So You Want to Sell Some Wine (Winter 2010)

At a recent national Markhams group conference, members of the Wine Business Development Unit heard an interesting anecdote, which formed part of a presentation on distribution and retail trends by David Batten, National Brand Manager for Vintage Wines and Spirits Ltd. With David’s permission we share his observations…

The calls keep on coming, but seem to swarm just after harvest or before the impending new vintage releases. Sleepless nights, counting cartons not sheep, have driven another wine brand owner to consider widening the distribution net, beyond car boot deliveries to local retailers and restaurants. Wine distributors provide a ‘route to market’ conduit between producer, retailer and ultimately, the consumer.

Contemplating the employment of a distributor to represent a wine brand is a large step for a small winery. It not only confirms a volume of stock to move beyond their own personal capabilities, probably a confidence that their wine can stand shoulders high in a market awash with a myriad of brands, but also marks a necessity to hand over some of the nurtured and hard won brand ownership to another entity – scary stuff indeed!

Yet so often, the early contact with a potential distributor partner, hopefully an expected part of a planned growth strategy, is really one of desperation and tells a sorry tale…

An example

Hi, I own a brand called X and we live in Y – have you heard of us before?

Well, we were growers for Z for many years – they got so many gold medals for their wines that were made from our fruit and we got no recognition so we thought we would hire a winemaker and do it ourselves.

So where do you sell your wine currently?
Well, supermarket A in town has put it on the shelf, Wine shop B has let me do a couple of tastings during the ski season and they supply wines to a couple of local restaurants but as Supplier C does their winter spirit promotions, the bars are under contract including all the glass-pour wines so they only sell the odd bottle of ours.

How do these customers get the wine?
Well, I generally deliver on the way home but if they get caught short I always keep a few cartons in the boot and the garage.

How much do they pay for your wine – do you have a trade price, and what is the price on the shelf?
Well, everyone pays $24 per bottle – about $36 on the shelf.

So, if you employed a distributor, how much would you charge them for your wine?
Well, everyone pays $24 per bottle.

To employ someone to distribute your wine, choosing to hire a commission agent or full service distributor will add on a markup of between 15 and 35 percent.
You can’t charge that, you will be making more than me. My wine would cost nearly $60 in the shops – it’s not worth that much – nobody pays that for a bottle of wine – I’ve got 1500 cartons to move – I’ll go broke!

What happens next?

Often the conversation ends there. Sometimes the brand owner rings back after canvassing the distribution community and, suffering a reality check, decides to take things a step further.

Once in a blue moon they strike it lucky and not only is the wine awarded a gold medal at a prestigious wine show, but a trophy and it’s all sold within two weeks. Most likely it appears six months later on an internet wine sale site at $14.99 as a cancelled export order.

This true and sorry tale reflects the plight of many – who as farmers, planted a vineyard, obviously produced quality grapes and had previously sold them on to a brand winery with whom they had a long-term business relationship. Perceived lack of recognition, envy of the neighbours, the lure of owning one’s own wine brand, were probably the combined motivation to create the situation where some two years on, no income, mounting costs, and 1500 cartons of unsold wine are the end result.

Selling more

We all readily value our own areas of expertise. Growers know the cost of rootstock, sprays and pruning per hectare. Winemakers can tell you the cost of an American Oak barrel per litre of wine over its lifetime and the flavours different yeast strains impart. Yet so often, the value of good distribution in the route to market equation is discounted to that of a quick trip across town and a cheery word.

Selling wine in one’s home patch is the easy bit, but has quantifiable value, is scalable and has an essential place in any pricing model, especially when that 1500 cartons of gold medal wine needs to be exposed to the wine drinking public of the rest of this country.

Published in WINE Hawke’s Bay WInter 2010.

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