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Food Distribution Part 2: Distribution and Retail to Consumers

In part 1 of this month’s series, we reviewed how food travels from the farm to processing and then manufacturing plants. In the second part of our 2-part series we’ll outline the final stage of the journey of food from farm to table. Whether it involves farmers going directly to consumers, or through distributors, wholesalers, and retailers, commercially grown food is destined to eventually end up in the hands of the consumer.

Here's just a brief overview of some of the different path's food undertakes on its journey to consumers.

Direct-to-consumer distribution

Perhaps the simplest method of getting food from the farm to consumers, the direct-to-consumer method is exactly as it sounds. It’s direct to consumers. This method eliminates the need for 3rd parties to get involved in both the distribution and retailing processes, thus reducing the cost of overheads. Although, this process can sometimes prove inconvenient for both parties as either one must travel to the other. An issue that has inspired innovative changes, most notably with the introduction of automated technologies. Convenience is key, customers are demanding it, and brands like Pepsi, Nestle, and Kraft's Heinz are turning to e-commerce as a way of meeting these new demands.

Role of distributors

For food products that aren’t sold directly to consumers, distributors play an important role in ensuring products are transported to the consumers. Whether it’s regionally, nationally, or internationally, food distributors will work with manufacturers to distribute their products to wholesalers and retailers. This often means distributors will have close relationships with manufacturers and have exclusive buying rights that cover specific territories as without distributors, manufacturers would struggle getting their products to customers. They will also act as the main contact for prospective buyers but will only engage with retailers on very rare occasions.

However, as overhead costs continue to rise, distributors are facing new challenges in conducting business. Challenges that create questions as to how a cost-reducing part of the food supply chain process will reduce costs themselves. The adoption of automation systems to improve process efficiencies is on trend with the global digital revolution currently occurring. And as the future of supply chains lies in an automated, data-driven environment, distributors should look to embrace this as the way forward.

Distribution through wholesalers

In most cases of food distribution, a wholesaler will be involved within the process and act as a crucial part within the process. Wholesalers are responsible for purchasing multiple products from distributors in high purchase volumes and either selling onto consumers, or to retailers. They will also purchase multiple products from multiple manufacturers, which then get purchased by retailers for final distribution to consumers.

However, wholesalers are losing favour as distributors and retailers look to cut costs and reduce time-to-market, a process defined as supplier disintermediation. This is occurring despite the wholesale industry continuing to grow. Wholesalers must find a way of competing with direct deliveries, and retailers wanting to better meet the changing demands of customers, if they wish to retain their value in the supply chain process.

Distribution to consumers

The final stage of the food distribution process sees retailers and other various vendors, like restaurants, get involved and finally complete the journey of food from farm to table. Retailers are firms, such as grocer's and supermarkets, and offer a collective place of sale for consumers to purchase their desired goods from. This final stage combines those previous and offers consumers various products available to purchase in usable quantities at a convenient location. Although recently, the convenience of location has shifted. It's gone from a central location, like that of a supermarket, to the comfort of one's own home thanks to the rise in home delivery options. This does present opportunities to convert the current brick and mortar stores into micro-fulfillment centers, which reduce the costs of fulfilling online orders. And with e-commerce sales in the food retail industry increasing by 35%, it's a trend that could reshape the industry. Retailers are also driving increases to transparency along the supply chain, to better aid visibility, agility, and predictability.

Whilst each business will have their own preferred way of acquiring and distributing food in alignment with their own unique business models, the end result is the same. Whether a distributor, wholesaler or retailer is involved, at the end of the cycle, food ends up in the hands of consumers. Global trends are changing consumer demands and the supply chain process to better aid retailers. The combined effect of which is reshaping the whole supply chain into a more modern and transparent process, capable of better satisfying the needs of consumers.

Published Date:

March 28, 2022

Read Time:

5 minutes


Team Tidy