By Dave Moore
Over the last 20 years the number of U.S. wineries has more than quadrupled. There are now over 9,000 wineries across the country. California is home to around half of those, almost 4,500 wineries. During this same time the number of wine distributors in the U.S. has dropped from around 3,000 in the late 1990s down to roughly 1,100 today. Competition is fierce. Getting noticed is hard. New brands enter the market every day.
But successful brands are built all the time. Weekly we hear stories of some start-up craft brand being sold for tens of millions of dollars. Maybe your goal isn’t to sell your brand but rather be offered in top restaurants across the country. Regardless, if you want to grow nationally then you’ll most definitely need the help of distributors to get you there. And if you’re just starting out and thinking about working with distributors, here are 5 questions to ask yourself before contacting them:
- What is your long-term vision?
- What markets are a good match for you?
- What segment is your wine best suited for (on-premise, off-premise, or retail chains)?
- Can you increase production and maintain quality as sales grow?
- Which distributor is the best fit for you?
1. What Is your Long-Term Vision?
You should have a clear picture of where you see your brand in the future. One year, three years, and 10 years down the road. Building a national brand takes commitment. Meet with your brand stakeholders and decide how much and how fast you want to grow. Determine how many cases you ultimately want to sell through distribution. Does this number make sense and is it achievable? An increase in sales takes an increase of capital. Bigger doesn’t always mean more profitable. Helping sell excess inventory is a poor reason to contact distributors. Ensure you have the resources time, and commitment from your team to achieve your long-term vision.
2. What Markets Are A Good Match for You?
Determine in what states you’re most likely to find new customers. I started with California, Texas, Illinois, New York, and Massachusetts. There are plenty of wine consumers in these states that drink my style and price of wine. Plus, I had contacts in each of these states, so it was easier for me to get referrals and provide support. Find out where your brand is a good fit. Sometimes getting into new states can start by getting authorized by a regional/national chain. Once approved, you are free to contact distributors letting them know headquarters has authorized your wine. Having built-in sales when you contact a distributor is a great way to get noticed and set up a meeting. Ask the buyers which distributors they prefer to work with and if they can make an introduction.
3. What segment is your wine best suited for (on-premise, off-premise, or retail chains)?
a. On-Premise – bars, restaurants, sports venues, concert halls, etc.
b. Off-Premise – fine wine shops, independent liquor stores, etc.
c. Retail Chains – Kroeger, Total Wine & More, BevMo, Whole Foods, etc.
It’s good to know where your wines fit on shelves or on wine lists at restaurants before meeting with distributors. If you’re just starting out, try visiting a variety of both on-premise and off-premise accounts. What brands do they currently carry that are similar yours? Is the price the same, higher, or lower? Familiarize yourself with prices of wines in your same category. This is referred to as benchmarking. I do this when I work with distributors and I do it on my own. Research wine lists and survey retail accounts looking for benchmark brands. Ensure your wine’s shelf price is in line with benchmark brands you’ve identified. Confirm that distributors will earn a healthy profit margin if they were to carry your wine. The higher the profit margin for your distributors the better!
4. Can you increase production and maintain quality as sales grow?
Make the following promises to your distributor if they agree to work with you:
#1 – that you won’t run out of inventory
#2 – that you won’t raise price
Distributors need to know that if your brand starts to grow that you’ll be able to keep up with demand; and you won’t raise your prices! I know it sounds crazy. The price of producing wine goes up every year. Labor prices increase. Raw material prices too. But unfortunately, the prices to consumers have stayed relatively the same over the years. It’s rare for a brand to increase price and for sales to stay the same. Keep in mind that a small $0.50 increase per bottle to the distributor can sometimes result in a $2.00 increase on the shelf. Commit to keeping prices consistent. Especially when you’re starting out. And don’t run out of wine. Ever. If your distributor is out of stock (OOS) on your wine, your wine will be replaced by another in an instant. Remember how hard it was to get the placement originally?
5. Which distributor is the best fit for you?
Once you decide your brand is best suited for the on-premise, off-premise, or retail chains, the next step is to visit accounts and meet with buyers. Ask them what distributors they prefer to work with and where your wine could potentially fit. For example, if your wine belongs in white tablecloth-type restaurants, then going with a boutique distributor with strong on-premise relationships may be a good fit for you. On the other hand, if your wine gets authorized across a multi-state chain of stores, contacting one of the large national distributors makes sense. Either way, do your homework, meet with accounts, and ask for referrals.
Building a national brand is tough and you’ll need strong support and consistent effort from your distributors. Americans have a tremendous thirst for new brands. Especially ones with a unique and authentic story. Distributors are always eager to represent hot brands rising in popularity. They like working with supportive suppliers too. Finally, finding the right distributor to carry your wine isn’t the end game; it’s just the beginning. Be clear on your long-term goal, commit to consistency, and get ready to work!