There’s an old saying about distributors… “George Washington makes every decision”.
Like most old sayings, it is true. Distributors are expert financial managers. Those who were not were bought out a long time ago. If you ever wonder why the distributors let so many great selling opportunities slip by and sometimes expect you to do everything, it helps to see the world from the distributor’s point of view. Then you will have a better chance of getting time, focus and attention on your brands.
A Typical Distributor’s Heritage
Great great-grandfather started selling beer after prohibition. He built a good business, passed it on to his son and now it is 4th or 5th generation. The big brewers perpetuated this by requiring succession plans with family members or approved key managers.
Now, as each generation in the family tree contains more people than the previous one, most distributors have family members who are silent shareholders, and the owner you see (or never see depending on how unimportant you are) has a fiduciary responsibility to the family to run a solid operation.
With consolidation, only the strong have survived. And they have gotten stronger. In 1980 there were 4,595 distributors and 92 breweries. Now there are over 6,000 breweries and only 3,000 distributors. Where to do you rank? Well, somewhere behind A-B, MillerCoors, Crown (Corona) Heineken, Diageo, Boston Beer and probably 50 other craft breweries and imports. When the route salesman from the distributor goes to make the pitch, he brings his book of a thousand brands and gets to pitch…maybe three, if the customer has time.
You and the Distributor
So you have to do it yourself. You go to the craft beer bar with 50 handles, speak to the owner, leave some samples and follow up. They want something new so you get a draught line. Then two weeks and a $15 dollar tap handle later, you’re out, rotated for the next new craft beer. And so it goes…and you experience the Craft Brewers Dilemma:
1. You can’t do it all yourself
2. The wholesaler won’t do it for you
So what is a hard working craft brewery owner to do?
The answer is a partnership, earning respect, cajoling, leading, pulling them a long, because you can’t really push them. Here are 10 rules to get the most selling effort from your distributors:
1. Be the wholesaler. (Don’t we wish.) But for a few minutes, put yourself in his shoes. He has 45 craft breweries that all want the same thing—more focus, time and attention. This is impossible. What’s in it for him? How will your brand add to his business? What do you bring to the table that 10 other breweries don’t? Bring something different.
2. Make a plan with the above in mind. Any wholesaler will sit with you to discuss a well thought out business plan, with realistic sales and distribution goals and a plan to achieve them. And know that when you leave, the next brewery will be right behind you with their plan.
3. Prevent meeting slippage: slippage is when you have a great meeting with the distributor and leave feeling really good about everything. Then two months later, you have a similar meeting and realize nothing got done since last time. There is always a reason. So track progress against the goals. Keep in contact, know your business better than the distributor and constantly follow up.
4. Understand pricing. Know how to calculate distributor margins, retailer margins, FOB, laid in cost, state tax, PTR, PTC, etc. The wholesaler will take his margin, but he will respect you if you don’t let him take more. No wholesaler tries harder to sell a brand because he makes a few extra margin points on it. Once pricing is settled, it is a volume game.
5. Make 3 friends in the distributorship. Three key people who have the best accounts for your brand. Work with them and et their cell phone number. Become their best friend. They will sell beer for you.
6. Create success in a handful of supportive accounts. Keep coming back—don’t be complacent. Success spreads to other accounts. Your 3 new friends will help you here.
7. Steer the consumers. Suggest that they can buy your brand at whatever large account does not currently sell it. They should ask for it and the retailer can get it the next day. Or, send them to your favorite store that does carry it. Most craft brewers are good at this.
8. Take the success back to wholesaler management. Show them why their focus and attention on your brand will make money for the house. It all adds up for the distributor.
9. Work the evening events. Stay out later than the distributor sales people. Never let them see you sit back. Always work harder than they do, at least when you are with them.
10. If 1-9 above fail, change wholesalers. There is an artful way to do this amicably without running afoul of franchise laws or facing death-through-litigation. If you are ever in court with a distributor you have already lost, because they have a lot more money than you do. If you do it right, there is a good chance you can make a deal with the distributor and leave gracefully.
Distributors seem to have a secret language and their expectations can sometimes seem unreasonable. But if you understand their businesses and can see if from their perspective, managing them becomes a lot more productive.