Does anyone know where Supermarkets purchase food by bulk, at a low wholesale price? I can't, for the life of me, figure out where these Stores purchase food in such bulk.
(I live in the US--so I'm speaking of Supermarkets like Ralphs, Albertson's, VONS, etc.)
I imagine they would have direct relationships with the actual food distributors. Not sure if supermarkets would use a middleman rather then buy cereal or such directly from Kellogg's or whoever.
If you're talking about produce they also probably buy from large growers groups.
There are food distributorships like Grocer's Supply and formerly Flemming (used to be the biggest, now bankrupt). These suppliers/distributors buy from the manufacturers and then sell to the grocers (both chains and individual stores).
Some chains have their own distributorships built into their plan and buy direct from the manufacturers, like WalMart does (one of the fastest growing grocers).
Very few grocers buy directly from the manufacturers, as this would entail hundreds of transaction a day to get new stock.
This does not apply to a few key segments of the grocers inventory, such as Brand Sodas, Potatoe Chips, Beer & Alcohol, Drugs, and certain "hard groceries" (like mops, school supplies, cosmetics, etc). These are usually done by separate distribution networks other than the normal grocery supply ones. Coke, for instance, has local (state) distributors that visit each store, take inventory, deliver and setup/stock the shelves for the grocer. This is similar with all the special segments I stated above.
From a little experience i have seen from doing some work for one manufactuerhere in Australia, the purchases are generally made direct from the manufactuer by the purchasing group under the control of the Main company.
So for example here in Australia i have managed to come up with a idea of how it works. When an individual supermarket needs something they dont contact the supplier they contact there head office for the state or nationally and place the order they need, Then either the Head office or state office, will either have that product they have perviously purchased and dispatch it or they will collate orders from all their supermarkets and make a single purchase from the manufactuer for x thouand units or whatever they need.
So rather then having the manufactuer wasting time and effort to take orders from and fulfill orders for 1000 supermarkets they get one order and deliver it to the distribution centre for that supermarket chain. This is partially what can be attributed to there low prices, the manufactuers doesnt need to make as much money to cover costs because they dont have to have freight and people processing orders, or at least not as many.
I work in a food production company in Switzerland, where it works more or less like this:
The 2 biggest chains (allthough Switzerland is a rather small company) order from us (the manufacturer) directly. We then generally deliver to a central distribution location and they organize the distribution themselves.
Smaller chains order through a distributor, which orders from us again. One or two order directly from us, but distribution is done through the same distributor as above.
Don't forget, every country and in some cases states, will have theire own version of the process.
The info I gave above is from my experience working with some food distributors (like Flemming) and several grocery chains and independants over the last 10 years. My firm has conducted alot of investigations and consultings for the industry, whether it was civil defense, civil prosecution, or finding the facts on thefts, embezzments and distributor corruption. It's often interesting what you can learn working undercover in a food warehouse or supermarket, and even more so when conducting interrogations of people involved in fraud/scams.
Agricultural workers in the US are modern day slaves. I would imagine the grocery stores deal directly with the plantation owners or the processors that buy raw goods from the same.
Hmm, interesting info. Thanks a lot...!
Here in California, the big companies like Kroger (includes Hughes, Ralphs and Food-4-Less), Albertsons (includes Savon Drugs), Safeway (also includes Pavilions and Vons), and Stater Bros, all manage their own distribution centers. This is because they get daily trucks of inventory based on what was purchased the day before. All orders are done automatically based on store receipts. One chain (Ralphs) hires independent produce distributors to come in an maintain those displays on a daily basis.
When they pull food from their shelves, it goes to secondary distribution and is sold at a loss to discount chains. The only independants that we have locally actually work with local farms, butchers and bakeries to get the bulk of their products.
I, personally, sell some prepackaged organic foodstuffs online and purchase most of those items directly from the manufacturer at this time. Some products such as fruit baskets are dropshipped directly from the manufacturer when ordered. Others are inventoried and stored according to shelf life. When I open a physical retail store and increase my product offering, I will have to use a distributor for many products.
The information provided thus far has been excellent. I wanted to add that while alot of the big chains buy direct from the mfg and run their own distribution, there are places like United Grocers who supply the smaller chains and even some of the single stand alone grocery stores that are still out there. In high school I worked for a small chain of 4 stores that bought and sold from 3 grocery distributors and they had just about everything we ever needed.
I worked in the grocery business and everyone has a good idea of how the grocery markets buy products!
If you are starting a small business, don't be afraid to talk to the supermarket buyers, they usually will give you a little info!
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