Ep. 409 Steve Raye U.S. Market-Ready | Distributors Part 1

Thanks for tuning in. I'm Steve Ray, author of How To Get US Market Ready. And in this podcast, I'm going to share with you some of the lessons I've learned from thirty years in the wine and spirits business, helping brands enter and grow in the US market. I've heard it said that experience is what you get when you don't get what you want. My goal with the book and this podcast is to share my experience and the lessons learned from it with you so you can apply those lessons and be successful in America. So let's get into it. Hello, and welcome back. This week, we're starting another two part series entitled working with or in spite of distributors. And this is part one of two. I trust you were intrigued by the title. The irony was that it was originally suggested to me and ultimately used for a seminar title at an industry conference by a notable top distributor executive. It's not intended as a criticism of distributors rather it's an acknowledgement of a disconnect between a brand owner's expectations and a distributor's performance. The key is communication. So the title working with or in spite of distributors is a creative way of highlighting the need for proper communication between the two parties. Let's start off this chapter with a fundamental truth that you need to recognize and accept. Distributors are at the fundamental level logistics companies that warehouse and distribute wines and spirits to on and off premise accounts. That's how they got their name distributor. However, like everything else in life, it's a bit more complicated than that. Yes. Distributors can help build brands and yes they provide significant added value to the basics of just storing and moving cases. But think about it. Most successful businesses focus on the eighty twenty rule. In the case of wine and spirits distributors, that means that twenty percent of the suppliers that generate eighty percent of the revenue and probably more focus on the profits than even the revenue. It's an economic fact of life, and it's true of the wine and spirits industry too. The burden falls on the supplier or the importer to find creative ways of getting a disproportionate amount of time and attention from their distributors. A key point here. You don't wanna just get more time from distributors. You wanna get a disproportionate amount of time and attention from them. And to do that, you need to provide them with added value where they see value. So it's no easy task when the distributor's goal is to focus that time and attention on the brands generating the revenue right now, not necessarily those that might be important in the future. And that becomes a challenge for you as the brand owner. How do I present my brand in a way that syncs what our goals are and what the distributor's goals are? So if you accept the truth of that statement, let's take an up close and personal look at what is happening in the world of wine and spirits distribution in the US now and the trends that are driving change. But before we start, let's make sure that we're clear on what the definitions are. A distributor, also known as a wholesaler in America, distributor and wholesaler are synonymous here, They are licensed to buy wine from an importer or domestic supplier and sell it to an on and off premise retailer from tier one to tier three. A license is issued by the individual state. It's an important distinction. The importer on the other hand is licensed to import a wine or spirit brand from a supplier outside the US into America. In that case, the license is issued by the federal government. It's called a basic permit and is therefore national. An importer may or may not have distributor licenses or operations in individual states. But even if they do, they operate that as separate companies. So just because you have an importer does not necessarily mean that there's a tacit agreement that when they say yes to you as an importer, that means automatically that you're getting them as a distributor in that state. That's something that you have to negotiate. We're gonna take a look at how the liquor wine wholesaler tier has changed in the last thirty years from nineteen ninety to twenty twenty. In nineteen ninety, there were five to eight major wholesalers in all markets. Now there's generally two major wholesalers in most states. In in that case, we're talking about non franchise states. In nineteen ninety, there were many wholesalers that were not statewide. Now you'll find about two to four, and they're they're growing some of the smaller, locally owned and specialty wholesalers in major cities, and many small players in all markets. So there's a lot more choice, but the trade off is they don't reach as many accounts, nearly as many accounts as the major wholesalers. Back then, there was local active ownership usually a family. Now there's no local ownership and major wholesalers, and they are in function as major corporations. Back in nineteen ninety, there were three thousand W SWA members. Now there's less than three hundred. And here's the effect that those changes have had on market entry. Thirty years ago, wholesalers fight for most brands, including small vendors. In fact, I remember sitting in the conference room at a company called Hugeline, which is what Diageo turned into Well, one of the local Connecticut wholesalers was making his pitch to the brand to please let them carry it. And that's in a franchise state. It was Connecticut. So I think that's kind of interesting. So in the old days where wholesale has fought for most brands, nowadays supplier struggled just to get presentation opportunities. In the old days, wholesalers made promises regarding sales volume and distribution, and nowadays, their time is dedicated to big vendors, making it harder for smaller brands. But not impossible. And lastly, suppliers used to monitor accomplishments of wholesalers with the threat of moving to another wholesaler looming over them. And that's no longer the case. The supplier, the importer must show how they will help sell and promote their brands. In the market. Thirty years, nineteen ninety to two thousand twenty, and it's the equivalent of the difference between the marketing in a country like Sweden and marketing in a country like Germany. I have a really good chart that shows the consolidation of distribution. As that's happening on a daily basis, you can view an updated version of the chart on the get us market ready dot com website under free tools. And there, I list the top ten wholesalers, a very detailed list of the markets, meaning the states, in which they operate. We take a look at sales revenue in dollars and also market share. And what you'll see is that, maybe twenty years ago. Well, ten years ago, the top ten wholesalers represented about fifty percent of the US market. And as of twenty twenty, it's more like seventy five percent. So there are fewer and fewer major distributors who are being more and more choosy about what brands they wanna focus on. And new brands are always challenged because they are questionable. How do I know it's going to sell? And the whole point of this book is to prove that point in their minds so that they will take it on and help your vision of reality become reality. Go to get US market ready dot com and click on free tools. You'll have to put your email address in there. And you can download a chart showing the current situation of distributor, size, strength, and market concentration. W I I f m. That stands for what's in it for me. What's in it for me or with them is a critical question I use to make sure that our planning and communications is on the right track. It's a great mnemonic to use in evaluating positioning statements and communication objectives. At the end of the day, good marketing communications means that you are speaking to a specific audience in a language and vocabulary that they understand. Wifam makes a great test by keeping everyone in the process focused on who is the target audience for a given message and does the message address their specific needs? And by different audiences, I mean, the message to an importer may be very different from the message to a distributor and different from the message to an on or an off premise retailer and then also a consumer. As an example, a lot of suppliers who wanna run ads and trade magazines use their consumer creative. Wrong. The readers of trade magazines don't really care about the brand the way you do. They wanna know what your brand can do for them. So answer the real question your target recipients have on the tip of their tongue. How is this product going to help me, grow my business, generate more customers, get customer shopping more frequently, make more money, and margin. Here's an even simpler way to think about it. The trade wants margin and profits, while the consumer wants romance and glamour. Make sure you're sending the right message to the right audience. Here's a quickie checklist of what many importers and distributors have told us they want in a new brand. Number one, most important that there be the right chemistry between the two companies. Number two, it fills an identified void in their portfolio. And by that, they're looking at brands with existing US volume that they can grow. New brands, they feel their expertise can develop and grow. And brands that have unique positioning For example, the nineteen crimes example I mentioned earlier about augmented reality. And lastly, when that enhances their image, value, and most importantly profitability. Bottom line, it's the supplier's responsibility to understand the target and their mission, performance, and successes. Then be able to translate that understanding in a way to communicate that a new brand is in sync with the importer's mission. Let me give you a case history example of one success we've had recently with a wine producer from New Zealand. The company is called In vivo. The brand that they came up with is In vivo, x comma s j p. And while that may seem like an odd choice for a name, it's done in, along with Sarah Jessica Parker. That's s j p, and that's the way she signs her emails or her social media notes, x, Thomas, s j p. And so when they put the brand together, they wanted to make sure that they got not only the celebrity's name in it, but that the leading thing was the brand name. They were very successful in doing that, and we were ultimately able to take the brand to Taub family selections. And the reason they were specifically interested in it is because they had tremendous success in the past, working with, skinny girl, with Bethany Franklin, and also staying with his Italian wine. Well, that's it for today. I don't want to take up any more of your time. This has been working with or in spite of distributors, part one. We'll see you next week for part two. As always, thanks for listening to how to get US market ready presented by the Italian wine podcast. Hi. This is Steve Ray. God gave you two ears and one mouth for a reason.