As a CPG company, data is your friend. Without numbers (and analytics to understand them), how can you know how well your products are selling? While you can look at individual items, you also need to pay attention to your brand as a whole. In this case, you’ll want to determine your total distribution points (TDP) to figure out how well your brand is distributed across retailers and their various locations. We’ll get into the details, but basically, the higher your TDP number, the better your brand or product is doing.
What are total distribution points?
Total distribution points (TDP) is a measurement that tells you the relative health of your brand or product by calculating the number of retailers your products are in (breadth) and the number of products you’re selling in those stores (depth). Looking at one or the other metric is valuable, but it doesn’t paint a complete picture.
How to calculate TDP:
To understand total distribution points, you have to know about all commodity volume (ACV) percentages. Your brand’s TDP is simply adding the %ACV for all of your items sold. Here is a brief primer on how to determine a product’s %ACV.
First, you have to know the total sales for each retailer. To keep things simple, let’s assume that there are three stores in our example market.
Next, you have to know whether a product scans in each store (meaning it’s in stock and on the shelves).
Store A sells $50 Million annually, store B sells $70M, and store C sells $80M. Let’s say that your product is not sold in store A.
Ideally, you want to calculate the weighted %ACV to know how well a specific product is being distributed. For example, an unweighted calculation would show that your product is in 67 percent of the market (2/3). However, a weighted distribution will look like this:
(Store B + Store C)/(All Three Stores)
We add stores B and C because your product is sold in both of them. In this case, the calculation would be:
(70 + 80)/(40 + 70 + 80) = 78.9 percent ACV
A weighted %ACV illustrates that your product is doing pretty well in distribution. By comparison, if your product was in stores A and B but not C, the %ACV would be 57.9.
As we mentioned, your brand’s total distribution points result from adding all the %ACV for each product. The maximum TDP you could have would be 100 percent distribution for each product, meaning that if you sold five products, your max TDP would be 500. That said, don’t assume that a lower number means you’re doing poorly. It simply illustrates how much growth you can expect in a given market.
How to use TDPs for retail:
There are several ways that your TDP can help your business. Let’s break them down.
Volume vs. Brand Distribution
Since TDP calculates %ACV for each item, the numb
er drops if retailers remove your items from their shelves. So, your brand’s ACV may be unchanged, but your total volume is reduced accordingly.
Gaining Space on the Shelves
Retailers only have so much shelf space, so they can’t always stock all your products, particularly if there are other competitors. TDP can tell you whether you’re gaining more space on the shelves or if the product category is expanding. In cases of expansion, you want to capitalize on the new real estate as much as possible. If the TDP remains stable, you can look for ways to edge out the competition and get their shelf space so that you can move more volume.
Fair Share of Distribution
Ideally, all brands would have equal opportunity to sell in a store, but that’s not always the case. TDP can help you figure out whether your brand is being fairly represented. All you have to do is figure out your TDP percentage (your TDP compared to other brands) and divide it by the volume percentage within a store.
So, let’s say that you’re competing with two other brands. Your total distribution points number is 250, Brand B has a TDP of 400, and Brand C has a TDP of 350. The total TDP for the market is 1000, and your TDP percentage is 25.
Then, let’s say that your volume percentage (the number of products on the shelves compared to other brands) is 30 percent. You would divide 25 by 30, which equals 0.83 or 83. A “fair” share of distribution is at least 100, so you know that you’re getting less than what you should. Overall, your TDP percentage should be higher than your volume percentage. If not, you don’t even need to calculate your share since you know it’s not at least 100.
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