By Dawn Dolan
“There is an inherent David and Goliath dynamic in three-tier distribution,” says Brian Rosen, owner of BevStrat. “It is skewed toward the top 300 brands globally, and the top five distributors focus on these brands, through which 98.4% of all wine, beer, and alcohol is sold.”
“BevStrat was formed to give the small independent producer a fighting chance in the three-tier system,” says Rosen. BevStrat provides the market support system that smaller wineries, defined by him as a 10,000 to 100,000 case production, need to be successful.
He points out that wineries have to understand the economics of the three-tier wholesale market. With discounts on the distributor and retail end, it may not make financial sense for most wineries to engage in the discount game that is wholesale. “First the economics have to make sense for the maker,” says Rosen. “If a winery wants to grow their brand above DTC, they need to get out there and sell. They really have to understand that it is a case of go big or go home.”
Take the example of a 20,000 case production winery, with 2,500 cases they’d like to go out for wholesale. Rosen explains that a distributor cannot pay attention to that small a size. They give a sales representative maybe 116 accounts. That rep will have many SKUs to promote, and he will first and foremost focus on the accounts and brands that are known money makers.
“Just because you are signed up with a distributor doesn’t mean they will give you any attention,” Rosen warns, and that’s where BevStrat comes in, they take on the sales support work for the small producer.
Hiring Rosen’s marketing and sales force means they take on the support role that distributors provide to larger accounts; meeting with the retailers, making them familiar with the smaller brand, and even taking orders to the distributors. These are all things that small producers may not realize need to be done to gain recognition and sales.
BevStrat offers to do this leg work, as well as marketing and strategic planning, for the small winery that want to jump into the wholesale market. Rosen says they should be considered the “sales and support arm” for the small producer.
The upshot for the unknown producer from Rosen’s viewpoint is that to make it work in today’s three-tier system, they need to put time, money, and effort into becoming successful in the market. “The big boys (via distributors) have people to call on their accounts,” he says. “Likewise, we have people on the ground, and are present in twenty-two states.”
In the eight years since he began this venture, BevStrat has worked up to 24 producers, with 118 SKU’s, accounting for about one half of a million cases of wine, spirits, or beer in the market.
“Distributors have no desire to carry small producers,” says Rosen. And while the new company, Liberation Distribution, will provide any small producer with distribution, the producer must then provide the marketing and sales force in order to gain sales, something not many are prepared to do. Rosen says he can help a winery grow from 10,000 to 100,000 cases, but with a dose of realism on the winery side.
“I know my narrative can be harsh,” he says, “but winemakers need to be business men. They need to think about their consumer; their audience isn’t grandpa, who did it such and such way in the good old days.”
That fierce competiveness of the market is a reality and Rosen understands this.“I want good partners; producers that understand that selling their brand takes work and effort, and can invest in that concept.”
Asked about how the recent acquisition of Whole Foods Markets by Amazon may affect the market climate, Rosen says that what he had predicted is coming true. “The way we buy wine won’t change, but the method we get wine will. People want to get around interstate shipping laws,” he notes, putting small, independent retailers at great risk.
He believes that the winery and the small retailer still matter. People still want to talk with an expert and get opinions about wine. The key idea here is focus. “My advice for small retailers is to do what you do and do it really, really well.”
And Rosen sees more disruption on the horizon of wholesale market. “I see another big distributor consolidation happening this year, and that will further squeeze retail. If everyone is in a race to the bottom, all lose profit. BevStrat seeks to avoid that by bringing more products to market, bringing in more profit to both the retail and maker ends of the chain.”
Brian Rosen writes the Three Tier Talk column on Wine Industry Advisor.
