|Advantage: The Small Wholesaler (part 2)|
Mass Market Brands vs. Regional Exclusives
Peter Sagansky writes...
Advertised commercial wine brands have great marketing power. Consumers seek out these items making them relatively easy to sell. These are commodity items. The customers know what the prices of these wines should be because they buy them regularly and see them advertised at low prices. The consumer’s loyalty is to the brand rather than to the merchants who sell the brand.
Pricing is the key issue for the merchants. Their prices on these commercial items affect their customers’ impressions of the entire store. Many merchants end up selling these selections at short margins to avoid giving their customers the impression that their wines are “too expensive.”
Unless the merchants are willing to sell these wines as “loss leaders” they must buy them at the lowest possible prices. The wholesale distributors are surprisingly successful at convincing most of their customers (regardless of the size of their businesses) that they are getting their best prices. All but the largest retail buyers must have doubts that they are really getting the deepest deals.
These brands saturate the marketplace. The salespeople who sell these wines are under steady pressure to place every SKU in every one of their accounts. These wines are in liquors stores of all sizes, convenience stores, wholesale clubs, and chain restaurants (the places where these wines are not found are in some independent fine wine stores and upscale restaurants.)
Commercial wine brands do not however have an exclusive on marketing power. There is also great marketing power in alternative wines that can compete successfully against the commercial brands. This can be achieved by combining these key factors…
1.) “Selectively Sold”- The wines are sold to the accounts as “regional exclusives”
2.) “Quality & Price”- The wines are highly competitive with the branded wines in quality and value
3.) “P.O.S.”- The wines have point-of-sale materials preferably including key reviews
At Charles River Wine Company we focus on exactly these kinds of wines. At the core of our customer base are small to medium-sized independent stores and chef-owned restaurants. These customers compete successfully in the wine business with the giant stores and chain restaurants in their neighborhoods by offering their customers alternative wines in better shopping and dining environments.
We select wines for our portfolio with our own customer base in mind rather than for the mass marketplace. We price our wines so that the kind of customers described above may buy them at our best prices every day. We are striving to be a strong resource to those customers by providing excellent products that they can feature and make good money selling.
Given our focus it makes no sense for us to have artificially high front-line prices so that we can give deep deals to a few big stores. It is hard to come up with perfect prices that work well for all types of accounts. We set prices for the kind of customers that are our best supporters. Our prices are in line with those of other major markets which in turn allows our customers to sell our wines at prices that are in line with national posted prices.
Our ability to selectively control the distribution of our products is one area where we have a strong advantage over our large competitors. We offer managed distribution while they offer mass marketing. Our approach is intended to create rewarding buying experiences for the types of accounts that make up our regular client base.
Charles River Wine Company employs a relatively small number of salespeople. Each salesperson operates as our sole representative in their regions (with some overlap only in the Greater Boston area.) This arrangement allows our salespeople to maintain control over the distribution of our wines to their customers. We encourage them to be sensitive to the individual needs of competing customers in their sales territories. This is the complete opposite approach to that of the large companies that sell big brands to every customer.
Our salespeople are able to grant “regional exclusives” to their customers. They place different wines on the wine lists of competing restaurants. When a retail customer features our wines their salesperson does not view that as an opportunity to make a new placement at the store across the street.
This is one area where our approach and that of the big companies strongly contrast. The big company’s salespeople tell their customers which other stores sell their wines. Our salespeople tell their customers which other stores do not sell our wines.
This sales approach allows our customers the option to price our wines at the level that they think they are worth rather than via a cost-plus-formula. Our discount programs allow our customers the option to run sales while maintaining decent profits, or to gain extra profits on wines that they already sell.
We buy wines with this exclusive marketing approach in mind. Our best selections are wines that our customers enjoy recommending to their customers. The buyers may do a little more work to sell some of our wines but by doing they create opportunities to make extra money while building loyal followings for their businesses.
Fine wines sold on an exclusive basis help to create customer loyalty towards the merchant rather than to the big brands that can be bought nearly everywhere.