If you are considering trying to make the move and enter the coffee distribution industry, now is a better time than ever to do so. According to the National Coffee Association, currently 57% of US adults drink coffee on a daily basis, and that number is projected to rise over the next several years, with the consumption per capita rate continuing its upward trend from 2013-2018. There’s no doubt about it – Americans are drinking more and more coffee, and there’s no sign of them stopping!
The fact of the matter is that becoming a coffee distributor today in America has the potential to be extremely lucrative. According to the IBIS World report, America is seeing a shift over the last five years towards higher-end, higher-margin coffee, which means more profit for you once you get started. At the same time, there are not many barriers to enter the industry – the capital-investment required is low, and the demand for coffee remains high, regardless of the presence of many reputable brands in the industry. If you plan wisely and do your research, buy the right products that are consistently in demand, and maintain good networking skills and stocking habits, you could wind up with a good chunk of change in your pocket!
In order to get your foot in the door of the coffee distribution industry and be successful, here are some key steps to we suggest for smartly moving forward:
1. Become a Coffee Expert
The hard part comes first: you’ll have to spend a good deal of time gaining a wealth of knowledge of the coffee industry. First of all, you’ll need to know about the world’s biggest producers and regions, the various beans and the flavors, aromas, blends, and roasts they produce, and how coffee is produced and manufactured wholesale. Then you’ll want to acquaint yourself on the business itself – coffee sales, how to buy coffee supplies in large quantities, the profitability margins, how to distribute to your intended consumers, and how all these factors play into the U.S. state or region in which you intend to distribute.
Once you’ve gotten a handle on all that, become an expert in coffee trends. If you can develop a nose for sniffing out the next big trend in the coffee industry, you could make a big profit when the product increases in demand and becomes pricier.
2. Pin Down your Market
Once you’ve gained all the knowledge you can about the industry, it’s time to choose your intended market. Decide what kind of coffee you want to sell and where you want to distribute your coffee – retail, wholesale, or commercial spaces. Deciding your niche early on will help you define your business strategy and company mission.
To determine your target market, you’ll want to consider coffee industry trends – both on the supply and demand side – over the last few years.
· Demand for coffee is changing. According to the 2018 IBIS World Report, there is an industry trend over the last few years away from standard drip coffee toward single K-Cup coffee, and the industry is seeing a huge spike in revenue as a result. In addition, Americans are drinking more and more specialty coffee, and are willing to spend more on it. In fact, 59% of coffee consumed daily in America is considered “gourmet,” which marks the first time in the National Coffee Association’s 67-year history that more than half of daily consumption falls into this category.
There is also an increasing demand for office and commercial coffee services since 2016, and that trend continues to move upward. At the same time, there is a growing number of restaurant and coffee chains across America, boosting competition in distribution to those markets.
· In terms of supply, the number of new players entering the industry is increasing, mostly in retail and wholesale areas, while the number of commercial business-to-business suppliers is not increasing significantly.
Whatever you decide, you should narrow your market to distinguish yourself from other distributors and establish your brand. Luckily, the coffee industry is highly fragmented, meaning if you cater to a niche group of consumers (for instance, selling coffee services to small- and medium-sized businesses) on the basis of convenience, you’ll be in good shape. The idea is to play to your strengths, eliminate industry competition, and target the right buyers for your brand.
3. Understand your Local Market
Compare and Choose the Best Manufacturer
Now that you’ve thought through the selling end of the process, compile a list of coffee manufacturers that produce coffee pertaining to your targeted market interests and you might want to work with. For example, if you plan to distribute both K-Cups and standard ground coffee, you might consider the most popular brands by yearly revenue (most of which sell both K-Cup and ground coffee products). But you’ll want to consider your local market in addition to nationally popular brands – what kinds of coffee are people in your area drinking? This could vary by location and local demand, so do your local research – talk to local business owners and ask around!
Next, you’ll want to do some research on manufacturer requirements for independent distributors, as well. For instance, if you register with a particular company as their agent, it’s possible you are signing up to exclusively sell their coffee, so if selling a variety of brands if the best choice for your local market, you need to be very careful when discussing contracts. You should also make sure you understand what their minimum orders are, as well as any other fees you could be responsible for when partnering with them.
You will need a distribution license. In some states, you may also need to attend an approved pre-distribution licensing course before you even apply. So plan accordingly, depending on where you’re setting up shop! Also, think through a company name or LLC label during this process. If you can provide this information, you can better protect your company and minimize your taxes.
Network and Get Leads
Plan to pour a lot of time and attention into building your brand – especially as you’re beginning to start up! You need to find and develop a reliable client base – in sum, find retail, wholesale, or commercial clients in your local marketplace that want to work with you and secure their business.
There are tons of networking strategies to gain clients and grow your business. First, talking to local businesses face-to-face may seem old fashioned, but it’s definitely an effective way to network and get the scoop on becoming successful in your area. Become a member of a business association or in your local community. Some worth checking out are the Better Business Bureau, National Small Business Association, or the Chamber of Commerce nearest to you. Also make good use of the internet. Social media – such as Facebook, Twitter, and especially Linked In – can help you form relationships with local business owners. Join groups and form a brand presence. Partnering with a lead generation service can be particularly helpful as you start to build your pipeline, as well.
4. Rent Space or Form a Website
Do you plan to have a physical space where you can network, do business, and meet with potential clients? Before distributing, it is a good idea to plan a space for these needs, as well as storing records and filing documents. As you grow, it will probably become unrealistic to run the distribution operation out of your home. A mobile office or steel building are good ways to allocate warehouse space for storage and save some money! You should also put some thought into considering where you set up shop and get situated – if you need to expand, you won’t want to fight the cost of land in your area to stay afloat.
If you choose to opt out of a physical space, you’ll still need to create a website around your brand – somewhere you can get your business exposure and attract organic customer interest. As far as branding, make sure your company’s name, logo, website, and packaging are attention-grabbing.
5. Establish a Financial Plan
It is important that – before you get started – you think through a method for keeping financial records and building an effective ordering cycle for your inventory. As far as getting started, the Small Business Association is a good resource to exploring your financial options – including setting up a business bank account, getting business insurance, applying for a business loan, paying taxes, and managing your finances moving forward. There are also several CRM software options – from as uncomplicated as Excel to as complex as Salesforce – that can help you maintain neat and efficient customer relations, as well as keep tabs on the revenue coming in from each client. As far as keeping reliable inventory, it is a good idea to start with ordering the minimum you need to get your business moving, then build your inventory cycle around your clients’ needs once you’re up and running.
6. Secure reliable transportation
To be a distributor, it goes without saying that you’ll need a means of getting your coffee from your stock room to its target destinations. You might consider the investment of a branded truck or van (which will get you brand exposure at the same time!), or sometimes it’s possible to secure a vehicle from a manufacturer, depending on who you’re working with. Keep in mind that if your client base ends up being farther away from your home base, you may have to establish a relationship with a shipping company, which could add to your expenses.
7. Provide good service!
Consistency is key here. Remember that even though the industry is growing at a promising rate, your success is never guaranteed. Coffee is everywhere – so even if you sell the best coffee in town, if you don’t give your clients outstanding service, they could give their money to a different distribution company. Check in with them weekly and let them know about any promotions or discounts you may be offering at the time. Keeping consistent, quality communication with your clients will help your reputation build in a positive way. Getting started can be a complicated process, but it can definitely pay off in the end!
If you’re a supplier looking to sell coffee services – or water services! – in the commercial space and need a few extra hands, we might be able to help you out. 360Connect is an expert lead generation service with over 12 years of experience in the coffee industry, and we are focused on your success. Right now, we are sending true-intent, sales-ready leads to over 125 active coffee service suppliers in our network. If you want to find out more about what we can do to help coffee suppliers boost their R.O.I,, check us out online or give us a quick call at (888)-259-6606.
By the way: building a great sales team is a must for any start up business. We provide the tips and tools you need to do so.