Today, the demand for alcohol is growing tenfold. In the U.S. alone, alcohol is a billion-dollar industry. Many experts predict that online liquor sales of beer and wine grew by at least 32 percent over the last 3 years. Learning how to ship wine is more important than ever.
When you're contributing to the ever-growing market, or you're looking to venture into one of the most profitable business industries, it's good to ensure you understand what wholesale alcohol is. There's a lot to know about this industry.
From rules, regulations, and laws to mixing drinks and beyond, the opportunities to grow our knowledge are endless. However, in this article, we’re going to start with the basics. This includes knowing what wholesale alcohol is, where to buy it, essentials of how to run a wholesale business, how to run a wholesale distribution business for alcohol, and what to know if you’re interested in becoming a distributor.
What Is Wholesale Alcohol?
Liquor, an umbrella term, describes a variety of alcoholic beverages. Many distributors sell alcohol in bulk to other retailers, who sell the alcohol to customers at a higher price. This is the wholesale definition in any application throughout the wholesale items industry.
Namely, alcohols produced by fermenting fruits, grains, and other plants fall under this umbrella. These plants produce CO2 and ethanol, which naturally turn into alcohol over time.
Some of the most common types of alcohol include vodka, rum, gin, brandy, whiskey, and so much more. Alcohol that falls under any of the above names usually has an alcoholic volume, or ABV, of at least 20 percent.
However, many are known to have a volume as high as 50 percent. These drinks are referred to as alcohol or hard drinks.
This is the most basic understanding of liquor. Many liquors are not the same. Some contain added sugars, oil, or extracts. A good example of this is wine; wine alcohol content is normally very different from that of hard liquor.
The ABV also affects the kind of liquor you're buying. Examples of alcohol with high ABV include vodka, Irish creams, and rum. An Irish Cream is a perfect addition to popular winter cocktail recipes–think about this when the holidays come around.
6 Factors Alcohol Wholesalers Must Master to Become Successful
As an alcohol distributor, you have to understand all aspects of the business. This starts with knowing who your target market is.
What is your target market? Are you selling to bars, restaurants, and nightclubs or are you selling to the general public? Knowing your target market is essential to growing your business.
This matters because knowing your target market helps you decide which product to sell, which is the next most important factor. For example, if you’re selling to restaurants and bars, you might decide to sell wine. If you’re selling to the public, you might want to sell beer.
As a liquor wholesaler or distributor, you'll likely buy alcohol and spirits from local or international suppliers. Local sellers like distilleries and companies that utilize warehousing like Costco or Specs are great go-tos.
Depending on which supplier you choose, the wholesale price will vary. In order to get the best prices, you can start by contacting bulk suppliers in your area.
When you speak to them you'll be able to request a quote or negotiate prices. For large quantity orders, it's not uncommon for the supplier to offer you a discount. Although, they'll ask for payment upfront.
Another option is to research online liquor sellers. Sometimes, you'll find better deals there than you would from a direct supplier. However, keep in mind that quality is always the best option and should be one of your top three factors in choosing a supplier.
Let's take a closer look at the six business factors alcohol wholesalers must understand to run a successful business:
1. Inventory Management
Inventory management will make or break your business. It's your job to update and monitor your regular stock as well as your safety stock on a regular basis. Using tools like a warehouse inventory management software platform can make all the difference for you and your business. It'll be up to you to implement demand planning strategies to keep your business on top of any changes.
This means keeping track of high demand products and ensuring that you have enough to meet that demand. For example, if one of your whiskey products is always in high demand during the winter, stock larger quantities during this time. This way, you won't have angry customers on the other end of the phone asking why a popular product is already sold out.
You can keep track of your products that are in high demand by checking your monthly sales reports and DTC trends. It may even be in your best interest to hire an inventory control manager to help you manage, especially if you're a small business owner.
They'll be able to implement the best inventory tracking methods for your business while you stick to other aspects of your business. This way you'll avoid potentially costly mistakes.
2. Product Demand
Something that goes hand-in-hand with inventory management is product demand. Demand is the number one contributor to your inventory stock. Once you establish yourself as a trustworthy business, ideally your sales will grow.
As a result, you'll quickly find out that customers want what they want when they want them. So, you'll need to be ready to keep up with the constant flow and order fill rate.
You can do this in three ways:
- Focusing on core competencies
- Having scalable resources
- Staying ahead of demand using a wholesale marketing plan
- Taking advantage of technology, including hospitality software
3. Focusing on Core Competencies
Focusing on core competencies is the best way to keep up with demand. This means not spending time or money on tasks your company isn’t built for. All this does is create more errors, accidents, and overall decreased deficiency.
To solve this, consider working with third parties to do the jobs you can't. You can focus on what you're good at, while they focus on their strengths.
4. Have Scalable Resources
Many think the more resources, the better. While this is true, it's more important to have resources specifically designed to help you succeed. Scalable resources are designed in such a way that they help you during busy periods.
For example, transportation technology that increases your shipping capacity during busy periods, or 3PL companies that offer flexible storage and delivery options. Knowing how to ship alcohol properly, without issue or delay, will be key to your success.
5. Stay Ahead of Demand
Getting ahead during slow periods means exactly what you think it does: get ahead and stay ahead. Obviously, when demand is high you make sure you're constantly stocked and ready to go. However, many businesses slack off while demand is low. This is the time to get ahead of customer demand by conducting an ABC analysis.
6. Take Advantage of Technology
Finally, there's the forgotten art of embracing technology. Technology is one of the biggest advantages in this industry. Companies that take advantage of it find themselves soaring above the competition.
Technology like smartphones with access to social media is probably the best piece of technology you can invest in. Your business might even benefit from using a shipping label printer. This is an inexpensive piece of technology that will save time and money. There's no right or wrong option here, simply choose what works best for your business process flow.
How to Buy Alcohol Wholesale
Before you start looking to buy alcohol wholesale, there are a few things you should know. Let's start with alcohol distribution.
Alcohol operates within a three-tiered system: manufacturers, wholesalers and distributors, and retailers. A manufacturer is a person or company that creates alcohol. Common alcohol manufacturers include Tito's, Smirnoff, and Crown Royal.
Manufacturers only sell alcoholic beverages to distributors. Buying wholesale alcohol involves supplier relationship management with these distributors, who sell you their goods at a minimum order quantity. As a wholesaler, you can then sell the goods to retailers or consumers, depending on your business model.
There is one state where manufacturers are able to sell directly to retailers, which is Washington. Other states, including Alabama, Iowa, Maine, Montana, Michigan, and Ohio have a state monopoly over parts or all of the distribution tier.
This means that these states and their alcohol products dominate over others'. There are few to no competitors in these states, so consumers must purchase alcohol from a specific distributor.
Where Can I Buy Wholesale Alcohol?
Frequently Asked Questions About Wholesale Alcohol
Starting a wholesale alcohol business is exciting, but requires a lot of industry-specific knowledge. If you haven't worked with manufacturers, retailers, or various licenses before, it can be a bit overwhelming.
We researched the most commonly asked questions about wholesale alcohol to help you out. Check out our answers below:
What Is Wholesale Alcohol?
Wholesale alcohol–also called liquor–is a term that refers to alcohol sold in large amounts to a retailer, who then sells the product for a better price to consumers in his area.
How Do I Become an Alcohol Distributor?
To become a wholesale alcohol distributor you’ll need to start with three things: a business plan, acquiring warehouse space, and applying for a liquor license or wholesale license within your state. All other necessities come further on in your business.
Who Is the Largest Liquor Distributor?
The largest liquor distributor in the United States is Southern Wine & Spirits of America. They’re a Florida-based company and have been in business since 1968. Today, they operate in over 35 states and distribute more than 5,000 brands of liquor every year.
How Do You Start Distributing Alcohol?
Distributing alcohol starts with getting your business licensure and paperwork in order. You need a business license, distribution or shipping license (for all the states you work in), and eCommerce license if you plan to sell online. Do you need any state-specific permits to operate your business, too? Make sure that's handled first.
Once those ducks are in a row, you can start planning your business model, marketing, and sales efforts. You'll also need to think about the capital and resources you have available to start a business. How much money do you have to start the business with? What type of space will you need? How much money do you expect to make in your first three to six months, and what kind of sales and marketing activity is necessary to reach that point? These are all questions to ask and answer before you launch your company.
How Profitable Is Selling Liquor?
The alcohol industry is one of the most profitable industries on the planet. In fact, it’s estimated that the alcohol industry earned $1.3 trillion in 2017. When it comes to profitability, alcohol is an industry that is hard to beat. Alcohol distributors earn a large percentage of their profits from wholesale alcohol. How much money will you make as an alcohol distributor? This depends on several factors, including your market, your business model, the laws in your state, your business expenses, and more. Profitability is one of the main reasons people start businesses. It’s often the dream of making a comfortable living while enjoying the work you do.
What Is a Liquor Distribution License?
Liquor distributors must comply with state laws and regulations. Every state has its own rules. Distributors must also be licensed. A liquor license is a permit or certificate issued by the state government allowing you to sell alcohol. Distributors sell beer, wine, and/or liquor. How do you get a liquor distribution license? First, you must find out what the requirements are in your state. You can do this by contacting the department of alcohol beverage control (ABC). Once you know what you need to do to get a liquor license, you can start applying for one.