Of all the types of eCommerce businesses, wholesale–especially wholesale alcohol–is one of the most interesting, misunderstood, and rewarding types to get into. Whether you’re still learning the basics, or you’re nose-deep, it’s important to understand the wholesale definition and how to run a wholesale distribution business, first. Then you can learn how to ship wine.
Learning how to become a wholesaler and how to run a wholesale business has its benefits if you have the right knowledge down pat. However, it’s important to know how to get a wholesale license before you get started with wholesale distribution. This way you can ensure you are conducting legal business.
Once you figure out what wholesale items to sell, now is the time to figure out where you’re going to get the products from. When you’re doing research, you’ll find that every distribution business varies in what they provide.
More than this, partnerships vary depending on whether you sell to retailers, consumers, or both. Let’s take a look at what alcohol distribution is, who the best distributors are, and where to get a liquor license for your B2B business.
What Is Alcohol Distribution?
Alcohol distribution in the United States operates within a three-tiered system. The system consists of producers, distributors, and producers. All of which have different roles and responsibilities toward each other.
Producers make the alcohol, then sell it to wholesale food distribution businesses. The distributor then distributes and sells the alcohol to retailers like bars, restaurants, or liquor stores. Finally, consumers, like yourself, purchase alcohol from retailers.
If you're looking to become a distributor, it's important for you to know what your job is: buying alcohol from producers and reselling it to chosen merchants and wholesalers. Your customers may be any number of people, from fellow alcohol distributors to partner retailers.
As a distributor, it's also important to understand distribution strategies and the roles they play for you and your business. In knowing, you'll gain large competitive advantages.
According to research, there are three main distribution points:
- Getting products from manufacturers to end customers.
- Controlling costs and saving time.
- Building competitive advantages via distribution.
Together, those three aspects ensure that all distributors are on the right track to distributing alcohol successfully.
As with any job, there are always going to be benefits as well as drawbacks. If you haven't started your journey yet, now is the time to explore both ends of the spectrum. This way, you have the full picture before getting in too deep. Let's explore the benefits and drawbacks of selling wholesale alcohol below.
What are the Benefits of Selling Wholesale Alcohol?
Overall, distributors have the largest impact on the alcohol industry. Working in the beverage industry as a liquor distributor, one of the first benefits you'll partake in is fair pricing. All liquor distributors have the opportunity to offer the same wholesale price--whether small businesses or large retailers. This means that even small businesses have an equal opportunity to compete against the big dogs.
Another huge benefit of selling wholesale alcohol is sales tax. The three-tiered structure allows for tax transparency because singular organizations monitor product shipments. Tax rates generally stay the same across the board when it comes to alcohol so there's never any need for worry.
What are the Drawbacks to Selling Wholesale Alcohol?
While there are many benefits, there are very ever-present drawbacks. The first issue has to do with consistency. Generally speaking, there is a lack of consistency in alcohol distribution laws across the states. As a result, distributors face many challenges when trying to reach large audiences.
While one thing may be acceptable in one state, the same may not apply in another. Another issue is that as a distributor, you cannot be neutral. You can't pick sides in times of need. For example, a small supplier you normally partner with may be struggling, but continuing to work with them can cause you to struggle too.
You won't always have the option to keep working with them due to their situation. As a business owner, sometimes your only option is to opt in to working with big brand name alcohol companies. Additionally, you need to implement a robust distributor marketing plan. This way you're able to maintain a consistent eCommerce sales volume.
How to Get a Liquor License
If you're thinking of starting a bar business, one of the first things on your mind should be getting a liquor license. Before you can begin planning happy hour ideas or happy hour drinks you need to ensure your bar is up to regulation. This includes obtaining your licensing.
Unfortunately, the process of getting your liquor license can be difficult, and quite frankly, annoying. However, it's best to work with your state's governing agency to ensure you're following the right steps. They'll be able to help you determine what kind of liquor license you need.
The type of liquor license you need depends on many different factors. You'll then have to explain these factors to your state's ABC (alcoholic beverage control) board. This board is responsible for regulating and controlling liquor and state stores.
The board has to know what type of business you're operating (bar, hotel, restaurant), if you'll let people bring their own alcohol (BYOB), the times and days you're selling alcohol, and if you'll manufacture alcohol on-premises.
Then, based on your answers to these questions, your ABC board will tell you what license you need and if it's available. Most states only have a limited number of liquor licenses, so you might not be able to get a new one. If this is the case for you, you'll have to make your purchase from an existing business.
Finally, once you have a liquor license in hand it's time to submit your application. Make sure to bring your employer identification number (EIN), business license, sales tax permit, health permit, building permit, and zoning permit.
Applications for a liquor license can take up to six months to be approved. Keep this in mind when looking to open your business.
Who are the Top 6 Wholesale Alcohol Distributors?
As a retailer, it's important that you know who you're buying alcohol from. Not every business is the same, and quality should always be a factor when making a decision to purchase.
So, we've compiled a list of our top six favorite liquor distributors in the United States. Check them out here:
1.) Southern Wine & Spirits of California
Created in 1969, Southern Wine and Spirits remains Golden States' single largest wine and spirits distributor in the United States. According to recent surveys, Southern Wine & Spirits is set to lead all wine and spirit distribution from 2020 forward. They sell wine online and in person.
2.) Empire Merchants North, LLC
On September 1st, 2007, Empire Merchants was formed. Two big-name companies–Service Universal Distributors and Colony Liquor & Wine–joined together to create this now powerhouse. This company employs over 600 associates and distributes more than five million cases of liquor per year. EMN is the only major distribution company in upstate New York.
3.) Henry Wine Group
The Henry Wine Group aims to represent both sellers and distributors in the wine industry. In order to do this, they've developed expertise, partnership, and technology to provide flexible and informed services. In addition, Henry Wine Group is taking steps to advance and grow with suppliers and markets in the distribution industry.
4.) Young's Market Company
Young's Market Company is the United States’ largest distributor and broker of alcohol operations within California. As a family-owned business, they know what it's like to work hard to meet customers' needs and keep up with high demand products. As a result, they've created an online platform making it easier than ever to shop their inventory, place orders, and connect with suppliers.
5.) Alliance Beverage Distributing
Alliance Beverage was founded in 1962 by Larry Gary. They started with only eight employees, but the business soon grew into a successful alcohol distribution business. There are now over 300 employees, and they serve more than 3,500 customers across the state.
Alliance Beverage offers full-service beverage supplies to local businesses. This includes beer, wine and several non-alcoholic beverages. There's something for everyone at Alliance Beverage.
6.) Wine Warehouse
For over 30 years Wine Warehouse commits to marketing and selling only the finest quality beverages you can find. What started as a single container of Burgundy, has now expanded to over 10,000 varieties of wines, beers, spirits, and non-alcoholic beverages.
Frequently Asked Questions About Alcohol Distribution
How Does an Alcohol Distributor Make Money?
Alcohol distributors make money by buying goods in bulk and then selling them at large profits. The products they buy sell at low prices, so distributors tack on an extra dollar or so in order to keep the price attractive to consumers.
Why Does Alcohol Distribution Operate Under the Three-Tiered System?
When the 21st amendment passed, ending prohibition, states received the authority to regulate alcohol distribution as they saw fit. As a result, states developed this system to help with the safe distribution of alcohol.
What is my Role as an Alcohol Distributor?
As a liquor distributor, your role is to purchase products from manufacturers and sell them to merchants and wholesalers. You can do this in many different ways. Either as a delivery driver, account executive, or warehouse employee.
Do I Need to Keep my Competition in Mind When Selling and Pricing my Products?
Yes, you always need to keep competition in mind regardless of what you do as a business. eCommerce competitor analysis is an extremely important factor in pricing and the way you run your business.