We define independent brands as <25,000 9L cases sold in USA
Looking at the current state of the supplier and retailer relationship one point is clear to me for sure. The commodity brands across all categories is a difficult horse to attach your cart to. Everywhere you turn you are being hit with lower prices on items being sold at mass merch, regional retail, C Store, corner store and general liquor off premise accounts. The very items you need to sell to get people in your door are the ones that make you the least amount of money. In addition to that quandary you need to buy big to get good pricing, sell more to make money, and match a price from a retailer that in many cases bought 10x more than you for that brand. That is a no win situation.
When I was a retailer and selling more than any other retailer in America, there was little competition. Now everywhere you turn, someone is selling the same brands you need to carry, and the very brands you need to carry are the ones that make you the least amount of money. Whole Foods, Target, Costco, Walgreens, 7-11, and countless others did not sell wine, spirits and beer 10 years ago. We were the biggest because there was little competition in the game, and in many cases we won by default. We could name our price, carry what we wanted, and market how we chose.
The world is different now. A consumer comes into your off premise store and often times asks for a name brand, well known, commodity brand. This same brand is available everywhere and thus this is a price buy. You hear phrases like, “can you match Costco’s price?” Or “it was in the ad for liquor chain X, what can you do for me?” The phrases are uttered so often that it makes all retailers cringe while shrinking the already light gross margin attached to the brand.
Independent and small brands are different. They often can be a full gross margin play north of 30% if the retailer takes an active role in their own success. I was selling Clicquot N/V for 10% gross margin and advertising it because it brought people in the door, our goal was to sell them other items when they were with us. Now that “goal” is a matter of personal and business survival as the only one getting rich in the liquor business are the distributors. Buying more items that are craft, special and quality will only help the overall blended margin for your stores. Rebalancing your inventory to increase the blended margin will in the end of the day make you more money. As the account you will still need to work your floor or counter and turn the customer engagement into a conversation and not a point and sell activity.
The independent brands can help you achieve success, turn your customer into a loyalist and create repeat business without having to match a price. As distributors continue to consolidate and expenses continue to rise, you will need a way to get net income back positive.
Small, unique, speciality brands have an ever increasing role in the sales channel and at one time it was the supplier pushing it down into the channel but currently it needs to be the account pulling it down, because price matching on commodity items is a very fast race to the bottom.