Veterinary Distributors and Distribution Models
Distribution into veterinary medicine can take several forms of logistics, often referred to a single or multi-step distribution channels. Establishing the distribution model is essential when creating the financials surrounding veterinary product development, as these can affect the net present value of the project (product). There are pros and cons with each distribution model, and various factors can play a role in the decision making process such as dating of product, special handling, simple vs. technical products, regulations, etc.
Veterinary Distribution of Animal Health Products:
The key players in veterinary distribution are:
- Veterinary Manufacturer: the producer of the finished product
- Veterinary Distributor: organization that handles veterinary product inventory – sells to veterinarians.
- Veterinarian: uses product or dispenses to client
- Veterinary Clients: consist of pet owners, feedlots, producers, etc.
Information about Veterinary Distributors
Examples of Veterinary Distribution Margins
As with any distribution chain, each person involved in the distribution takes a margin, often calculated a a percent margin of profit. Below are some general ranges of veterinary distribution profit margins.
- Veterinary Manufacturer: 30-70%
- Veterinary Distributor: 18-25%
- Veterinarian: 30-70%
Examples of Veterinary Distribution Cost Analysis
Let’s assume that a veterinary manufacturer can produce a final product for $1.00, representing the cost of goods (COGS). Let’s also assume that a client is willing to pay $5.33 for the finished veterinary product.
Given that example, then a multi-step cost analysis may look something like this:
- Multi-Step Distribution: the Veterinary Manufacturer may sell to the Veterinary Distributor for $2.00 (50% margin), then the Veterinary Distributor may sell to the Veterinarian for $2.67 (25% margin), and the Veterinarian may sell to the Veterinary Client for $5.33 (50% margin).
- Direct to Veterinary: In many situations, if the veterinary price point is determined to be $2.67, the manufacturer may elect to sell direct to the , capturing the $0.67 normally paid to the veterinary distributor.
- Direct to Client: In other situations, the manufacturer may be able to sell directly to the client for $5.33, thereby capturing an additional $4.33 that would normally go to the veterinary distributor and the veterinarian.