I have this really clear memory of a distributor review meeting, sometime in my mid-twenties, that makes me cringe every time I think about it. Not because of the ridiculous outfit I was wearing, though it was – I have pictures of myself from this time period and for some reason I thought super flared jeans and wispy bangs were a good look – but because, knowing what I do now after many years of brand/sales management on the wholesale side of the wine business, basically everything I said in that meeting was a complete waste of my distributor’s time.
I think I showed up to the meeting with a legal pad and a pencil, and only possibly my laptop with a wifi connection so I could glance at some shipment reports, but really I just thought you showed, up, asked for increased shipments, and gave the distributor a target list (I think I literally copied and pasted something from Wine Spectator’s restaurant awards) and hoped for the best.
I remember sitting there, asking the owner of the distributor why their numbers were so far down and getting an exasperated sigh after he walked me through their depletions (way up) and accounts sold (also way up). Evidently I hadn’t thought that loading up a distributor the previous year on wine that they didn’t need yet didn’t necessarily translate into increased depletions. (Andy Pates, I am so sorry. I owe you so many cocktails for your insane levels of patience and politeness.)
To come full circle, I had lunch recently with a girlfriend of mine recently who runs sales for her family’s winery. We don’t work together, but she did ask my advice about how to successfully execute a year end planning meeting with her distributors, and so, upon reflection of my many poorly planned meetings of yore, I have come up with a list that, while no means exhaustive, should be a good jumping off point for your own planning meetings.
- Do not bring up shipments. These are irrelevant to any wholesaler. They make their money off depletions and in theory, if the wine is depleting well, shipments should follow.
- A year end meeting is not a chance to air all your grievances – if there are serious issues, by all means, bring them up. But this is not a time to nitpick every small detail.
- Come prepared with depletion data so you are both on the same page. This means:
- Sampling data (ie how many sample bottles vs how many sold – if the number is low, offer to support 100% sampling for certain periods or certain wines. If the wines are not being shown, the wines will not sell. If sampling is high, and sales are soft, perhaps the problem is with your wine)
- Overall depletions by wine
- Your account universe – is it getting bigger or smaller? What about sales by channel? Are sales to one retailer or restaurant disproportionately large? If you have targets for accounts sold or actual accounts, have these ready too.
- A comparison of your sales in that state with your other national markets
- Be transparent about goals – starting with sharing your production levels, what your winery growth for the year (and years ahead) looks like, and understand that though 2016 might be the biggest vintage you’ve ever had and it was unexpected, just because your production grew 20% doesn’t mean your distributor can grow 20% too, unless the market/distributor is new for you and is also having explosive growth.
- Make sure you have pricing information/price grid* and any budget for incentives or deals already figured out. It’s always better to be proactive than reactive – and also to let your distributor know that if you DO have to be reactive, that you have a budget to work with if you need to stimulate sales by dropping prices for a short period, or support sampling, or run incentives.
- To that end, if you want to run incentives, have them ready before the meeting. Hammering out details of these things during planning meetings takes an inordinate amount of time and 99% of them are rarely effective anyway.
- Don’t ask, “how can we help?” unless you mean it. Are you prepared to either pour at retail tastings (or pay to have someone do it for you), work with reps in parts of the market that don’t have all the cool somms and Instagram-worthy restaurants but nonetheless have potential for sales, or host wine dinners at clubs where most people will be drunk before the first course, but again, you still might sell a lot of wine (but you also might not)?
- Don’t go over an hour. Anything beyond that is a waste of time for one winery.
Did I miss anything?
*To figure out the gross profit margin and gross profit margin percentage your distributor is making on one of your wines, here’s how you calculate:
Wholesale Price minus FOB (with taxes/freight)=gross profit
Gross profit/wholesale price=gross profit margin percentage
So, for example on WINE XYZ:
The distributor’s wholesale price is $13.99 (that would put the wine at $19.99 retail on a shelf)= $167.88/case wholesale
WINE XYZ FOB price is $120/case.
Distributor laid in costs are $120 (FOB) + $5/cs freight/taxes=$125 (freight and taxes vary wildly from state to state so please check with your distributor. This is merely an example)
Gross profit on a case of the wine is therefore $167.88-$125=$42.88
Margin is the gross profit divided by the case price $42.88/$167.88=.255 or 25.5%