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Distributors keep about two cents of every dollar they sell. On margins that thin, almost every growth move means spending money long before you make any back.

In our latest webinar, Pepper's Nick Ziech-Lopez sat down with Jake Vanderveen, CEO of McDonald Wholesale, a broadline distributor with three DCs in the Pacific Northwest. They talked through how to weigh growth against profitability, and how McDonald is using net item value and billbacks to earn more on every case.

Here's what we covered.

Every Growth Lever Carries Risk

When we polled attendees on their top goal for next year, about half said selling more to current customers.

Jake wasn't surprised, since the truck and the rep are already there, it's the safest bet.

Other moves cost more. Raising prices costs volume. Opening a new district takes McDonald 5 to 7 years just to break even, with $500,000 to $750,000 spent in the first year alone. Improving margin is the exception: every dollar drops straight to the bottom line. As Jake put it, profitability is a moat on which your boat will float.

Independents Can't See What a Case Earns

Most independents run a core ERP with a stack of bolt-ons that each report on their own corner of the business. None of them show what an item truly earns once billbacks and local programs are counted.

Billbacks are the biggest blind spot. Buyers Edge Platform offers roughly 145,000 contracts, and McDonald's pricing administrator already manages more than 1,200 a month. Matching and normalizing that data by hand wasn't realistic.

Billbacks Can Add Nearly $6 to a 51-Cent Case

An average case for McDonald runs $36 to $40, which leaves about 51 cents of net profit. Working with Pepper, McDonald normalized its data, matched its items to the contracts, and built a monthly process that feeds into normal AR. Its average billback now adds $5.98 in gross profit to that same case, and the customer gets their own rebate check.

To sell into it, McDonald "badges" contract items and their in-house equivalents so reps see the more profitable option while writing orders. If McCain is on contract and Lamb Weston isn't, the goal is to shift the mix over time. Ten cases of fries replace ten cases of fries, every cost stays the same, and McDonald earns nearly $6 more a case. Reps are paid on GP, so they share in it too.

Up and Running in 60 Days

Jake's path: join the contracts, normalize your data, sign up 100% of your customers, then badge the profitable items. McDonald paid a $500 SPIF to every rep who got 95% of customers signed up in a month, since a slow rollout could miss $2,000 to $3,000 per customer. Identifying profitable items takes about 30 days, and badging takes another 30.

It's not just for broadliners. Produce and specialty distributors can use it to decide what to stock. As Jake said, if you're going to wade into a pool, do it where the water is warm.

Profitability First, Then Growth

Today only 6.8% of McDonald's case sales flow through the contracts, and billbacks already bring in about $1.1 to $1.2 million a year. Jake wants to reach 15% to 20%. At that level, he can price contract items closer to cost on bids and take full accounts from national competitors.

It's not growth versus profitability, Nick said. It's profitability, then growth.

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