The new financial year is a great time for sales people to stop and relook at their sales territory. By now the figures for the last 12 months should be in, making it a great time for wine reps to go through their own customer list and do an honest appraisal of where things currently stand.
Assumptions are a salesperson’s worst enemy: assumptions that your wines won’t suite a venue, assumptions that the buyer won’t want to see you, assumptions that the decision maker is too busy, assumptions that your competitors have better relationships than you and most importantly, assumptions that you know your sales territory inside out.
I guarantee that that for the great majority of reps, an hour studying recent sales figures by customer by SKU versus historical data will highlight a raft of changes that haven’t necessarily been obvious during the everyday activity of doing business.
Sales people focus on orders coming in and opportunities that we want to exploit, while we tend to overlook or (if it’s painfully bad news) blatantly ignore contractions in our territory. It isn’t easy or all that pleasant to follow up where sales have diminished but it is a habit that the best reps have managed to get into and as a result they tend to minimise their losses where other reps would simply move on.
A solid annual review is your chance to right this wrong, to identify where business used to be and potentially could be once again. The loss of a small restaurant winelist is annoying at most at the time, such is life, but over a year that loss it might have punched a big hole in your budget for several wines. Have new listings replaced this loss? If not then you’re behind the eightball. If yes, then great, but quite often that new winelist you like to boost your ego by telling your work colleagues about has only replaced lost sales, rather than grown your area.
Be honest with yourself and your sales data, embrace the facts of what it tells you and then develop some areas of focus for this financial year to fix and replace those leaks. As a salesperson you’ll always be on the hunt for new opportunities, so add the habit of reversing/replacing contractions to your sales armoury and you’ll see sales blossom accordingly.
Many of the frustrations felt by wine reps and wineries are caused by a lack of wearing the shoe on the other foot – putting oneself into the place of the customer and understanding what their real (and perceived) needs are. As we should all understand, the most solid relationships are built around trust, however trust is hard to build if you do not show that you ‘get’ the trials and tribulations the other side is facing. So lets put ourselves in the shoes of an independent retailer who sells a bit of wine and is a good example of an ‘average’ retail customer:
‘My banner group has a core range, mainly products from the big boys which aren’t necessarily suited to my shop but since they pay the dollars, they get the core ranging and regular promotional placements. I’ve complained in the past but to be a member of the banner group I need to just grin and bear it. Due to the large number of core ranged products I don’t have too much space for other products, so I make sure the other wines I do stock offer my customers a point of difference; some are local favorites, some offer crack a jack value, others just offer me massive gross profit.
As the promotional schedule is done by the banner group, I don’t have any direct say in which products are promoted (basically whichever supplier stumps up the cash gets the gig), but I still run a few in store specials. I guess my problem is that I don’t want my customers just walking out the door with specials because I don’t make as much GP (and the banner group promotions often give me low GP), so if I’m going to do an in store special it really needs to let me take in my normal GP while still offering a discounted price to the customer. Reps get annoyed that I won’t lower my GP expectations when they are giving me a good deal but I’ve got a business to run and need to make good GP just to survive.
Each day I have reps show me new products and ‘must have’ wines which I’ve no choice but to turn down. Firstly I just haven’t the room for new products, basically one product has to go for another to come in; secondly I need to manage my stock on hand – stock that I’ve paid for and that’s sitting and waiting to be bought. Thirdly, over the years I have learned what my customers will buy and in many cases, although new wines that I am offered would suit my customers well, there are already several other wines that satisfy their needs. I know that I have enough wine brands and styles to satisfy 99% of my customers, I’m not particularly bothered if its wine X, Y or Z they walk out with, so long as they walk out with something. What’s the use of me stocking three more wines to compete with wine X, if wine X already makes my customers happy?
Sometimes, especially around tax time and BASS, I do struggle to pay all my bills on time. I’ll always make sure my wide range wholesaler and breweries are paid first as without their products the shop would need to close. This does mean that some of the wine distributors need to wait for payment, the good ones understand that life isn’t always easy and that I do what I can – its generally the reps who look after me the most that get paid quickest, and the ones who race in for a quick sale or just to pick up a cheque that get paid last. If someone’s account department constantly hassles me and calls when I’m busy I’ll just make sure to buy less from them so there’ll be no money for them to chase next time.
I do have some problems with old wines and ask that reps take back or replace wines that don’t sell – if suppliers choose not to support me with this I tend to be less interested to to business with them, after all if they sell me a wine that won’t pull through its their responsibility to do something about it. I don’t want to have a bargain bin full of wines I make no money on.
The chains and their discounting do make my life hard because customers are constantly telling me that they could save money by shopping elsewhere. I understand that I am effectively a convenience store, I certainly don’t do many full case sales anymore because people tend to head to big box for them. Unfortunately many of the wines that sell well here are often discounted in the chains, sometimes priced as much as $5 a bottle less than me. That $5 is my profit margin but most of the time people just think that I’m ripping them off so it makes me look bad. Those wineries who support the chains with big discounts and large ads don’t get any love from me and I make sure I call the rep if I see a price that’s below my buy price. I wouldn’t stock many of those wines if they weren’t in the core range or if my customers didn’t keep asking for them.’
Phew! Any rep will be able to relate to the above statements, having heard similar on countless occasions in the past. Whilst we may not agree with what our retail customers say we still need to understand their motivations in order to find a way to amicably get around potential speed bumps. In many respects, reps will need to swallow their pride and their words in order to foster successful business relationships; understanding a customer’s take on a situation and the reasons for it gives the rep the advantage, even if his own opinions are polar opposite. Remember – you can’t change their point of view but you can understand where it comes from.
Some discussions on the weekend have backed up the notion that we in the wine trade and wine industry are not moving with the times. For hundreds of years the wine sales chain was fairly standard: producer to middleman to licensee to consumer; simple and effective.
Our booming export trade of the 1990s funded a change in the makeup of our industry – winery buyouts, mergers and expansions. This change created middlemen on steroids – winery owned/controlled distribution arms with portfolios the size of War and Peace but did little to change the way the sales chain operated or influence the modus operandi of smaller producers.
Unfortunately, in the background other changes were afoot; to start with the world flattened and our export treasure chest customers started to get a taste for other countries’ offerings, products which have the distinct advantage of lower costs, causing the reigns of export growth to be pulled in. Added to this structural market transformations, most notably the growing dominance of supermarket chains in wine retail both at home and overseas, shifting the power even further into the hands of buyers.
Yet even with all of this going on, our domestic wine trade/industry and the way we look at selling wine domestically has remained static. Basically we haven’t equipped ourselves with off road tyres even though the terrain has gotten rougher.
My previous article looked at this in narrow terms, using big box retail as the example which I’ll do again. If our two liquor retailers can become national powerhouses in only 7 years, controlling 2 out of every 3 bottles of wine sold, then clearly they are doing something very right. They are taking lessons from the whole gamut of their retail, supply and producer experience and implementing them in liquor; they have become importers, producers, wholesalers and discounters because the traditional wine trade wasn’t there to offer sufficient competition. We are ineffiicent and worse, ineffective, leaving the door wide open for efficient and effective operators such as the chains.
We limit ourselves to the role we have been playing since time immemorial; producers produce, distributors distribute and licensees sell. Example: wineries steer clear of selling direct from their websites because “it’ll upset my distributor;” distributors don’t sell direct to consumers because “my retail customers will get annoyed.” Instead, some retailers and dozens of entrepreneurs have snapped up online liquor licenses and are enjoying double digit growth, low costs and an ever increasing market size (as more people shop online). Good on them, bully for the rest of us.
The rules have changed. The competition is smarter and more powerful than ever. But the world is flat. The opportunities for sales are greater than at any time in history. The multinationals are awash with wine and doing a great job at devaluing their brands as they try and shift it, but they will improve and become increasingly dangerous as they spend their shareholders money hiring specialists and analysts.
For the rest of us it is time to look outside of the square, take a step back and open our eyes to the possibilities. Wine is a commoditised fast moving consumer good, no matter what oak it’s aged in and how many generations of family have been making it. Look at the national and global wine trade as an economist would look at any competitive FMCG marketplace.
Producers can sell to whomever they want. Distributors can do the same. Secondary brands, bulk wine, BOB, export packaging, banner group agreements, hotel chain agreements. Supplier – distributor partnerships. Inflate list price to deal back later. Incentivise. Seek advice from experts in different industries. The possibilities are endless, but they need initiative to grasp and implement them.
Let me end on this, something I heard a few years ago (and please correct/extend if you know more): when designing their super winery in the Barossa, Wolf Blass Wines looked outside the square. Instead of asking ‘how will we get our ferments from all around our large winery into the presses they said what’s the most efficient way of moving very heavy loads around a worksite?’ They figured that since miners do that every day, they’d talk to a mine engineer – who ended up helping them design the winery using transferable techniques developed in mining industry. That’s thinking outside of the square. That’s using expertise from another industry. That’s what we need more of today.
The ongoing ‘them and us’ outlook of independent retail when referring to the chains is understandable and realistic given the business goals, financial backing and supplier clout differences between the two off premise routes to market.
The chains have brought fresh ideas (many borrowed from grocery) into liquor retailing, whether that be marketing campaigns, adverts or increasingly – clever deals and specials. They have broken the mold of liquor retail and it is high time the rest of us get on board if we are to be relevant and compete in the future.
Should an independant retailer simply squeeze his margins and attempt to build business using the same promotional schedule as 5 years ago? Should the distributor limit himself to selling branded liquor to liquor license holders, accepting a small middleman’s cut as recompense? Should wineries leave the selling to their distributors, relying on a small pot of accrued co-op dollars for distributor initiated trade promotions?
Take the big box retailer. It sells booze to the public. It sells booze to cafes, restaurants and even other retailers. It even has the odd rep who builds direct sales with local businesses. It has the clout to demand very attractive trading terms, discounts and advertising spend from its suppliers. It then creates it’s own brands to compete directly with it’s supplier’s products – whilst making massive GP on these products along the way. It also uses these brands to create the illusion of super specials (buy 12 bottles and get a free/discounted carton of beer etc). It parallel imports some products (eg beer), cutting out the local producer/supplier entirely.
In short, it is a retailer, distributor, producer, importer and marketer on a national scale. Bravo.
To compete with this sort of modern and nontraditional operation, the rest of the wine trade and industry really needs to take a good look at how it adds value, find some like minded partners and work together in more areas than their own traditional field if long term growth is to be guaranteed. Distributors can work with their own winery suppliers to come up with their own home brand that generates more GP for them and volume for their suppliers. Wineries can align their marketing and promotion activities with the needs of each market by working with their distributors and their unique areas of strength. Those wineries who go direct to market themselves can align themselves with banner groups, hotel groups or even other wineries from different regions to add value to their offer.
What I’m suggesting does not have to be revolutionary and in many cases, steps are being taken by forward thinking operators to come up with modern solutions to a very different liquor trade landscape than yesteryear. Changes in focus, style and delivery do not have to be driven by squeezing margins, rather squeeze out rehashed ideas and methods and identify different ways of doing business in order to, once again, add value.
Help me find a distributor! A common theme for emails to this site. Unfortunately, wineries seeking distribution today face more hurdles than in any previous time in recent memory. Distribution companies are bombarded almost daily by wineries hoping to secure a distribution channel, meaning few succeed in their quest. It is a numbers game, distributors sell wine to make money, they don’t represent wineries to build brands.
It is important for wineries seeking distribution to put themselves in the place of a distributor in order to see their wine’s offer through their targets eyes. Any new winery added to a portfolio must bring something to the table for that no other winery currently does, such as regionality, price point, awards, quirky marketing etc. Alternatively the winery needs to have an inherent demand in the marketplace, providing current and ongoing case sales (and least one pallet a month) to justify it’s inclusion in the portfolio.
Does your winery bringing any of the above to the table? If not then securing a decent distributor will provide a challenge. A good starting place would be to complete the ‘Pre-Distribution Checklist,’ available on this site, which lists the key aspects a distributor will be interested in, allowing you to refine your approach. Obviously the ‘Seeking distribution guide’ provides far more detail and will certainly take your offer to the next level.
A great deal of emails received to this site come from wineries unable to secure distribution, and I am unable to provide detailed answers to every unique case. My simple advice is to get out on the road and start making regular sales calls in order to build up business, targeting independent retailers, fine dining restaurants and larger cafes. Bringing a list of current and loyal customers to a distributor demonstrates that there would be immediate profits to be made from selling your wines.
There is no easy way to secure distribution, however ensuring that you and your product tick as many boxes as possible will give you the best chance for success.
The wine industry loves awarding medals and trophies to itself, much like the entertainment industry loves giving itself shiny awards (in 1991 the Academy Awards won an Emmy Award for best Variety show!). In the 2009 Melbourne Wine Show, 566 producers entered 3,493 wines in the chase for the 22 trophies on offer, and with over 50 different classes available, every conceivable wine could be included. The fact that most classes only required a minimum holding of 250 dozen, even the smallest winery had the opportunity to put forward their wines; the result? Hundreds of medals awarded of course, pats on backs all round.
For a small or medium producer, receiving a medal or two from piers in the industry must be very satisfying, a confirmation that their hard work is worth it all. Medals are rightly displayed with pride at cellar door, and its not long before the stickers are produced to go on every bottle. This is where we are going to jump in, shout ‘stop,’ and take a wine trade view of medals on bottles.
If your wine scores 15.5 or more out of 20 it will get awarded a medal at a wine show, score more than 18.5 and you’ve got yourself a gold. However as much as the wine industry and some of the wine trade understand this, the average consumer views medals in the same way as they see sporting medals – gold for first place, silver for second, bronze for third. That is a wine trade fact. Thus the winemaker’s pride in being awarded a silver medal in a class full of much bigger producers is not reflected in the consumers view of that same silver medal on the bottle – ‘so it came second.’
Add to this the large amount of classes within a wine show, (and there are often even different classes for the same variety), meaning a cheaply priced, young and well made shiraz can get gold in it’s class, while a better made, barrel aged shiraz can get silver in it’s class, and the only difference is the class number on the medal. Consumers don’t understand class numbers and they don’t have the time or inclination to research them during purchase decision making. So when a $12 gold medal shiraz sits next to a $20 silver medal shiraz, what is the consumer to think? Moving up the price scale, how can a consumer justify spending $50 or more on a wine if it has ‘only’ won silvers and bronzes, or $100 on a bottle that has won a gold but no trophy?
From a sales perspective, producers should think long and hard about why they should put medals on their bottles. Certainly trophies and multiple golds medals will add good reasons for consumers to choose that wine, particularly if they haven’t heard of the producer, as it adds a third party acknowledgment to the quality of the wine. However the jury is out on whether silvers and bronzes add to the appeal of the wine, unless they are a platform for the multiple golds above them to shine. Human nature is to seek out the best value, and how can a silver or bronze medal winner offer value when there will be a gold medal winner or two at a similar price? Think about it – what excites people? The Oscar winner or the 3 other films shortlisted? The world cup winner or the beaten finalist?
Another view of the medal debate is the fact that it brings up vintage differences, which can be a bad thing if you are trying to build up overall brand. Brands offer consumers trustworthy products that they can always purchase with the reassurance that they will deliver a positive or known outcome. Brand is built up over years and becomes much more than the product in the bottle, much more than the sum of it’s parts. A silver or bronze medal on the bottle will erode brand equity because it brings focus back to vintage variation, breaking the trust in the consistent image of the brand. On the other hand a trophy will build brand equity, reassuring the consumer that their trust in the brand is validated by the wine show judges. This is why you won’t see market leading brands display anything less than trophies or golds, if any medals at all.
To medal or not to medal, that is the question. The Wine Rep recommends smaller producers only include a silver or bronze on a bottle if there is at least one trophy or several golds to back them up. As for wines over $30 retail – never anything less than gold.
Thought this video might amuse, found it on YouTube:
In the old world of wine, regionality is everything – it is the style of the wine, the varieties used, the outlook of the producers, the crucible holding centuries of tradition together. Customers roughly know what they are paying for when they put their hand in their wallet for a Chianti, Burgundy or Rioja – a large degree of trust has been built through decades and even centuries of wineries in each region pumping out relatively consistent styles of wine using roughly the same varieties vintage after vintage.
In contrast, The New World upstarts have been breaking unwritten wine rules from the very beginning and regionality is no exception. Whilst each Aussie wine region has a reputation of making a certain varietal or blend better than others, wineries do not limit themselves (and are not limited by appellation laws) to only a handful of styles. The opportunities are endless and in the pursuit of commercial success (‘they more different wines you make the more chance of sales’ mentality), the urge to let a winemaker’s creative juices run free and often just to ward off boredom and to try something new, wineries big and small end up with a large stable of wines with styles and blends unsuited to the style of winery and reputation of the region. The wines might be good and offer value for money – but is producing this endless stream of non regional wines a self destructing habit wineries need to get out of?
Lets skip to the other end of the sales chain: a distributor’s sales force is armed with a portfolio of wines from all around the country, a mid size distributor might represent 2o wineries and 200 wines. Given each state has plenty of these distributors on the road, your average retailer and restaurateur might have an ongoing choice of over 3,500 wines in price catalogues sitting in their desk drawer. Putting together a new wine list involves balancing customer needs, food matching and price levels, never an easy task. The staples that will go on the list are regional wines at the right prices – Margaret River SSB, Marlbourough SB, Barossa Shiraz, Yarra Pinot etc etc, with relatively little or no space for that Coonawarra Sauvignon Blanc, Barossa Valley SSB, Margaret River Merlot or Yarra Valley Verdelho. Yes, those wines might be excellent, yes they might offer excellent value for money but unfortunately, yes, the average customer will overlook them because the region and variety/blend does not endear trust.
Every distributor in the country will have wines in their portfolio which can only be classified as dogs, practically unsellable and a lingering issue of discontent between the distributor and the winery. Take it as fact: 9 out of 10 of these wines will suffer from lack of regionality, be a variety or blend with next to no consumer demand or be stupidly overpriced. Price can be changed, styles with little inherent demand are niche products that will always struggle but offer a point of interest/difference to both wineries and distributors; lack of regionality is simply a winemaking blunder, a wine produced for the wrong reasons.
Wine Australia has been advocating ‘Regional Heroes’ for some time now but it seems the message has not sunk in. Perhaps the need to reduce Australia’s wine production is the perfect time to weed out those non regional wines. Somehow I doubt it, especially with the unceasing Sav Blanc demand lighting up winemakers eyes. Shame though, it would be nice to reduce the number of dogs sitting in distributor’s warehouses.
It’s probably about time that we face up to the fact that the discounting and buy deals of the last half of the decade have now become the expected norm – the trade does not expect to pay list price, that’s just a starting point for negotiations.
Given the reduced return distributors and wineries are seeing from deals - for a deal stand out in today’s market it needs to involve a great deal of margin sacrifice or a disproportionate about of bonus stock – other approaches need to be trialled. The theory behind a deal is increased volume at the cost of some extra discount or bonus stock; the retailer can then offer the product at a lower price while still making required margins and has stock weight on the floor to help sales (and remind him he needs to move the stock quicker to recoup his spend). It should be a win win.
Unfortunately while retailers might be purchasing stock in deals, they then don’t feel obliged to move it quickly; if for example, a retailer sells an average of one carton of Wine A per week, they’d happily buy a 6+1 deal every 7 weeks, which simply costs the seller a carton every couple of months with no real increase in volume. It’s this cycle that many distributors need to get their customers out of, a very difficult process.
One option that the Wine Rep recently came up with (and admittedly is as yet untried), is time or frequency based discounts. Simply put, buy at discount X today and if you reorder within a certain time period you will get improved discount Y. The onus is then on the retailer to move sufficient stock to be able to regularly reorder within the required period, effectively shifting a retailer’s focus to your products.
There are a lot of caveats that need to be well thought out before such a deal structure is put into place, but it does offer an option for shifting the responsibility of pulling through stock back onto the retailer – if they want the extra discount/bonus, they don’t necessarily have to buy more (which is how most deals work), they just have to buy more often.
This type of deal structure also offers a significant point of difference in the trade which alone might be worth the effort, retailers love trying something new if it means they can get (or think they can get) something extra. Worth a go if current trading tactics are not yielding sufficient growth.
An esteemed member of the trade recently put forward a good reason that many wineries struggle to make a mark in the retail sector, namely unsuitable, unseemly or just downright poor packaging. A wine’s front label along with bottle shape and colour is it’s calling card, its brand communication, as well as quality and value statement, all in one. There are no signs in bottleshops that read ‘Don’t judge a book by it’s cover,’ because that is exactly what the bulk of consumers will do when choosing a bottle of wine.
Next time you’re strolling down a supermarket isle, have a gander at the different labels on offer, whether it be on homebrand tomato sauce, loaves of bread or packets of Jasmin rice. The bulk of those labels will stand out as professionally designed, well suited to their product and appealing to the eye – after all their job is to entice the consumer to purchase. Now have a wander around your local bottleshop – how many of the wine labels on display there look as professional as those in the supermarket?
Smaller wineries need to bite the bullet and spend some money on packaging design if they want their wines noticed by retailers and picked up by consumers. In house design is no longer an option in such a tight marketplace, professional marketing companies will draw up designs that take brand identity, region, price and competitive advantage into consideration to communicate the most sale-able aspects in the simplest fashion possible. A good label can do amazing things to sales, especially if the quality of the wine then over delivers on price – because the customer would have never been exposed to the quality if the label didn’t do enough to entice purchase.
For motivation, have a look at the packaging of some wines from small producers which are punching above their weight sales wise at the moment, you’ll notice it is well suited to the brand and price as well as easy to understand. Finally, remember one thing - a winery is full of people who have an emotional connection to the brand and therefore these are not the people to judge the quality or suitability of packaging. Distributors and retailers will provide far more balanced reviews as they will be looking through the eyes of salesmen looking to provide solutions to customers needs.