Thursday, March 5, 2015

Dear wineries: Big wine & spirits distributors hate you

Southern Wine & Spirits Director of Sales Joseph Eger (crotch being grabbed) at the Hustler Club. Photo: Facebook/New York Post
The New York Post ran a story this week about Southern Wine & Spirits' Director of Sales dumping Champagne into an ice bucket while a stripper grabbed his crotch.

The sales director, Joseph Eger, was upset because Laurent-Perrier was moving its account to Winebow. Hard to blame L-P, when you look at what Southern thought of its product.

But that's exactly what most big distributors think of the wines they carry: interchangeable juice not as interesting as a stripper's grip.

The Post story is lurid, but it's also right on about distributors' attitude. It's an issue nobody talks about loudly in the wine industry for fear of retribution. But they talk about it to each other all the time.

What sucks about this for consumers is that this is why supermarkets and big wine stores tend to carry the same industrially made wines, because those are the ones that move most easily through the major distribution channels. If you want an interesting wine, you have to go to small wine shops that pay attention to small distributors.

Not only that, the big distributors make more money -- a lot more -- on each bottle of wine you buy that passes through their hands than either the winery or the store. You're paying for their lap dances!

Some wineries, particularly those outside the U.S., think they're fortunate when a big U.S. distributor agrees to take them on. Then a year passes and they've had about as many chargebacks for samples as actual sales, and they wonder, why isn't my wine selling?

Three reasons:




1) A salesman has to sell, but not your wine

If a distributor has 50 Chardonnays in his portfolio, the salesman can have a good day, sell 200 cases, of only the top 10. He might be very hard working, but he can't lug around 50 sample bottles of only Chardonnay.

Think about the logistics. The salesman might be able to visit 6 accounts in a busy work day. He's got to bring red wines, whites, maybe some pinks. Some big wine company is probably offering incentives -- a free trip to Spain -- for the person who sells the most of its product. Is he going to put your Vermentino in his bag?

2) There's no incentive for a big distributor's salesman to explain a small wine brand

Most wine lovers would be horrified to overhear a conversation between a distributor's wine sales rep and a store's wine buyer. There's no romance of wine; it's all numbers. Nobody from a big company is going to bother to read up on the soils of a vineyard and the way it catches the afternoon breeze. And if one did start talking about in a sales situation, the buyer would laugh and say, "How much?"

3) Wine sucks for distributors compared to spirits

Spirits are reliable, and reliably profitable. A good gin tastes the same every year. Nobody sends back bottles because they're corked. Nobody complains that this vintage isn't as good as the last. Nobody says the New Zealand dollar is stronger so the wine costs more now.

Spirits are also easier to sell. A bar needs vodka, gin, Bourbon, etc. Nobody actually needs your Vermentino.

xxxxxx

This is a reality of the wine business that so many people don't understand. It's the frustrating answer to a lot of questions from both consumers and wineries. Why can't I buy that wine I saw recommended? Why aren't wines by the glass in restaurants more interesting? Why does my local store have all these boring big-company wines?

Because big wine & spirits distributors hate you and your wine. Unless you're a stripper. In which case it's grab this, baby. And can I pay you in Champagne? We get a discount.

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13 comments:

Larry the Wine Guy said...

How is this different from any other product? If you live in a small town (or even in some big towns), you don't get the best selection of wines, of foods, of clothes, of movies. You can make an effort and go elsewhere for it or order online.

W. Blake Gray said...

It's very different from other products because in many states the three-tier distribution system is legally grandfathered in, meaning all wines must go through this middle tier run by people who hate wine.

You can't say that about food, clothes or movies. You can just buy whatever you want on Amazon. But you knew that.

Tom said...

Yes!!

Mitch Bakich said...

Great Post. Unfortunately, so true these days.

Bon VIn said...

Your ignorance is epic.....all distributors are the same and evil and hate everyone; just as all restaurants are evil McDonald's and all car dealers are rip-off Chevy dealers.
Distributors bring more wine to more people than you can possibly imagine from your little ivory tower......

nomadfromcincy said...

I loved the headline for this. Your story is spot on.

Distributors focus on the brands that generate the most revenue for them (sales manager priorities), the brands they like (sales people choose), the people they like, and the squeaky wheels. I don't think they hate any small suppliers, but they don't have any incentive to focus on them unless they are talking to buyers that want small suppliers.

And yes, distributors play games where they force you to take the big brands to hit their quota in order for them to sell you the small hard-to-get brand.

I think there is some onus on the grocery stores and chain stores to push for better wines. They are the only ones that have the power to disrupt the current incentives from distributors... but they historically are just as beholden to big wine companies.

Aaron said...

@Bon Vln
No, not all distributors are horrible. I know of a couple of (relatively small) distributors/importers that have some great wine, and often from smaller or even tiny wine makers, both locally (Central Coast, CA) and internationally. Of course, you also need to find the wine stores or higher end markets (such as my local Whole Foods, although not necessarily all of them) who make an effort to work with those distributors because that's how they can get the good, and often interesting wines that many of their customers want.

And I'm fortunate that, at least in my local Whole Foods, the wine buyer is pushing for better quality, generally somewhat smaller production wines. Or at least, wines that aren't manipulated chemically to make it exactly how the wine maker created it to be.

Bella Vino said...

Hi Blake...The national picture indicates that you are spot on in your assessment, especially where large Distributers have a monopoly on the market, like Las Vegas, or where a majority of residents are less than savvy (Houston, Kansas City, Miami for example) but, there are Distributers and then there are Brokers. Brokers work on an entirely different infrastructure, and they are the ones that often sell the "vermentino's" of the world. NYC is full of Brokers. Also, remember that people make the world go round. A sales rep that works for a big Distributer can still do a great job of identifying his customers needs, and tasting the buyer on the wine in his book, that's right for the buyer. As a buyer for a big cellar back in the day, I had a Josef Edger once...& I showed him the door. Buyers need to be in charge, not some jerk. For every Josef Edger, there is also the guy that does a good job. Unfortunately good guys never get the kind of press that bad boys do. On the other side there is no excuse for buyers not doing their homework, and identifying wines their clients want & who the seller is, and then insisting that these wines be available to sample. Not much excuse either for Wineries failing to augment their distributer by getting out in the market, with or without the Rep., and generating interest in their product. But wait a minute...that's expensive, right? OK, sure, but Mr. "Vermentino" doesn't make tens of thousands of cases, his total production, among 3 varietals might be less than 5,000 cases.. Many low production fine wine producers identify 5 markets and concentrate on those. Intricate state restrictions can also play a role in this discussion...Oregon is a "bottle state"...the buyer pays the same price per bottle, whether it's 3 bottles or 30 cases...no discounts of any kind. And finally, none of us would even be having this conversation if we got rid of the 3 Tier scheme. A rigged game perpetrated by muscle decades ago makes absolutely no sense in 2015...

W. Blake Gray said...

Bella Vino: I completely agree with your conclusion, but don't think it's politically possible.

There's nothing wrong with a national distribution system popping up in a capitalist country. But that's not what happened with wine, spirits & beer. Legislators put it in in the 1930s to restrict access to alcohol when that seemed politically important. Only in states like California where politicians can have an adult conversation about wine can the system be changed.

Nick Katin said...

The bottom line for any winery is to understand the industry and the best way to market. Many 'boutique' wineries seem to have the attitude "make it and they will come" and then wonder why they can't sell their wine. The big supermarket chains and the distributors who serve them want turnover. Everything else is secondary. The successful small wineries focus on niche wine shops and their own mailing lists and with the internet they are starting to punch above their weight - so it's not all doom and gloom.

Peter Koff MW said...

Actually, the big distributors don't hate you. They just love the most lucrative, easiest to sell products, whatever those products may be! And payment comes in many forms besides salary; bonuses, overseas trips, baseball tickets, weekends at the winery's guesthouse etc. Can we really blame salespeople for being driven by quotas imposed on them by management? Can we really blame them for chasing the rewards, for picking the lowest fruit?

A more fruitful discussion revolves around the question; how and to whom do we sell "vermentino?" How do we introduce a commercially significant number of consumers to these products and have them look for them and demand them? How do we get "vermentino" to go mainstream?

Bob Henry said...

“West Coast Wineries Are Up for Sale — Quietly”

[Summary: A wave of recent deals show investors see opportunities in wine, while owners see an exit strategy.]

Link: http://www.winespectator.com/webfeature/show/id/49221#.UoI_yAMMzG8

SELECTIVE EXCERPTS:

“… While small wineries can succeed by selling most of their inventory direct to consumers and large producers have muscle with wholesalers, those in the middle — annual production of 5,000 to 15,000 cases, for example — can’t get much attention from distributors unless the brand is hot.”

AND:

“… ‘I’ve never seen more wineries for sale in California than there are today,’ [said Charles Banks, who through investment groups such as Terroir Selections purchased Santa Barbara Syrah specialist QupĂ© in October and Napa veteran Mayacamas Vineyards in April.] … Banks … estimates that between 30 to 50 percent of California wineries are either in financial difficulty or aren’t as profitable as they could be.”

Bob Henry said...

UPDATE # 2:

"Booze Salesmen Suspended Over Lewd Strip Club Pics"

Link: http://pagesix.com/2015/03/03/booze-salesmen-suspended-over-lewd-strip-club-pics/