Do you want to know how much money coffee bean distributors make yearly? If YES, here is an analysis of the income & profit margin for coffee bean distribution. According to reports, presently 57 percent of US adults drink coffee on a daily basis, and that number is expected to grow over the next several years, with the consumption per capita rate continuing its upward trend.
There’s no doubt about it – Americans are drinking more and more coffee, and there’s no sign of them stopping. Owing to this encouraging statistics, coffee distribution in America is indeed a profitable business. Experts believe that America is seeing a shift 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 investment required is low, and the demand for coffee remains high, regardless of the presence of many reputable brands in the industry.
Becoming a coffee distributor requires knowledge of the product, wholesale connections and a customer base. Since coffee is a highly traded commodity all over the world, a coffee distributor is expected to understand the various regions of production and available varieties. Note that this educational background and the ability to supply high quality beans make the coffee distributor an important resource to many coffee retailers.
A coffee distributor is expected to know about the world’s biggest producers and regions, the various beans and the flavours, aromas, blends, and roasts they produce, and how coffee is produced and manufactured wholesale. You will also want to acquaint yourself on the business itself – coffee sales, how to buy coffee supplies in large quantity, 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.
It will also be helpful if you decide what kind of coffee you want to sell and where you want to distribute your coffee – retail, wholesale, or commercial spaces. Choosing a particular niche earlier will help you define your business strategy and company mission.
Since the success of a distributorship business ultimately rests on consumer tastes, it’s very pertinent to stay updated on current trends in the industry. If you know your market inside and out, you can turn a profit in any economic environment.
Regardless, it’s important to always be on the lookout for the “next big thing” that can make you a ton of cash. Once you’ve firmly established yourself in the coffee and tea game, branch out into other areas to make your distributorship more resistant to economic shifts.
How Much Money Coffee Bean Distributors Make and Their Profit Margin
First and foremost, the profit margin of any business is the gross profit as a percentage of total sales, where gross profit is total sales minus the cost of goods sold. The equation looks like this: (total sales – cost of goods sold)/total sales.
Sometimes, you also tend to hear of net profit margin. This is simply the net profit as a percentage of total sales, where usually the net profit accounts for selling, general and administrative expenses in addition to cost of goods sold. Generally, net profit margin does not take taxes or extraordinary expenses into account.
According to reports, the typical profit margin of a coffee distributor is very low. The margin frequently exceeds 10 percent. If the distributor sells retail already, then people have the option of going direct. If it doesn’t, then people can easily choose other distributors or other channels.
Most of this margin would be on volume discounting. This means that a distributor would a) have to have a substantial customer base for this business to be viable, and b) they need to carefully plan and manage their inventory purchases and distribution.
As a coffee distributor in the United States, you are not going to make much money if you can’t aggressively market your goods. The key is to play to your strengths and target the right buyers based on the kind of coffee or tea that you are promoting.
For example, free trade coffee would be easy to sell to local mom – and – pop coffee shops and boutique roasters. Although social media sites like Google+, Facebook and Twitter are always helpful and a wonderful platform for advertising, you will find that making a direct sales pitch to customers in person is the most effective approach.