In today’s issue, I’ll analyze the most common issues new drinks brands have with sales and distribution. I'll show you my 5-step process to ensure a great relationship with your distribution partners.
By adopting this process, you’ll make sure you have solid basics in place before scaling up your brand.
Unfortunately, most brand owners treat all distributors the same. They fail to acknowledge the difference between an importer and a wholesaler when exporting their brand:
- An importer is an entity that represents your brand in a market. It works at a national level across channels. They may have a sales force but it’s spread nationwide so it lacks deep dive to the last mile.
- A wholesaler is regional (city or across a few provinces). It has a sizeable sales force in a small territory, on specific customers and channels. It can impact the sell-out but it doesn’t give you a national presence.
Brand owners don't realize that importers and wholesalers are 2 sides of the same coin to scale
A short personal story. My great grandfather and my grandfather were wholesalers in the south of Italy for 100 years. The business survived 2 World Wars but it closed when I was a child in the 1980s. All I have now is a photo in my wallet and a passion for the industry. I've spent years understanding the role of wholesalers in building brands.
I’ve worked in 30+ markets on 4 continents bringing brands to market only via 3rd party distributors. I soon realized the crucial importance of small/medium local wholesalers. A brand will never succeed without the granularity of wholesalers' business.
I know that there are nuances in RTM in each market, but I noticed that the dynamics are similar. I will talk about the most common traits that work across the globe so bear with me if it doesn’t apply 100% to your market. It applies 70-80% and it’s good enough. What are the most common challenges?
Challenge 1: most importers have a quite small direct salesforce. When you launch in a market, you look for an importer. The thing is that they usually have a small salesforce across the country. Every brand knows the theory of a city-based commercial approach but only those who know how to work with wholesalers can win in a city.
Challenge 2: wholesalers are the ones who actually ship your cases. Nobody talks about them but they are the last mile to the trade. Importers will rarely introduce to them but they are the enabler of a granular approach. In fact, bars think bottom-up. They work with 2-3 wholesalers that bring them the goods. If a brand is not available with them, they'll order another one their wholesalers have. They don't want to have tens of invoices from different players. Even if an importer has direct distribution to the same accounts, bars are very likely to order through wholesalers out of convenience. If you don't have their sales teams on board, you're missing out.
Challenge 3: your importer may lack good relationships with key wholesalers. Importers may lack access to some segments in the market that only wholesalers serve. Think of traditional on-trade ones such as Italian, Mexican, and Japanese restaurants when bringing to market Italian vermouth, tequila, or a Japanese Whisky. All brands have a traditional occasion that is a big value pool and you will miss that if you only focus on the top of the pyramid with your importer.
Challenge 4: wholesalers think bottom-up. A bar is more valuable than a brand. They’re not new in town. Most wholesalers are historical businesses with established relationships. You have to convince them to give you access to their network. They have the keys to the city. They own the last mile. A bar is likely to stay around but they don’t know if your brand is going to leave their city. Would you give your friend's address to someone you don't trust? They'll never recommend their customers a brand they don't trust.
Challenge 5: for the importer, you're the only one. For wholesalers and bars, you're not. If you base your commercial strategy on the fact that the importer gave you exclusivity in your category, you're missing a crucial point. Wholesalers have more brands per category in their portfolio and you need to explain what your brand does differently. They think like a bar, not like a brand.
Here’s the 6-step process I follow to overcome the above challenges:
Step 1: Ensure the value chain works for all links in the chain
If your value chain only works for the importer, the wholesaler won’t care about your brand. If so, you'll only win in the segments where importers have direct distribution (i.e. you will stay niche in just a few bars). Make sure there's value for all. Creating a value chain sitting at an importer’s office may only make you two happy like an echo chamber. You'll miss the rest of the links of the chain i.e. wholesalers, bars, and consumers. Keep it fair and they’ll all sell for you.