Consolidation continues to make distributors bigger and fewer while the number of producers grow with new small producers enter the market. The vast majority of wineries in the US produce less than 5,000 cases, and they’ve been effectively blocked from three-tier distribution because distributor giants won’t take them on, but that’s about to change.
Liberation Distribution (LibDib) today announced the launch of the first web-based three-tier alcohol distribution platform, and it has the potential to impact distribution in a big way. Now any licensed producer that wants distribution can have it. The catch? No catch, just go signup and start selling, and if you later want to switch to a different distributor, you can leave at-will without paying any fees, or fear of franchise law enforcement.
LibDib Founder and CEO, Cheryl Durzy, knows the pain small producers are feeling first-hand from her years of experience managing wholesales for her family’s 80,000 case winery, Clos LaChance, and it inspired her to create LibDib.
“A year and half ago I was trying to get a wholesaler for a new brand that we were doing,” Durzy relates, “Nobody would take it. I contacted every single wholesaler in New York, and nobody would take it, but with LibDib any winery that wants distribution in states that we cover can have it. A 200 case Oregon winery can have distribution in New York, and they can set it up within an hour.”
For now, LibDib is only licensed as a distributor in California and New York, but the plan is to expand and cover all 50 states.
Alcohol distribution laws governing New York and California mostly allow for shipping directly between the producer and the retailer, but spirits entering California are subject to an at-rest law requiring them to be shipped to LibDib’s licensed warehouse and then be shipped from there to the retailer by the distributor. “We started in those two states because we’d be able to prove both models, the warehouse model plus the direct shipping model,” Durzy explains, “and the two states represent 25% of consumption.”
For orders placed through their platform LibDib takes care of all the legal obligations in terms of taxes and reporting, as well as invoicing and collections, while the producer handles shipping and the sales and marketing of their brands. For many small brands handling their own sales was something they already had to do, and with LibDib they’re only charged 15%, less than half of what the average distributor takes.
LibDib keeps down their expenses by not carrying any inventory, but shipping everything directly to the retailer as orders are made.
The time is ripe for a web-based three-tier alcohol distribution platform, not just because the technology is available, but because of the market trends. “There’s a new niche in the market, that people want unique items, small production, craft, and traditional wholesalers don’t make money on it, so it’s a perfect opportunity to provide this service for people and allow them to ship direct,” says Durzy.
Unlike the traditional distributors, LibDib doesn’t rely on any one account or popular brand to make their numbers, but by taking a very small cut out of thousands of individual transactions.
This model not only benefits the producer, but also the restaurant, bar, or independent retailer who’s trying to deliver on the customer’s demand for something special. “LibDib also helps small restaurant and small retailers, who can’t make the minimums,” says Durzy. “They can buy two or three cases a month, and that’s all you have to buy. You buy what you want, when you want, and how much you want.”
As an example, a vegan restaurant that wants to offer vegan wines can go to LibDib.com and search for vegan wines, and in one order get a case each from three different small wineries that no one else in their city carries. And if they know a winery has wine that’s not listed, they can contact the winery directly and ask them to list it for sale.
“We encourage direct communication between retailers and makers,” says Durzy. “Wouldn’t it be better to manage your own brand and talk to the restaurants you think want your things, and you can contact them through the platform and make appointment, or send samples and do an online tasting?”
Ultimately LibDib plans to have an extensive online catalog where producers can easily share their brand stories, collateral and product details for retailers to research and buy. And it is up to the producer to decide which products they want to sell where, in what quantity, and at what price.
“Each state you have a different price because of different taxes and cost of shipping,” Durzy explains. “They decide which products they want to put in distribution in that particular state, and then they set their price.”
The platform has a transparent pricing tool that shows the producer what the costs are, so they and set the price according to what they want to pocket. A few companies were invited to try the platform before the launch, and the initial response is very positive.
“Distribution has been the most frustrating aspect of our business,” said Arthur Hartunian, Owner of Napa Valley Distillery. “LibDib is simple, easy to use and allows us to get our products to market efficiently. I’ve been telling every small to mid-sized producer I know that they need to work with LibDib.”
Though Liberation Distribution looks a lot like other web-based market solutions we’ve seen work for other industries like AirBnB and Amazon, it’s different in that it enters a highly regulated market, but it has the potential to make a huge impact, and Durzy is not shy about her ambitions; shooting for a thousand accounts by the end of the year.
“We want to be the best distributor to work with, we want to teach people how to sell, we plan on having a lot of educational webinars, and things like that to educate people on how to be better in the marketplace,” says Durzy. “We want to be the distributor that helps brands grow, not hinder them.
“It’s not just a technology platform, it’s an idea change too, it’s a shift in perspective.”
By Kim Badenfort