How to start a beverage distribution company?
Supply chains and distribution systems have become critical factors in maintaining the success of the beverage market. Thanks to intelligent delivery and delivery systems, companies can cut tens or hundreds of millions of dollars, increasing profits and competitive advantage. So, in this article, Tan Do Beverage will give you an overview of how to build an effective drink distribution business.
To start a drink distribution entity, you need to build detailed and reasonable business strategies as well as have careful preparation.
Roles of distribution in the beverage supply chain
In business activities, distributors are like a canal system that brings water to refresh the fields. For water to reach each area, it is necessary to clear the flow in all branches of canals. Whether “water” flows fast, flows strongly or not depends on many different factors such as the size of the channels, the slope of the flow, the degree of obstruction of the water flow, etc.
Read more: Top 10 largest worldwide beverage distributors (Update 2021)
Products manufacturing enterprises want to bring products to reach target customers through distribution channels. Distribution channels are individuals, independent business organizations, or intermediate means and tools responsible for transferring products from the manufacturer to the market to respond quickly to consumers. A distribution channel is a set of intermediaries selected and decided by the manufacturer to bring the product to the market in the most effective way at the lowest cost.
Specifically, the role of distribution channels for businesses:
- Distribution channels are the critical competitive tools of a production business in the long run. It helps manufacturing enterprises reduce difficulties in bringing their products to the market, and reaching the end consumers.
- Distribution channels enhance the ability to link and cooperate between organizations and individuals operating in production and distribution for the common purpose of providing goods/services to end customers together while satisfying the individual goals of each party.
The distribution step plays a vital role in the beverage industry
How to build a successful drink distribution business?
Statistics show about 300,000 distributors in the United States with an annual generated value of $3.2 trillion. The beverage distribution is a large-scale, resource-rich market to exploit. A detailed and specific plan for new distribution businesses entering the market is the closest way to success.
Stage 1 – Create a business plan
You should clearly define the type of distribution business you will run at the beginning stage. Distribution businesses can be divided into two types of groups based on the audiences they serve.
- Retail distributors: these businesses buy goods from wholesalers or manufacturers and sell products directly to consumers (end users).
- Wholesale distributors: these businesses buy from manufacturers and resell products to retailers or other distributors.
Type of distribution products, targeted customers
Your business may decide to focus on a specific product or offer a variety of items. Your decision may be based on the advantage of your company, interest or necessity in the market. With beverage products, distribution businesses need a professional delivery team and a modern warehouse system to preserve products.
In the market, large distribution enterprises often serve large manufacturing companies. Meanwhile, specialized retailers often lack support in the distribution of goods. As a result, you can entirely focus on providing the right products for these specialized retailers, especially as the number of retailers increases and the global supply chain becomes more and more complex and developing.
If you waste money and effort on people who are not interested in your product, there will be no revenue.
You also need to develop a blueprint for how much money it will take to get your business up and running. With a distribution business, inventory costs will account for the highest proportion. However, the initial operating costs will depend on the type of items your company intends to distribute. In addition, costs for the business location, office equipment, and some warehouse equipment (such as forklifts or shelves) should also be considered.
After estimating initial operating costs, you can proceed to develop a specific and detailed business plan. With this plan, your business can give complete visibility into your new distribution business. This plan will be a particular direction to help your business succeed. This plan will summarize information about the business distribution model you will become, the products you intend to offer (at least in the initial stage), your company’s name, the target customer based on your goals, shipping methods, and general strategy. This strategy can be as simple as focusing on rapid delivery speed and efficiency or as complex as determining how to offer specialized products not available to other distributors.
Should know: 7 steps to create a beverage company business plan
Your marketing campaign will largely depend on your target audience and the type of product you’re offering. However, the ultimate goal of any marketing plan is to let potential customers know about your business and what products/services your business can offer.
Therefore, make a detailed marketing plan so that you can promote the services of your business. As a small business, you can do a lot of marketing for the first few years until your company has a large base of loyal customers and has built a reputation. You can use one or more of the following marketing tools most effectively to optimize your customer reach:
- SEO (Search Engine Optimization)
- Google Ads (Google Adwords)
- Banner ads (GDN display ads)
- Social Media Marketing: The most used Social Media channels today are: Facebook, Youtube, Tiktok, Instagram, etc.
- Email Marketing
Read more: Tan Do Beverage Social Media Presences
Stage 2 – Get business started
After developing detailed plans, your business can take critical legal steps to get started. To avoid many problems, learn carefully the laws and regulations in your business area, especially those related to distribution activities or the products your business is preparing to distribute.
Forming company legally
First, legalize your business by establishing a legal business. Thoroughly check the regulations of the country or region where your company operates. In addition, if your business has a joint venture or investment cooperation with other partners, you need to contact and ask these partners to cooperate in the process of company registration. The main benefits of establishing a legal business are legalizing this enterprise’s business activities, publicizing transparent information, and announcing that this enterprise is engaged in industries that benefit society rather than harmful ones.
No company can operate without establishing a legal entity
Get company licensed and registered
Purposes of getting your company licensed and registered:
- First, the state’s guarantee: When registering its business, a company exists as an organization – legally established and operating. At that time, any business activities of this organization will be legalized openly and transparently.
- Second, customers’ trust: Being legally established and operating is also proof of the responsibility of that organization to customers. If there is a violation, any commercial activity of that organization must be held responsible before the government agency and customers, which creates customers’ trust with the registered organization.
- Third, investors’ trust: When carrying out commercial activities, business entities must seek and develop the market. To do that, they need a certain amount of capital. Investors are often the object that business entities and businesses aim at. The first thing investors look to is the right to conduct legal activities. That only happens when you have registered your legal company.
To register a business, you can consult with business registration offices or consulting offices to understand the process and procedures to be prepared.
Find your distribution business’s location
This is a factor that corporate distributors should consider carefully. Your office or warehouse should be in a convenient location for distributing goods to retailers or customers. In addition, you also need to determine the minimum size of your company’s warehouse, based on the size of the product and the method of distribution of your business. For a business just starting up, choosing the right location can help your business minimize costs and provide the best delivery service to customers in the beverage industry. As your business grows, you may consider moving to more extensive facilities to accommodate more inventory needs.
Read more: Beverage industry overview: a brief analysis for business owners
Traffic density is a factor you should investigate before choosing a warehouse location. It tells you the number of vehicles at the intersections, the traffic condition each day, the risk of delays in the delivery process. These parameters can be obtained from the local traffic department or police.
By this stage, you should be building a website for your business. When everything is updated on social networking platforms, a website with an attractive interface will be an extremely effective communication tool in the digital age. In addition to simple contact information, this website should describe product prices and services. This is especially important if you sell directly to consumers. You can also invest in search engine optimization (SEO) to drive potential customers to your website.
Websites act as a communication channel and a leading business tool for every business.
In summary, the above article has given an overview of how to form a beverage distribution business. Distribution is one of the crucial stages, helping goods be transported from the manufacturer to the consumer quickly and efficiently.
It can be seen that businesses that are just starting to enter the beverage distribution market will inevitably face many problems from the stage of creativity, plan preparation as well as business operation. At Tan Do Beverage, we also provide ODM (Beverage Private Label) and OEM (Beverage Co-Packer) services to support newbies from ideation, preparation and business stages.
Tan Do is a global beverage ODM/OEM manufacturer and supplier located in Vietnam. Since 1996, we have built trust and credibility not only throughout Vietnam but also in many parts of the world. Leveraging state-of-the-art technology, we have crafted thousands of products that align with ISO, HACCP, HALAL, FDA, and many other standards.