Once upon a time, distributors experienced sales as a meritocracy. If you had the right fit for the right wine program, and you were a worthy business partner, you earned the sale.There was a safe place for fine wines from all over the world at all prices and at all production levels. These were the halcyon days of independent retail and family owned wineries.It may sound like a far away, sepia-toned, alternate reality, but it was just a scant 10 years ago.
If any of you have asked me how business is, you've gotten a very long answer. And on some level, that's just scratching the surface. 3 weeks away from ampelography's 9th birthday, here's the reality-I sold more cases in 2017, than I have in any other year, and 2018 is looking even better. That is all great news. I get to keep doing what I'm doing, my relationships have never been better or healthier, and I have a pretty predictable sales cycle. Here's where the news gets a little mixed-When I set out, I envisioned a multitude of rotating small family owned producers, along with some solid medium sized wineries and a bunch of imports. That felt like a well diversified mix. In 2018, I stand here with a couple of great import partners, a handful of great medium (medium for me, small for many distributors) sized producers, and very small handful of small producers remaining. While imports and medium sized producers are thriving, setting records each year, the small, <5k case production wineries have all but disappeared from my book. There are several reasons for this, some have sold, some have fully pulled out of distribution altogether, some haven't been successful. For me, personally, this is a gut punch. I really believe in the need for small wineries to gain exposure through distribution markets. During the last recession, one of the first expenses cut from wine drinkers' budget was wine clubs. I worry that the small wineries won't survive the next, inevitable recession. This is also frustrating, because, one of the reasons I started this business, was to champion those small producers. Unfortunately, the market has completely shifted. Here's where we are:
- Too many wineries, not enough distributors-alarming trends you can read about here. "The number of U.S. wineries has risen sharply recently, from around 1,800 in 1995 to 9,645 as of December 2017. Distributor counts, however, have gone in the opposite direction, shrinking from around 3,000 distributors in 1995 to around 1,150 or so today."
- Consolidation favors the people pulling the strings-As retiring, or leveraged, family owned and liquidating wineries sell, they are selling some idea of credibility to the giant wine sales factories, entrenching them further into the fine wine market. This is happening in craft beer as well. Those, once family owned wineries, are now being turned into a commodity. Fewer distributors give less bandwidth to the remaining, less cash rich wineries, leaving many stranded.
- Convenience Shopping-Large, chain grocers have been trying to figure out how to make their stores a one stop shop for years. The idea of "Grocery Store" wine has evolved. Now, mega marts have the appearance of being a fine wine shop as well, even though, every producer on the shelf is cranking out 100k+cs and being chosen by Nielsen data and not quality, 1000mi away.
- The erosion of the Fine Wine Merchant-see above. The corner Fine Wine Merchant used to be your source for the good stuff. Now, it's an extraneous stop.
- Changing restaurant wine programs-Thank you craft cocktail craze! Restaurants have shifted away from white tablecloth service and towards more casual upscale, chef-driven cuisine. Many promote cocktails and craft beer to feel more approachable. This has had an impact on wine sales, although, we are starting to see a shift back, slowly.
- A glut of leveraged, mediocre wine at the sub $20 category. Technology has allowed winemakers to make, uninspired, but not bad wine at a very low price point. Slap a funky label on it, and you give the illusion of something handmade. Inexperienced consumers may not realize what they're missing.
Here is my free advice
- Stake out your distribution channels. If you produce up to 3k cases, you really need 5+ good markets. Spend your time and money in a few concentrated markets
- Take the road less traveled. NY, CA, TX,FL, IL-yeah, that's the obvious shopping list, your time and money is probably better spent in smaller markets with less saturation. It's like baseball-hit 'em where they ain't.
- Choose the RIGHT distributor-If you get in bed with a big distributor, you won't matter unless you are a top 20 supplier, and YOU will NEVER be a top 20 supplier. Find a great distributor that has a great culture. Start by calling the most respected shops and restaurants., Find out how long most of their team has been in place. Don't be surprised if you don't get return calls. If you can't find the right people, look at another state.
- Find your people-Unless it's is your home market, you ABSOLUTELY need people on the streets fighting for you. This could be a broker, but more importantly, a brand manager, sales manager or just a great rep on the street. If you are a small winery, there are actual people behind it. we all want connections and hate selling corporate juice.Get to know the people, they will take care of you.
- Understand what is happening on the streets. Distributors may be a barely better than break even proposition, but predictability and cash flow are pluses and can help give you leverage. Price to the market, don't price to what you think it's worth on the high end.
- No one, and I mean no one, cares about medals. Few care about ratings anymore either.
We have a fight ahead of us. I'm not giving up. You shouldn't either.