Food For Thought

The wine industry and domestic wine trade have both grown enormously over the last decade, with increasingly savvy consumers choosing from an ever more competitive market. Wineries have grown, technology has been embraced and sales have multiplied, however the supply chain model has generally stayed the same.

Supply map

The dominance of the supermarket chains and the oversupply of wine has made today’s wine trade tougher than ever, especially to new entrants and smaller producers. The highly competitive nature of the trade has also meant that the traditional supply chain needs to be modernised if wineries and distributors are to consistently grow in the future.

Please forgive any generalisations below.

Difference in Focus

Experience has shown that the key stumbling block between wineries and distributors, the root cause of frustrations, failings and below budget sales is very simple: difference in focus.

Distributors are focused downstream, on their customers and on consumers. It is their role in the supply chain to move wine through on and off premise customers to the shopping bags and dining tables of consumers.

Wineries are focused upstream, on the inputs with which they make their wine. Time, energy and money are spent in the vineyard, at the cooperage and on the cellar floor, all in the quest to make better and greater wines.

In effect, this difference in focus means the winery and distributor are looking in different directions. Neither is doing anything wrong, quite the opposite, they are both focusing on their key role in the supply chain, focusing on where their skill set lies – after all, wineries use distributors as they provide the sales skill, a very different skill set to winemaking.

Supply Push

This difference in focus has meant that the supply chain tends to be ‘supply push’; a wine is produced and added to the winery’s portfolio, thereby effectively adding it to the distributor’s portfolio. The distributor’s sales reps then must persuade customers to stock the wine and hope that consumers choose it.

This ‘supply push’ supply chain is failing for more reasons than space here on this webpage, but effectively because consumer needs are not being addressed. The wine industry will always be and needs to be supply push so that winemakers can express themselves and their vineyards by creating new, exciting and unique wines, however this needs to be balanced by a distinct move to include ‘demand pull’ into winemaking considerations.
A ‘demand pull’ supply chain is one where consumer needs are researched, identified and a product produced to satisfy needs. The current Sauvignon Blanc market is a good example of demand pull gone crazy; it is obvious where current consumer tastes lie, so wineries from all corners of the country are producing Sauvignon Blancs to try and cash in. The result is a swath of generic wines which don’t match the winery’s history or region, don’t fit in the winery’s or distributor’s portfolio – oh, and don’t sell that well either.

The Wine Rep is advocating a decent dose of ‘demand pull’ added to the current ‘supply push’ mentality. The companies in the best position to identify consumer needs are distributors, so it makes sense that wineries work closer with their distributors to gauge market needs and come up with products that both satisfy these needs and match the history, capabilities and region of the winery.

A Winery’s Sales Department

Add to the above the following notion: a winery makes wine, creates a brand for the wine, markets the wine but employs the distributor to sell the wine. So wineries handle production and marketing while distributors handle sales – effectively meaning that the distributor is the winery’s sales department.

The problem here is that sales and marketing departments are meant to work hand in hand – with marketing building the image of the product and product attributes to assist and augment sales, facilitating the sales department’s job. That certainly happens in wineries with the means and in house sales force, but for wineries that use distributors it isn’t so easy.

Yet both parties have a vested interest in the other’s success: the distributor needs the winery to produce good wines and to market them well, while the winery needs the distributor to have an effective sales team and to meet sales budgets.

Conclusion

The above food for thought lays out the reason this website has been created; wineries need to understand consumer and customer needs better and to do so they need to work closer with their distributor in areas besides sales budgets. Distributors need to provide more constructive and actionable feedback to wineries if they are to be provided with more saleable wines and effective marketing.

Hopefully the articles and tools provided on this website make the above easier.