How US Importers Can Develop Strong Relationships With Their Distributors
Building new distribution partnerships is a comprehensive process and success is based on a mutual understanding of both of your long-term goals
In today's hyper-competitive market, distributors are pitched hundreds of new products every week and it can very difficult for importers to secure distribution for a new brand if they don't already have an established relationship with a distributor's buyer. Due to higher average suggested retail prices because of added transportation and warehousing costs, this can be an especially complex issue.
At the heart of their business, distributors are never looking for low-volume, high-priced brands with little turn-over which, unfortunately for small and medium sized importers, can often be the case for many of the SKUs in their portfolio. Although differentiation is usually an important factor in a distributor's general sourcing rubric, the negative supply issues that come with an exclusive, hard-to-find brand often outweigh the benefits.
To make matter worse, the number of national wineries, breweries and distilleries whose products are available across the country is staggering and every year there are thousands of new brands being created (as well as discontinued!) inside the USA.
Last year, domestic beer accounted for 85.7% of the category while domestic wine and spirits accounted for 76.7% and 58% of their categories, respectively, with total retail sales totaling $212 Billion (Beer $103B, Spirits $78B, Wine $31B).
The potential for astronomical sales figures for new international brands is a big attraction, but national sales still hold a large majority. Part of this large divide stems from the difficult nature of the three tier distribution system in the USA that many foreign brand owners are unaware of. Another large factor is the recent "local artisan" movement that has taken over almost every alcoholic beverage category. Local brand owners are generally dedicated to building their local markets through active marketing and hand-selling and expanding to neighboring territories can be considerably easier.
Although all importers have a fundamental understanding of their market, but it is difficult for them to convince their supply partners of the importance of a 'hands-on' approach to sales, both to their distributors and to the retailers. The complexity of the US distribution system and the cost of market visits can often dissuade international wineries, breweries and distilleries from taking their US business venture as seriously as they should and it is too often the case that they blame their importers for an unsuccessful US Market launch.
As an importer looking to build distribution for your brands, you'll need to have a thorough understanding of you and your distributor's market and be able to clearly communicate the foreseeable challenges with both your distributor and your supplier. Even if your supplier is unable to provide the marketing support that you know will be necessary to get the brand off-the-ground, you'll need to be able to allocate a proper budget to developing successful programming for your brands. There is much more to the US wine, beer and spirits import business than simply offering a unique portfolio.
Building new distribution partnerships is a comprehensive process and success is based on a mutual understanding of both of your long-term goals. In order to be successful, you need to think and act like a distributor - as much as you want to be in the import business, you have to also think of yourself as in the distribution business.
Know Your Retailer's Customer
You can't expect your distributor to be interested in your imported wine, beer and spirits if your core demographic hasn't even heard of them. Develop marketing campaigns and launch them in your market before you start talking with your distributor. Social media, word-of-mouth, event sponsorship, direct marketing - whatever it is, build the hype up and make sure your distributor has heard of your product before you pitch it to them.
If you don't have a strong marketing budget, then allocate some of the cost into your final suggested retail price. It seems that distributor's are looking for more and more margin every day, so make sure structure your pricing to give them their asking share while also saving a strong margin for yourself.
Know Your Distributor's Customer
Retailers and distributors only make money if your product is moving and the best way to ensure high velocity is to get friendly with your distributor's key accounts. Make sure you are frequently checking in at retail stores across your market and find out which retail stores are selling your products and which ones aren't. Activate slow markets by doing in-store merchandising, promotions and tastings.
If you can't get the attention of your distributors, then this is also one of the best ways of generating interest in your brand. Start by talking with their top retail stores about your new SKU and get them to ask for it directly from your distributor. Better yet, get a purchase order and take that directly to your distributor's top buyer.
Know Your Customer
Understanding the inner workings of your distributors will give yourself the best chance at successfully pitching your product to them. Know when they source new products and when they are way too busy to even consider adding a new SKU. Figure out their logistics system and calculate typical turn-around times. Find out what type of products they prefer and why. Offer them ample programming, margin and incentive packages for your new brands.
Beyond knowing your distributor's business, it's also just important to personally know the people behind the company and this can be the most challenging part. A good way to get in touch with these types of people is to attend the same events as they do. Trade shows, sporting events, community fund raisers - make an effort to be a prominent member of their society and develop your relationship on a personal level.