Industry Blind Spots WHAT ARE DISTILLERS NOT THINKING ABOUT, BUT SHOULD BE?
Written by Scott Schiller
Sales Performance Distributor relationship and leverage: Distributor consolidation is nothing new, but the last few years are different. What once was the big five are on the cusp of being the big two. Due to the decreasing options, distributors are continually raising their minimum sales thresholds. In some markets, this equates to 1,000 9L cases per portfolio. If you are not delivering meaningful and growing profit within a few years, you are tying up cash and space from the distributor’s point of view. The days of ‘launching and leaving’ are long gone, and your brands must always be on the upswing. Tracking shipments-to-depletion ratio, percentage of business between on and off-premise, number of accounts sold, and the velocity per outlet are all indices for ensuring your brand is not only growing but growing the right way for both parties.
Financial Health Establish annual budgets, manage them monthly, and track every variable that matters. It is essential to understand what metrics you are watching and ensure those metrics are relevant to your brand or distillery’s short- and medium-term goals, as well as your longterm vision. For example, tracking your EBITDA (earnings before interest, taxes, depreciation, and amortization) is an excellent way to see your profitability by quarter or year numerically. But what about the capital you just raised or banknote that you subsequently took on? This requires a focus on your free cash flow and tracking all dollars leaving the business. In other words, your working capital, from known costs to capital expenditures, to potential changes in FET, needs to be kept in check as not to overspend for profitability’s sake. WWW.ARTISANSPIRITMAG.COM
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hile spreadsheets and strategy sessions may not be the most romantic aspects of the distilling business, they are vital parts of your daily operation. Regardless of what stage this article finds you, cash positive or not, there are several key areas that every distiller should have a watchful eye on and have an evolving strategic plan that addresses them. The following are four key areas to monitor continually, and they all fall under the commercial side of the business.
Employee Morale Ensuring all employees are working toward the same organizational goal is imperative for success, but how? First and foremost, your distillery or brand must have a clear and succinct vision and mission. Without them, there is nothing employees can point to for purpose, which means all you eventually end up with is clock watchers and low performers — the star talent will all move on. You must not only live by this purpose but help your employees understand it and believe in it. Everyone on staff needs to know what their roles are, how they fit into your spirits company, what they’re responsible for, and, most importantly, how this contributes to your overarching vision. Due to everyone’s uniqueness, personal objectives, thoughts, habits, values, and beliefs, it often is hard to shift behavior or get the whole team on board to a specific goal or direction for your brand. But being practical, and clear on the brand’s vision and future and how that translates to specific roles and responsibilities goes a long way in working together for a common outcome.
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