The net is filled with brands trumpeting innovation and digital wonders. Yet distributors play a crucial role for a healthy business. In this article, we explore their expectations and give a few tips to alcohol brands. And no, “cheap price” is not a priority.
In 2014 Brand Reveal conducted an online survey to understand the expectations of distributors towards alcohol beverage brands. The following results reflect the opinion of 104 distributors, with an equal split across Europe / The Americas / Asia, and most of respondents at senior levels.
Selection Criteria: Portfolio match, margins & reputation. A distributor n.1 reason for brand listing is the fit with its portfolio. This fit can be at price level, distribution, provenance etc… It is therefore important for brands to understand how distributors organize and view their portfolio for possible matches.
Good margins also matter, so brands need to understand the value chains of the territory / channels they want to enter, so that the desired retail price leaves enough margins. Brand reputation is the 3rd most important criteria, so the material and stories that demonstrate reputation and product quality are key, especially if the brand is new.
The room for negotiation and contract period were listed as the least important criteria. Distribution is no charity business, but when there is a portfolio match, margin and reputation, the hard commercial elements play a second role.
Finding new & attractive brands is hard. Three quarter (!) of respondents think it is hard to find new & attractive brands. It does not mean though there are no good brands out there, or that distributors are not good at finding brands. But when brands complain about how hard it is to find (good) distributors, there certainly is an opportunity for brands to up their game, e.g. how they look for distribution and how they present themselves (assuming the product and packaging tick all boxes).
The dynamic game of listing & delisting. Once a brand listed, it has to perform: with 74% of respondents indicating they will definitely / probably delist brands in the next 12 months, it shows that nothing is granted. Conversely, 92% of respondents state they will definitely / probably list new brands, so this shows that distributors portfolios are not set in stone and are very dynamic.
Therefore, brands need to stay alert and follow up closely their distributor and market: bad product quality, poor logistics or no understanding of local needs are cited as main reasons to terminate a relationship. However, a brand delisting risk may represent another brand listing opportunity. So stay alert.
Building the future with local understanding and joint market plans. If we focus on the bright side of the future, distributors expect close contacts with brands to develop initiatives that fit local needs, and to develop plans together. Discounts, although important for the bottom line, are not listed amongst the most important element to build a long term relationship.
So Net Net (Net?), whist a sound commercial agreement is always essential, our tips to brands, based on distributors expectations, suggest that a good understanding of the local business, good brand & product elements and a close working relationship, are important to build a fruitful relation.
So, like any partnership, distributors need attention and will certainly walk the extra-mile if brands manage the above – even if they weight little in a distributor business.
Brand Reveal Specialises in Strategy, Marketing and Commercial Development, with a preference on wines & spirits. More on www.brandreveal.net .