The food distribution industry can be quite profitable. As we all know people consume food products every day. However, the food industry can face many challenges.
Gas prices can affect your business any day. What can you do to avoid the impact of gas prices so it will not affect your business earnings? As you all know, gas is a commodity. You can view historical prices every day on any major exchange and analyze gas prices ahead of time. Major companies like Ryder Trucks have specialists that just analyze gas prices similar to a commodities trader on the Chicago Board of Trade.
Natural Disaster or Causes of Nature
Some food distributors may rely on specific products such as coffee, beans, rice, produce, etc. While you may be able to acquire cheaper goods outside of the U.S., you may consider purchasing from two different regions that produce the same food product. This is called, hedging your positions.
Some food distributors rely on one two to five products because they understand everything about those products. However, to avoid a dependency syndrome on few products you may consider reinvesting some of your products in expanding your product line. In the short run it may be more expensive, but in the long run you will come out winning.
Larger food distributors can obtain financing from large banks. However, small and medium size food distributors may have difficulties in obtaining bank financing. Other options to consider are; inventory based financing, purchase order financing, accounts receivables financing, and cash flow lending. Few lending companies have been fueling capital into the food industry. The food industry can utilize many mechanisms of short term financing because the sales cycles are short.
Today, more than ever the dollar is picking up traction in becoming a strong currency around the world. The strength in the dollar may or may not affect you depending on the role you play as an importer or exporter. Exporters in the U.S. may have a more difficult time selling outside of the U.S. because a strong dollar reduces purchasing power in foreign nations. Currency fluctuations can be attacked by purchasing within the U.S. and outside of the U.S. A purchase diversification strategy can help you defeat currency fluctuations.
There are more issues that the food industry faces. Despite of the issues, the food distribution industry is very lucrative because people consume food products every day.
By Gil Martin Zapata