Saturday, January 20, 2018
Distributors - a serious problem?
Related
to our last class, I found our discussion on distributor consolidation pretty interesting.
While I can understand the general argument that big distributors tend to forget about their smaller customers, I still can't believe such is the case with
regards to the wine industry. Prohibition era booze laws and mob-esque middle-man
muscle definitely play roles here, but I’d imagine the customers – i.e. the
retail buyers and end consumers – are significant mitigants. There is a trend
towards variety, “finds,” and smaller brands, much as is occurring in the beer
industry. Mid to premium users feed off the cultural value and
pseudo-intellectual points they gain from drinking smaller batch wines. Something
to keep in mind when industry participants are bemoaning their distribution
channels – it could be a lot worse! Market forces are providing significant tailwinds,
which makes me question just how much of a problem distributors actually pose.
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Interesting perspective! One trend that seems to have occurred in other alcohol categories (e.g. beer) is large conglomerates buying up small, local brands so that they can be "on trend" - it was interesting what we learned in class about how common it is for wineries to do the same thing and just create new labels for Costco and the like. It makes me wonder whether the "variety" that consumers crave is actually being fulfilled, or if we are just drinking from the same large producers who have distributor relationships and ability to control P a couple different label types...
ReplyDeleteIf the liquor industry is indicative of the wine industry the data would suggest that both of your hypotheses are correct. I worked for a major liquor and wine distributor. We did an analysis of growth in the market and 80% of the growth over 10 years came from 10 brands. Many of these brands were from existing major players with deep distributor ties (eg, Jameson and Pernod Ricard) or were quickly acquired once they showed promising signs of growth (eg, Diageo and Casamigos). The few exceptions (eg, Fireball and Rumchata) were driven by massive consumer pull in major markets like Texas and Chicago. Distributor push- the common way to spur growth in brands- was secondary to consumer demand.
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