US Drinks Conference Distributor Panel

One of the highlights of the U.S. Drinks Conference was the distributor panel moderated by Ted Roman, EVP of William Grant, with panelists Kevin Fennessey, CMO of Southern Wine and Spirits; Efren Puente, VP of Marketing at Charmer Sunbelt; Bob Hendrickson, President of RNDC, and Jeffrey Altschuler, President of Allied Beverages.

Here are the key takeaways:

·        There was general agreement and recognition that entrepreneurs are the ones driving innovation, not the major multinationals, so distributors have to be open to new ideas that may come from people outside the industry.  industry outsiders need to bring in folks with industry experience for credibility and practical advice.

·        For brands trying to pitch a wholesaler to take their products:

  

o   Primary question you’ll get asked: “Is the proposition unique, does it fill a new niche distributor does not have a current entry in”.  If the answer is yes, then follow ups will be “do you have industry experience or are you working with someone who does?”, “Is the marketing plan complete and comprehensive, not relying on one gimmick?”, “Do you have sales management people with industry experience, and do you also have street sales people (brand ambassadors/market managers) with industry experience, trained, on the ground, and supported with a good budget?”,
o Come to the distributor with the flexibility that allows them to help shape the idea /be willing to listen to and respond to  distributor advice

o   Midcourse corrections need to be anticipated…you will NOT get it right from the beginning, probably won’t even get it close

o   Have we done business with this person or company before…wholesalers will always take a meeting from people we have worked with

o   Ask for one market, not the whole system.  You need to prove your concept, and accept the fact that however well planned and executed, you’ll learn and adjust.  It’s unlikely you’d get more than one or two markets anyway, asking for the whole system is naïve at best and impractical and probably not executable by you at worst.

o   The bigger you go the harder it is to see results and make changes

o   FOCUS, FOCUS, FOCUS Stay focused on a limited number of accounts, don’t do promo in one and then move on.

o   Do not pipeline volume…it may generate a big number at first, but it will hurt you in the long term…distribution is just the first step; customer and retailer reorders are what the distributor wants to see.

o   The best way to expand in a given wholesaler’s network is to have a testimonial from a state GM.  Prove it works in our system, “works” being defined as repeat orders at retail and on premise.

·        Chocovine is a new product that has surprised everyone…It may have received a smirk in the first presentations to the importer, but the astonishing success it has had reinforces the point that a new idea that connects with consumers, and fills a new niche, has potential.

·        Local market themes and approach will be much more interesting to a distributor than a generic national program. So be prepared to work with distributor to do POS around local events.  Retailers love it because they want to be unique and not have the same thing as everyone else. Most distributors have the internal graphic resources to help you.

·        That said you still need to have sufficient quantity of flow materials, but recognize most won’t get used.

·        It’s imperative to allocate a budget for local or Account Specific POS materials rather than flow.

·        Wine brands should recognize that small wineries will find a home in mall houses first.

·        There’s an inherent paradox that if you go to a small wholesaler and build your brand, they won’t be too pleased if you end up pulling it to go to a major.  By the same token, most majors won’t take one-off small volume brands because there’s little upside potential for the time and attention they take.

·        A wholesaler agreement (contract) is absolutely necessary. Recognize for a new brand or company, the distributor will dictate terms.

·        DEMONSTRATE PASSION don’t just talk it.  Wholesalers are much more likely to work with you if you’ve got skin in the game, or you’ve burned your ships.

·        They also want to see a commitment of as much of your people’s time as possible.  Have people stationed in the market, don’t think you can fly in and out and make an impact.

·        Should you include an incentive program in your plans?  Not early on…distributors don’t want suppliers managing their staffs or taking them out of the market on trips as a regular program.  However there are two circumstances where they are important: When you can define very specific targeted distribution (but not loading), or secondly, where a product is close to the tipping point and incentive program will help it get there.

·        Steve Luttman of Leblon Cachaca…who came out of Moet Hennessey and knows his stuff said it’s taken him three times as long and cost three times as much as he anticipated.)

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U.S. Drinks Conference 2008 An Outstanding Success

This was the second year that we’ve put on the event in London and this year we had a larger number of delegates from even more countries. The feedback we’ve gotten from attendees was overwhelmingly positive with frequent comments on the level of insight provided and comprehensiveness content.

The roster of speakers this year included some of the top executives in the American Drinks market including Rudy Ruiz, EVP of Southern Wine and Spirits, Vincent O’Brien, Senior Counsel at Nixon Peabody, John McDonnell, COO of Patrón Spirits, Bill Earle, President of the National Association of Beverage Importers, Roy Danis of AV Brands, and conference co-organizer John Beaudette, President of MHW Ltd. The subject matter included case histories and lessons learned by brands that have been successful in the U.S. and a wealth of data on the American market structure. Jeff Grindrod, Managing Partner at Brand Action Team, and Mike Ginley, President of Next Level presented results of “hot off the presses” research on consumer trends and preferences.

Several themes recurred through the conference including the impact of the global financial crisis on the Drinks industry, aligning distributor and supplier expectations, and the shift in marketing strategies toward more online and non-traditional spending.

Impact of Financial Crisis

“The economic crisis we’re going through is certainly having an impact on the business, but the research results clearly demonstrated that the U.S. beverage alcohol industry is recession-resilient,” commented Ginley of Next Level.
Grindrod added that “we see continued growth in volume and revenue, albeit slowing, and a shift in consumption from on premise to off premise. This is very timely data since much of the survey was completed in the two weeks preceding the conference.
Perhaps the most interesting thing we found is that for those folks going out to restaurants, the last thing they tend to cut out is the cocktail, wine or beer part of the meal,” he noted.

Aligning Expectations

Ruiz of Southern Wine and Spirits gave some well received advice to suppliers looking to export their brands to the U.S. “The key to a successful relationship between supplier and distributor is in aligning expectations,” he stressed. “When presenting new brands to Southern, expect to come in with a three year plan including a detailed one year operating plan with realistic expectations on case volume. It is more worthwhile to consider launching in smaller markets, proving your success with programming that demonstrates it’s repeatable.” According to Ruiz, the best demonstration of brand traction is when they see bars and retailers calling Southern and asking for the brand.

Evolution of Internet as Strategic Tool

Steve Raye of Brand Action Team brought home the importance of new online tools such as blogs and social media marketing for brand building. “It’s a noble goal to get visitors to your brand website, but at the end of the day, it’s more important to get your content out to where prospective customers already are spending their time…reading blogs, searching for recipes, reading comments on wines that other consumers have posted. Indeed, research shows that 65% of consumers read reviews online before purchasing a product.”

The US Continues As The Worlds Best Beverage Alcohol Market For New Brands

As John Beaudette summarized at day’s end, imports continue to drive growth across all beverage alcohol categories. “Considering the emergence of Eastern Europe, the Far East, and the rest of the world, we recognize that suppliers have many options in terms of investing behind new or existing brands. We hope we’ve clearly demonstrated that America is still the primary destination you should target”. Sphere: Related Content

Rudy Ruiz' comments at the US Drinks Conference 2008

I'm reprinting an edited version of Rudy Ruiz's extemporaneous presentation at the U.S. Drinks Conference. He's 100% "spot on" with most of his comments.
We highly recommend new brands do not target New York and FL in their initial launch plans. We believe it is better to be a big fish in a small pond where you'll have a much better chance of demonstrating success. Once you've generated a repeatable, scalable program and worked out the bugs, then you can move on to the bigger markets.
And we agree completely with the concept of alignment...retailers both on and off premise are not interested in building your brand. They're interested in building their business. And if your brand gets built in the process...then we all win. But their interest is in three primary things:
-Getting more customers
-Spending more money
-Coming back more often

Effective marketing programs are designed with the recognition of this alignment in goals...help them build their business first and you'll build your brand in the process.

So, here's what Rudy said:

The key to a successful relationship between supplier and distributor lies in ALIGNING EXPECTATIONS.

On the on-sales side, make enough use of the potential benefit from a strong relationship with the bartender. Win over the bar teams and you have on site ambassadors for your brand. The importance of getting your product on the drinks menu should also not be underestimated.

Product displays are more important that securing a good space on the main shelves, since without the brand recognition, consumers won't pick it up.

What SWS expects from brand owners.
I try to make time to see everyone, but I want to see a 3-year plan, including a 1 year operating plan including KPIs etc. It must be clear that the brand is relevant, and this won't happen just through distribution - all the effort of opening new accounts will be wasted if these are then lost by a lack of support from the supplier. It's amazing how often potential suppliers come to see me with very little insight into the type of consumer they wish to target, or research into the market and their category. So many plans are put together in a vacuum, with no reference to the competition.

A new product entering a crowded market needs to be different. I don't have time to work with them to put together a business plan, but in these situations I encourage them to seek professional (marketing) help. It's a question of applying some rigor to setting out the offer and then tightening it.

Testing to prove the concept.
Testing the market place on a smaller scale is a good idea, rather than trying to get into all 50 states at once. If successful, these tests should generate excitement from the GMs, which is more sustainable than having this enforced by HQ.
I generally recommend brands avoid testing in California - although it's a popular strategy, it will be very expensive. It may be more worthwhile to consider launching in a state that is less significant in the beverage alcohol market and building loyalty there before expanding.

The first step should be setting up bar tender focus groups, followed by maybe 20 accounts which will be supported by these bar staff. At this stage price and other parts of the plan can be tweaked according to feedback. I usually advise brands to avoid high end night clubs during the testing period. It's difficult to get a feel for the brand's potential once the exclusive period ends and consumers move on to the next month's promotion.

Hopefully after one year, the brand will be in 2 markets. If the brand has been pitched right with strong research, then demand should spread to other markets from here. We want bars and retailers contacting us to get hold of the brand. The key to achieving this result is the ability to show tremendous marketing discipline.
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U.S. Drinks Conference Next Week

Anticipation is rising for the U.S. Drinks Conference coming up next week on Oct. 14 in London. With the financial crisis roiling markets across the world, it's more important than ever to take a fresh look at brand strategies for the U.S. market. Jeff and Mike are working on the consumer trend information and just completing some surveys that will give us a look at sentiment and behavior as recently as last week. And I've put together a manifesto of sorts on the new realities of marketing in the America with tools (like this blog!) that reach and engage people on an individual level. And, we've got a boffo lineup of speakers from the U.S. including Rudy Ruiz, EVP of Southern Wine and Spirits, John McDonnell of Patron spirits and John Beaudette of MHW. And for the international perspective, we'll hear from Charlotte Hey, of The Drinks Business and Olly Wehring at Just-Drinks.com. So if you've been thinking about coming, get off the fence and go to http://www.usdrinksconference.com/ to register! Sphere: Related Content

Link to The Drinks Business article on distributor consolidation

Here's a link the article from the Sept. issue of The Drinks Business on distributor consolidation in America and my comments on options for exporters to the U.S. Market. Sphere: Related Content

Article on Distributor Consolidation in The Drinks Business

The Drinks Business, one of our sponsors for the U.S.Drinks Conference 2008 just ran an article in their Sept. issue on distributor consolidation in the U.S. with a focus on the Glazer's/SWS deal and some comments from me. The article is particularly timely since Rudy Ruiz, EVP of SWS will be speaking on just this issue at the conference. I can't post the whole article here, but drop me a note and I'll forward a copy to you.

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TOTC Day 2 The Renaissance of Grappa

I was guilted into attending the Grappa seminar led by Francesco Lafranconi of Southern Wine and Spirits. My experience with Grappa,k like so many others was with what I referred to as "lighter fluid gone rancid". We used to import some grappas from Ceretto and other producers and as much as I tried to appreciate it (I'll never like it), I just couldn't. Francesco explained that producers used to just ship off the pomace to large distilleries and then essentially copacked the grappa for the wineries. The ones in the seminar...Poli and Marolo...are artisanal producers whose only business is grappa. And the results were there...well made, not harsh, aromatic and innovative.

There are five regions in Italy that are allowed to produce Grappa, all in the north. Having just been in Venice, I was particularly interested in Poli's range because that's where he's from (Bassano). Sphere: Related Content

TOTC name dropping

I landed and dashed to the Monteleone to catch the end of Jamie Boudreau’s Molecular Mixology seminar, but never made it. Ran into Cort Kinker, Marissa Frisina and Shawn Kelley of Pernod Ricard, Francesco Lafranconi mixologist extraordinaire for Southern Wine and spirits (and yes Francesco, I will attend the Grappa seminar), Camper English of Alcademics fame and courtesy of Elizabeth Lang an intro to Damian Windsor of Gordon Ramsay’s of SF. Sphere: Related Content