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Three Tier Selling Insanity…Again!

I have been writing on Linkedin, Wine Industry Advisor, Beverage Dynamics and elsewhere for nearly 8 years. Nothing I have written in my career has struck a cord like the last article I penned called, “Fire Your Distributor Sales Teams”. I have written some provocative articles about self distribution, about weed, about the death of the three tier system, about the death of the independent retailer, but my article last week was by far the piece that struck a cord with distillers, brewers, winemakers and distributors around the globe.

Why is that? Why would something so far out in its simplicity and radical in its approach touch so many people at the core of what ails them? Our feeling in the office is that because it hit a major cord within America and globally that the problem that I described is real, is ‘now’ and is relevant.

There is no other industry that I know of where the barrier to entry is so great. You can make a beer, wine or spirit but then what? You cannot easily find a distributor, you cannot easily get into market, you cannot easily convince an account to buy AND sell your good. Nothing about the adult beverage business is easy, and yet there are 100 new craft brands coming to market weekly. There are entrepreneurs attempting to be Tito’s Vodka daily while forgetting that it took Tito 20 years to become an overnight success.

We stand behind what we said about terminating your distributor sales teams. The distributors that reached out to me post article thanked me for my brutal honesty. Brian, they said, “you are encouraging the brand to hire an independent resource to support them, so basically we can collect our 25-30% while not actively selling the brand, that would be our most profitable move this year.” “We do not have the bandwidth to service and sell the brands we carry.” “We don’t build brands, that is up to them.” The conversation was NOT asking me to stop with rhetoric that would encourage the brand to fend for themselves. Rather thanking me for allowing for a potential increase in distributor Net Income in cutting sales teams enough to trim labor expense. I was totally aghast in the conversations and emails that I received from distributors. Two dozen in total.

But I understand for sure.

Look I get it, this is a dog eat dog world, and brands are wearing milkbone underwear. As brand people we need to understand the rules of the game. Distributors, while very necessary logistic and compliance companies, will not support your sales goals. There are 300 brands globally that account for 94% of total adult beverage sales. Yet, as noted earlier, there are 100 brands coming to market a week. The brands need a champion on their side or a brand Sherpa that will/can guide them through the pitfalls of an incredibly difficult terrain.

We recommend the use of data, we use a sophisticated matrixes, but it is still critical for the brand to understand their customer. Understand who the buyer is both at the account level AND the customer level. After all, selling onto a retailer’s shelf AND off the retailer’s shelf is the brands responsibility. Fish in the right pond; meaning know that approaching 25 accounts in New York City is not as beneficial as selling the right 8 accounts in New York City. Data will tell you all that. Limited time and people means a need for selling smartly and using strategy. The rules of the game are changing, and the winners in this version of “Hunger Games” will be the brands that understand what the three tier can look like and how to use what is available to a brand’s benefit.

Producer- Distributor- Sales Teams for the Brand- Account- Consumer, The victors will be the brands that look at sales, marketing and promotion as a very critical part of the production process. The victors are the ones that say, ‘we love our distributor,’ but we will handle the selling of our own brands. The winners will take the brand growth in their own hands by investing smartly in ground teams that use data, knowledge, statistics to attack the right accounts at the right times.

This is what winning will look like for a progressive and smart brand. The critical selling season is just about here. There is roughly 8 weeks left to pitch a distributor to take in a new product or enter a new market. There is roughly 12 weeks left to pitch a retailer to add something to the shelf set. Remember, a new brand intro is stealing a customer, not creating a new drinker. These are real deadlines that are very inelastic in nature.

What are you doing on behalf of your brand to make 2017 end strong? Every week there is 100 newbie brands coming after your market share and your category. Before you know it, it will be January 2018 and this whole process starts again.

The definition of insanity is doing the same exact process and expecting a different result.

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 "Three Tier Selling Insanity…Again!"

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  1. Steve says:

    If there were no such thing as a distributor monopoly in beer/wine/spirits distribution/sales, how would the landscape change? If a distributor is someone who expects to deliver product for a fairly healthy fee, could a delivery system be put in place based solely on competition, the consumer and not be a monopoly distribution system. If the producer of product is responsible for negotiating price with retailers, arranging shipping of product, marketing, tastings, PR, product development, etc. the distributor adds value where? Well, does the landscape change? The big distributors might start deliver divisions. Maybe the small guy producer goes UPS. Or maybe small producers want distributors. Will the day come when the government will dictate you can only buy chewing gum sold to a distributor and then sold to a retailer as a negotiated market up. It would be ILLEGAL for Chiclets to sell their gum directly to retailers. How does a monopoly system help consumers?
    Just a passing thought. Nearly 100 years of the current system may be one indication that change would not be bad. Todays technology and retailing may indicate something that is broke needs to be fixed.

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