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Marketing,Wine,Wine Business,Winery

Why Small Producers Don’t | Won’t Matter to Wholesalers

The Set is *MORE* Controlled Than I EVEN Imagined. How naive was I, anyway?

I recently wrote, “The Set” ~ Could it be more controlled?, only to privately find out, “Well yeah!”

It’s not just the wholesalers, it’s also your supermarket chain divisions. Here’s capitalism at work…

I got a private Email from someone who knows the system well, and this is what was explained to me.

As I explained to my source, when I sold wine, I wasn’t the national chain sales manager, so I was never privy to this info; although, I did hear some rumblings about the stage where this game is played out. I just never had to work it. Here’s how the Northeast works. You can apply this to all areas of the US. The northeast isn’t an isolated area… Only the names are changed as you go along with the chains.

Once a year in January, Chain Marketer A (corporate office in the Midwest) sends out a request for all distributors in their respective markets to suggest new products for the store sets. The national sales guys get first crack and domaine based on the back room, dark alley shelf placement deals. They then select about 15 new sku’s to add to the shelf and drop about 15 -20 sku’s. They then send out a list in early March for store resets in April to June.

Most store /category managers at the store level, can make a few small additions and subtractions based on market demands, but are not empowered to alter placement. Store plano-grams are sent down from the Midwest and suppliers are tasked with making it look similar.

Chain Marketer B is slightly different in that as a regional supermarket. They have a cattle call for new products. Major brands are given designated appointments to pitch samples (two bottles each) and the rest are taken American Idol style, wait in line, turn over two samples and price sheets placed on long tables ……next please…. A week later they send out an add and drop report, with this year’s authorized product list.

This process happens regardless of the current pending legislation. National sales guys will still have the lion’s share of the products, regardless of local distributors desires.

So, there’s how it’s done, boys and girls, for those of you with a brand and having wanderlust about going to wholesalers who you think “might” pick up your brand for sales outside of your winery.

What will you do to be able to break that chain?

I think it helps to understand the system and reality of it all, because I work with many small producers of fine wine, who just don’t “get” why their wonderful wine is just not picked by wholesaler or chain stores. Now, it’s spelled out… right here before you.

You efforts should be entirely devoted to direct sales marketing, if you’re ever going to sell every bottle you’ve produced, minus your samples from your promotional budget. When your brand is so hot and it sells itself, someone might notice… but not a second before, truth being told.

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22 Responses to “Why Small Producers Don’t | Won’t Matter to Wholesalers”

  1. Josh says:

    Absolutely, Jo; it’s a sucker’s bet any other way–unless it’s someone else’s money.

  2. Kathy says:

    Jo – its always great to see someone illuminating the challenges faced by small producers when it comes to getting distribution. I do want to point out the story above applies mainly to very large distributors who deal primarily with large production brands. There is a whole cast of small distributors who focus on placements for limited production brands who wouldn’t even be interested in the opportunities you mention above. Small production brands don’t want their wines in a chain store or a regional supermarket. Its not a brand/positioning fit. My clients are small producers and I advise them to maintain a healthy revenue mix between direct-to-consumer, distribution, and local wholesale sales. We work to ensure the direct-to-consumer portion of their revenue is the largest — which is also a necessity since fewer restaurants and retail shops can carry much high end inventory these days. Bottom line is distribution and wholesale placements help drive direct-to-consumer business by building awareness of the brand.

  3. Larry Chandler says:

    Isn’t this also true for small artisanal producers of any food product? You can buy Kraft cheese in every supermarket in the country, but how many markets sell Bellwether Farms or other small cheese producers? People who create these products generally know it’s a hand sell to small local markets, and perhaps over time these products catch on.

    Whether it’s cheese, baked goods, granola, or wine, it’s not just a matter of having something good and suddenly Kroger’s or Safeway can’t wait to stock your items. It’s unrealistic and not limited to wine.

    Direct sales may be more difficult for wineries because of state regulations. Direct sales of food generally is not a huge market, unless there is a major marketing push such as for Omaha Steaks. A winery can go this route where legal and there are still plenty of legal markets where they can direct sell.

    Wineries, like everyone else, need to focus on local markets first and do their own promotions via social media and other marketing efforts. It’s not reasonable to expect that Safeway will want your wines before the public has learned to ask for them.

  4. You hit the nail on the head. Direct sales is the way to go for small producers. Of course, they shouldn’t stop trying to get into the distribution system. But they should be reaching out to influencers, building up their clubs, and hiring great PR firms like yours!

  5. Jo Diaz says:

    Larry,

    It may not be reasonable, but I’ve still had to counsel unreasonable expectations for the last 18 years… That doesn’t seem to go away.

    Another great point is that this also happens with other food products, but – unlike wine – the restrictions from one state to the next don’t exist.

    For instance, I can get my favorite pork products from Maurice Bonneau’s Sausage Kitchen in Lisbon Falls, Maine – through overnight mail. I can’s ship wine through USPS, FedEx, of UPS – anytime, anyway.

    Other food products are apples to oranges…

  6. Jo Diaz says:

    Steve, the more directly a winery sells its wine, the greater the profit margin. Once it goes into the three tier system, vintners go through bottle shock…

    And… hiring a PR/Marketing company, although it’s an expense, will have a return on those dollars, if ot right away, shortly thereafter.

    It takes money to make money.

    It’s a hard business lesson – marketing – but one has to have written that into a business plan, or no legitimate bank will fund the project. Interestingly, when doctors, lawyers, and liberal arts majors use their money earned from a past profession they become the bank. That’s where it all falls down. If one has a degree in law, medicine, or liberal arts, marketing isn’t their core competence, many of them go it alone… struggling, failing, and not knowing why.

    Someone with a business degree and/or years of business marketing experience is an expediter.

  7. Jo Diaz says:

    Kathy, excellent comments and points of interest. I’ve found small wholesalers to still have a heart and soul within, because the “owner’s in the store” still applies. Someone once gave her dad’s advice to me. (Her dad is a business professor at Harvard University.) It was, “Never love a corporation, because it won’t love you back.” This is not to say that one can’t have a relationship with large corporation, but one must never forget that it’s “Just business” with that type of relationship. I’ve always loved the small wholesalers, who do – as you know – still have some shelf space allowed to them, both with on and off premise accounts…

  8. Mike Sterling says:

    Hello!!??
    Anyone who has done this for more than a month knows the cards are stacked against them. The trick is to go around distributors. The Three Tier system has been lamented endlessly by the little guys. And in this case – even 10,000 cases is little. The tasting room is the ultimate outlet for wine producers – simply because you give up less profit to truckers, wholesalers and retailers. Seriously, 30%

  9. Jo Diaz says:

    Mike, another thought… Truckers are picked up by wholesalers in their laid in costs when purchasing wines from a wine supplier… That means that they (wholesalers) control how much will be paid tot he shippers, not the wineries. Wineries have little control over those costs.

  10. T.J. says:

    Your scenario only paints one picture of “national” brands, and “national” stores. This is completely biased against wholesalers. True, many don’t care about smaller wineries. But that is an inaccurate sterotype of our business. I doubt you, or any real wine lover, even shops at those national stores. If you’ve ever been to a retail store and found a bottle of Txakolina, Kerner, or a Oregon PN w/ a case production under 300 cases, you can thank the wholesaler for presenting a case for these wines. Please stop using us wholesalers as a lightning rod for whats wrong with this business. You don’t hear me complaining how often wine bloggers like to get up on their soap box.

  11. Jo Diaz says:

    TJ

    I hear what you’re saying. Let me first give you a little background, lest you think I’m arm-chairing this one.

    I’ve been in the wine business since early 1993. I was a district sales manager for Bill Hambrecht’s wineries (Belvedere and Grove Street). My states were N.CA, N.NV, OR, WA, MN, IA, PR, and I spent a great deal of time in the North East (being from Maine and MA), as well as traveling 65,000 miles a year for a long, long time, to visit with wholesalers. Then… I went on to work with Mondavi, K-J, Barefoot, Ironstone, all before starting my own PR/Marketing Firm – Diaz Communications.

    I’m also the founder and executive director for PS I Love You, the advocacy group for Petite Sirah. http://www.psiloveyou.org (Here, I interface with about 80 small and large brands.)

    This gives me more than a quick snapshot, and it’s coming from the heart of wine country… Napa/Sonoma counties.

    I know you guys – on the streets – are a great group of people. I couldn’t have been as successful as I was (while in sales) without you guys. I sold a lot of wine that was “outside” of the set, so I know that it can be done. I also know the amount of work that goes into it on both sides of the fence, yours and mine (at the time I was selling).

    This isn’t an attack on you or wholesalers. I know you get plenty of that, and are constantly having to defend yourselves… Not the CEOs, but the guys on the streets, whose lives depend on selling wine.

    this blog entry is simply stating that if a small brand wants shelf space, he’d better get over it and PDQ (as my dad used to say when he wanted me to move fast). The reality is that it’s not going to happen, unless (s)he’s willing to get out there and ride with you guys, offer sales allowances, depletion allowances, sales incentives, take people to lunch, take people to dinner… break bread and form that all-important relationship that will get you a spot on a shelf.

    Would you agree that most wholesalers aren’t going to carry a brand just starting out with absolutely no track record, no “90+” score from Parker, Tanzer, Heimoff/Gregutt, or Laube?

    If there’s a large wholesaler ready to do that, that’s the info missing here.

    Inquiring minds are ready to hear that one.

    I appreciate your reaching out. Sales guys are very frustrated within this system, too.

  12. Brian says:

    Jo,
    Cool stuff. I think your most salient point is that the “bankers” who are now “wineries” are out of touch with reality and they expect that if they make a good quality product (which many do) they’ll get picked up and distributed.

    The fact of the matter is that they have false hopes based on some crazy assumptions. The best thing that these guys can do is already mentioned above so I won’t rehash it.

    Best of luck educating the small wineries, we all want them to succeed and continue to make good product, so that we have something to banter about online.

    Cheers
    Brian Wing
    norcalwingman

  13. Jo Diaz says:

    Brian, thanks…

    So many people come into this business not knowing anything about it, and expecting an easy segue…. Because they’ve achieved professional status.

    I honestly am guilty of that, coming from radio PR… Not wine. My learning curve was steep, regardless of the fact that I know how to communicate with writers and know how to put a press release together… The rest of it was with an ant’s knowledge in an elephant world.

    Same holds true for us all. No harm, no foul, just a reality…

  14. ravi says:

    These large entities will perhaps eventually destroy the wine trade, as a consumer I would like to be able to buy select small parcels of wine produced by unique smaller producers even from the shelves of my local supermarket.. for this I am happy to pay a premium.

    The boutique wineries need to take a stand collectively.

  15. greg mueller says:

    All true. And IF said small producer is lucky enough to get that placement or two the wine doesn’t sell because no one has heard of it and it has no marketing and awareness and then it gets discontinued by the chain or the distributor sales rep takes it out because he has pressure to get distribution of his companies corporate brands and/or he can’t afford to tie up space with a wine that doesn’t sell. The chains are owned by the corporate brands and this is another reason why.

  16. Jo Diaz says:

    I love the concept, too, Ravi. The only problem I foresee is what Greg Mueller has mentioned. If the wines don’t move fast enough – because we’re so trained to not buy fine wines in a grocery retail outlet – they’ll collect dust for the most part. Supermarkets think “shelf life” as if it were a head of lettuce. If it doesn’t move quickly, it’s taking up valuable shelf space.

    The next time I go to a place that’s unknown to me, I’ll Google wine shop and the name of the town.

  17. Jo Diaz says:

    Greg… Exactly.

  18. Jane Perez says:

    No one is a bigger supporter of the little wine guys than myself. It is tough for them to even fathom entering a market when the chance of failure is so high. Its easy for me to say, but perhaps more boutiques need to make the jump. “The road to success is paved with failure”

  19. Brian says:

    Another positive outake is the move toward “slow” food and buying locally. It seems like there are a lot of states moving into wine production, thus giving their local markets access to vinifera fermented juice. I think this will help the smaller producers. They understand (or hopefully understand) their localities and the palate of thier local patrons and would therefore be able to serve their niche markets respectively.

    Anyhow… I digress. We just need to watch out for the smaller guys and make sure stupid legislation like the HR5034 bills of the world don’t squash their ability to directly market their products.

    So on that note, go out and buy some wine from the little guys!

    Cheers
    Brian
    http://norcalwingman.com

  20. Randy says:

    All the more reason for small producers to GO DTC! Screw the large corporate slugs of the wine world. Due to recent breakthroughs on technology… like the internet and the fact more and more folks are coming out to wine country to do their own research and development (of their own tastes), one really doesn’t need to kiss the butt’s of some clown salesman in Chicago or Miami or Dallas. Keep productions in line and your wine club sign ups moving and you should be ok.

    A few other tips… Get your winemaker in the retail area and have them sign bottles and shake hands with tasters. (add a few btls to the order)

    Tell them you can ship to all 50 states (with a little help from third party shippers). Do the extra work involved with shipping to all 50 states.

    Give them the discount! With distributors, you’re giving 40-65% off and you have the travel expense associated with selling pallets not bottles. 20% off and you have a new fan!

    Most importantly, have your own style!!! Avoid the “14.1%” alc phenomenon… By that, more than 1/2 of all Pinot Noirs and whites I see in my neck of the woods are labeled… exactly… 14.1%. Your clients are smarter than that. They know the 14% alc/label rule. Either people are making (via harvesting) nearly the exact same wines and differentiating themselves merely by oak barrels or they’re being dishonest and making higher alc material and playing the “low alc card”… either way, they’re running with the herd… Break free from the herd and make something unique. People will talk about you and the wines…

    Good luck out there!

  21. Jo Diaz says:

    Great advice, Randy…

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