When it comes to working with wine distributors, it is very common in the wine & spirits industry...
Left Behind
Kodak missed the signs. Their inability to see digital photography as a disruption to their business model cost them dearly.
Blockbuster failed to adapt, and we all know how that turned out.
Dog watching car drive away, leaving him behind. (This image was generated by AI.)
And now, the same thing is happening to wine and spirits brands. Failing to see the shifting sands beneath their feet, they stubbornly cling to what used to work.
It’s not so much their inability to adapt to the changing marketing conditions as they cannot SEE the changes (or are at least in denial about them).
Take the Spoon out of the Cup
It’s like the old Vaudeville joke about a man complaining to his doctor that he gets a sharp pain in his eye every time he drinks coffee. “Take the spoon out of the cup,” says the doctor.
The “spoon in the cup” in the wine and spirits business is this: too many brands and too few distributors.”
For about eighty years, the “old playbook” worked just fine. And you know the plays in this playbook by heart:
- Find a good distributor
- Educate the distributor
- Work with the distributor
- Provide incentives for the distributor
But something monumental has rendered the old playbook obsolete in the last ten years. The perfect storm of thousands of new “craft” brands in the market and the wholesaler network's massive consolidation.
“It’s the environment, stupid!”
In 1992, political strategist James Carville coined the phrase, “It’s the economy stupid,” during Bill Clinton’s successful presidential run.
Who is the James Carville of our time and for our industry? Who will coin a phrase for the 50,000-plus wine and spirits brands fighting for distributors' “share of mind?”
The problem we face is one of capabilities! No amount of education, training, cajoling, begging, or incentives can change the fact that large, medium, and small distributors are completely overwhelmed.
How can so many people be missing this?
The True Cost of Denial
It’s a real head-scratcher. Getting your head around our industry's rampant and pervasive denial is difficult.
But this widespread, self-inflicted blindness is already taking its toll on hundreds of companies, and most are completely clueless about what to do about it.
The question on everyone’s lips who awakens from their Rip Van Winkle slumber is, “Why is everyone missing this?”
There are three main reasons why:
- The leaders of our industry made their bones using the old playbook, so they cling to it
- There’s a stubborn belief that it’s the distributor's “job” to sell their brands
- A complete lack of knowledge about the alternatives
What used to work no longer works or works as well.
On the Brink of Extinction
There’s no way to soft-pedal this. Failure to adapt to changing market conditions will render you obsolete.
What got you here won’t keep you here, no matter how badly you want it to.
Just because something worked for 80 years does not mean it will continue to work.
No amount of denial can save you from your impending doom.
If this sounds overly harsh, don’t shoot the messenger. One of the problems we have in our industry is no one is standing up and telling the emperor he has no clothes.
Here is what is on the latest version of the endangered species list:
- “Managing” distributors.
- Holding distributors accountable for results.
- Expecting distributors to “earn” their 30 percent plus profit margins.
- Garnering distributors “share of mind.”
These things didn’t used to be extinct. Heck, even six or seven years ago, these things worked! But not anymore. And the sooner you accept the new realities, the sooner you can make the necessary adjustments and begin prospering again.
The Only Three Things a Distributor Can Do For You
The new reality is this: there are only three things a distributor can do for you:
- Hold inventory of your products in their warehouses
- Deliver to the accounts you and your team have sold to
- Potentially match your efforts in each market
You must pay them handsomely if you want them to do anything beyond this. But beware because the cost of distributor incentives is skyrocketing, and any new distribution you pay for is temporary.
Today’s typical distributor sales rep makes just over 50% of their income from their base salary. The rest of their income is from supplier-funded incentives.
Every month, distributor sales reps choose from a very long list of incentives and have implemented systems to “rotate” these through their account base to squeeze as much fast and easy income as possible.
Many suppliers know this but look the other way because they do not know what else to do.
Time to face the facts: your leverage is gone and it ain't coming back.
I’ve written about this extensively elsewhere. I highly suggest you check out these articles if you haven’t already:
- 10 New Rules for Partnering with Wine & Spirits Distributors
- The days of “managing” wine distributors are over!
- 3 Ways to bypass the distributor bottleneck
- The 1980s called. They want their wine sales playbook back
Indeed, I’ve written about this before, but what’s fresh and new in this article is the call to urgency to wake up and accept reality!
Here is my message in a nutshell:
You’ve lost your leverage! There is no more leverage! You’ll have to do it yourself if it's important to you!
Mega brands have lost the leverage they once had
Large brands have lost leverage
Small brands never had any leverage to begin with but now you know WHY.
There is no more leverage!
There are way too many brands and way too few distributors, and the situation gets worse by the day.
Introducing the NEW playbook:
Most of you think I’m nuts. That I’m out of touch. I already know you think this because I’ve spoken to you about it, and you go right back to what you’ve always done.
But the legions of “converts” are growing daily, and we have plenty of room in the boat for everyone.
Ten plays in the NEW playbook
- You need fewer people managing distributors and more calling on chains and key accounts.
- Reduce the sales activities and investments of things that cannot be scaled (hint: anything that involves the physical presence of a human being cannot be scaled).
- Ramp up sales activities and investment in the things that can be scaled (digital lead generation, inbound marketing to trade buyers.
- Learn to leverage digital 3-tier (LibDib) and winery & spirits direct deals.
- Ditch the newsletters and learn REAL email marketing!
- Leverage data to tell you how to leverage 80/20 (fish where the fish are) regarding the accounts and chains to target.
- Leverage 80/20 regarding the number of states (and which states) you are in. 50% of all US wine sales happen in just nine states. Nineteen states do just over 75% of all wine volume. More states do not equal more sales. The RIGHT states do!
- Switch from a “transactional” way of selling (all about features and benefits) to adding real business value to the relationship.
- Leverage CRM to show respect for the customer journey and accelerate your sales.
- Switch from backward-looking metrics like shipments, depletions, and accounts sold to more forward-looking metrics such as velocity, PODs in target accounts, and retention rates.
Stop trying to leverage distributors and leverage data and technology instead.
When the horse stops breathing, it’s time to dismount.
Stop trying to leverage distributors and leverage new strategies and new technologies instead.
You’ll have to do it yourself if it's important to you.
Let go of any notion you can “motivate” distributors into performing for you.
Hire people who can help you SELL your way to prosperity!
And, as always, my team and I are here to help.
