How To Successfully Launch and Distribute a Beverage in a New Market
Over the years I have seen multiple microbreweries, wineries, and distilleries fail at expanding into new markets — often due to an unhappy relationship with a distributor. It seems that many company leaders think if they just sign up with a distributor, their products will magically appear on shelves everywhere and sales will skyrocket. If only it was that easy!
I decided to sit down with 100 Proof Beverage Company’s Jordan Williams and Kirk Wayne to discuss the right pathway to launching products into a new market and how to establish a successful distribution arrangement. Companies that execute this process well are more successful — and they make their distributors more successful, so everyone wins. 100 Proof is a subsidiary of Williams Entertainment and Consulting in Nashville, TN, and they regularly help breweries, wineries, and distilleries break into new markets.
“Distribution contracts are a lot like marriages, except it’s harder to get out of a bad one,” says Williams. “And much like a marriage, getting counseling and doing your homework before you enter the arrangement can help ensure a healthier relationship and long-term success,” added Wayne. Distributors invest time and resources in each product. It is very important to make sure you find a good match and then constantly work on making the relationship a success. Even if a product isn’t currently well-known it might catch fire later, so distributors have a vested interest in keeping it.
Before even looking at distributors, the first step in the process is making sure your own branding is on point. It may sound simple, but poor branding will make it harder for you and your distributor to sell a product. Products need to be “approachable, attractive, and matched appropriately to their target demographic,” says Williams. This means focusing on labels, packaging, displays, and advertisements, as well as developing an understanding of where to go and who your competitors are.
The second step is knowing your production capacity. When you enter a new market and a new distribution contract, the last thing you want to do is promise more product than you can deliver. “If you can’t deliver you will lose placement in stores and restaurants and get replaced by something else in a distributor’s lineup,” says Wayne. This can cause you to have to completely start over to get sales and gain traction because you’ve been replaced. Distributors are not going to wait on your stock to sell products, they will just replace you and move on. They won’t reorder because of your lack of production and foresight.
After handling production, do some research on the state in which you plan to sell. Some state governments control alcoholic beverage distribution, so you’ll want to know about any requirements. For example, some states must approve your distribution contract; some must approve your sales and marketing plan, labeling, and ads; and some even require you to publish pricing with them on a quarterly basis. Make sure you know the rules of the game.
The next thing to consider is timing — and timing is critical. If you’re launching that new delicious Christmas Ale, don’t show up still full from Thanksgiving dinner. You will be way too late. Product expansion or launches are planned well in advance. “Retailers and distributors already know their OND (October, November, and December) lineups as early as July or August,” says Wayne. He adds, “If you miss your wedding date, you probably aren’t getting married.” Knowing exactly when to approach a distributor can be the difference between success and failure.
So you’ve reached a point where you know who you are (branding), what you’re capable of (capacity), where you’re going (governmental rules and regulations), and when you’re going (timing). Now you’re ready to get going, right? You may be headed right into a buzz saw.
Well-established distributors will want to know what chain commitments you have obtained. A chain commitment is an agreement from a larger retail or restaurant chain to purchase your products. At the same time, these chains will ask for the name of your distributor. If you don’t already have really solid relationships with chains and distributors, “you may get stuck in a perpetual game of chicken or the egg,” says Wayne. Also, once you get a GSM (General Sales Meeting) with a chain and with a distributor, you’ll need to know how to sell your product and educate your audience about it. These are just more reasons to seek consultation with someone well-connected when entering a new market.
To find the right distributor, you’ll want to do a little homework. You’re looking for the best fit for the product you have based on the distributor’s size and experience. Do they carry large brands, and if so, might yours be lost? Or are they both large and experienced with helping brands get established? Alternately, are they small and able to dedicate more attention to you? Or are they too small to have enough clout? Meet with several and find the right match. Again, select wisely as contracts are hard to break.
Once you find the right distributor for you, it is critical to set up your product for success. (In my mind I can hear Jerry Maguire saying, “Help me… help you.”) This is done by creating the right incentives to promote your product on all applicable levels within the distributor’s organization. Think cash awards or non-cash items such as event tickets or trips. “When I worked for a distributor, one particular company established a cash reward for the number of multi-bottle displays we could set up in stores. They also created a sales incentive for our manager. It made us want to convince our retailers to set up the displays because it made a difference for us on the front lines,” says Williams. “That helped the product gain some prominence it may not have gotten otherwise, and it was successful.”
Remember, you are responsible for promoting your product. Your distributor can help, but ultimately you need to facilitate the process with them. Once your product is moving, you should be very proactive about assisting the warehouse manager with order times and quantities. “They deal with many products and likely are ordering based on whatever is in their computer,” says Williams. In other words, if an upcoming event may create demand or something is slowing demand, remind the warehouse manager so they can appropriately manage their inventory and avoid having too much on hand (which is frowned upon) or too little to meet demand.
Make your distributor’s life easy and successful and they will help you succeed. If you don’t make it easy, you will be “shelved.” This is a term distributors use when you have not given them enough reasons to put effort into selling your product (it’s likely someone else has). As a result, they keep your products on the warehouse shelf but they don’t release you from the contract. This happens when there is no marketing assistance, no incentives, or a lack of reorders from retailers and restaurants. In my mind I can hear the Toy Story toys saying, “Woody’s been shelved!” Don’t be a Woody.
So there you have it, a game plan for setting up a new product for successful distribution. The score is measured with reorders (wins) or being shelved (losses).