“Push yourself again and again. Don’t give an inch until the final buzzer sounds.”
… Larry Bird
I’d been listening for more than a hour, taking notes, watching for signs or cues that my client wanted more than a confirmation that the strategic business model conceived more than 7 years ago was still viable in this new, emerging economy. Sometimes it’s just best to let someone talk and talk. And after all the points are expressed, restated and then exhausted the steam just runs out. As my client turned in his chair, at the large cluttered antique desk, holding the latest account sold report, he looked at me and said one last time, ‘just a little more hard work.’ ‘Yep, that’s what we need, a little more hard work.’ I leaned forward in the faded leather club chair, pinching my eyes closed with my thumb and forefinger and started to feel the onset of a migraine. A migraine that would only go away when my client saw the light. I fought back the urge to answer with my best Dana Carvey imitation of Bush 1 saying “Not gonna do it.” But, self preservation and 7 years of history got the better of me, and I responded that it was time to rethink the winery’s business model. We needed to flatten out the growth curve of the principal brand, while continuing to focus on the best quality. Some of the juice would have to declassified to be sold in bulk, bottled as a value tier or launched as a new brand. If the new tier or label strategy were to be implemented then pricing tactics would allow the winery to open up new channels for wine by the glass (WBTG), independent retail, or grocery distribution. The word grocery resonated like a scratch on a blackboard. My clients face scrunched-up as if he had just smelled a carton of month old milk. He looked up at me over the top edge of his bifocals and said ‘GROCERY?’
The Grocery Channel
I understand your reticence. You’re concerned with endangering, what Tim McDonald CSW refers to as, your winery’s ‘Reputation Engineering.’ And, based on old models, this concern was once justified, but no longer. Today’s grocery is more than a viable distribution alternative for wineries of small and moderate size. The world of grocery distribution seems to the uninitiated to be dominated by the big boys, the 30 largest wineries in the USA market. And it seems to be most appropriate as a channel model only for those wineries producing 100,000 cases or more. Well the grocery market, like the wine market is highly differentiated and segmented. Groceries are classified and merchandized by neighborhood and product selections determined by local demographics. A sharp, regionalized well conceived channel strategy is a must. There is a spot across most price points somewhere within the grocery segment for your wine brand(s). There are convenience store concepts, independents, mid-chains, large regional multi-unit stores, and then there’s Safeway and Krogers. Within these larger grocery brands several regional sub-brands keyed to the needs of their local markets exist. Consolidation, a current trend in the adult beverage business for producers and distributors, has also found its way into the US Food & Drug business segment. It is not a one-size fits all solution anymore. As I look across the country, I see data that demonstrably reveals pricing segment shifts and channel shifts that favors due consideration of grocery distribution for your brand(s). I believe that it’s time to reset your expectations. It’s time to innovate. It’s time to realize that there are new points of price sensitivity that factor into consumer wine purchase decisions. It certainly is time to recognize the need for real-time category information as a key part of your decision making matrix.
Please note that large areas of the country, including the Inter-Mountain West, several control states such as Pennsylvania, and large US Eastern population centers including Maryland, New Jersey, New York, Connecticut and Massachusetts don’t as yet allow wine sales in grocery stores. For the smaller, niche, highly-differentiated winery single unit independents and mid-chains are the most appropriate targets for selected distribution. In the nine county San Francisco Bay Area, the small and mid-chain grocery market is vibrant. Within 100 miles of most wineries in Napa and Sonoma several points of potential distribution exist. Although not meant to be comprehensive, the following list represents strong premium grocery retail wine locations: Oliver’s, Fiesta/Pacific, Molsberry Market, Sonoma/Glen Ellen Markets, Vallerga’s, Ranch Market, Sunshine Foods, Oakville Market, Dean & Deluca, Molly Stone’s, Paradise Foods, Nugget Markets, Real Foods, Andronico’s, Berkeley Bowl, Monterey Market, Farmstead Cheese, Draeger’s, Lunardi’s, Cosentino’s, Diablo Foods and many more. Whole Foods, and Trader Joe’s are also larger specialty food retailers with strong wine programs, and a significant Bay Area presence. Although, I’ve focused on my back yard, I would also target strong local or regional grocers such as the Carolina’s Harris Teeter, Chicago’s Treasure Island, Seattle’s Metropolitan Market, Portland’s New Season’s Markets, Los Angeles metro area Gelson’s and Bristol Farms, Florida’s Publix Markets, Texas’ Central Markets, Arizona’s AJs, Cleveland’s Heinen’s and St. Louis’ Dierberg’s.
A Very Short Course in Category Management
Category Management is “a retailer/distributor/supplier process of managing categories as strategic business units, producing enhanced business results by focusing on delivering consumer value.” …FMI ECR Committee
Selling to groceries can seem daunting to the first timer. The concept of management by objective is key to your grocery presentation. What specifically are your goals? How do you hope to achieve your placements? Do you understand how to leverage your brand equity with that of the retailer’s equity? You don’t have to be Gallo or K-J to have defined goals and a plan. Your brand’s equity is based on your prior distribution achievement, sales history, reliability, pricing and promotions. Understand that this is a business relationship that requires candor, confidentiality, participation and the ability to give unbiased recommendations in reference to the category, varietal and other winery’s products. Wineries of all sizes have the ability to grow and diversify their depletions by taking the category management approach with retailers seriously. Understand that retailers are seeking multiple points of input to get a holistic view of their marketplace. Use your unique position as a smaller winery and your knowledge of the super and ultra-premium price segments to become a trusted adviser helping the grocery buyer to be better at focusing on the end user. In your presentation be objective, be consumer oriented, keep the message simple and focused, be action specific, and sell a ‘win-win’ program.
A very simple analysis is to quantify your opportunity by comparing the Consumer Development Index and your Business Development Index, What may sound like geek speak to you, is actually a simple concept. CDI is a specific market accounting of the % of sales for an item based on type and price. To access this information you need to refer to data from IRI, Nielsen, Trade Pulse, or other previously discussed wine consumer insights firms. BDI is your actual % of sales within a defined geography. Select markets where CDI>BDI. Calculate the gap as CDI-BDI = a positive opportunity. Then utilizing the formula (Volume/BDI)*Gap = opportunity volume, develop a plan. This is allows you to ask and discover the answers to the 3 basic questions of distribution:
- Where are we?
- Where should we be?
- How do we achieve desired targeted distribution objective
Swim to Win
Selling wine to groceries tends to be a more technical and specialized arena than other available wine sales channels, but not necessarily more complex. Sales is sales. My Dad used to always say ‘sales is a contact sport.’ And in any contact sport you want the best tools in order to just not survive but to succeed. You’ll need to incorporate your market, brand and wine knowledge, salesmanship, business skills and your entrepreneurial mind set. Yes, it’s tough out there, always has been, always will be. But, you’re in the game to win. And if you close your mind to any available channel before a thorough strategic market analysis, win you won’t. As you swim in the grocery channel, utilize technology to access the best market and category information tools to target, prepare, present , close and win.
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