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April 22, 2020
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Cheers to you if your wine brand has reached the point of producing quality wines with great packaging, and good value for money.
But now what? You have everything in line to start distributing and getting your wine placed on supermarket shelves and on restaurant wine lists - but how are you going to decide which distributor is perfect for you?
The distribution framework in the United States can be a maze even for those who have been in the industry for long and are known as old-timers.
After the annulment of Prohibition, about 30 states embraced a three-tier system where the supplier is required to work with an independent, licensed wholesaler, who takes the title of the wine and afterward sells it to wine shops, supermarkets, cafés, and carriers. These are frequently alluded to as open states.
In simpler words, the three-tier system is a Supplier - Distributor - Retailer.
Other states (of which there are around 20) reacted by getting to be wholesalers and retailers themselves. These are classified control states. In this channel, the state organizations offer to retail locations and cafés. These states likewise have state-claimed retail establishments for the sale of wine straightforwardly to customers.
Due to the three-tier system in the United States, it’s very important for a wine brand to choose the right distributor. You need to pick a distributor who will satisfy all your distribution needs.
Here’s what you need to do to find out how to pick the right distributor for your wine.
What you really want to do is think through and figure out what your distribution objective is. For example, if your goal is to sell 1000 cases in a particular market, then make sure you work towards finding a distributor.
Once you’ve decided what your distribution objective is, make sure you go towards a distributor who can help you fulfill your objective.
Let’s take 1000 cases as an example again. If your goal is to sell a 1000 cases, then a good move would be to pick a distributor that has around 5-6 sales reps who service around 1000 retail accounts - compared to someone who has 2 sales reps who service around 300 accounts.
All in all, you should know your maximum case goal - and then figure out which distributors can match your goal.
To know how to pick the right distributor for your wine, you need to decide where you want your wine to be.
Do you want your wine to be at every mom&pop joint including gas stations, convenience stores, fine restaurants, etc. Or are you just looking to be in your local area? So if you’re looking for your wine to be distributed everywhere and make a mark, then it would be better for you to work with a distributor who has a larger footprint such as Southern Glazers Wine & Spirits or Republic National.
However, remember that working with large distributors comes with a very high cost where those distributors will simply order a palate and they’ll want you to do the sales. So be ready to find yourself openly communicating with them to find out what you’ll need to sell a thousand cases.
For example, one of the requirements would be to work the market constantly with them. The good thing here is that the larger distributors have a good relationship with the accounts so you can use their introduction as leverage to have the upper-hand while selling.
► Want to know how to get your wine into major restaurant chains? Click here for insights.
It’s very important to know if the distribution company you’re picking is financially stable. Once your cases are sold, can they pay you immediately? Are they credible enough to pay you when you need them to?
One way to test if the distribution company is financially stable is by placing terms. For example, you can place an upfront term of 50% payment. A lot of times when you’re a new wine brand, you end up getting excited about sales - and end up sending the purchase order to the distributor without figuring out if your payment will ever come through to you or not.
Wine distribution is a very tough game. As a supplier, you need to understand that distribution is a tough task. In fact, it’s easier to be an importer or a supplier than to be a distributor and service retailers. It’s a tough compilation of logistics and relationships. So the chances of you, a supplier, getting paid on time is usually around 10%. So make sure you ask your distributor for an upfront of 50% to try and find out how financially stable the distribution company is - and if you’ll be able to get your money on time.
Fun Fact: Most of the times, when you pitch a 50% upfront term to a distributor, you’re going to end up eliminating half of the distributors from your list as they would not agree to this term due to their current financial state.
So use this tip to eliminate and pick the top 5 distributors who end up saying yes to what all you need. A distributor who agrees to meet your needs, and can meet your goal once your purchase order is sent is the distributor you’re going to want. So it’s very important to be clear if a distributor can meet your needs.
When picking a distributor for your wine, make sure you find someone who is willing to smack a deal at a point where everyone in the chain will end up making money. So for example, if your wine is $8.99, a good strategy would be to price it up a dollar so that everyone makes money, and it’s an all-rounded profit. This will keep you happy, your distributor happy, the retailer happy - which will help boost your sales from the side of the distributor and retailer, versus a brand that is just looking to make money for themselves and offers the distributor and retailer a very minuscule margin.
It’s very important to know if your distributor is serious and passionate about their business. In this case, the best strategy for you to pick your distributor would be to pick a distributor in your own stream. For example, if you’re a boutique supplier, then it’s best if you pick a boutique distributor. If you’re a mass supplier - if your vision is to make a million case brand then you should go for a larger distributor like Budweiser distribution network or Miller distribution network. If your goal is profit and high-end restaurants, then you would want to see which distributor serves the high-end restaurants.
Fun Fact: If you’re looking to distribute your wine in high-end restaurants, then going to different restaurants and see which distributors are supplying to them will help you a lot. This will aid in creating a list of distributors you can pick from - and then use your own criteria to eliminate and land on the perfect distributor for you.
With these tips and tricks, you will be able to learn how to pick the right distributor for your wine - one who can meet all your needs and will be able to help you gain a wide presence, and a good profit margin.