Wholesale Foods | How to Start a Food Distribution Business

By
Joanna Okedara
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    Wholesale foods distribution is vital to the success of any business in the retail food and beverage industry, hospitality industry, and restaurant industry. Companies within these industries depend on a fresh,  steady supply of wholesale foods to maintain their operations.

    Key Takeaway - Starting a food distribution business requires managing a relationship with food producers and consumer-facing companies. Depending on the type of food distribution business, you'll be operating a B2B eCommerce model, DTC model, or O2O business model.

    The business model you operate will determine your distributor marketing plan and help streamline your niche market research. Undoubtedly, the food and beverage industry is highly competitive, but with a solid business process flow chart, you'll be able to both navigate it and produce desirable results in your restaurant supplies business.

    This guide will teach you the steps to take before starting your food business. Let's review how to start a wholesale foods distribution business and the steps you need to take to become a food wholesale distributor.

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    How to Start a Wholesale Foods Business: 4 Things to Consider Before Launching Your Food Business

    There's a lot of profit to be made from starting a food distribution business. However, before starting your wholesale foods distribution business, you must put several things in place.

    Here are four things you should consider before you launch your wholesale foods distribution business: 

    1. Wholesale Food and Warehouse Inventory Management

    You need to choose the type of wholesale foods you want to distribute. The biggest challenge in distributing food is warehouse inventory management due to the limited shelf life of foods.

    With the perishability of your food in mind, whichever wholesale foods you choose to distribute must be stored under temperature conditions that can extend the shelf life. Your warehouse layout design and structure must be perfect.

    1. Logistics and Overhead Costs

    It helps if you also consider the most likely logistics disruptions you will face, including your plan for last mile delivery. To solve this, you may need to integrate route optimization tools into your wholesale food business.

    As a new foodservice wholesale distributor, it’s smart to minimize your overhead costs. Using a wholesale distribution management software like BlueCart will streamline your operations and the costs of running your business.

    1. Shipping Food and Order Fulfillment

    Shipping food and order fulfillment is another crucial thing to consider when launching your wholesale food business. Integrating the best shipping processes for your wholesale product is essential to avoid spoilage and other shipping issues.

    Partnering with local manufacturers and food businesses will make receiving and delivering fresh food products easy. However, once your business expands, you may need to learn how to ship perishable foods across borders.

    1. Package Design and Shipping Labels

    If you plan to operate private label brands for your wholesale food distribution business, you must consider your package design and product marketing ideas. You'll also need to learn how to print product shipping labels.

    Creating your unique selling point is essential to marketing your product to your target audience. Writing an eCommerce marketing plan will help you build your brand and expand your business.

    Now that you know what to consider before launching your food wholesale distributorship business, let's discuss ten tips to get you started.

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    How to Start a Wholesale Foods Business: 10 Tips to Get Started

    Here are ten tips to get started with your wholesale food distribution business:

    1. Business Plan and Wholesale Distribution Process Flow

    To start, write a business plan that covers your entire operation and business process flow. Your wholesale distribution business plan will help validate your idea and simplify things.

    Are you looking for a simpler way to create a flow diagram for your wholesale food distribution business? You can use our editable business process flow chart to streamline and optimize your business processes. Download our free business process flow chart template here.

    Consider adding the following sections to your business plan:

    • Executive Summary: An overview of your product, the market, and potential areas for growth.
    • Overviews and Goals: A description of your company, your target market, and the resources you'll need to run it.
    • Products and Services: Information about the specific wholesale foods your company will offer.
    • Market Opportunities: Evaluation of client demographics, purchasing patterns, and demand for your product.
    • Distributor Marketing Strategies: Describe your strategy for reaching consumers and how you plan to differentiate yourself from the competition.
    • Competitive Analysis: Evaluation of your competitor's strengths and weaknesses.
    • Operations: Your company's organizational structure and the requirements for day-to-day productivity.
    • Leadership Team: Specifying the duties of each manager by their responsibilities.
    • Financial Evaluation: Laying out operational budgets, future expense estimates, and all costs.
    1. Select Your Business Bank

    One mistake you should never make is using your bank account for your business needs. Opening an account with one of the best banks will make it easier to process transactions.

    You can also consider integrating the best payment gateway into your business. This will streamline online transactions and make it possible to accept payments online

    1. Wholesale License and Legal Permits

    It is essential to sort out all the legal requirements of your business early on. Getting your wholesale license gives you legal permission to buy wholesale food in large quantities and resell them in smaller amounts to businesses in the food industry.

    It’s best if you also choose whether you wish to be an LLC, S-Corp, or C-Corp. As a foodservice wholesale distributor, these three options preserve your assets and give you access to specific tax advantages.

    Here's a brief overview:

    • LLC: The limited liability corporation (LLC) personal income tax return is used to disclose all business-related earnings and outlays.
    • S Corporation: Owners collect dividends from profits and pay themselves salaries.
    • C Corporation: A C Corporation is a separately taxed entity that files a corporate tax return (Form 1120). Any tax owed is paid by the proprietors personally; there is no income tax paid at the company level.
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    1. Choose Your Food Distribution Business Model

    There are various business models you can run. However, it’s crucial to understand the needs of your target market first.

    The business model you select can come as a value-added service. You can even combine more than one, depending on your management tools.

    Let's look at some of these models:

    • Subscription billing and recurring payments model: Customers are billed for the wholesale food they repeatedly order with this payment model. Subscription billing solutions streamline invoicing, automated billing, payment processing, and order fulfilling processes. 
    • Dropshipping model: Dropshipping allows you to receive products from wholesale dropshipping suppliers and manufacturers without worrying about inventory carrying costs, warehousing, and bulk shipping. Customers place their orders and pay on your website, and in turn, you send all order requirements to the product manufacturer. The manufacturer will then process the order and deliver it to the customer.
    • Private label model: As a private label brand, you get to exclusively rebrand already-manufactured products and sell them as your own. Manufacturers produce and design products, and you relabel, sell, and profit from them. Understand white label vs. private label.
    1. Design Your Catalog and Food Packaging

    If you choose to be a private label brand, then it’s vital to design your shipping label and food packaging. A shipping label printer will do the trick. Whichever food eCommerce packaging option you choose must adhere to food safety regulations and prevent spoilage.

    Designing a digital catalog to showcase your products will also come in handy. You can use a simple catalog creator, an eCommerce website builder, or product catalog builder software.

    1. Partner With a Large-Scale Food Producer

    Partnering with a large-scale food producer is crucial to the success of your wholesale food business. You can connect with more than one manufacturer if you plan to have a large inventory and supply various types of wholesale food products.

    However, it would help if you decided on a few things before choosing a supplier for your business. Here are some questions to ask yourself:

    • Do you want to work with local suppliers or international suppliers?
    • Can you negotiate to become that manufacturer’s exclusive distributor?
    • Will you sign a wholesale purchase agreement?
    • Can you work with their shipping policy?
    1. Set Your Wholesale Price

    How much will you charge your customers for your wholesale foods? It is essential to research your competition and the current market price and wholesale price for the products you want to sell online.

    Pricing is one of the most challenging aspects of starting a new business. Customers may view your products as substandard if you underprice, especially compared to similar foodservice wholesale distribution companies.

    On the other hand, overpriced products will make customers run to your competition. This will damage your business’s reputation and perception. 

    Before customers make a purchase decision, they tend to check online retail stores and wholesale marketplaces for the price of wholesale goods. You can do the same when you are about to set your wholesale price.

    All in all, striking a balance between what price is obtainable online and your required profit margin will keep everyone satisfied. Here are some factors to consider when pricing your product:

    • Understand your customers, knowing what they’re willing to pay for a product will help you set the perfect price.
    • Evaluate your competition, check their price and look for a way to beat that price.
    • Understand your overhead costs, including inventory carrying fees, shipping costs, and business operating costs.
    • Create revenue objectives for each product to monitor its performance and how customers respond to set prices.
    1. Find Your Customers

    This is the critical part of starting a business. Knowing where to find your target customers will help you to market your product and make sales leading to high ROI.

    You may need to launch various wholesale marketing campaigns and monitor your eCommerce metrics. Using eCommerce marketing strategies like eCommerce email marketing, eCommerce content marketing, and eCommerce marketing automation tools will help you get results faster.

    1. Pick Your Team

    The truth is you can't do it alone. You need an eCommerce team structure that will help with your business operations.

    You can start with a small team and hire more people as your business grows. Here are some key departments and roles in any distribution business that need to be staffed:

    1. Get Your Resources Ready

    Besides having a great team, integrating the best tools into your wholesale food distribution business will streamline numerous aspects of your operations. For instance, a wholesale distribution management system offers an all-in-one eCommerce solution for wholesalers.

    Here's a list of tools and resources you need for your business:

    Frequently Asked Questions About Starting Wholesale Foods Distribution Business

    Starting a wholesale food distribution business requires adequate planning and the right resources. Let's answer more related questions you may have.

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    What Is Food Distribution?

    Food distribution is the process of making food items available to wholesalers, retailers, and consumers. To make food distribution possible, the food distribution channels must work together in balance.

    What Is a Wholesale Distributor?

    A wholesale distributor serves as an intermediary between a manufacturer and a retailer. The wholesale distributor buys products in large quantities from manufacturers and resells them in small amounts to consumer-facing businesses.

    What are the 5 Pricing Techniques?

    Here are the five pricing techniques to help you attract more customers for your business:

    1. Price skimming: Listing a product price as high as possible and then gradually lowering it until it meets the market average.
    2. Market penetration pricing: Setting the price of a product low at its initial entry into the market.
    3. Premium pricing: Keeping the price set higher than your competitors to create a perception of luxury.
    4. Economy pricing: Lowering the price of products due to the low costs of production.
    5. Bundle pricing: Grouping products into bundles and selling them at a single price.

    Ready, Set, Go!

    Starting a wholesale food distribution business comes with many benefits and profits. With a great team and wholesale management system, you can get an ROI quickly.

    This guide's recommendations and strategies will help you start your business. Remember to do your research before launching your wholesale food distribution business. This will help you prepare for any situation.

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