The Distributor’s Dilemma
Bill Sciambi, Co-Founder and Chairman of the Board of Verity Wine Partners on the major challenges faced by distributors in today’s U.S. marketplace.
On Day 1 of the ABID conference in New York City, Bill Sciambi, Co-Founder, and Chairman of the Board of Verity Wine Partners outlined the major challenges facing distributors in today’s highly competitive U.S. marketplace. He then suggested 12 different steps that these distributors can take to become more successful.
The current situation facing U.S. distributors
Sciambi led off the discussion with a closer look at the current market environment. Make no mistake about it, in just the past 20 years, the U.S. wine market has become even more competitive. For example, in 1998 there were 47,000 different wines competing for retail shelf space in the United States; by 2018, however, there were 110,000 wines available. In New York City alone, it’s now possible to buy more than 80,000 different wines.
And that’s not all, say Sciambi. It’s not just that there are more wines out there – it’s also that there are also more importers who are bringing wines into the U.S. marketplace. Right now, there are thousands of wine, beer, and spirits importers, leading to a very crowded marketplace.
And, even though consumption of wine in the U.S. marketplace has increased by 116% since 1978, that’s still not a fast enough pace to keep up with the record number of wines now available in the United States. In that same 40-year period, the number of wines has increased by 550%. Thus, we are now in a situation where there are more good wines that consumers who want them.
Major factors for U.S. distributors
As Sciambi outlined in his talk, there are four major forces that all distributors must address: revenue, inventory, growth, and pricing. Inventory is a particularly pressing demand, given that it is the largest asset for any distributor. But how do you keep up with the escalating number of wines? There’s no doubt about it, says Sciambi: long-tail inventories place enormous pressure on cash flow.
Pricing is another key factor to consider. Price a wine too high, and customers won’t buy it. Price a wine too low, however, and your margins are going to collapse. Thus, there is a delicate balancing act between price and margin. In many ways, says Sciambi, it is getting harder and harder to show the steady, year-over-year growth that is the norm in other industries. Distributors have to become more creative about their approaches and look for new paths to growth.
A 12-step plan to future success
With this as context, Sciambi then discussed a 12-step plan to deal with these four major factors – revenue, inventory, growth, and pricing – in a way that will keep employees and management awake, aware and engaged.
The first four steps are meant to address the culture of an organization, and can help to create a well-run sales organization:
Make sure that sales are priority one
Establish a coaching culture
Embrace a philosophy of developing strengths, not just fixing weaknesses
Use training and education to prepare top performers
The next three steps are designed to change the processes within an organization, making it better able to deal with all the tremendously competitive market forces that distributors must now face:
Give everyone in the organization the responsibility and the authority to solve problems
Create cohesive, consistent processes that serve the customer, not the organization
Focus on planning and maintenance, not on fire drills and breakdowns
Finally, Sciambi outlined five key strategies that all distributors can follow in order o become more successful:
Focus on making all sales goals bottom up (and not top down)
Align individual goals with company goals
Enlist supplier partners to participate in the negotiation and fulfillment of goals
Make sure that brand management, sales, and marketing have a seat at the table when negotiating
Turn supplier goals into executable sales plans and strategies
Avoiding pain points and worst-case scenarios
By taking all 12 of these steps, distributors can minimize many of the classic pain points that they face on a daily basis. For example, they will no longer need to “manage by a fire drill.” They will no longer be setting impossible goals with impossible deadlines. And they will no longer be spending an inordinate amount of time dealing with “the squeakiest wheel” or the last contact.
It all starts by establishing up front that sales are priority one. That means every aspect of the organization – from how sales processes are set up, to how employees are empowered to meet their sales goals – must be completely focused on driving more sales. A little advance planning can help to avoid many of the everyday problems that U.S. distributors currently face.