Food Distribution Agreement: What To Include

Yes, you should have a written food distribution agreement in Australia if you're supplying, buying, warehousing or delivering food products through another business.

The reason it's a little more nuanced is that food isn't like ordinary stock. A late delivery, incorrect label, broken cold chain or short shelf life can quickly affect food safety, customer relationships, cash flow and liability under the Australian Consumer Law.

A good agreement doesn't just say who pays what. It sets out how the food will be stored, labelled, ordered, delivered, recalled and replaced if something goes wrong.

Do You Need A Food Distribution Agreement In Australia?

Yes, in most food distribution relationships you should have a written agreement because verbal arrangements leave too many practical gaps.

If you're distributing food, you're usually sitting between the supplier and the customer under a supplier agreement or distribution arrangement. That might mean you're buying products from a manufacturer and reselling them to cafes, supermarkets or restaurants. Or you might be acting as a distributor for a brand in a particular territory.

Without a written food distributor contract, you may be left guessing about things like:

• Who is responsible if products arrive damaged, warm or close to expiry
• Whether you can return stock that doesn't meet agreed shelf life requirements
• Who handles a food recall and who pays for it
• Whether you have exclusive rights to a suburb, state or customer group
• What happens if one party can't meet minimum order volumes
• Whether you can recover unpaid invoices, storage costs or delivery charges

For example, say you distribute chilled dips to 40 cafes across Brisbane. You order 500 tubs at $4 each, but the supplier delivers them with only 3 days left before the use-by date. If your agreement says stock must have at least 14 days of remaining shelf life on delivery, you have a clear basis to reject the stock or request a credit. If it doesn't, the conversation becomes much harder.

Your agreement should match how your business actually works. A simple wholesale arrangement won't need the same clauses as an exclusive national distribution deal, but both should be clear on food-specific risks.

What Food-Specific Terms Should Your Agreement Cover?

Your supply agreement should cover the food-specific risks that ordinary contracts often miss.

At a minimum, you should think about the full journey of the product, from production to storage, delivery, resale and any recall. Food moves quickly, and so do the consequences if something goes wrong.

Product Standards

Your agreement should describe what the supplier is required to provide. This might include:

• Product specifications, ingredients and allergens
• Packaging requirements, including carton strength and tamper evidence
• Labelling requirements, including use-by dates, batch codes and country of origin claims
• Quality standards, such as size, weight, colour, flavour or grade
• Temperature requirements for chilled or frozen products

Storage And Transport

If the products need to stay chilled, frozen or dry, the agreement should spell that out. For example, chilled products might need to be stored and transported between 0 and 5 degrees Celsius, depending on the product and food safety requirements.

You should also set out who keeps temperature logs, who checks goods on arrival and what happens if a delivery vehicle breaks down.

Delivery And Acceptance

Your delivery terms should explain when risk passes from one party to the other. Is it when the supplier loads the goods, when your warehouse receives them, or when your customer signs for delivery?

You should also include a process for checking products and reporting issues. For example, you might need to notify the supplier within 24 hours if goods arrive damaged, out of temperature or with incorrect labelling.

Who Is Responsible For Food Safety, Labelling And Recalls?

Responsibility depends on your role in the supply chain, but your agreement should clearly allocate who does what.

In Australia, food businesses need to comply with the Food Standards Code, which is developed by Food Standards Australia New Zealand. State and territory food laws also apply, and local councils often handle registration, notification and inspections for food businesses.

Your agreement can't contract out of legal obligations. However, it can make the commercial responsibilities clear between you and the other party.

Labelling And Product Information

The supplier will often be best placed to warrant that labels are accurate, because they know the recipe, ingredients and production process. That said, if you relabel, repackage or make extra marketing claims, you may take on responsibility for those changes.

Food labels can raise issues under the Food Standards Code and the Australian Consumer Law, especially for:

• Allergen declarations, including plain English allergen labelling requirements
• Use-by and best-before dates
• Country of origin statements
• Health, nutrition and organic claims
• Batch numbers and traceability details

If a label says a product is gluten free, Australian made or suitable for vegans, those claims need to be supportable. Misleading claims can create risk under the Australian Consumer Law, even if nobody gets sick.

Recalls And Withdrawal Processes

Your agreement should include a recall clause. This is especially important if you're distributing to many retail or hospitality customers and need to move quickly.

A recall clause should cover:

• Who decides whether a recall or withdrawal is needed
• Who notifies regulators, customers and other supply chain partners
• Who pays for transport, disposal, replacement stock and customer credits
• How batch records and customer lists will be shared
• What records each party must keep

You should also check whether you need a written food recall plan. Food Standards Australia New Zealand provides recall guidance, and many food businesses are expected to be able to trace products quickly if there's a safety issue.

How Should Pricing, Minimum Orders And Shelf Life Work?

Your agreement should set out pricing and ordering rules in detail, because small misunderstandings can become expensive when you're moving perishable stock.

Food distribution often works on tight margins. If you commit to too much stock, you can be left with expired products. If the supplier can't meet demand, you may lose customers.

Pricing And Payment

Your agreement should state whether prices are fixed, variable or subject to review. If prices can change, include:

• How much notice must be given before a price increase
• Whether increases apply to existing orders or only future orders
• Whether freight, pallet hire, storage, fuel levies or cold-chain charges are included
• Payment terms, late payment consequences and credit limits

If you use standard form terms with small business customers or suppliers, be careful with unfair contract terms under the Australian Consumer Law. Since the expanded unfair contract terms regime took effect, courts can impose penalties for unfair terms in standard form small business contracts. A small business contract can be covered where at least one party has fewer than 100 employees or annual turnover under $10 million.

Minimum Orders And Forecasts

Minimum order quantities can work well if they're realistic. For example, a supplier might require a minimum order of 100 cartons per week, while you might ask for the right to adjust orders if customer demand drops.

Your agreement should explain whether forecasts are binding or just estimates. If your supplier produces stock based on your forecast, they may want you to take a minimum quantity. If you can't guarantee demand, you should avoid wording that locks you into more stock than you can sell.

Shelf Life

Shelf life is one of the most important clauses in a wholesale agreement or food supply agreement. You can set a minimum remaining shelf life on delivery, such as 70% of the product's total shelf life or a set number of days.

For example, Mia distributes yoghurt to independent grocers in Melbourne. Each carton costs $32 and she orders 500 cartons, so the order value is $16,000. Her agreement says chilled yoghurt must arrive with at least 14 days of remaining shelf life. If the supplier delivers with only 5 days left, Mia can reject the order or ask for a credit under the contract instead of absorbing the loss herself.

Can You Agree To Exclusivity Or A Territory?

Yes, you can agree to exclusivity or a territory, but the wording needs to be very clear.

Exclusivity can be valuable. If you're investing in sales reps, refrigerated vehicles, warehousing and marketing, you may want confidence that the supplier won't appoint another distributor next door.

Common options include:

• Exclusive territory: You're the only distributor for a defined area, such as NSW or South East Queensland.
• Exclusive customer channel: You handle a particular type of customer, such as cafes, gyms or independent grocers.
• Non-exclusive distribution: The supplier can appoint others and sell directly as well.
• Performance-based exclusivity: You keep exclusivity only if you meet agreed sales targets or minimum orders.

Be careful with vague phrases like exclusive distributor for Australia if the agreement doesn't explain what that actually means. Does the supplier still sell online? Can they service national supermarket accounts directly? Can existing customers stay with the supplier?

Your agreement should also cover territory leakage. For example, if you have Victoria and another distributor has South Australia, what happens when an Adelaide customer orders through your website?

Exclusivity can also raise competition law questions in some situations, especially if restrictions affect pricing, customers or resale channels. If the arrangement limits who can sell what, where or to whom, it's worth getting tailored advice before signing.

Food Distribution Agreement Template: What To Include

A template can help you organise the main points, but it shouldn't be treated as a finished agreement.

Food distribution arrangements, including international distribution agreements, can look similar on the surface and be very different in practice. A lawyer should tailor the document before you use it, especially if you're dealing with chilled goods, allergens, private label products, exclusivity or large customer accounts.

Here is a practical outline you can use to prepare your instructions:

1. Parties: List the supplier, distributor and any related companies involved in ordering, warehousing or invoicing.
2. Products: Describe the food products, product specifications, packaging, labels, allergens and any approved substitutes.
3. Territory And Channels: Set out where you can sell and which customers or channels are included or excluded.
4. Appointment Type: State whether the arrangement is exclusive, non-exclusive or performance-based.
5. Orders And Forecasts: Explain how orders are placed, whether forecasts are binding and what minimum quantities apply.
6. Pricing And Payment: Include prices, GST treatment, freight charges, credit limits, payment terms and price review rules.
7. Delivery And Risk: State delivery points, timing, acceptance procedures and when responsibility for goods transfers.
8. Storage And Handling: Set temperature, hygiene, stock rotation and record-keeping requirements.
9. Shelf Life And Returns: Set minimum remaining shelf life, rejection rights, credits and disposal rules.
10. Food Safety And Compliance: Allocate responsibility for the Food Standards Code, state food laws, licences, registrations and audits.
11. Labelling And Marketing Claims: Confirm who approves labels, product descriptions, images and health or origin claims.
12. Recalls: Set out the recall process, notification steps, cost allocation and traceability obligations.
13. Liability And Indemnities: Allocate responsibility for contamination, defective products, misleading claims, late delivery and customer claims.
14. Term And Termination: State how long the agreement runs, renewal rights, notice periods and immediate termination triggers.
15. Confidentiality And IP: Protect recipes, pricing, customer lists, brand materials and trade marks.
16. Dispute Process: Include a practical escalation process before either party takes more formal steps.

You should also check insurance. Depending on your role, you may need product liability insurance, public liability insurance, transport cover, stock cover or recall-related cover. The agreement should say what insurance each party must hold and whether certificates of currency need to be provided.

Key Takeaways

• A food distribution agreement in Australia should do more than set prices. It should cover storage, delivery, labelling, shelf life, recalls and liability.
• Food-specific risks matter because a short shelf life, allergen issue or broken cold chain can quickly affect safety and sales.
• Your agreement should clearly allocate responsibility for compliance with the Food Standards Code, Australian Consumer Law and relevant state or territory food laws.
• Minimum orders, forecasts and exclusivity can be useful, but they need careful wording so you don't take on more risk than your business can manage.
• Templates can be a helpful starting point, but food distribution contracts work best when they're tailored to your products, customers and supply chain.

If you'd like help with your food distribution agreement, wholesale supply terms, recall clauses or exclusivity arrangements, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.