A business entity that sells products to other businesses - so called “B2B” or “business to business” - is called a wholesaler. A food wholesaler therefore is a wholesaler that caters to restaurants or any commercial dining establishment. In the food industry a producer of food such as a farm can also be a wholesaler when they sell their own products wholesale.
There are generally two types of wholesalers; wholesale grocery distributors, and wholesale grocers. One wholesale company may even run on both business models. A wholesale grocery distributor is primarily a B2B business entity mainly selling to other commercial establishments that will ultimately sell the products at a retail level to end customers, such as a grocery store or restaurant. Wholesale distributors have very large minimum order quantities in order to achieve the economy of scale to lower the prices of each unit of the products.
Unlike wholesale distributors, wholesale grocers sell bulk packages with smaller minimum order quantities, although minimum purchases would still be much larger compared to conventional grocery stores. This gives the opportunity for small and micro enterprises or even home consumers to get most of the savings in wholesale, but in more manageable packages.
Food wholesalers play a major role in the development of the food and beverage industry (F&B). Wholesalers act as centralized distribution centers for producers of food (e.g farms). Food producers are therefore relieved of the burden of managing a vast logistical network. The alternative would require food producers investing in a much larger cargo fleet as well as opening their own distribution centers to streamline delivery operations.
Malaysia’s food wholesale environment
Malaysia’s Food and Beverage Industry (F&B) is one of the fastest growing industries in the country with a 7.6% annual growth in value according to a report made by Flanders Investment & Trade in 2020. This is largely driven by the country’s openness and diversity in F&B, catering a wide variety of Asian tastes as well as Western.
The diversity of Malaysia’s wholesale market is reflected in the variety of dining establishments scattered throughout the nation. While local cuisines still retain their dominance foreign cuisines have no trouble finding a foothold. With many of the ingredients available on a wholesale level locally the prices in these restaurants are also relatively affordable.
Competition is a major challenge for a food wholesaler with everyone hunting for the best sources, offering better logistical solutions, and promising reliable supply to customers. This has a direct positive consequence to customers however as it encourages competing wholesalers to lower prices in order to attract more clients.
Some local farms and food manufacturers may even become wholesalers themselves. Without the middle man they can ensure greater quality control while reaping all of the profit for themselves. This however comes at the expense of having to fund and manage their own logistical and storage solutions. This is largely the reason why most local agricultural products are sold through independent wholesalers.
Family-run small farms are sometimes seen selling their own crops to local wet markets and restaurants. In most cases with agricultural produce there is no marked difference in prices compared to wholesale products sold through independent wholesale distributors. Malaysian dairy farms sometimes sell their products through various wholesale grocers across different regions, however they may also distribute to retailers such as supermarkets on their own.
Food wholesale challenges
Quality control and food safety remains the biggest challenges in the wholesale food industry. The pressure to meet high standards of both are exacerbated with the need to offer lower prices in order to be competitive.
Wholesalers - especially ones dealing with fresh produce - require very large capital in order to establish the required infrastructure. The main goal is to ensure that perishable food items are transported from the source to customers with minimal loss in freshness, reduction in shelf life, and without any life-threatening contamination. Depending on the products they distribute, a wholesaler’s facility may house large walk-in freezers or coolers, and operate a fleet of cargo trucks outfitted with refrigeration units. Agricultural crops that are delivered within the same day to customers sometimes only require simpler and more energy efficient (therefore cheaper) solutions.
Wholesale food distribution business in Malaysia is a highly rewarding venture with great potential for growth. Malaysia’s openness in global import-export, steadily growing agricultural sector, healthy, and steadily growing population are some of the contributors to the strong performance in wholesale foods.