How To Successfully Launch and Distribute a Beverage in a New Market | Marcum LLP

Over the years I’ve seen several microbreweries, wineries and distilleries fail when expanding into new markets – often due to an unhappy relationship with a distributor. It seems that many business leaders think that if they simply sign up with a retailer, their products will magically appear on shelves everywhere and sales will explode. If it just could be that easy!

I decided to sit down with Jordan Williams and Kirk Wayne of 100 Proof Beverage Company to discuss the right way to launch products into a new market and build a successful distribution agreement. Companies that implement this process well are more successful – and they make their distributors more successful, so that everyone wins. A subsidiary of Williams Entertainment and Consulting based in Nashville, TN, 100 Proof regularly helps breweries, wineries and distilleries discover new markets.

“Distribution deals are a lot like marriages, except it’s harder to get out of a bad one,” says Williams. “And much like marriage, getting counseling and doing your homework before entering into the arrangement can help ensure a healthier relationship and long-term success,” Wayne added. Distributors invest time and resources into each product. It is very important to make sure you find a good match and then constantly work to make the relationship a success. Even if a product isn’t very well known at the moment, it can catch fire later, so retailers have a vested interest in keeping it.

Before you even start looking for distributors, the first step in the process is to make sure your own branding is on point. It may sound simple, but poor branding makes it harder for you and your retailer to sell a product. Products need to be “accessible, attractive, and appropriately tailored to their target audience,” says Williams. That means focusing on labels, packaging, displays and advertising and developing an understanding of where you need to go and who your competitors are.

The second step is to know your production capacity. When you enter a new market and a new distribution deal, you really don’t want to promise more product than you can deliver. “If you can’t deliver, you lose placement in stores and restaurants and are replaced with something else in a distributor’s lineup,” says Wayne. This can mean you have to start over from scratch in order to make sales and gain ground because you’ve been replaced. Distributors won’t wait for your inventory to sell products, they will just replace you and move on. You will not backorder due to your lack of production and foresight.

After you’ve settled the production, research the condition you want to sell in. Some state governments control the distribution of alcoholic beverages, so be sure to check any requirements. For example, some states must approve your distribution agreement; some need to approve your sales and marketing plan, labeling and advertisements; and some even require you to publish prices quarterly. Make sure you know the rules of the game.

The next thing to consider is timing – and timing is crucial. When you launch this new delicious Christmas beer, don’t still emerge from Thanksgiving dinner full. You will be way too late. Product enhancements or launches are planned well in advance. “Retailers and distributors already know their OND lineups (October, November and December) in July or August,” says Wayne. He adds, “If you miss your wedding date, you probably won’t get married.” Knowing exactly when to contact a dealer can mean the difference between success and failure.

So you’ve reached a point where you know who you are (branding), what you’re capable of (capacity), where you’re going (government rules and regulations), and when you’re going (timing). Now you’re good to go, right? They could be fed straight into a circular saw.

Established distributors will want to know what chain commitments you’ve received. A chain promise is an agreement by a major retail or restaurant chain to purchase your products. At the same time, these chains ask for the name of your retailer. Unless you already have really solid relationships with chains and distributors, “you can get stuck in a never-ending chicken-and-egg game,” says Wayne. Additionally, once you get a GSM (General Sales Meeting) with a chain and distributor, you need to know how to sell your product and educate your audience about it. These are just more reasons to seek advice from someone well connected when entering a new market.

To find the right distributor, you should do some homework. You are looking for the best solution for your product based on the retailer’s size and experience. Do they carry big brands, and if so, could yours be lost? Or are they both big and experienced in helping brands establish themselves? Or are they small and able to pay more attention to you? Or are they too small to pack enough punch? Meet with several and find the right match. Again, choose wisely as contracts are hard to break.

Once you’ve found the right distributor for you, setting up your product for success is critical. (In my head, I can hear Jerry Maguire saying, “Help me…help you.”) It does this by creating the right incentives to promote your product at all relevant levels within the distributor’s organization. Think of cash rewards or items of monetary value such as event tickets or travel. “When I was working for a retailer, a certain company introduced a cash reward for the number of multi-bottle displays we could put up in stores. They also created a sales incentive for our manager. We wanted to convince our retailers to put up the displays because it made a difference for us on the front lines,” says Williams. “That helped the product gain some notoriety that it might not otherwise have gotten, and it’s been successful.”

Remember that you are responsible for promoting your product. Your distributor can help you, but ultimately you need to facilitate the process with them. Once your product has moved, you should be very proactive in supporting the warehouse manager with order times and quantities. “They deal with a lot of products and probably order based on what’s in their computer,” says Williams. In other words, if an upcoming event could create demand or something is slowing demand, remind the warehouse manager so he can appropriately manage his inventory and avoid having too much (which is frowned upon) or too little on hand to handle the to satisfy demand.

Make your distributor’s life easy and prosperous, and they will help you succeed. If you don’t make it easy on yourself, you will be “put on hold”. This is a term distributors use when you haven’t given them enough reason to bother trying to sell your product (it’s likely someone else has). This keeps your products on the storage shelf, but doesn’t release you from the contract. This happens when there is no marketing support, no incentives, or a lack of repeat orders from retailers and restaurants. In my head, I hear the Toy Story toys saying, “Woody has been shelved!” Don’t be Woody.

So there you have it, a game plan for setting up a new product for successful distribution. The score is measured with backorders (wins) or deferred (losses).