This One Little Metric Could Have A Big Impact on Your Wine or Spirits Sales

When it comes to measuring and tracking the right things in the wine & spirits game (KPI’s to those of you pulling on the oars in the belly of corporate slave ships), there are far more options than there used to be. Oh, sure, you still have the old Reagan-era metrics like depletions and accounts sold. No doubt important but not very insightful if you’re looking for deeper understanding into the quality of your distribution. It’s nearly impossible to tell from these rudimentary dimensions if you’ve got the right products in the right places. In fact, for those of you given to impatience, “right places” is very much where I’m headed in this article.

And what about top ten and bottom ten? There are all kinds of ways to apply these whiffle balls (accounts, territories, distributors, states, etc.). But while this is certainly something that’s good to know the best it can do is indicate where YOU’RE doing or (not doing) business. It will never tell you where you SHOULD or should not be doing business. If it was me, I’d much rather learn about the most valuable “white space” accounts, the 20-percenters, the honey holes, the big tunas. Well, who wouldn’t, you might say? Good luck with that, some might say.
Given the unprecedented level of the competition today, it’s a fatal error to assume something can’t be quantified. I encourage all of you reading this to immediately start questioning everything- starting with what you measure and why. Sometimes you’ve got to be like Yoda and unlearn what you have learned. In case you haven’t noticed, we live in a very flat world. Literally everything can be optimized. Now I do think optimization as a concept has been overdone in certain applications (Fitbit comes to mind) but the wine & spirits business can never be accused of going overboard with it.

Which brings me to what I regard as the single most important metric: sales per point of distribution aka velocity. I know for a fact that not all accounts are equal so what I want to know is precisely which accounts are the most unequal – especially on the biggest-bang-for-the-buck end of the spectrum. “Wide and thin” used to be a popular and noble strategy for distribution but with so many more SKU’s chasing much fewer square feet of shelf space, it just isn’t a practical pursuit any longer. Fewer accounts but the RIGHT accounts -now that’s using your noodle.

And with less total points of distribution available, we must pay close attention to the retention and longevity of each placement as well. “Churn” is the mortal enemy of modern distribution and if YOU don’t pay super-close attention to it, you’ll be among its many victims. Churn is the most insidious byproduct of the too many brands / too few distributors dilemma we find ourselves in nowadays and God help you if you’re not monitoring it DAILY. Like cancer cells feed on sugar, so does the distribution machinery feast on churn. And guess where you won’t notice churn? By measuring depletions and account sold, of course.

Once you commit to relentlessly measuring velocity, like proverbial scales falling from your eyes, you’ll notice opportunities everywhere. You’ll begin to see crystal clear correlations like the one between foot traffic and velocity. You’ll see with Clark Kent clarity that certain “attributes” of one high volume account can easily be extrapolated to twenty more just like it. Look, we’ve been so used to relying on distributors for so long now, we’ve forgot how to think (and research) for ourselves. Remember when we used to set goals for “HT and MT” accounts (high traffic and medium traffic)? Maybe people still do, I don’t know. But nowadays you can apply “High Traffic” to just about everything – and you’d be very wise to do so.

Foot traffic is KEY when it comes to high velocity placements. And the data is staring you right in the face. Take on premise accounts, as an example. Restaurants with lots of private dining space and/or outdoor seating have far more foot traffic than an average restaurant. I’m not talking one or two times the traffic. I’m talking factors of ten and twenty times. Have you identified these accounts? Are you tracking them? If you were, you’d already know that these are among the highest sales per point of distribution (velocity) accounts in every market. Why do you think hotels do such high volume? You guessed it: foot traffic. Lots of people. A hotel with 1,000 or more guest rooms and 100,000 or more square feet of meeting space is typically the highest volume account in the city. Hint: they can usually be found near city centers and convention centers. Starting to see the correlation?

A quick side note: to those who say, “That’s great, Ben, but those hotels are all ‘corporate.’” To you I say don’t buy that malarkey for one minute. I spent 17 years as a VP of On-Premise chains for the US. I know from firsthand experience only about 40% of any given hotel’s volume is from the “mandates.” The other 60% is up for grabs, locally. Not only do your distributors know this, they leverage it to the hilt.

I could go on and on with many more examples of high-volume account types driven by high foot traffic (both on and off-premise). The point is if you start paying close attention to velocity, you’ll deepen your appreciation for how powerful this metric is. From there, it won’t be long before you start asking yourself, “Where are the other high traffic accounts where we’re NOT doing business?” Not only is it possible to do more with less, in today’s brutal environment, it’s mandatory.

How to Apply DTC Sensibilities to the 3-Tier System

Paul Mabray of Emetry shared an article on LinkedIn the other day about how the direct-to-consumer model is infiltrating the alcohol industry and I haven’t been able to stop thinking about it since. In case you’re not familiar with Paul’s work, I consider him the EF Hutton of the wine industry. When he talks, I listen. When he posts and article, I read it.

The take-away from the article that’s induced my insomnia for two nights in a row is this idea of “applying DTC sensibility” to the 3-tier system. My post is all about expanding on this idea.

When the supreme court case, Granholm v. Heald, was decided in 2005, it kicked off an avalanche of investment and innovation the likes of which our industry had never seen. It was our Y2K. Only this time instead of stocking up on freeze dried foods and filling our bathtubs with fresh water, it was all about rushing to install CRM systems, e-commerce platforms, legally compliant order fulfillment and a whole slew of new marketing strategies & tactics. Wineries found themselves face to face with the ability AND the platform of permission to connect directly with consumers in a context other than their own tasting rooms.

It’s also quite interesting to recall that, at the time, the formidable Wine & Spirits Wholesalers of America had a singular focus for the funds in their lobbying coffers which was to stop the DTC train from ever leaving the station. I remember this well because I was heavily involved in helping to recruit new members to the American Beverage Institute which was up to its eyeballs in the battle against the (successful) attempt to lower the BAC level to .08 in all states. Despite strident efforts by some of the most powerful buyers of alcohol in the country, WSWA’s standard response in refusing to support the ABI financially was they needed to keep all their powder dry for the DTC battle. In the end, consumer choice won out as it inevitably does.

But the Granholm decision was 14 years ago. No one can deny most if not all the wineries in the US have been working overtime ever since to capitalize on the opportunities ushered in by the ruling. I’d go even further to say the epic proliferation of US wineries was enabled by this newfound marketplace. It allowed for small wineries to sell their entire production without ever having to darken the paneled hallways of a distributor. We’ve come a long way and learned a great deal about CRM, email marketing, targeting & re-targeting, data sets and a host of other tech and data driven best practices. And yet, from where I sit, I’ve seen very little of this transfer over to selling efforts in the 3-tier system. I certainly have my own theories of why this is. At most wine companies, the DTC team is siloed away from the “regular” sales team that oversees the wholesale network, which is a shame, in my opinion, because many of the same SENSIBILITIES can and should be applied to the trade side.

For example, take email marketing. What is your strategy for acquiring well-qualified email addresses of trade buyers from all over the country? How large is your list now? How is it segmented? How dialed-in is your messaging and your use of email service software such as MailChimp or Constant Contact? Many wineries have their email marketing tool as a plug-in to their e-commerce system, so they’re not used to operating it as stand-alone platform. What a missed opportunity! Especially considering the low cost of this technology.

Next, let’s talk digital advertising. How often do you upload lists of trade buyers to your Facebook Ad Account, save it as a Custom Audience and then create Lookalike Audiences so you can launch highly targeted ads on Facebook aimed at wine buyers both on and off premise? How well are you leveraging Facebook’s Audience Insights tool to research and create trade audiences with titles like Restaurant General Manager, Bartender and people who have an interests like Master Sommelier and WSET. Do I hear crickets?

And don’t even get me started on CRM! News flash: CRM is not just for DTC! Talk about DTC sensibilities circling the drain (instead of being leveraged). As powerful as CRM is and has been for the DTC channel, it’s TEN TIMES more powerful in the 3-tier realm. I’ve been a street-corner evangelist on this topic for more than 5 years. My poor, ragged cardboard sign is in tatters. But don’t cry for me, Argentina. Cry for yourselves. Because while you’ve been doing what you’ve always been doing (believing the distributor is the center of your universe), many of your competitors have been going to night school at places like the University of GreatVines and KARMA College, putting in the time required to learn CRM sensibilities- but this time for the trade. And now, while you’re asleep at the wheel (blissfully unaware just how dramatically this business has changed in the last 14 years) a new breed of wine companies (armed to the teeth with said DTC Sensibilities) are quietly eating your lunch. Nom Nom.

So let’s go back to the DIGIDAY article that launched this rant in the first place. It’s called, “Direct-to-consumer is coming to the alcohol industry” (dated July 9, 2019). Just for fun, let’s Key Word the crap out of it. Here goes: “infiltrate, shift, branding, opportunity, content, growth playbook, hit mainstream, making an impression, brand equity, natural evolution, growing competition, healthy results.” By the way, I don’t meet a lot of wine sales pros who eat, sleep and breathe key words. Case in point.

Since it’s a Friday, I’d like to end on a positive note. It is by no means too late to start applying these DTC Sensibilities to the trade. If fact, if past performance is any indication of future results, you’ve still got a gigantic head start on the rest of the field.