies:(4) 9,778,300$
PLUSYear1Costs: Recruiting 1,986,750$
Training 500,000$
Equipment 1,500,000$
TotalYear1: 13,765,050$
Staffing:
Salaries,Benefits,Expenses:Basedongeographicareaandotherconsiderations
(1)AssumesSalary+25%SG&A+15%Bonus(+$10KTravelandEntertainmentforSalesStaff)
(2)SalesSupportStaffmayinclude:
SalesPlanningSpecialist ProductTraningSpecialist
SalesDataAnalyst OrderManagementSpecialist
LocalMarketingSpecialist Trade/DeductionCoordinator
FoodShowCoordinator Other
(3)Assumesall-invehiclecostsof$0.54permileandaverageof35,000milesperyear.
(4)Excludesfirst-yearcostsforrecruiting,training,andequipment,forexample,kitchens,freezers,andcoolers.
CostofEach
AGENCY SALES or DIRECT SALES?
EXAMPLE LARGE MANUFACTURER
Direct Sales Model Cost Worksheet - Example Based on $5MM Annual Commissions
(Actual costs will differ depending on each Manufacturer’s requirements)
Why Sales Agencies Are More Cost-Effective And Efficient than Direct Sales by Manufacturers 13
* All of these comprehensive Studies were sponsored by the ASMC Foundation, an afliate of the Association of Sales
& Marketing Companies, a predecessor of FSMA. While the Studies focused on retail food sales and marketing
agency companies, they have applicability to foodservice sales and marketing agencies as well.
See outside cover page for notable excerpts from these Studies.
APPENDIX D
LIST OF SALES AGENCY OUTSOURCING STUDIES*
Title & Subtitle Research Partners
Value of Outsourcing Sales and Marketing
A Study of the Prevalence of Use of Sales and
Marketing Agencies by Consumer Packaged Goods
Companies
Institute for Customer Relationship
Management
Outsourcing Is In!
How CPG Companies Enhance Performance, Reduce
Cost & Increase ROI through Outsourcing Sales and
Marketing
Institute for Customer Relationship
Management
Maximizing the Impact of Outsourcing
How CPGs Can Best Use Sales and Marketing
Agencies in a Changing Environment
Bain & Company
Collaboration Dynamics When Outsourcing
How CPG Companies Enhance Performance by
Collaborating with Their Sales and Marketing
Agencies
Georgia State University - J. Mack Robinson
College of Business
and
Institute for Customer Relationship
Management
14 AGENCY SALES or DIRECT SALES?
ASMC Foundation is a 501(c)3 tax-exempt organization dedicated to
research, education, training, and charitable contributions for sales and
marketing agencies (SMAs) and their industry partners. The Foundation has
been in existence since 1957 and was founded for its tax-exempt mission
by the sales and marketing agencies of the former Association of Sales and
Marketing Companies (ASMC) and its predecessor the National Food Brokers
Association (NFBA). As of 2009, more than 90% of CPG use SMAs for retail
support in some form. For more information visit the Foundation website at
www.asmcfoundation.org.
ASMC Foundation
5225 Wisconsin Avenue, NW, Suite 316, Washington, DC 20015
(202) 293-1414
www.asmcfoundation.org
Franklin Foodservice Solutions was founded in 1996 to help food
manufacturers align marketing and sales decisions with supply chain realities.
Founder Dave DeWalt’s background has provided a unique ability to design
and conduct projects which provide measurable results for our clients. He
is able to draw on formal consulting techniques, practical knowledge, and
an excellent network of industry experts who are available to contribute to a
client’s success. For more information, visit www.franklin-foodservice.com.
Franklin Foodservice
247 Daniel Drive, Sanibel, Florida 33957
(239) 395-2787
www.franklin-foodservice.com
Why Sales Agencies Are More Cost-Effective And Efficient than Direct Sales by Manufacturers 15
FSMA
FOU N DATION
The Foodservice Sales & Marketing Association (“FSMA”) represents the
world’s leading foodservice manufacturers and their agency representatives.
Its mission is to promote sales and marketing agencies as the preferred
method for manufacturer/suppliers to go-to-market; to be the national
voice of the sales agency community; to advocate on behalf of sales agency
interests; and to enhance relationships among manufacturer/suppliers,
agencies, distributors, operators, customers, and other key stakeholders. For
more information, visit the FSMA website at www.fsmaonline.com.
Foodservice Sales & Marketing Association
1810-J York Road #384, Lutherville, MD 21093
(410) 491-7857
www.fsmaonline.com
FSMA Foundation is a 501(c)(3) tax-exempt organization dedicated to
research, education, training, and charitable contributions for sales and
marketing agencies (SMAs) and their foodservice industry partners. The
Foundation has been in existence since 2013 and was founded for its tax-
exempt mission by the foodservice sales and marketing agencies of the
Foodservice Sales & Marketing Association (“FSMA”). As of 2017, SMAs
are estimated to represent more than 70 to 75% of all US foodservice sales
revenues. For more information, visit the Foundation website at www.
fsmaonline.com/fsma-foundation.
FSMA Foundation
5225 Wisconsin Ave, NW, Suite 316, Washington, DC 20015
(202) 293-1414
www.fsmaonline.com/fsma-foundation
“Maximizing the Impact of Outsourcing”
“The majority of CPGs believe that SMAs are the lower-cost provider for retail activities, estimating that using an
SMA costs 23% less than employing a direct sales force, on average.”
~ PAGE 6
“CPGs that have carefully considered their use of SMAs often realize double-digit cost savings with improved
effectiveness, when done right. We estimate SMA optimization could be worth hundreds of millions of dollars
for the industry.” ~
PAGE 1
“Collaboration Dynamics When Outsourcing”
“For most CPG companies, SMAs provide a substantial return on investment as the invested infrastructure,
sales teams, and systems of SMAs are utilized by CPG companies to achieve their sales and marketing
objectives. The superior regional/local market knowledge and expertise of SMAs provide the basis for
building the business of many CPGs.” ~
PAGE 3
“SMAs are perceived to be more capable [than CPGs] on 4 of the 5 dimensions of dynamic capability …
[and] signicantly better [than CPGs] in overall dynamic capability, organizational vision, and learning
from interactions with business partners.” ~
PAGE 4
“Outsourcing is In!”
“Collaborative management is considered a best practice in managing the agency relationship.
Collaborative efforts between CPGs and SMAs undertaking joint development activities resulted in long-term
gains for all parties.”
~ PAGE 21
“SMAs should strive to involve clients in major planning and review activities as well as the overall governance
of the relationship. Collaborative methods of managing outsourcing relationships are preferred and yield best
results. Both retailers and CPG companies are highly satised with SMA processes and attributes.” ~
PAGE 22
“Value of Outsourcing Sales and Marketing”
“CPG companies can help improve SMA performance by involving SMAs in strategic
product-market planning and by aligning their incentives to SMAs for improving overall marketing
effectiveness.”
~ PAGE 20
“By operating more cooperatively and collaboratively with SMAs, CPG companies can
enhance results in areas of critical importance.”
~ PAGE 21
PRIOR OUTSOURCING STUDIES – NOTABLE QUOTES