Third-Party Logistics (3PL) VS. Wholesaler: Which is Right For Your Drinks Business?

Whether you’re a producer of craft beer, fine wine, spirits or non-alcoholic drinks, understanding the pros and cons of using a third-party logistics (3PL) provider versus a wholesaler is critical for weighing up what distribution route is best for your business.

3PLs and Wholesalers present slightly different purposes, benefits and disadvantages to getting your drinks into the hands of your loyal consumers.

Let’s dive into the key differences in what 3PLs and Wholesalers offer to help determine which is right for your unique business needs.

What is Third-Party Logistics (3PL)?

Third-party logistics providers (or ‘3PLs’) specialise in streamlining logistics operations. For drinks producers, this could include the storage of products in a secure, temperature-controlled warehouse, the picking and packing of orders, inventory management and direct drinks delivery to bars, pubs or direct-to-consumer (DTC).

Third-party logistics providers typically charge for storage, handling and shipping. Some 3PLs operate under a simplified charging matrix for their standard service while offering additional services such as kitting and specialised storage under separate charges.

What is a Wholesaler?

A wholesaler focuses on purchasing products in bulk directly from producers and resells them to other businesses, such as retailers, bars and pubs. They act as a bridge between producers and retailers, helping to simplify the distribution process.

Wholesalers usually charge using cost-plus pricing (where a markup is added to product costs), volume-based pricing, tiered pricing (where a discount is added for larger orders) or a flat per-unit rate. Charges may change based on the client's industry and individual business needs.

The Key Differences Between 3PLs and Wholesalers for Drinks Producers

Now let’s look at 3 key distribution features and compare the difference between 3PLs and Wholesalers:

Focus and Services Provided

3PL: Offers specialised logistics services, which could include temperature-controlled or cold storage, order fulfilment, customer service and direct-to-consumer (DTC) ecommerce delivery.‍

Wholesaler:  Primarily focuses on buying drinks in bulk from multiple producers and selling them to other businesses (such as retailers, bars, pubs and restaurants). They may also offer additional services, such as marketing and sales support.

Ownership of Goods

3PL:  A 3PL carries out logistics on behalf of drinks producers, without purchasing and therefore owning the stock.

Wholesaler: A wholesaler will purchase stock directly from the drinks producer, taking over ownership and responsibility for its movement along the rest of the distribution chain.

Venue Interaction

3PL: A third-party logistics partner interacts directly with both drinks producers and venues behind-the-scenes to provide a customised delivery service.

Wholesaler: A wholesaler engages with retailers and businesses as its customers, often with little-to-no input from the drinks producer.

‍Pros and Cons of Third-Party Logistics (3PL) vs. Wholesaler‍

So, what are the main pros and cons of 3PLs vs. Wholesalers for drinks producers?‍

Benefits of Using a 3PL for Drinks Producers:

• ‍Room To Grow: Third-party logistics providers offer a scalable service, allowing your brewery, winery or distillery to grow as your brand gains momentum.‍

• Producers Decide What Happens With Their Product: a 3PL does not sell brands to venues, allowing producers to keep control over their products, reputation, pricing and positioning in the market.‍

• Bespoke & Flexible Logistics: Most 3PLs provide a bespoke service offering (such as special timed delivery requests). This provides a high level of flexibility in the service, making partnering with a 3PL a great choice if your business has unique or specific needs. For example: if a venue runs out of your product, most 3PLs provide a next-day service to help keep your drinks stocked at all times. ‍

• Stronger Venue Relationships: Third-party logistics partners interact with drinks producers and venues directly to help maintain strong and sustainable relationships.‍

• Lower Costs and Reduced Spend: A third-party logistics provider can help reduce a drinks producer’s spend by offering a more flexible and cost-effective distribution model. Additionally, drinks producers set their own product prices- a 3PL does not have influence over this.‍

• Access to Specialised Alcohol Storage: Many 3PLs offer cold storage, ideal for delicate drinks such as wine, craft beer and spirits. Some 3PLs may also offer Bonded Warehousing for international drinks producers looking to support importing their products into the UK.

‍Potential Disadvantages of Using a 3PL for Drinks Producers

What are the potential disadvantages of using a third-party logistics service for drinks producers?

• ‍No Sales and Marketing Support: A 3PL typically does not aid in increasing product demand or sales; they focus solely on logistics service offerings, allowing you to focus on brewing.‍

• You Get Paid Once You Sell- a 3PL does not purchase products from producers, but manages the logistics on the producer’s behalf. Therefore, a producer’s revenue comes from direct sales to venues or consumers.‍

• You Need to Know Your Trends: With a 3PL, drinks producers choose the amount of stock they want to hand over. This means it’s a drinks producer’s responsibility to keep on top of demand forecasting to avoid overstocking or understocking. Poor forecasting can result in unnecessary storage costs or lost sales opportunities.

Key Benefits of a Wholesaler for Drinks Producers:

What are the benefits of using a wholesaler for drinks producers?

• ‍Access to Market: Wholesalers often have pre-established relationships with retailers and hospitality businesses, helping drinks producers expand their reach at a large scale.

• Instant Revenue: Wholesalers buy large quantities of products from drinks producers in bulk, providing instant revenue.‍

• Transfer Responsibility of Unsold Goods: By transferring inventory ownership to the wholesaler through selling products directly to them, producers can focus on crafting drinks, without having to worry about wastage of unsold goods.‍

• Marketing and Brand Support: Wholesalers often have dedicated sales and marketing teams that advertise products to retailers, improving sales performance and helping to increase brand awareness.‍

• Forecasting Knowledge: Wholesalers know how much stock to purchase from producers based on their knowledge of market trends, seasonal fluctuations and current customer demand.

Potential Disadvantages of Using a Wholesaler for Drinks Producers

What are the potential disadvantages of using a third-party logistics service for drinks producers?

• ‍You Surrender Control of Your Brand: Once the product has been sold to a wholesaler, drinks producers have less control over how their products are marketed or positioned by the wholesaler.‍

• Decreased Revenue: Wholesalers often purchase products from drinks producers in bulk and at discounted rates, which can cut into profit margins. Wholesalers typically purchase inventory upfront and set their own margins, while charging underpricing models which can increase service costs if producers require specific or additional services. ‍

• Limited Customer Relationships: Wholesalers act as intermediaries, so they don’t interact directly with your customers. This can hinder your ability to build loyalty or tailor your offerings to specific market demands.
  

How to Choose the Right Option for Your Drinks Business

Deciding between a 3PL and a Wholesaler depends on your individual business model and operational needs.

3PL: This is often the preferred option for drinks producers who seek logistical support to handle storage, shipping and direct-to-consumer or retail fulfilment. For drinks producers focused on selling direct-to-consumer or niche markets and require help with storage and order fulfilment, a 3PL partner may be the right choice.

Wholesaler: Suitable for drinks producers looking to widely distribute their products to retailers and venues. For drinks producers aiming to sell large quantities of your beverages quickly and with instant revenue, a wholesaler may be for you.

To Summarise

Whether your drinks business requires support with logistics or access to broad distribution networks, both 3PLs and wholesalers play vital roles in the supply chain. By understanding the differences between a third-party logistics provider (3PL) and a wholesaler, drinks producers can make informed decisions that align with their business goals and specific operational requirements.

Interested in Partnering with a 3PL? Get in Touch With Tap’in.

Are you a drinks producer looking for a reliable 3PL logistics service? If so, Tap'in are here to help.

Tap'in is a third-party logistics company based just outside of London, specialising in product distribution for craft breweries and other drinks producers throughout London, Brighton and the Home Counties.

We deliver into the key London postcodes up to four times a week, offering a next-day delivery service so you're ahead of the demand.

Tap'in operates under a straightforward and transparent 'price per delivered litre' pricing model, which we tailor to each client's individual needs, considering the movement and management of the product.

Focus on your business, while Tap'in ensures your drinks reach your customers on time and in perfect condition. Get in touch with our expert team today to discuss how we can support your individual logistics needs.

Read More 3PL and Drinks Related Content Here: 

What is a 3PL? Understanding the Basics of Third-Party Logistics

How to Break Into the London Drinks Market with a 3PL Service

The Benefits of 3PL eCommerce