Whether you’re planning on purchasing products from a food wholesaler, or thinking about moving into food wholesaling yourself, this overview of the industry – and what its future holds – is for you.
Here we cover the basics of food wholesaling with a focus on the UK, then get into the nuts and bolts of this industry, including:
- How to start a food distribution business
- Price-setting and maintaining your margins
- Challenges for food wholesalers in 2022
- Ecommerce for food wholesalers
- Tools to streamline your wholesale transactions
Learn more: Handle your wholesale orders with confidence
What do wholesale food distributors do?
A wholesale food distributor acts as a middleman between food and beverage manufacturers and operators, supporting the end-user by streamlining product distribution.
By warehousing products then delivering usable quantities of goods to the buyer, wholesalers are a key part of the food & beverage supply chain for businesses such as restaurants, cafes and retailers. Wholesalers can operate using different sales models, such as cash-and-carry offerings or delivery – which we’ll discuss in more detail below.
Is a cash and carry a wholesaler?
Cash and carry is one of the sales models a wholesaler can use. On this model – as the name suggests – the customer pays cash up front then carries the product away. Since the model is based on cash payments, credit transactions – and any associated costs such as fees – are effectively eliminated.
A cash-and-carry business is still a wholesaler but is limited by its reliance on cash payment and the pick-up of goods. However, many cash-and-carry businesses are starting to modernise their model, and some are now offering online ordering to their customers.
How big is the food wholesaling industry in the UK?
In the UK, the food wholesaling industry is huge, employing 60,000 people and with turnover hitting around £30 billion.
The food wholesale sector supplies food and drink products to over 400,000 business across the UK, from restaurants and hotels, to care homes, hospitals and prisons – and of course, retailers.
A key player in this industry is the Booker Group, which sells thousands of products to outlets such as grocery stores, and operates both cash-and-carry and delivery models. Before being acquired by Tesco in 2018, Booker’s revenue was around £6 billion per annum.
What are the biggest wholesale food suppliers in the UK?
There are several major whole food suppliers in the UK. The largest is Booker, which was acquired by supermarket giant Tesco in 2018 in a £3.7 billion deal to become an industry behemoth.
Other major wholesale food suppliers are Brake, CostCo, and Bestway.
The industry as a whole has been heavily hit by Covid, with buyers such as restaurants and cafes shuttered under the lockdowns and the businesses being forced to rethink their strategies as a consequence.
Brake, for example, declared significant losses as a result of the pandemic and is now offering home delivery and call-and-collect services directly to individual customers.
This move reflects a general trend in the industry away from cash and carry towards a delivery-based model, in part due to the ongoing impact of Covid.
What role do wholesalers play in the food distribution network?
Wholesalers play a vital part in the supply chain. The wholesaler is the entity that buys directly from the producer or manufacturer, or from a larger distributor. The wholesaler could work with the food producer, for example, or an organisation that is producing items or goods in bulk.
The wholesaler chooses which source providers to work with depending on several factors – such as their ability to supply, cost, service, end-user demands, current market trends and the like.
Once the wholesaler has made a decision on who to purchase from, it will order the goods or product in bulk, then usually warehouse it pending final orders from its customers. Those customers are likely to be retailers, hospitality businesses, or organisations like universities and hospitals.
How is wholesale food distribution different from retail?
Wholesale food distribution is quite a different proposition from retail. Wholesalers are generally the entities that sell to the retailers. They buy in bulk from the original source of the produce – such as the farmer or markets – and can often negotiate discounted pricing.
They then store the product in a warehouse before selling it on to retail outlets like caterers, pet food retailers, restaurants or the like.
How do you start a food distribution business in the UK?
Starting a food distribution business can be complex, but also extremely rewarding.
The first step is to analyse the market you’re looking to enter. You’ll want to see if there’s a niche that needs filling, an opportunity that has arisen, or a way to deliver a better service than the existing operators. Given the competitive nature of the UK’s food industry this analysis is vital, and key to the business’s future success.
Once a market opportunity has been identified, you’ll have to research regulatory requirements for food businesses and put a business strategy put in place – which includes finding a warehouse and office space. Your business strategy will also need a clear plan for finding, growing and retaining your customer base.
The food industry has its own particular set of requirements around health and safety, and even if you’re not producing food products, but warehousing and delivering them, you’ll need to be familiar with these. And of course, the food supply chain can be volatile – it can be susceptible to weather conditions or the quality of a crop, for example.
As such, starting a business in the food industry requires extensive planning and analysis to ensure it’s a viable long-term proposition.
How are wholesale food prices set?
Wholesale food prices are set according to a number of different factors. But before we discuss this, it’s important to differentiate between wholesale and retail prices.
The wholesaler buys from the original producer – say, a farmer, or market –before selling the goods on to the retailer. The pricing at each point is driven by different factors.
When the wholesaler is buying from the producer, pricing takes into account the fact you’re buying in bulk, commercial relationships, and of course the cost of making the product. The producer will want to be making a profit when selling to the wholesaler, and will add a margin before selling it on.
When the wholesaler then sells to the retailer, it is a different proposition. The retailer will be looking to purchase an amount of goods at a price it knows is less than the customer is willing to pay.
There are different strategies when figuring the final price point. A common strategy is absorption pricing, where all costs – including those which are fixed and the profit margin added – are factored into the final price.
Another pricing strategy to use is differentiated pricing, which is calculated in response to demand for the product. This is based more on what a customer is willing to pay, and means different price points will be reached depending on the market circumstances.
What margins do wholesale food distributors charge?
The margins charged by wholesale food distributors vary depending on the business but can sit as low as 10% or as high as 30%.
It can also vary depending on the product, and how each product fits into the company’s overall selling strategy. For example, you might have ‘loss leaders’ in the mix.
As a wholesaler you’ll need to figure out an ‘average’ margin across all the products you sell, to cover all operating costs and allow for a healthy profit margin on top. This ensures the company will generate a profit and has a sustainable future.
So how do you calculate the gross profit margin percentage? Generally, you’ll use this formula:
Gross Profit Margin = (Net sales – Cost of Goods Sold / Net sales) x 100
For example, a packet of chips costs £1. It is sold for £3.
That means the gross profit margin is [(£3 – £1) / 3] x 100 – which equates to 67%.
Managing your profit margins is most efficient using software that can track your costs accurately – and this is especially true in times when supply chains are disrupted and costs change quickly.
- Learn more: How to calculate profit margins
Is wholesale food sold online and delivered?
The short answer: Yes – and increasingly so.
As a result of the Covid-19 pandemic, the wholesale food sector has seen significant changes in its delivery model.
Traditionally, the wholesaler is the go-between for the producer and the retail outlet. Under this model, the wholesale food was often sold online and delivered to the end-user. Many wholesalers also often offered ‘cash and carry’ to their customers.
The pandemic forced wholesalers to adapt their business models, as lockdowns in the UK shuttered many of the wholesale food sector’s traditional clients such as restaurants, bars and cafes.
As a result, the industry has seen an increase in wholesalers who sell via apps like Foodchain.
Many food wholesalers have pivoted completely in response to the pandemic, by selling food products directly to individual end consumers – read on to find out more about this trend.
- Learn more: Unleashed B2B eCommerce Store
What wholesale food is available to the public?
The wholesale food industry has traditionally had a business-centric customer base, but that has changed as a result of the Covid-19 pandemic and the impact of lockdowns on businesses.
With lockdowns leaving wholesalers with millions of pounds’ worth of goods, many of them shifted to a model that sells to both businesses and individuals. This was partly to shift stock that was left on shelves, and partly as a way to protect and futureproof themselves against further business shocks.
An example of this is HG Walter, a London-based butchery. HG Walter usually supplies to top restaurants in the city, but has recently been offering ‘survival packs’ to individuals, as it sought to shift its products and keep the business afloat.
So what do you need to set up an online store for B2C sales to the public?
You’ll need an online store – powered by a provider like Shopify or Amazon – and you’ll need inventory management software that integrates with this to manage your stock.
How do you find wholesale food distributors?
Finding online wholesale food distributors is easy. Most have a prominent digital presence with easy-to-use websites. Or you can use food directories such as this one to find the major sites, along with some details of what customers can expect from each.
Websites for individual wholesalers generally ask you to enter customer details or register to access the services. The Booker website, for example, asks for customers to log in using their customer number, in order to browse and purchase the products. This design reflects its traditional customer base – that is, businesses across the UK.
The Costco site has a different customer base – that is, individuals as well as businesses – and this is reflected in the emphasis on deals and bargain-buying opportunities.
If you’re looking for a supplier for your business, you’ll want to check information like fulfilment times, locations and payment options – and whether they can supply all the goods you need.
What challenges does the food wholesaling industry currently face?
The food industry is inherently volatile, with a supply chain that can be dependent on factors outside the producer’s control, such as major weather events.
The supply chain can also be disrupted by transport issues such as strikes and labour shortages – and in the case of the UK, by issues related to Brexit and new import-export rules.
Furthermore, once the goods have reached the wholesaler, they need to be managed with great care. Food wholesalers are generally dealing with perishable goods and there needs to be infrastructure in place to ensure products remain fresh and can be sold. Usually this means warehousing that includes fridges, freezers and other storage that can preserve the quality of the product.
Dealing with perishable goods also means receiving and delivering products are time-sensitive, so efficient warehousing and fulfilment is essential.
Another challenge for food wholesalers is ensuring goods are tracked and suppliers identified, in case of issues around quality or verification of the process. This is where finding and using the right tools can make all the difference to how your business operates – inventory management with batch-tracking functionality takes the hassle out of this part of food wholesaling.
What challenges will food wholesalers face in 2022?
Food wholesalers have faced a multitude of challenges in 2021, and many of these will likely continue into 2022.
The impact of COVID continues and will likely reverberate through the industry for some time. The pandemic has disrupted the structure of the industry, with an estimated one in ten restaurants closed since Covid-19 hit. This has forced food wholesalers to rethink their business models, and many are now expanding their customer base by supplying directly to households and individuals.
But the pandemic is not the only headwind faced by the industry. About 30% of food consumed in the UK comes from the European Union, and the industry has faced a staffing and supply chain crisis since Brexit.
In many ways the effects of Covid-19 and Brexit have exposed the vulnerability of the UK’s food supply chain – which is where careful consideration of the design and complexity of the way you source food products comes in so that your business remains resilient.
How does inventory software help with food wholesale?
If there’s one thing the past few years have taught food wholesalers, it’s that the flexibility to adapt to external conditions is essential.
The question is: How do you achieve this?
One key factor in any business’s ability to adapt is using the right software. With software suited to your needs you’ll be able to maintain supplier information, track incoming and outgoing inventory, and keep on top of minimum and maximum inventory levels – all while batch-tracking and taking into account variable factors like lead times and pricing.
Inventory software will also keep an accurate record of your costs so you can maintain visibility over profit margins – which can otherwise become complicated with fluctuations in the price of goods.
And of course, if you’re going to pivot to a new business model – whether it’s B2B or B2C eCommerce – you’ll want software that includes or integrates with apps that give you this functionality.