A bad distributor agreement can trap your brand in an underperforming market for years. A good one gives you upside when your distributor performs and an exit when they don't. Here's everything you need to know about structuring supplement distribution contracts that protect your brand internationally.
Exclusive distribution agreements give your distributor the sole right to sell your product in a defined territory. This can motivate the distributor to invest in your brand — but it also removes your leverage if performance is poor. Best practice: never grant blanket national exclusivity for an initial term. Instead, grant exclusivity by channel (e.g. 'pharmacy channel only') or by region, and make it contingent on minimum purchase commitments being met. If minimum purchases are missed in any 12-month period, exclusivity automatically reverts to non-exclusive.
Minimum purchase commitments (MPCs) are your main protection against a distributor sitting on exclusivity without building your brand. Structure MPCs in three ways: (1) Rolling 12-month minimum — distributor must purchase at least X units/value per year or lose exclusivity. (2) Ratchet-up minimums — Year 1 minimum is achievable, Year 2 is higher, Year 3 higher still. (3) Channel-specific minimums — e.g. must list in at least 3 major retailers within 6 months of contract start.
Your agreement must specify: (1) Your transfer price to the distributor (usually a fixed price or a percentage off your recommended retail price). (2) The distributor's right to set their own resale price — you can recommend an RRP but most jurisdictions prohibit legally binding RPM (resale price maintenance). (3) Promotional pricing — require distributor to seek approval before running any promotion below a floor price to protect brand positioning. (4) Currency — which currency invoices are denominated in and who bears foreign exchange risk.
International distribution agreements must address: (1) Trademark usage: Grant the distributor a limited licence to use your trademarks for the purpose of distributing your products only. No sub-licensing without written consent. (2) Label adaptation: If the distributor needs to adapt labels for local market compliance, retain approval rights over all label changes. (3) Trade dress: Prohibit any modifications to packaging design without written approval. (4) Parallel imports: Prevent the distributor from selling outside the territory — include explicit provisions.
Every agreement needs: (1) Term: Initial 1–2 year term (not 3–5 years) with renewal options. (2) Termination for cause: Immediate termination rights for non-payment, regulatory violations, or insolvency. (3) Termination for convenience: 90–180 days written notice after initial term. (4) Post-termination stock: Distributor must cease using your trademarks within 30 days; you have the option to buy back unsold stock at cost price minus 15%. (5) Non-compete: 12-month post-termination restriction on distributing directly competing products from the same category.
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