Wholesale vs retail: Which is the best sales channel for coffee roasters?

Kahwei Yoong
October 13, 2021
retail coffee

As a roaster, the way in which you sell your coffee will be one of the most important decisions you make.

Whether through online subscriptions, direct to coffee shops, or on ecommerce platforms such as Amazon, you must ensure the route you choose works not only for your business, but for your customers.

The majority of sales will fall into two broad categories: wholesale and retail. Wholesale is the distribution of large quantities of coffee to retailers at relatively low prices, whereas retail involves selling directly to consumers for a profit.

While both can work just as effectively, finding the right solution based on your goals is the key to a successful, long-term sales strategy.

To find out more, I spoke with the owner of Pomelo Coffee Consulting and The Lev Co, Luke Waite.

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wholesale coffee
Wholesale is the distribution of coffee in bulk from roaster to retailer

What is wholesale coffee?

Put simply, wholesale coffee is the distribution of coffee in bulk from roaster to retailer. These retailers – typically cafés and grocery stores – then act as “middlemen” by selling the coffee onto consumers at a higher price.

Selling wholesale coffee has a number of benefits for roasters, particularly for those who are just starting out.

It opens up access to a wide and diverse range of customers by tapping into the retailer’s market, while providing a significantly high volume of sales.

Luke Waite runs branding and marketing agency, The Lev Co. He also owns a coffee consulting company called Pomelo Coffee Consulting. He tells me that in addition to greater reach, one of the main advantages of selling coffee wholesale is that it allows roasters to plan for the future.

“Exposure and consistent, recurring revenue are the two biggest benefits of wholesaling.”

“Exposure and consistent, recurring revenue are the two biggest benefits of wholesaling,” he says.

“Once you land a wholesale client, you have a rough idea of how much they’re going to purchase and an understanding of how much revenue you’re bringing in. That helps you budget internally for various things like hiring.”

However, Luke is also keen to point out that while wholesaling provides opportunities for quick business expansion, it’s rarely a case of sitting back and letting the retailers do the work for you. A considerable amount of time and energy is often required to build a sustainable relationship.

“You have to really manage the relationship and understand how you, as a coffee roaster, are taking care of your clients, as well as how you can meet their needs,” he says. “It’s a lot of work.”

What’s more, selling coffee in bulk naturally means lower prices for roasters and, therefore, relatively low margins compared to other sales channels. This is because retailers need to sell the coffee at a profit to themselves.

It also means that roasters have little control over the way in which their coffee is presented to customers. This involves everything from shelf placement to method of brewing.

retail coffee recyclable bags
Retail is the sale of coffee directly to consumers

What is retail coffee?

Retail refers to the sale of products directly to consumers. While the transaction can occur anywhere, including at a physical shop, online store, or kiosk, the core benefit of selling through a retail channel is the direct interaction between roasters and consumers.

As a retailer, roasters retain complete control over the product, from discounts and special deals to the way in which it’s presented.

“Let’s say you have a coffee with a beautiful story behind it,” Luke says. “You can create marketing materials around that and train your staff in-house on ways to present it to consumers.

“Sharing stories gives consumers something special to hold on to – and that’s huge. It creates a lot of trust between you and your customers, while also encouraging repeat purchases.”

Furthermore, as roasters are involved in the end-to-end process of selling, they can develop a better understanding of consumers and their preferences. For example, instant feedback allows roasters to learn and adapt quickly to market demands.

Luke tells me that since the outbreak of Covid-19, retail has grown significantly, particularly in the form of ecommerce. The total revenue of ecommerce in the US alone is expected to reach $4.9 trillion by 2023, while coffee subscription sales have risen by an estimated 109% over the last year.

This has enabled roasters to find out more information than ever about who buys their coffee, from favoured brewing methods to the number of cups they drink per day. Access to this data allows not only for more targeted marketing, but it also brings the roasters closer to their customers. 

“Sharing stories gives consumers something special to hold on to – and that’s huge.”

“Ultimately, the relationship you get to have with the end consumer and the trust you get to build with them are the major benefits of retail,” Luke says.

However, like wholesale, selling coffee directly to customers is not without its flaws. 

For one, a retail setting does not provide as much financial stability as a regular bulk buyer. This means that one month can look significantly different to another depending on a range of factors.

Retail also means that the responsibility of marketing, branding, and building credibility is completely in the hands of the roaster, which can put a strain on resources. In some cases, this can cancel out the higher prices for which the coffee is sold.

roaster putting roasted beans into a kraft paper coffee bag
You must make sure your sales channels align with the goals of your business

Choosing the right sales channel for your business 

The most important factor when deciding on your route-to-market is that it’s strategically aligned with your business objectives.

Luke recommends taking a step back and reflecting on two fundamental questions: why your business exists and what you’re trying to do as a company.

He explains that roasters who set business growth as an end goal will adopt a different distribution strategy from those whose aim is to highlight the story of producers, for example. Typically, roasters who look to scale and expand quickly will opt for a wholesale model.

Resource availability is another important factor to consider. In other words, do you have the financial capacity to expand operations effectively and fulfil high-volume orders? If you sell wholesale, you may have to meet certain quotas each month, which can put a strain on resources. Retail, on the other hand, provides a bit more flexibility.

However, that’s not to say you can’t opt for both. Many roasters simultaneously sell their coffee through wholesale and retail, balancing the two with good time management and careful distribution of resources.

Once you decide on your sales channels, it’s important to assess how your coffee packaging fits in.

“Your packaging is the first interaction that your buyer is going to have with your product.”

“Your packaging is the first interaction that your buyer is going to have with your product,” Luke explains. “It has to be in line with your ‘why’ and serve both your wholesale and retail buyers.

“Use your packaging to tell your consumers who you are, why you exist, and what you are trying to do. It can even be on a QR code or somewhere on the packaging.”

Indeed, packaging design that communicates a brand’s story allows consumers to form meaningful connections with the product. According to a recent study, packaging that includes a short brand story promotes positive consumer responses towards the brand.

It’s also important to be aware of the differences between wholesale and retail buyers. For example, a wholesale partner is likely to appreciate packaging that fits well on shelves, while a retail customer may be more drawn to packaging with clear labels and information such as origin, roast profile, and weight.

retail vs wholesale coffee
Whether selling coffee via wholesale or retail, it’s important to choose the best packaging available

For roasters, having good understanding of your business’s purpose and capacity will help you strategise and select the best distribution channel for your business. However, it’s also essential to use marketing tools such as packaging to further boost sales and strengthen brand recognition.

At MTPak Coffee, we offer a range of sustainable packaging options for specialty coffee roasters that are fully customisable, from material and shape, to design and additional features. We have a dedicated team who will work closely with you to design the perfect packaging that will keep both wholesale and retail clients coming back for more.

For information on our sustainable coffee bags, contact our team.

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