SELF-DISTRIBUTION
Part one of three
e m a G t n e r e f f i D A g n i P l ay
J
ust ten years ago, there were fewer than 500 craft distillers in the United States. In August 2022, there were 2,687 according to the Craft Spirits Data Project. In 2020, craft spirits comprised 4.7 percent of spirits sales by volume and 7.1 percent by value, totaling $6.7 billion. And the craft spirits market share has nearly doubled since 2016. IWSR global trends report predicts that the value of craft spirits will double again by 2025. Yes, you read that right — set to double in just the next 18 months. Today, craft is no longer a rarity; it’s a rapidly growing part of the fabric of the spirits industry. This rapid growth will impact everything from the way we make our products to the way we distribute them — and the way we contend with our competition. While there is, of course, competition among craft spirits producers, the impact of the big five multinational producers on the craft distilling market can’t be overstated. They have the money, connections, economies of scale, marketing, and access to public capital markets that we, as craft distillers, do not. And the fact is, we’re never going to beat the big five at their game. So, we must play a different game. One way we can do so is to reconsider our distribution models.
Build a New System
The current distribution model doesn’t work for most craft distillers, and it’s no surprise. It wasn’t built for us. And it certainly is not optimized to help us grow. If a distributor can make 35 percent selling a household name Kentucky bourbon vs. hand selling Black Button Distilling, then why wouldn’t they sell that big-name Kentucky bourbon? They have to do what is in their best interest. When there were just a few hundred craft distilleries, the idea of going national was possible. But today, increasing competition among the thousands of craft distilleries nationwide, coupled with the strong brand presence of the big five, makes it hard for us as a New York whiskey to succeed in a state like Texas, for example. Texas had 173 active craft distillers in August 2022 (Craft Spirits Data Project). Why would a Texas distributor take on New York whiskey when there’s plenty of Texas whiskey to go around? Or, more importantly, why would a Texas consumer pick up a bottle of New York whiskey on a Texas shelf? And, if a distributor gets paid by percentage, then volume is a key factor in their bottom line. For example, 20 percent of 2000 is better than 30 percent of 1,000. Distributors have the allure that you only pay a percentage of sales, but 35 percent of low sales volumes is still not enough money to live on. If this model doesn’t work for us, then it’s a good bet it isn’t working for other craft producers. So, instead of fighting the system, we’re building our own. W W W . ARTISANSPIRITMAG . C O M
Building Relationships, Telling Our Story
More important than the economics of craft, is the relationship between us and the retailers. If the last three years have taught me anything, it’s how important these relationships are. The relationship is the difference between the bottom shelf and eye level. The difference between being delisted or given a second chance. The stores and their staff knowing our story and sharing that with customers is much of what moves the needle. And it starts with relationships. In New York, we’re fortunate to have independent liquor stores. When we self-distribute, we get to work with those small businesses with no one in between. We employ full-time dedicated Key Account Managers (KAM) for our brand, allowing us to be true partners to our accounts. They make their living telling our story and selling our products. We train them, manage them, coach them, and support them with a tasting team of our own part-time Brand Ambassador employees. Instead of existing as one of hundreds of brands in a distributor’s books, our KAMs go beyond just today’s sale at an account. They look at the account and make recommendations on how to grow the business together for the long term. They seek opportunities to put point of sale in the right positions, create unique events that drive movement on the shelf, and provide digital marketing assets to get the word out to the store’s customers. We can go so much deeper in support of our accounts through our self-distribution team than we could afford through a traditional distribution model. That is why we call our sales team members Key Account Managers, not sales reps. They are partners looking for every opportunity to grow the brand and support their accounts. Doing this is incredibly expensive, labor intensive, and time intensive, but it works for us.
Opportunities in In-State Markets
We sell tens of thousands of cases a year, and 99 percent of it is in upstate New York. That’s only one small part of the state. So, this year we’re going to redeploy our efforts and focus on the entire state of New York, where we already have a start on brand presence and name recognition. We plan to expand into sub-markets like the Hudson Valley, Long Island, and New York City, where there is a huge opportunity for us.
Instead of fighting the system, we’re building our own
Written by Jason Barrett
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