BREXIT+Distributor Consolidation= New Challenges for U.S. Market Wine and Spirit Entries
The passage of BREXIT is shifting the attention of export wine and spirit brands to the U.S. market. This comes at a time when dramatic distributor consolidation has made it even harder than ever for brands to find a receptive ear.
Distributor consolidation in the U.S. challenges new brand entries.
However, when one door closes, a window opens, and that’s the key attitude prospective brands need to embrace when planning for U.S. market entry.
Yes, it’s true that consolidation is making it tougher for small and mid-sized “new” brands to get the attention of the big wholesalers. With distributors shedding more brands than they take in as they “rationalize” their portfolios, new brands now find themselves competing with established imported brands that already have existing U.S. volume and distribution looking for new homes.
As a result, we’re seeing some of the fallout from consolidation being an expansion of new options. Existing second and third tier and boutique wholesalers are redefining themselves as specialists. And importers are coming on the scene with a defined focus. Whether they’re concentrating on countries of origin, styles of wine, drink rituals or channels of trade, these wholesalers and importers are looking for brands that rise above the general din with positioning that appeals to a new customer base of engaged wine and spirits drinkers.
Indeed, what is clearly resonating with the innovator and early adopter drinkers in the under-36 crowd is brand authenticity. That’s a word that’s been bandied about and (pardon the pun) given a lot of lip service. The truth is it is an absolutely critical component and a common ingredient in successful new brand introductions. Consumers want to know the brand’s story, and it has to be something they can discover and share with their network of like-minded peers.
Authenticity can be a function of legacy or heritage (of an old recipe rediscovered, for example, or an old distillery revived). It can also be something new…e.g. a creative spin on something previously taken for granted. Rutte Gin’s celery base puts a modern spin on an old Dutch brand. Rosé’s renaissance began in the Hamptons and has now spread globally. All have been driven by the power of word of mouth via social media… friends telling friends “Hey, have you heard about the new XYZ?”
So our message to brands looking to crack into the U.S. market: Think beyond how great your wine or spirit tastes, and focus instead on a message that matters to them. What makes your brand unique; what gives it a Point of Difference that Makes a Difference.
Then you’re in a position to take that out to the changing universe of importers and distributors and offer something that really is new and remarkable.
Seven Tips for Great Agency Client Relationships
When I first moved from the agency side to brand management, I held an onboarding meeting with my new advertising agency. The “manifesto” I shared with them is still a philosophy I follow in agency and client relationships today: Astonish each other with performance, and reward each other with growth.
Agency and Client Relationships — Goals for Both
What the client should expect from the agency:
- Leadership: Understand the end user, the client and all points in between as though you were pitching the business every day. Because you are.
- Listen: We were given one mouth and two ears for a reason. No matter how many awards you’ve won, honesty and humility will get you a lot further than hubris.
- Take the lead technologically: Adapt the creative process to capitalize on new media and marketing tools.
- Commitment: Wash windows willingly.
- Quality: Good enough isn’t. Materials should be as polished and error-free as if they were a formal presentation to pitch the business. They are.
- Timeliness: Fifteen minutes early is on time. On time is late. Late is unacceptable.
- Fiscal responsibility: Treat the client’s money as if it were the agency’s…it is.
What the agency should expect from the client:
- To appreciate, protect, and run great advertising and communications, even―especially―if it makes you a little nervous.
- A sense of respect and trust supported by an understanding of the agency business and how its people are motivated.
- Clear, consistent, and constructive direction.
- Be open minded, decisive, and willing to take risks.
- Question data. Just because it’s labeled research doesn’t mean it’s true.
- Explore “what if?” and “why not?” before saying “no.”
- Say thank you, publicly, for a job well down.
(re-posted from MENG Blog http://mengonline.com/blog/2016/06/07/seven-tips-for-great-agency-and-client-relationships/)
The truth about “Red Wine Hangovers”…hint, it’s NOT about sulfites.
There was a great piece in the Chicago Tribune (http://trib.in/1Vj94Of) explaining the science behind red wine hangovers in layman-speak. Bottom line, it has nothing to do with sulfites. The reason many people think sulfites are the cause is because the statement about sulfite use is legally required to appear on the label. That’s often the only production or component information on the label, therefore it must be the cause. But correlation is not causation.
In point of fact, sulfites are a natural byproduct of fermentation, and are also added in very small quantities to prevent oxidation and maintain the freshness of a wine through the production process and into the bottle. Their presence is so minimal– single digit ppm– they get a bad rap for doing good.
There are other factors that contribute to hangover headaches. All are natural byproducts of fermentation that in fact give the wine flavor, structure and mouthfeel. These include phenolyics, a large class of compounds which includes tannins (the “chalky” mouthfeel in red wines), flavonoids (the nutrient group known for the antioxidant and anti-inflammatory health benefits), and a host of other individual chemicals that contribute the individual flavors people sense: “green apple” (malic acid), “buttery” in Chardonnay (diacetyl) and so on.
Unfortunately, many of these chemicals have some unpleasant side effects. They can be diuretic and cause vasodilation which may contribute to the end result of a headache. Put them all together and it boils down to the body using up water to “process” the wine you drank. And that in turn causes dehydration which leads to a headache.
So Steve’s non-medical solution to avoiding hangovers? Simple. Just drink two glasses of water before you start drinking wine. And when you wake up in the middle of the night, to, well, you know, drink a glass of water then too. Chances are you’ll wake up feeling fine.
Top 10 Mistakes Export Wine and Spirit brands make in the U.S. market-and how to avoid repeating them
This piece originally appeared in and was written for Meininger’s Wine Business International Newsletter. You can subscribe for free here:https://www.meininger.de/en/newsletter
Thursday, 19. May 2016 – 14:45
“Wow!” I thought. This wine, from this producer, at this price could be a winner in the U.S. “Have you thought of bringing it over?” I asked the producer who was exhibiting his wine at the London Wine Fair.
“To tell you the truth, I’ve thought about it, but I’m a bit gun shy,” he said. He went on to share a story about other producers he knows that never got paid for the goods they had shipped, who had been promised distribution and sales that never happened, or who lost time and money trying to figure out the three-tier system – only to be stymied.
That’s a story I’ve heard many times before – and yet it’s not difficult to avoid making mistakes that will cost producers dearly in time, money and momentum. All it takes is checking off the following ten points:
1. Invest in a guide, and make sure they specialize in wine brand introductions.
The US market and its three-tier system can seem Byzantine in complexity. And as many have found, the road is littered with potholes that will trip you up, set you back and cost you money. One great way to avoid them is to find a guide that will help navigate the process who is not only experienced in the US wine market, but has expertise launching brands here. The right guide can save a supplier from wasting money doing the wrong things, or even the right things in the wrong order.
2. Don’t launch too far or expand too fast.
Many companies want to launch in multiple states and expect to be present nationally in the first year. That’s often the recipe for disaster. Focus resources on a limited number of accounts in a limited number of markets, learn what works and only expand when you can replicate that success on a broader scale. Recognize the US market has 52 different regulatory entities (50 states plus D.C. and Montgomery County, MD.) Pick the markets in which it will be easiest to develop your case history. Volume comes later.
3. Anticipate objections and pre-empt them before they get asked.
Importers and distributors have an arsenal full of reasons why they won’t take your brand: “It won’t sell in my market. It isn’t any different than Brand X. I’m not looking for another Cabernet Sauvignon. You don’t have a track record. If I put it in, I have to take something out that I already know is selling. You don’t have a brand ambassador. It’s too expensive.” Knowing that these objections will be raised, pre-empt them so they never get asked in the first place. The best way to do that is to build a case history and creatively tell the trade about your success. The end goal being to get them to call you rather the other way round.
4. Understand that finding an importer is not necessarily your first step.
You are better off starting with a ‘service importer’ who essentially will say “yes” to every brand. Then focus on building your success case history. Next, pitch that success to the importers you want to work with in the long term. You’ll end up with more meetings and more options if you can demonstrate success, rather than simply promising it.
5. Realise the importer or distributor won’t build your brand for you.
Importers and distributors have their hands full with existing suppliers. Assume the importer and/or distributor will do nothing for a brand. The burden is on the supplier to drive distribution and sell through.
6. Ask WIIFM (What’s in it for me?).
Recognize that brands have two different audiences and each requires a separate positioning/benefit statement, or point of difference. The trade wants margin and profits, while the consumer wants romance and glamour:
a. Show the trade how your brand will make them money, margin and market share.
b. Tell a brand story that is authentic, unique and motivating. Your story needs to be one that consumers will enjoy discovering and sharing with their peers. Here’s a quick test: If it doesn’t generate a smile or tears, go back to the drawing board.
7. Don’t launch while you’re still a work in progress.
Bottles, liquid, label, marketing, brand ambassadors, and inventory all have to be complete and available in the US. Always be ready to leave a sample bottle when making a sales call, and ensure that your website and point of sale materials are ready. It’s imperative that everything is ready and available by the time you have a meeting with a gatekeeper.
8. Don’t think you can fund growth out of profits.
This is a big one. Recognize you must invest ahead of volume or profitability. Volume and profits will come – in fact, can only come – after a brand has established credibility and traction. Many brands, unfortunately, think they can support their growth through cash flow. Not only is that unlikely to work, it is often the reason an importer or distributor won’t take a brand in the first place
9. Recognize that the US system is different.
Demonstrate an understanding of the US system and respect for the gatekeepers whose approval and support are needed to get off to a good start. Invest the time to learn things like margin structures, franchise state laws, and the regulations that have a direct impact on strategy. For example, supermarkets in New York do not sell wine and retailers can only have one store. So when an importer or distributor hears a supplier say they want to “focus on supermarket chains in New York” it’s a clear indication that the supplier doesn’t understand the market.
10. Put feet on the street.
Whether you call them Brand Ambassadors, market managers or sales reps, you need people whose primary job is to get your brand into distribution on- and off-premise, and then make sure it’s selling through to consumers in each and every account. In many cases, local market support must be available before imports or distributors will even consider your brand. Yes, it would seem that’s the distributor’s job; however, in the US market, the burden is on new brands to do the work themselves.
Although these ten points may seem daunting, in the end it comes down to a few solid principles: do your research, understand the market, and build a good case for your brand. Doing that will put your brand ahead of all the others who are still making simple mistakes.
Steve Raye is the president and founder of Bevology Inc, a marketing consulting company that specializes in helping wine and spirits brands enter and grow in the US market. He is regularly called on to speak internationally on what wine brands need to do to enter the US market
Nielsen Data on Prosecco/Sparkling Wine in the U.S.
Here are couple of recent data slides from Nielsen on the U.S. Prosecco market, reinforcing my comments in yesterday’s post. Volume up 34%, value up 37% and a whole lot of headroom to continue growth. No surprise that I saw many new vineyards being planted there. Hard work, but looks like it’s a wise investment.
And keep in mind Champagne is growing as well, just at a slower pace…6% volume and 9% value is not too shabby.
Prosecco: Looking for Love in all the Right Places
I’m just back from a tour of Prosecco vineyards courtesy of the Italian Trade Commission and CIA/Agricoltori Italiani with a great group of colleagues.
As always, actually visiting the vineyards gives one a tremendously better insight on the region, the wines and the people who make them. In the case of Prosecco it’s all about “location, location, location.” DOC and DOCG Vineyards are located in the relatively small area between Conegliano and Valdobbiadene, particularly those vineyards on the steeper slopes and on the top of the hills. This is a moraine area where glaciers from the Dolomite Alps scraped the landscape to primary rock and left stony soil as the ice melted. Erosion has further weathered the hills to primary rock and stones. Clay from the hills has moved down the hillsides and the flat plain of the Piave river.
Vineyard exposure plays an important role in quality as well…south facing slopes with vines draped over the spines of the hills paint a beautiful picture. But that beauty is undermined by the challenges of working those hills…they’re too steep for tractors, and practically all the labor is hand; even down to the digging of holes for fence posts and contouring the rows for access, moisture retention and to minimize erosion.
Corresponding to the vineyards are the thick, brushy forests filling the north-facing hills and the too-steep-to-farm slopes.
While it may seem Prosecco has exploded onto the American wine market (and the UK market as well), in my opinion it isn’t truly an overnight success story, but rather something that has been gestating for a while, and waiting for a breakout event—Americans drinking sparkling for events-other-than-celebrations. It’s a niche that Champagne can’t fill because of the cost, and frankly, the (lack of) residual sugar in the styles most commonly marketed in the U.S. Sparkling wines produced by the Methode Traditionale method fall into the same category. Asti Spumanti is too sweet, and relevant only to an older generation. But Prosecco hit the “sweet spot” of the modern American palate with RS levels from 9-24 g/l of RS.
It was embraced not only by the oft-mentioned Millennial age cohort, but a broader market, and particularly women, who have found it to be something they actually like much better than the go-to Chards and Pinot Grigios to which they had previously gravitated. The “trend” that we’ve seen is really a manifestation of the power of the internet, the importance of discovery, and the ability to share these discoveries much more widely via social media.
So what makes great Prosecco. Well, as usual, place plays the primary role…the hilltops of the DOC and DOCG regions, so look for the words Conegliano, Valdobbiadene and Prosecco Superiore on the label.
And for the top tipples, look for Rive which indicates the name of the municipality or village where the grapes were grown.
The wines are made from minimum 85% Glera grapes, a local nomenclature only recently established as the legally accepted name to distinguish the wine from the former name of the grape variety (prosecco).
The bubbles come via the Charmat bulk process which yields a wine that can be retail priced in the U.S. from $11 to $20. And we’re seeing introductions of higher level marques such as Rive and Cartizze at even higher price points, still Charmat-produced.
So I’d like to shout out a big thank you to CIA and ICE for hosting the trip, to the wineries we visited: Drusian, Le Carline and Ronfini and the guest houses we stayed at Le Noci and Althea.
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Brand “Story” vs. “Narrative”: Why the Difference Matters
In today’s hyper-connected world, brands are no longer rooted in feature-based USP’s or Positioning Statements. It’s all about how a brand connects with consumers in a meaningful and motivational way by way of their story.
A lot of folks look at the words “story” and “narrative” as synonymous, but they are most decidedly not. Both have their uses, but it is important to understand the difference. The story is simply the sequence of events, with a beginning, middle and end. A narrative tells those events in a way that creates a dramatic effect and response. Further, great narratives are usually open ended and invite the reader to become engaged, participate, and personalize an idea.
So let’s look at an example of how I turned my story into a narrative.
Here is my story: I spent the first decade of my career in PR and advertising. I began to acquire an interest in wines and took a couple of courses at the local university. My job included a fair amount of travel, and I discovered another passion – to learn about other places, cultures and people. During the most recent years of my career I have been in marketing spirits and wines, with an emphasis on helping brands enter and succeed in the US market. With my consulting company, Bevology Inc., I am able to combine my passions for wine and travel with my expertise and experiences in marketing and act as a guide to help wine and spirit producers who want to break into the US market.
Here is my narrative: My wife and I were vacationing in Italy and went to a small restaurant recommended by the clerk in a wine store. The décor was faded pictures tacked on the walls, mismatched chairs and cheap flat forks, but the food smelled great. We were seated right next to two older Italian gentlemen. I, of course, used my best Spanish (yes, Spanish…it’s closer to Italian and it was either that or just speak English louder) to order a nice bottle of red. The wine was fantastic; after all, we were in Italy, on the vacation of our dreams, how could it be anything else? The two gentlemen were clearly not impressed by us or our wine selection. We were Americans intruding in their neighborhood restaurant, spoke lousy Spanish in Italy, and couldn’t even order a decent bottle of wine.
They insisted we try theirs, which they had brought with them in a brown paper bag. Wow, turned out our wine was not so great after all. By the end of dinner we had learned that they were old friends who dine together every Thursday evening and have done so for decades. They left a few coins for the waiter, and the bottle of wine for us. That was 12 years ago, and I think of that dinner, those two old men, and their fabulous red wine every time I embark on a new journey with a new winery hoping to make it in America.
So marketers, your challenge is to figure out how to articulate a brand’s narrative in a way that’s so meaningful and motivational that it makes people, smile, laugh and maybe even cry.
In the Wine Biz, It Seems Brand is More Important Than Land
The Prisoner Lineup
The recent $285 million sale of Prisoner Wine Company from Huneeus Vintners to Constellation raised eyebrows this week. Not just because the brand was originally purchased by by Huneeus for $40 million when it was doing 85,000 cases…comparably stated as $470/current case sales at the time. Current volume is 175,000 cases which works out to $1,628 per current case. WOW!…just about a 4x increase in value.
The real news is that there was no land, vineyards or winery as part of the deal…it’s for the brand only.
What drove the increase in value? Two things…the right timing as the red blend category began to take off, and pricing the line at super premium MSRP’s, The Prisoner brand line retails for $35, another category that’s growing rapidly.
Cool Infographic from VinePair on U.S. Consumer White Wine
Cool graphic from VinePair on U.S. consumers re: white wine. Meet VinePair Pres. Adam Teeter Mar. 23, he’ll be moderating the press panel at USA Trade Tasting Mar. 23. Seats are just about sold out, so snag the remaining few here: http://bit.ly/1lz5CQr
Put Your Money Where Their Mouth Is: In-Store Tasting Is a Primary Promo Strategy
Tastings are probably the most effective tool wine and spirit suppliers have to make a direct impact on moving more boxes while building the brand. This is in contrast to couponing and discounting which can also have a significant volume impact, but at the risk of undermining, rather than building a brand.
The most successful retail promo programs are those that help individual accounts increase their volume and margins. Let’s be realistic, on and off premise accounts are going to be more interested in supporting the brands that support them…directly (and legally.)
But as they say on TV “But Wait! That’s not All”. Here’s a list of some of the other lessons of a successful tasting program we relearned:
“Remind” the trade that the brand moves
Even if it might not be the sexiest new product in the store, a brand that is a proven volume generator is part of the foundation on which the retailers’ business is based. As is often the case, the attention of management and line folks at the distributor and importer level is often diverted to other priorities. Tastings keep your brand top of mind by making your brands’ sales velocity and customer satisfaction strengths more visible.
New Distribution
The same is true in terms of new distribution; tastings can be a great tool for sales to use to increase distribution for proven brands, not just new brands.
Increase Visibility
Brands sponsoring tastings are the ones that are going to get the floor displays.
Increase Volume
Moving boxes is the name of the game. In one program we ran we increased average sales per store 16X the day of the event. That’s testimony not only to the program, but the quality of staff training and retailer commitment.
Repeating Events Tell a Stronger Story
Scheduling a series of events in a given store can dramatically increase the run rate in between events. The retailer will be more receptive to stocking inventory and reordering based on sales in their own store. It’s also a great way for local sales to demonstrate support for your best accounts. Implicit message… “we’re here to help you.”
Scaling Perception into Reality
A good goal is to achieve a 30% conversion rate…30% of the people tasting, purchased product. And depending on the price point, that conversion rate can often be in multiple bottles purchased.
In fact, we executed this particular promotion in what we considered second tier markets, and the conversion rates there reached almost 60%. Clearly, showing a little love can pay off in spades. The same point is true in terms of bottles purchased/event. Where we had corporate chain support we nearly doubled the average number of bottles sold per event.
Bottom line, there’s a lot of great new promotion ideas out there, but in the wine and spirits business, getting customers to put the product in their mouth is the most effective sales promotion tool in our arsenal.
