All Tiers Need to Listen Up!

Every Wednesday in the local papers, usually in the Good Eating section or the Food section are an assortment of wine/beer/liquor ads. Sometimes they are really pretty and well designed. Sometimes they are a grocery list of brands and pricing. I have been involved in the adult beverage business for nearly 40 years and that is basically the only constant since I was in diapers. I remember, as CEO of Sam’s in Chicago, we would start focusing on these weekly ads on a Monday and they went to design Tuesday morning and finally went to print for a Wednesday paper run. 

I am lucky enough to be hired all over the country by brands in all categories to help them go to market in different regions or through different obstacles. One piece of advice I can share, and this is a freebie, is that selling by price will be the end of your brand. Period. End of that sentence.

I look at these Wednesday ads and I really and truly shake my head. We all bemoan the death of the independent retailer or the specialty brand. We speak in open secrecy about distributor consolidation and state regulations. Marketing by price will kill your brand, your retailer game, and your distributor power. What these ads do is commoditize the product to a selling or purchase dollar value. They teach and train the customer to look at price as a driver, not quality, story, or innovation. If that is achieved then the brand cannot sell on any other merit that is not easy to match like quality, story, or image. When we continually sell by price and discount we have trained the tier below us to purchase that way. We have trained them to use price in the decision tree.

I have written many times about the death of the independent retailer. This is no “chicken little” scenario, this is 100% happening. How can Mr. Independent compete when his core brands need to always be price matched to Costco, Walmart, Trader Joe’s, etc.? They need to sell on other factors, and that is why the Wednesday ad just perpetuates the failing model.

How can Whole Foods be so much more expensive than your local chain? They have successfully trained the consumer to believe that the food is better, the experience should be valued, and paying more means you value your health more than you do if you shop your local grocer. Brilliant work.

The only way the ads work, or selling into the three tiers work, is if we sell more craft, boutique brands across all categories. This takes more time, more sales help and more products knowledge but will yield a more survivable 30%+ GM on goods.

If you can change your SKU mix to less commodity products and more speciality goods while training selling staff better, you can raise your overall store or distribution gross margin.

The price ads, no matter what day they come, will kill your business. No one, and I mean no one, has ever won a price war on Cambria, Kettle One, Miller, and Rutherford Hill. 

With the distributor consolidation, the large maker contracts that force selling aggressiveness, the shrinking retailer base, and the increasing craft innovation, the only option is to sell with a story and training.

Any other way will be the means to your end, no matter what tier you play in. Happy Wednesday!