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How to Start a Coffee Distribution Business

Coffee Distribution Business

A coffee distribution business is a company that specializes in sourcing, processing, and distributing coffee to various customers such as coffee shops, restaurants, hotels, offices, and retail stores.

This type of business acts as an intermediary between coffee producers (often coffee farmers or coffee estates) and end consumers, ensuring a smooth supply chain for coffee products.

The coffee distribution industry can be competitive, with many players offering a wide range of coffee varieties, blends, and specialty products.

Success in this business often depends on factors such as product quality, reliable sourcing, efficient operations, strong relationships with customers, and effective marketing strategies.

Steps on How to Start a Coffee Distribution Company

  1. Conduct Market Research

Conducting market research for a coffee distribution business is crucial to understand your target market, competition, and opportunities for growth. First, you need to clearly define your research objectives. Identify what specific information you need to gather and how it will benefit your coffee distribution business.

This could include understanding customer preferences, assessing market size, identifying competition, or evaluating pricing strategies.

Next, you would need to determine the specific market segment or segments you want to focus on. Consider factors such as demographics (age, gender, location), psychographics (lifestyle, preferences), and behavior (coffee consumption habits, purchasing patterns).

Start by collecting existing information about the coffee industry, such as industry reports, market studies, and trade publications. Look for data on coffee consumption trends, market size, competitive landscape, and emerging opportunities. Government websites, industry associations, and market research firms are valuable sources of secondary data.

Lastly, based on your research findings, develop a market positioning strategy for your coffee distribution business. Determine how you can differentiate your products, pricing, or services to meet the needs of your target market. Develop a marketing and sales strategy that aligns with your research insights.

a. Who is the Target Market for Coffee Distribution Business?
  • Coffee Shops and Cafés
  • Restaurants and Hotels
  • Offices and Workplaces
  • Retail Stores
  • Online Consumers.
b. Is the Coffee Distribution Business a Profitable Business?

Yes, the coffee distribution business is a profitable business. According to the National Coffee Association’s 2021 National Coffee Data Trends report, approximately 64% of Americans aged 18 and over consume coffee every day. On average, coffee drinkers in the United States consumed about 3.1 cups of coffee per day.

c. Are There Existing Niches in the Industry?

No, there are no existing niches when it comes to the coffee distribution business.

d. Who are the Major Competitors?
  • Keurig Dr Pepper
  • Nestlé USA
  • Starbucks Coffee Company
  • M. Smucker Company
  • Farmer Bros. Co.
  • Royal Cup Coffee & Tea
  • Peet’s Coffee
  • Boyd Coffee Company
  • Dallis Bros. Coffee
  • S&D Coffee & Tea
  • Intelligentsia Coffee
  • Counter Culture Coffee
  • Swiss Water Decaffeinated Coffee Inc.
  • Dutch Bros Coffee
  • La Colombe Coffee Roasters
  • Stumptown Coffee Roasters
  • Allegro Coffee Company
  • The Roasterie
  • Portland Roasting Coffee
  • Irving Farm Coffee Roasters.
e. Are There County or State Regulations or Zoning Laws for Coffee Distribution Businesses?

Yes, there are county and state regulations as well as zoning laws that may apply to coffee distribution businesses in the United States. However, specific regulations and zoning requirements can vary depending on the location and jurisdiction.

Coffee distribution businesses typically need to obtain the necessary business licenses and permits to operate legally. These requirements can vary at the county, state, and federal levels. Examples of permits that may be required include general business licenses, food handling permits, and health department certifications.

Coffee distribution businesses may need to comply with food safety regulations to ensure the proper handling, storage, and transportation of coffee products. These regulations typically fall under the jurisdiction of state or local health departments.

Coffee distribution businesses may need to ensure that their operations comply with zoning regulations related to industrial or commercial activities. It’s important to check with local zoning authorities to determine if there are any restrictions or specific zoning requirements for your chosen location.

f. Is There a Franchise for Coffee Distribution Business?

Yes, there are franchise opportunities for the coffee distribution business, and here are some of them:

  • Dunkin’ Donuts
  • Gloria Jean’s Coffees
  • PJ’s Coffee
  • Scooter’s Coffee
  • Seattle’s Best Coffee
  • Dunn Brothers Coffee
  • Coffee Beanery
  • The Human Bean
  • It’s A Grind Coffee House
  • PJ’s Coffee & Tea.
g. What Do You Need to Start a Coffee Distribution Business?
  • A Feasibility Report
  • Business and Marketing Plans
  • Business Licenses and Permits
  • Distribution Trucks
  • Commercial Driver’s License (CDL) (at least a Class B CDL)
  • Insurance
  • EIN (Employer Identification Number)/Federal Tax ID Number.
  • A Corporate Bank Account
  • IRP Plates
  • Employees
  • Operational Capital (For Ongoing Expenses)
  1. Choose a Memorable Business Name

When looking to start a business, before you can begin to file the necessary documents with the constituted authorities or start your website, it is necessary that you come up with a name that you will be recognized with. It is essential that the name you come up with can easily be pronounced, is unique and easily memorable.

Make it also fun because your business essentially sells fun. Some of the catchy business name ideas suitable for a coffee distribution business are;

Creative Coffee Distribution Business Name ideas
  • Guy Bruce© Coffee Distribution Company, Inc.
  • Fresh Air® Coffee Distribution Company, LLC
  • Mariah Mike© Coffee Distribution Company, Inc.
  • Coffee Solutions® Coffee Distribution Company, Inc.
  • Coffee King™ Coffee Distribution Company, Inc.
  • Coffee Line™ Coffee Distribution Company, LLC.
  • Iverson Bush and Co© Coffee Distribution Company, LLC
  • Coffee Guys® Coffee Distribution Company, Inc.
  • Star Rig© Coffee Distribution Company, Inc.
  • Cornell Donnell© Coffee Distribution Company, Inc.
  • Princewell Hanks® Coffee Distribution Company, LLC
  • Raphael Tyson® Coffee Distribution Company, LLC
  • Jake Camdenton™ Coffee Distribution Company, LLC
  • Bob Fellas© Coffee Distribution Company, Inc.
  • Solomon Harris® Coffee Distribution Company, Inc.
  • Peter Humphrey™ Coffee Distribution Company, Inc.
  • Coffee Motion™ Coffee Distribution Company, Inc.
  • Brown Cups© Coffee Distribution Company, Inc.
  • Jill Murphy® Coffee Distribution Company, LLC
  • Coffee Depot™ Coffee Distribution Company, Inc.
  1. Register Your Business

a. What Type of Business Structure is Best for Coffee Distribution Business?

Even though there are several options such as sole proprietorship, partnership, limited liability company (LLC), and corporation when it comes to the business structure for a coffee distribution business, the one that most players in this line of business consider is an LLC.

It is common to consider an LLC because providers want to protect themselves from lawsuits. Please note that an LLC will need an EIN if it has any employees or if it will be required to file any of the excise tax forms listed below. Most new single-member LLCs classified as disregarded entities will need to obtain an EIN.

b. Steps to Form an LLC
  • Choose a Name for Your LLC.
  • File Articles of Organization.
  • Choose a registered agent.
  • Decide on member vs. manager management.
  • Create an LLC operating agreement.
  • Comply with other tax and regulatory requirements.
  • File annual reports.
c. What Type of License is Needed to Open a Coffee Distribution Business?
  • Business License
  • Food Handling Permit
  • Seller’s Permit
  • FDA Registration
  • Specialized Permits.
d. What Type of Certification is Needed to Start a Coffee Distribution Business?

You don’t need any certifications to start a coffee distribution business.

e. What Documents are Needed to Open a Coffee Distribution Business?
  • DBA
  • EIN
  • Business and liability insurance
  • Federal Tax Payer’s ID
  • State Permit and Building Approval (For your parking)
  • Food Handling Permit
  • Seller’s Permit
  • FDA Registration
  • Specialized Permits
  • Business License
  • Business Plan
  • Employment Agreement (offer letters)
  • Operating Agreement for LLCs
  • Insurance Policy
  • Online Terms of Use
  • Online Privacy Policy Document
  • Contract Document
  • Company Bylaws
  • Memorandum of Understanding (MoU)
f. Do You Need a Trademark, Copyright, or Patent?

In a coffee distribution business, you may need to consider trademark protection, while copyright and patent protection may have limited relevance. A coffee distribution business may create marketing materials, website content, or other promotional materials.

Copyright protection primarily applies to the specific expression of those works, such as text, graphics, or photographs. While there may be innovation and technology involved in coffee processing or packaging, obtaining a patent for a coffee distribution business is less common, as it typically applies to novel and non-obvious technical inventions.

However, if your coffee distribution business has developed a unique and innovative process or equipment related to coffee production or distribution, you may consider consulting a patent attorney to explore the possibility of patent protection.

  1. Cost Analysis and Budgeting

a. How Much Does It Cost to Start a Coffee Distribution Business?

The startup cost for a coffee distribution business is not uniform. But basically, a coffee distribution business will cost from $50,000 – $500,000 to start and that can easily go higher depending on your overall business goals and objectives.

b. What are the Cost Involved in Starting a Coffee Distribution Business
  • The total fee for registering the business in the United States of America – $750.
  • Legal expenses for obtaining licenses and permits as well as the accounting services totaling – $1,200.
  • Marketing promotion expenses (2,000 flyers at $0.04 per copy) for the total amount of $80.
  • The cost of hiring a business consultant (writing of business plans inclusive) is $4,500.
  • Insurance (general liability, workers’ compensation, and property casualty) coverage at a total premium – $6,400.
  • The cost of logistics software, accounting software, CRM software, and Payroll Software – $1,500
  • The cost of leasing a warehouse facility (long-term lease agreement) – $105,600.
  • The cost for facility remodeling and installations – $20,000.
  • The cost for the purchase of distribution trucks and vans: $100,000
  • Other start-up expenses including stationery – $500
  • Phone and utility deposits will cost – ($2,500)
  • Operational cost for the first 3 months (salaries of employees, payments of bills et al) – $50,000
  • The cost for store equipment (cash register, security, ventilation, signage) – $3,150
  • Operational capital – $50,0000
  • The cost of launching an official website – $600
  • The cost for our grand opening party – $3,000
  • Miscellaneous – $2,500
c. What Factors Determine the Cost of Opening a Coffee Distribution Business?
  • The size of the coffee distribution business (number of manufacturers you want to distribute for)
  • The choice of location
  • The required licenses and permits
  • The cost of hiring and paying a business consultant and attorney
  • The cost of branding, promotion, and marketing of the coffee distribution business
  • The cost for furnishing and equipping the coffee distribution business – warehouse facility
  • The cost of the insurance policy covers
  • The cost of registering the business
  • Cost of recruiting and training your staff
  • The cost for the purchase and customizing of uniforms
  • The cost for the grand opening of the coffee distribution business
d. Do You Need to Build a Facility? If YES, How Much Will It Cost?

Actually, it is not compulsory to build a new facility for your coffee distribution business, but if you have the required finance, it will pay you to build your own warehouse facility. The truth is that building or reconstructing a facility will help you come up with a facility that will perfectly fit into your overall business goals and vision.

e. What are the Ongoing Expenses of a Coffee Distribution Business?
  • Gas and lubricants
  • The cost of sourcing coffee beans or coffee products from coffee producers or suppliers
  • Packaging materials such as coffee bags, boxes, labels, and other packaging supplies.
  • Utility bills (internet subscriptions, phone bills, signage, and software renewal fees et al)
  • Salaries of employees
  • Trucks maintenance
  • Insurance
  • Marketing costs
f. What is the Average Salary of your Staff?
  • Chief Operating Officer (Owner) – $68,000 Per Year
  • Admin and HR Manager – $48,000 Per Year
  • Transport and Logistics Manager $48,000 Per Year
  • Marketing and Sales Executive (Business Developer) – $42,000 Per Year
  • Accountant $38,000 Per Year
  • Distribution Truck and Van Drivers – $36,800 Per Year
  • Loaders – $28,000 Per Year
  • Customer Service Officer (Receptionist) – $26,100 Per Year
  • Security Guard -$24,000 Per Year
g. How Do You Get Funding to Start a Coffee Distribution Business?
  • Raising money from personal savings and sale of personal stocks and properties
  • Raising money from investors and business partners
  • Sell shares to interested investors
  • Applying for a loan from your bank/banks
  • Pitching your business idea and applying for business grants and seed funding from the government, donor organizations, and angel investors
  • Source for soft loans from your family members and friends.
  1. Write a Business Plan

a. Executive Summary

Coffee Depot™ Coffee Distribution Company, Inc. is a coffee distribution business based in Albany, New York, specializing in sourcing, processing, and distributing premium coffee products to the local market. We are in business to provide the highest quality coffee beans and products to coffee shops, restaurants, offices, and retail establishments, delivering an exceptional coffee experience to our customers.

Coffee Depot™ Coffee Distribution Company, Inc. is positioned to become a trusted and influential player in the coffee distribution industry in Albany.

With our commitment to exceptional quality, tailored services, and customer satisfaction, we are confident in our ability to capture a significant share of the local market. We are excited about the opportunities that lie ahead and look forward to serving the coffee needs of our valued customers in Albany.

b. Products and Service

At Coffee Depot™ Coffee Distribution Company, Inc., we prioritize quality and offer a wide selection of coffee beans sourced from renowned coffee-producing regions worldwide. We meticulously roast and package our coffee to preserve its flavor and freshness.

Our product range includes single-origin beans, unique blends, and specialty coffee options tailored to meet the distinct preferences of our customers. Additionally, we provide customized roasting services and support to ensure our clients receive the perfect coffee for their specific needs.

c. Mission Statement

At Coffee Depot™ Coffee Distribution Company, Inc., our mission is to provide the highest quality coffee products and services to our customers in Albany and beyond. We are dedicated to sourcing, roasting, and distributing exceptional coffee beans while delivering an unparalleled coffee experience.

We aim to be a trusted partner to coffee shops, restaurants, offices, and retail establishments, offering customized solutions, unmatched quality, and outstanding customer service.

Vision Statement

Our vision at Coffee Depot™ Coffee Distribution Company, Inc. is to be the leading coffee distribution company in Albany, known for our unwavering commitment to quality, innovation, and customer satisfaction.

We aspire to create a thriving coffee culture in the region by partnering with local businesses, fostering sustainable relationships, and contributing to the growth of the coffee industry. We envision Coffee Depot™ Coffee Distribution Company, Inc. as a trusted brand, synonymous with excellence, integrity, and the ultimate coffee experience.

d. Goals and Objectives

The goals and objectives of a coffee distribution business are to distribute a wide range of coffee from top coffee production companies at affordable prices to coffee retailers, restaurants, hotels et al.

e. Organizational Structure
  • Chief Operating Officer (Owner)
  • Admin and HR Manager
  • Transport and Logistics Manager
  • Marketing and Sales Executive (Business Developer)
  • Accountant
  • Distribution Truck and Van Drivers
  • Loaders
  • Customer Service Officer (Receptionist)

Marketing Plan

a. SWOT Analysis
  • Coffee Depot™ Coffee Distribution Company, Inc. is committed to sourcing and delivering the highest quality coffee beans, ensuring customer satisfaction and loyalty.
  • The company offers customized roasting services and personalized blends, allowing clients to create unique coffee profiles and meet specific demands.
  • Being based in Albany, Coffee Depot™ Coffee Distribution Company, Inc. has a deep understanding of the local market, enabling it to cater to the unique preferences and needs of customers effectively.
  • The company emphasizes building long-term relationships with coffee shops, restaurants, offices, and retail establishments, fostering loyalty and repeat business.
  • Coffee Depot™ Coffee Distribution Company, Inc. has a dedicated and knowledgeable team that provides excellent customer service, ensuring a positive experience for clients.
  • Coffee Depot™ Coffee Distribution Company, Inc. currently focuses on the Albany market, which may limit its potential for growth and expansion.
  • The company’s success is dependent on maintaining solid relationships with coffee bean suppliers, ensuring a consistent supply of high-quality beans.
  • The increasing popularity of specialty and artisanal coffee presents an opportunity for Coffee Depot™ Coffee Distribution Company, Inc. to capture a larger share of the local market.
  • Coffee Depot™ Coffee Distribution Company, Inc. can explore expanding its distribution network beyond Albany, targeting other cities and regions where there is a demand for quality coffee.
  • Collaborating with local cafes, restaurants, and retail establishments can provide additional avenues for distribution and exposure.
  • The coffee distribution industry is highly competitive, with established players and new entrants vying for market share. Coffee Depot™ Coffee Distribution Company, Inc. must differentiate itself to withstand competition.
  • Shifts in consumer preferences, economic conditions, or industry trends can impact the demand for coffee products, requiring Coffee Depot™ Coffee Distribution Company, Inc. to adapt and innovate accordingly.
  • Any disruptions in the supply chain, such as changes in coffee bean prices or availability, could impact Coffee Depot™ Coffee Distribution Company, Inc. operations and profitability.
b. How Do Coffee Distribution Businesses Make Money?

Basically, coffee distribution businesses sell coffee products in large quantities to wholesale customers such as coffee shops, restaurants, hotels, offices, and retail stores. These sales are typically made at a lower price per unit but in higher volumes, allowing for bulk discounts.

c. Payment Options
  • Credit and debit cards
  • PayPal
  • Apple Pay and Google Wallet
  • Gift cards and store credit
  • Installment payments
  • Cash on delivery.
d. Sales & Advertising Strategies
  • Introduce your coffee distribution business by sending introductory letters alongside our brochure to coffee shops, restaurants, hotels, offices, retail stores, and key stakeholders in and around your city and state
  • Print out fliers and business cards and strategically drop them in offices, libraries, public facilities and train stations et al.
  • Use friends and family to spread the word about your business
  • Place a small or classified advertisement in the newspaper, or local publication about your company and the products we offer
  • Leverage on referral networks
  • Advertise our business in relevant magazines, newspapers, TV stations, and radio stations
  • Engage in a direct marketing approach
  • Encourage the use of word-of-mouth marketing from loyal and satisfied students
  • Join local chambers of commerce and industry to market your services.

Financial Projection

a. How Much Should You Charge for Your Product/Service?

Generally, coffee distribution businesses charge based on the quantities of goods distributed.

b. How Much Profit Do Coffee Distribution Business Owners Make a Year?

It depends, but the available report shows that on average, the distributor typically needs to make 25 to 30 percent gross profit when they sell it to the retailer. Hence, a coffee distribution business should net more than $110,275 per year assuming they have a steady clientele.

c. What Factors Determine the Amount of Profit to Be Made?
  • The capacity of the coffee distribution business (number of distribution trucks owned and number of coffee production companies you are distributing for)
  • The types of related services and products offerings (warehousing and advertising et al)
  • The locations the coffee distribution business is covering
  • The management style of the coffee distribution business
  • The business approach of the coffee distribution business
  • The advertising and marketing strategies adopted by the coffee distribution business.
  • The number of years the coffee distribution business is in business
d. What is the Profit Margin of a Coffee Distribution Business Product/Service?

The profit margin of a coffee distribution business is not fixed. It could range from 25 percent to 30 percent.

e. What is the Sales Forecast?
  • First Fiscal Year: $470,000
  • Second Fiscal Year: $680,000
  • Third Fiscal Year: $1.2 million.
  1. Set Up your Shop/Office

a. How Do You Choose a Perfect Location for Coffee Distribution Business?
  • The demography of the location especially as it relates to coffee consumption
  • The purchasing power of businesses and residents of the location
  • Accessibility of the location
  • The number of coffee retailers, coffee shops, restaurants, hotels, offices, and retail stores in the location
  • The local laws and regulations in the community/state
  • Traffic, parking, and security et al
b. What State and City is Best to Open a Coffee Distribution Business?
  • San Francisco, California
  • Washington DC
  • Chicago, Illinois
  • Dallas-Fort Worth, Texas
  • Boston, Massachusetts
  • Las Vegas, Nevada
  • Los Angeles, California
  • New York City, New York
  • Washington, D.C.
  • Scottsdale, Arizona
  • Asheville, North Carolina
  • Palm Beach, Florida
c. What Equipment is Needed to Operate a Coffee Distribution Business?
  • Coffee Roaster (drum roasters, fluid bed roasters, and sample roasters)
  • Coffee Grinders
  • Packaging Machines
  • Weighing Scales
  • Storage Containers and Silos
  • Coffee Brewers and Espresso Machines (for quality control, testing, and sample preparation).
  • Delivery Vehicles
  • Packaging materials such as coffee bags, labels, boxes, and other materials for branding, storing, and shipping your coffee products.
  • Standard office equipment, including computers, printers, phones, and software for inventory management, accounting, and customer relationship management (CRM).
  1. Hire Employees

When it comes to hiring employees for a standard coffee distribution business, you should make plans to hire a competent chief executive officer (you can occupy this position), admin and HR manager, transport and logistics manager, marketing and sales executive (business developer), accountant, distribution truck and van drivers, loaders and customer service officer (receptionist).

  1. Launch the Business Proper

In recent times, no coffee distribution business opens its door for business without first organizing an opening party to officially launch the business. You can choose to do a soft opening party if you are operating on a low budget or you can go for a grand opening party.

The bottom line is that with a proper launching of the coffee distribution business, you will officially inform people in your city that your coffee distribution business is open for business.

a. What Makes a Coffee Distribution Business Successful?
  • Choose a good location and reliable distribution trucks and vans to launch the business
  • Partner with leading coffee production brands
  • Hire only competent, hardworking, and trustworthy staff
  • Throw an open house grand party before officially opening the coffee distribution business
  • Be deliberate with your marketing sales approach
  • Encourage the use of word of mouth to promote your coffee distribution business
  • Leverage all available online and offline platforms to promote your coffee distribution business
b. What Happens During a Typical Day at a Coffee Distribution Business?
  • The business is open for the day’s work
  • The distribution trucks are washed, cleaned, and ready for deliveries
  • Customer’s requests are taken and their goods are distributed to them
  • Schedule maintenance of vans and trucks is carried out
  • Marketing/website upkeep
  • Supply ordering
  • Administrative duties
  • The business is closed for the day.
c. What Skills and Experience Do You Need to Build a Coffee Distribution Business?
  • Good driving skills
  • Customer services skills
  • Interpersonal skill
  • Logistics and material handling skills
  • Business management skills
  • Bargaining skill
  • Work experience in the distribution industry
  • Experience in managing people
  • Experience in business administration
  • Experience in handling distribution, logistics, and transportation software.