By Elizabeth Hans McCrone
Ever since Prohibition was repealed by the 21st Amendment in 1933, alcohol sales have been dominated by a 3-tier distribution system that’s created both huge profits and big headaches for those involved in the adult beverage industry.
But that tried-and true paradigm could be shifting.
In 2015, producers, distributors and retailers alike are grappling with new market realities that are calling into question traditional models, especially as market consolidation grows for outlet giants like Costco and millennials on smart phones dance their way into the drinking years.
“There are only so many livers out there,” quips Brian D. Rosen, owner of the Rosen Retailer Method, a recognized authority on sales and marketing techniques across all sectors of the alcohol beverage industry.
“There’s an overabundance of competition and an under abundance of new drinkers,” he explains. “New products are being created everyday; sports drinks, power drinks with alcohol, near beer … and millennials are indifferent to brand loyalty. They hop ship all the time.”
Rosen believes that the lines between the 3-tiers of distribution are becoming less distinct. He advises his customers to “run your old school business with new world thinking,” by looking at the 3-tier system from the bottom up – from the customer’s perspective – and reexamine their previous assumptions of dominant core market practices.
“Wineries have to stop being 100% distributor-oriented with a skeletal national staff,” Rosen asserts. “Vineyards and wineries can speak directly to the consumer through social media, (wine) clubs, and tasting rooms.”
Rosen points out that 94% of millennials own cell phones and 60% of their purchases are made from mobile devices. “Wineries need to create brands that don’t sell at retail, and then push them through social commerce,” Rosen insists. “Make something unique from your brand.”
Oregon-based wine consultant Carl Giavanti puts it a little differently. Quoting from the recently-released Silicon Valley Bank’s State of the Wine Industry Report, Giavanti notes that in 1995, there were 2,000 wineries and 3,000 distributors throughout the US. Under those circumstances, “odds were pretty good to get your wine into multiple markets,” Giavanti says.
In 2015 however, the report projects there will be 7,000 wineries and 700 distributors. According to Giavanti, that makes retail wine placement staggeringly more difficult and highlights the importance of the DTC (direct to consumer) channel, which, he acknowledges, is no slam-dunk.
“It takes a long time before you gain traction and create brand awareness,” Giavanti says. “Before people have heard about you, want to come and taste your wine, want to bring friends, join your wine club, and be an ambassador for your wine … it takes a lot of hard work.”
Giavanti says such work includes extensive market research, authentic brand development, consistent communication and exceptional customer service.
“Exceptional customer service isn’t ‘this is our 2010 Pinot Noir from our XYZ vineyard,’” Giavanti points out. “It’s really telling the winery’s story, the owner’s story, asking people questions; how much do you know about wine? It’s creating a dialogue so that they feel like they belong.”
Giavanti advises smaller wineries, whose revenue stream depends on word of mouth and tasting room sales, to go out of their way to create a unique experience for winery guests.
“People have come to expect a standing tasting room experience,” he clarifies. “What about offering vineyard tours or wine and food pairing or seated tastings? It’s been proven that seated tastings sell more wine, sign up more clubs and gain more ambassadors.
“People have so much information and so many choices about who they’re going to patronize,” Giavanti continues. “They’re going to patronize a brand that they can relate to … You need to know who your target audience is and talk to them the way they want to be talked to.”
In the country’s heartland, Rebecca Ritz, owner of Bauerhaus Design has been building brands for multiple businesses for the last 15 years. Her current focus is wineries and small companies that provide “luxury” products and services – and she has distilled her brand-building strategy down to five basic steps.
- Define your target audience
- Have a good business strategy in terms of price, innovation, and differentiation
- Define your wine strategy in terms of varietal(s), owner/winemaker, and place/terrior
- Define your core position; i.e., what (unique, differentiating) product or service do you deliver to your target audience?
- Define your brand’s story
Ritz advocates subliminal messaging in branding and stresses the importance of a clearly defined image or story that differentiates customers from their competitors.
“The brain takes in 43 million bits of information every day,” Ritz claims. “You make assumptions you’re not even aware of … based on what you’ve learned in the past. How do you get through all of that to make yourself heard?”
To better illustrate the point, she uses this example, published in one of her more recent blogs.
“Spitfire Sauvignon Blanc derives its name from an iconic site in Marlborough, New Zealand that was used as an air force training base during World War II. At dinner celebrating our anniversary this weekend, the sommelier told my husband and I about Spitfire and four days later, I still remember the name Spitfire.”
“It was very memorable,” Ritz notes. “If people would just define what it is that makes them different, they’d be unforgettable.”