Waiting for your distributor to find the time and sales power to sell your wines is no longer good enough.
By Jeff Siegel
For years — decades, even — the relationship between a winery and its distributor was simple and straightforward. The winery made wine and the wholesaler sold the wine to the off- and on-premise markets using its dedicated sales force. The winery was expected to help with the latter, of course, and often did. But the wholesaler had the primary sales responsibility, and the roles of each were well defined.
But, says Sonoma, Calif., wine marketer Paul Tincknell of Tincknell & Tincknell, times change. In this, as the relationship between the winery and the wholesaler has evolved, so must the winery’s approach to how it deals with the wholesaler. Waiting for the distributor to find the time and sales power to sell its wines is no longer good enough — and will leave both parties disappointed and unhappy.
“Creating relationships with distributors is not as easy as it used to be,” says Tincknell. “There may seem to be contradictions, and it may not seem as rational as it used to be. But focusing on [the difficulties] won’t help you adjust to the changes.”
And, according to a new study by the Rabobank consultancy, that holds true for wineries of almost any size. Rabobank found that even the biggest suppliers, those who are large and powerful enough to command the attention of the biggest wholesalers, have to make concessions.
“With high costs and the weakest market for wine and spirits since the early 1990s, suppliers are struggling,” said the report. “Many are tempted to treat their distributors like a piggy bank, but those benefits may put the long-term success of their relationship and their business at risk.“
Put in the work
The key change here? The wholesaler is now what Tincknell calls “a conduit to the marketplace,” where its job is not necessarily to sell the producer’s wine but to offer the producer a path to the market. The producer is responsible for selling their wine and the wholesaler is only an entry point — a place to get the winery started. This difference, though it can be subtle, is crucial. And understanding the difference will make the producer’s relationship with the wholesaler that much more successful.
“The difference is that the relationship is more transactional, so the winery has to understand the wholesaler’s needs — and not assume that those needs mesh with the producer’s, because they often don’t any more,” Tincknell says. “It’s one of those things that you just have to say, ‘This is how it works,’ and accept it as such. If you understand that, you can create a successful working relationship with the wholesaler.”
Notes the Rabobank report: “One of the most effective ways to capture a distributor’s attention is to ensure it makes plenty of money selling your product. … said an executive at one large wine and spirits supplier. ‘The more money they earn on our products, the more incentivized they are to drive our brands.’ ” The report added that “eventually distributors would focus on brands that offer better margins.”
Price matters
These changes are notable up and down the supply chain; one specific case in point is in on-premise. Previously, it might be enough to taste a restaurant staff on your wine, show that it fits within the wine list and include some recommendations from customers. Price was always important, but it wasn’t necessarily a deal breaker. And there was room for negotiation and compromise.
These days, though, given cuts in restaurant wine programs as well as shortened wine lists and shrinking on-premise sales, there’s less incentive for the wholesaler to place the wine with the restaurant. That responsibility not only increasingly rests with the winery, but pricing has assumed the most important role. Can the winery work pricing out so that it’s acceptable not only to the restaurant, but to the wholesaler, which has to fill the orders and whose costs must be taken into account in a way it may not have been before?
“Margins, for both the restaurant and the wholesaler — and even in the off-premise — are more important than ever before,” says Tincknell. “You have to understand that the wholesaler margin matters, and you have to be proactive in working with the wholesaler to create a viable pricing strategy that works for each one of you.”
In the end, no one wants an adversarial situation in which the winery and its distributor end up glaring at each other … and no one makes any money.
***
If you’d like to learn more about cultivating distributor relationships, join us at the 12th Annual WIN Expo on Thursday, December 5, 2024. We will explore real examples and strategies for building stronger partnerships that benefit both your brand and your distribution partners in the conference session Distributor Relations: Controlling Your Brand’s Destiny.
Visit the event website to learn more: wineindustryexpo.com
___________________________________________________________
Jeff Siegel
Jeff Siegel is an award-winning wine writer, as well as the co-founder and former president of Drink Local Wine, the first locavore wine movement. He has taught wine, beer, spirits, and beverage management at El Centro College and the Cordon Bleu in Dallas. He has written seven books, including “The Wine Curmudgeon’s Guide to Cheap Wine.”
