Distributor Consolidation

2016 will go down as the year of mass distributor consolidation. It does not matter what part of America you live, sell, or merchandise in; you are seeing consolidation at a rampant pace. It used to be Southern and everybody else, now it is Southern, Breakthru and others clambering for the same “shrinking” pie.

Did I just say “shrinking” pie or customer base? Yes, I did!

If you are a regular reader if my column you are aware that I am an advocate for the little brand, the small distributor, and the independent retailer. This is so because I believe, as many of you do, that in this day and age of small authentic brands and craft goods, and the only good outlet for these products is the little distributor and retailer.

The pie is shrinking because no matter how good the new craft (insert category) is; there is not a new drinker being created. Everyone is stealing from the others share.

Think about it, no matter how good your new vodka is, you are not creating a new drinker, you are simply stealing a drinker from another brand. The reason distributor consolidation is troubling is that it creates a mega large wholesalers environment, where the independent, craft brand cannot get off the shelf.

When Breakthru or a Southern Wine & Spirits has to sell Tito’s or Cambria or Jack Daniels, how can they devote sales attention to a craft house cocktail? If the big guys do not sell the key items in their portfolio than the EOM, EOY and other incentives for them will not be achieved.

If this wave of consolidation continues, I believe that a small brand’s best chance will be with a small distributor. It’s Simple math really; shrinking on and off premise output, increasing brand creation and decreasing distribution channel. Said in another way: more brands, fewer accounts, and less sales people to focus on small brands. The small distributors are hyper focused in the craft game.

From my 25 years of experience consulting in adult beverage, I can only confirm that the road is littered with dead brands and out of business distributors. The path to market needs to be thought out well ahead of going to the street and attacking a customer base. But David can slay Goliath in the Adult Beverage game.