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All Tiers Need to Listen Up!

Expert Editorial

Every Wednesday in the local papers, usually in the Good Eating section or the Food section are an assortment of wine/beer/liquor ads. Sometimes they are really pretty and well designed. Sometimes they are a grocery list of brands and pricing. I have been involved in the adult beverage business for nearly 40 years and that is basically the only constant since I was in diapers. I remember, as CEO of Sam’s in Chicago, we would start focusing on these weekly ads on a Monday and they went to design Tuesday morning and finally went to print for a Wednesday paper run. 

I am lucky enough to be hired all over the country by brands in all categories to help them go to market in different regions or through different obstacles. One piece of advice I can share, and this is a freebie, is that selling by price will be the end of your brand. Period. End of that sentence.

I look at these Wednesday ads and I really and truly shake my head. We all bemoan the death of the independent retailer or the specialty brand. We speak in open secrecy about distributor consolidation and state regulations. Marketing by price will kill your brand, your retailer game, and your distributor power. What these ads do is commoditize the product to a selling or purchase dollar value. They teach and train the customer to look at price as a driver, not quality, story, or innovation. If that is achieved then the brand cannot sell on any other merit that is not easy to match like quality, story, or image. When we continually sell by price and discount we have trained the tier below us to purchase that way. We have trained them to use price in the decision tree.

I have written many times about the death of the independent retailer. This is no “chicken little” scenario, this is 100% happening. How can Mr. Independent compete when his core brands need to always be price matched to Costco, Walmart, Trader Joe’s, etc.? They need to sell on other factors, and that is why the Wednesday ad just perpetuates the failing model.

How can Whole Foods be so much more expensive than your local chain? They have successfully trained the consumer to believe that the food is better, the experience should be valued, and paying more means you value your health more than you do if you shop your local grocer. Brilliant work.

The only way the ads work, or selling into the three tiers work, is if we sell more craft, boutique brands across all categories. This takes more time, more sales help and more products knowledge but will yield a more survivable 30%+ GM on goods.

If you can change your SKU mix to less commodity products and more speciality goods while training selling staff better, you can raise your overall store or distribution gross margin.

The price ads, no matter what day they come, will kill your business. No one, and I mean no one, has ever won a price war on Cambria, Kettle One, Miller, and Rutherford Hill. 

With the distributor consolidation, the large maker contracts that force selling aggressiveness, the shrinking retailer base, and the increasing craft innovation, the only option is to sell with a story and training.

Any other way will be the means to your end, no matter what tier you play in. Happy Wednesday!

Brian RosenExpert Editorial
by Brian RosenRosen Retail Method

Brian Rosen is Former CEO of America’s #1 Retailer, Sam’s Wines in Chicago, Former Partner at PricewaterhouseCoopers in Retail and sought after retailer consultant.

He can be reached at @roseretail or brian@briandrosen.com

 

1 Comment on "All Tiers Need to Listen Up!"

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  1. Bob Henry says:

    In their book titled “The 22 Immutable Laws of Marketing,” marketing consultants Al Ries and Jack Trout state:

    Law # 3 (law of mind)

    Summary: It’s not important to be the first in the market but the first in the mind of consumers.

    Law # 4 (law of perception)

    Summary: Marketing is not about products (their features or quality) but about perceptions (how people perceive products).

    Law # 11 (law of perspective)

    Summary: Marketing effects take place over an extended period of time. It’s a mistake to sacrifice long-term planning with actions to improve short-term balance sheet.

    Observation: marketing your product purely on price is a proverbial “race to the bottom.” A single point of differentiation that is indefensible long-term, as other producers undercut you based on larger economies of scale or (if imports) more favorable currency exchange rates.

    Wineries can work with retailers to differentiate themselves in other ways.

    Start here: in-store sampling.

    Excerpt from MediaPost
    (December 8, 2016):

    “40% Of Alcohol Beverage Buyers Make Their Decisions In-Store”

    Link: http://www.mediapost.com/publications/article/290633/40-of-alcohol-beverage-buyers-make-their-decision.html?edition=98740

    “Fully 40% of U.S. consumers who buy alcoholic beverages haven’t decided what they’re going to purchase when they walk into the store, according to a new study from IRI.

    “Of the 60% who do have a planned beverage purchase, 21% end up changing their minds in store, and 50% of those who change their minds ultimately buy a different brand than they originally intended.

    “All of which points to ‘immense’ opportunities for alcohol manufacturers to find new pockets of growth by engaging and influencing consumers while they’re in the store, point out IRI’s analysts.

    “Beer, wine and spirits manufacturers are increasingly aware of the importance of working with retailers to win over consumers, according to Robert I. Tomei, president of consumer and shopper marketing for IRI. ‘When you consider how often most shoppers are going to the store, and that 21% of them change their minds during the shopping trip, you realize the impact that in-store signage, creative labeling and other marketing could have on your portfolio,’ he stresses.”

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