What does "exclusive" mean in a distribution agreement?
It means the brand agrees not to appoint another distributor, and usually not to sell directly, inside the agreed territory and categories for the length of the term. As the US Chamber of Commerce describes it, exclusive rights make the distributor the only company allowed to sell the products in a specific country, region, or market, which is what makes it worth the distributor's while to invest in marketing and brand building without competing against another official distributor of the same brand. For an imported food brand, that investment is concrete: regulatory work, label adaptation, listing fees where they apply, sell-in, and inventory. The distributor pays for those before the first reorder. Exclusivity is the brand's side of that trade. This article explains the mechanics; it is not legal advice, and the agreement you sign should be reviewed by counsel in the United States.
Which clauses matter most?
Ten, in the order they usually cause problems.
- Scope. Which products, and which future products. A well-drafted scope names the categories and states whether line extensions and new SKUs fall inside it automatically.
- Territory. The United States as a whole, or named states or regions. Territory should match where the distributor can actually service accounts, not where it hopes to.
- Channels. Retail, foodservice, e-commerce, and club can be split. A brand that already sells online often carves out its own store; a distributor that sells only to retail should not hold foodservice rights it will not use.
- Term and renewal. Long enough for the distributor to recover its launch investment, with renewal tied to performance rather than automatic.
- Performance minimums. The volumes, accounts, or revenue the distributor must reach to keep exclusivity. This is the brand's main protection: if the minimums are missed, exclusivity converts to non-exclusive or the agreement ends.
- Pricing and payment. The transfer price to the distributor, the distributor's freedom to set its own resale price, and payment terms. In the United States the distributor generally sets its resale price; the brand can suggest but should be careful about dictating it.
- Marketing and trade spend. Who funds promotions, demos, slotting where it exists, and retailer programs, and how the cost is shared or recovered.
- Regulatory roles. Who is importer of record, who is the FSVP importer, who is the US agent for the facility registration, and who pays for label changes. The US food import requirements checklist lists each role.
- Trademark and brand assets. The brand keeps ownership; the distributor gets a license to use the marks in the territory during the term, and nothing more.
- Exit. What happens at termination: sell-off period for remaining inventory, return or destruction of marketing materials, transfer of account relationships and regulatory filings, and non-compete limits on both sides.
Who owns the trademark, and who registers it in the United States?
The brand does, and the brand should be the registrant. Register the mark with the United States Patent and Trademark Office in the brand's own name before the agreement is signed, or make the filing a condition of the agreement with the brand as owner. A distributor that registers the brand's mark in its own name holds leverage the brand will find hard to recover. The USPTO explains why a federal registration matters: it is the public record of ownership, it supports enforcement, and it is what marketplaces and retailers ask for. The agreement should grant the distributor a limited license to use the mark in the territory for the term, and end that license at exit.
What protects the brand if the distributor underperforms?
Performance minimums, reporting, and a conversion clause. Minimums should be specific and staged: a first-year number that reflects launch reality and later years that reflect the plan. Reporting should give the brand sell-through by account at an agreed cadence, because a brand that only sees purchase orders cannot tell whether the product is moving or sitting in a warehouse. The conversion clause is the teeth: missed minimums for an agreed period turn the appointment non-exclusive, or allow termination, without a dispute about whether the distributor tried hard enough.
What protects the distributor?
The exclusivity itself, a term long enough to recover the launch cost, and a commitment from the brand on supply, price stability, and product quality. A distributor that has paid for reformulation, registration, and listings needs to know the brand will not raise the transfer price after the first order, will not run out of stock in the middle of a promotion, and will not appoint a second distributor the moment the accounts are open. Both sides are protected by the same document when it is written for both sides. What each side is paying for is laid out in how much it costs to enter the US market with a food brand.
Who is responsible in a recall?
Both parties, in different ways, and the agreement should say so before it happens. FDA's recall framework in 21 CFR Part 7, Subpart C describes how recalls are conducted and what a firm is expected to do. In practice the importer holds the distribution records and executes the recall in the United States, while the manufacturer holds the production records and the root cause. The agreement should assign notification duties, cost allocation, and insurance, and the brand's product liability policy should name the distributor. A recall clause that is never used costs nothing to write. One that is needed and missing costs the relationship.
What does exclusivity look like at FISA Lab?
We take on brands under exclusive US distribution agreements for the agreed categories and territory. We act as importer of record, we adapt formula and label in our own lab when a listing requires it, and we sell into the accounts we service. The brand keeps its trademark. Territory, term, and minimums are agreed in writing before anything ships. See what we look for and apply.
Questions brands ask about exclusivity
Does exclusivity mean the distributor owns my brand in the United States?
No. Exclusivity is a right to sell, not ownership. The brand keeps its trademark and grants the distributor a limited license for the territory and the term. Register the mark in the brand's own name before signing.
Can I keep selling online if I sign an exclusive agreement?
Only if the agreement says so. E-commerce is a channel like any other and can be carved out, shared, or included. Decide before signing, not after the distributor discovers the store.
What happens if the distributor does not reach the minimums?
Whatever the agreement provides. A good one converts the appointment to non-exclusive or allows termination after an agreed period of missed minimums, so the brand is not locked in with a partner that stopped selling.
How long should the term be?
Long enough for the distributor to recover its launch investment and short enough that a brand is not trapped. Terms tied to performance, with renewal conditioned on results, serve both sides better than a fixed long term with no exit.
Who pays for the label changes and the FDA filings?
Whoever the agreement assigns. When a distributor buys the product and imports it, it usually takes the filings and shares the label work; the brand usually supplies artwork, specifications, and supporting documents. Write it down either way.
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